S M Dugar - Guide To Competition Law (7th Ed)
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1. INTRODUCTION TO COMPETITION LAW
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2. THE COMPETITION ACT, 2002
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3. [s 1] Short title, extent and commencement
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4. [s 2] Definitions
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5. [s 3] Anti-competitive agreements
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6. [s 4] Abuse of dominant position
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7. [s 5] Combination
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8. [s 6] Regulation of combinations
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9. [s 7] Establishment of Commission
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10. [s 8] Composition of Commission
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11. [s 9] Selection Committee for Chairperson and Members of Commission
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12. [s 10] Term of office of Chairperson and other Members
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13. [s 11] Resignation, removal and suspension of Chairperson and other Members
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14. [s 12] Restriction on employment of Chairperson and other Members in certain cases
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15. [s 13] Administrative powers of Chairperson
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16. [s 14] Salary and allowances and other terms and conditions of service of Chairperson and other Members
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17. [s 15] Vacancy, etc., not to invalidate proceedings of Commission
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18. [s 16] Appointment of Director-General, etc.
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19. [s 17] Appointment of Secretary, experts, professionals and officers and other employees of Commission
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20. [s 18] Duties of Commission
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21. [s 19] Inquiry into certain agreements and dominant position of enterprise
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22. [s 20] Inquiry into combination by Commission
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23. [s 21] Reference by statutory authority
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24. [s 21A] Reference by Commission
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25. [s 22] Meetings of Commission
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26. [s 23] [* * *]
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27. [s 24] [* * *]
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28. [s 25] [* * *]
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29. [s 26] Procedure for inquiry under section 19
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30. [s 27] Orders by Commission after inquiry into agreements or abuse of dominant position
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31. [s 28] Division of enterprise enjoying dominant position
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32. [s 29] Procedure for investigation of combinations
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33. [s 30] Procedure in case of notice under sub-section (2) of section 6
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34. [s 31] Orders of Commission on certain combinations
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35. [s 32] Acts taking place outside India but having an effect on competition in India
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36. [s 33] Power to issue interim orders
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37. [s 34] [* * *]
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38. [s 35] Appearance before Commission
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39. [s 36] Power of Commission to regulate its own procedure
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40. [s 37] [* * *]
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41. [s 38] Rectification of orders
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42. [s 39] Execution of orders of Commission imposing monetary penalty
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43. [s 40] [* * *]
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44. [s 41] Director General to investigate contraventions
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45. [s 42] [Contravention of orders of Commission
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46. [s 42A] Compensation in case of contravention of orders of Commission
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47. [s 43] [Penalty for failure to comply with directions of Commission and Director General
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48. [s 43A] Power to impose penalty for non-furnishing of information on combinations
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49. [s 44] Penalty for making false statement or omission to furnish material information
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50. [s 45] Penalty for offences in relation to furnishing of information
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51. [s 46] Power to impose lesser penalty
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52. [s 47] Crediting sums realised by way of penalties to Consolidated Fund of India
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53. [s 48] Contravention by companies
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54. [s 49] Competition advocacy
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55. [s 50] Grants by Central Government
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56. [s 51] Constitution of Fund
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57. [s 52] Accounts and audit
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58. [s 53] Furnishing of returns, etc., to Central Government
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59. [s 53A] Establishment of Appellate Tribunal
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60. [s 53B] Appeal to Appellate Tribunal
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61. [s 53C] Composition of Appellate Tribunal
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62. [s 53D] Qualifications for appointment of Chairperson and Members of Appellate Tribunal
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63. [s 53E] Selection Committee
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64. [s 53F] Term of office of Chairperson and Members of Appellate Tribunal
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65. [s 53G] Terms and conditions of service of Chairperson and Members of Appellate Tribunal
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66. [s 53H] Vacancies
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67. [s 53I] Resignation of Chairperson and Members of Appellate Tribunal
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68. [s 53J] Member of Appellate Tribunal to act as its Chairperson in certain cases
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69. [s 53K] Removal and suspension of Chairperson and Members of Appellate Tribunal
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70. [s 53L] Restriction on employment of Chairperson and other Members of Appellate Tribunal in certain cases
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71. [s 53M] Staff of Appellate Tribunal
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72. *[s 53N] Awarding compensation
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73. [s 53O] Procedure and powers of Appellate Tribunal
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74. [s 53P] Execution of orders of Appellate Tribunal
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75. [s 53Q] Contravention of orders of Appellate Tribunal
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76. [s 53R] Vacancy or Appellate Tribunal not to invalidate acts or proceedings
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77. [s 53S] Right to legal representation
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78. [s 53T] Appeal to Supreme Court
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79. [s 53U] Power to punish for contempt
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80. [s 54] Power to exempt
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81. [s 55] Power of Central Government to issue directions
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82. [s 56] Power of Central Government to supersede Commission
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83. [s 57] Restriction on disclosure of information
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84. [s 58] Chairperson, Members, Director General, Secretary Officers and other employees, etc., to be public
servants
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85. [s 59] Protection of action taken in good faith
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86. [s 60] Act to have overriding effect
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87. [s 61] Exclusion of jurisdiction of civil courts
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88. [s 62] Application of other laws not barred
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89. [s 63] Power to make rules
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90. [s 64] Power to make regulations
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91. [s 65] Power to remove difficulties
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92. [s 66] Repeal and saving
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INTRODUCTION TO COMPETITION LAW
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume
1 > The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 >
INTRODUCTION TO COMPETITION LAW
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
INTRODUCTION TO COMPETITION LAW
The competition regime of any country consists of competition policy and competition law. The competition policy addresses
competition distortions in policies relating to trade, commerce, industry, business, investment, disinvestment, fiscal taxation,
IPR, procurement, etc. and endeavours to provide competitive neutrality and level playing field. The competition law on the
other hand addresses anti-competitive conduct of the enterprises by a mix of preventive, punitive and remedial measures.1
“The ultimate goal of competition policy is to enhance consumer well-being. These policies are directed at ensuring that
markets function effectively. Competition policy towards the supply side of the market aims to ensure that consumers have
adequate and affordable choices. Another purpose in curbing anti-competitive behaviour is to ensure “level playing field” for
all market players that helps markets to be competitive. It sets “rules of the game” that protect the competition process itself,
rather than competitors in the market. In this way, the pursuit of fair and effective competition can contribute to improvements
in economic efficiency, economic growth and development of consumer welfare.”2
Competition law plays an important role in shaping the behavior of businesses whether it is business contract, merger/takeover,
coordinated action, pricing behavior or incentive to innovate. Competition law has assumed great importance in monitoring
national and international market and as businesses struggle to come to terms with the implication and impact of competition
law, they require awareness of the significance and effect of provisions of the law. Competition law in India aims at preventing
practices having an adverse effect on competition, promoting and sustaining competition in markets, protecting the interests of
consumers and ensuring freedom of trade carried on by other participants in markets. It is to ensure, that there is a healthy
competition in the market, as it brings about various benefits for the public at large as well as economy of the nation.
It frowns upon the activities of those undertakings (whether natural persons or legal entities) who, indulge in practices which
effect the competition adversely or take advantage of their dominant position, while undertaking their economic activities.3 It
also prohibits combinations, which cause or are likely to cause appreciable adverse effect on competition in the relevant market
in India.
Although, the Indian Parliament passed the Competition Act in 2002, the Act actually came in to effect in 2009 after its
constitutionality was established in 20054 facilitating the subsequent notification of important sections. Competition Act, 2002
is a unique example where the entire Act was not enforced by one single notification but different provisions of the Act were
enforced in bits and pieces by issuing various notifications over a span of time. The Competition Act was subsequently
amended by the Competition (Amendment) Act, 2007 and the Competition (Amendment) Act, 2009.
The Competition Commission of India is thus, one of the youngest regulatory agencies in the Indian business landscape.
However, even in this limited time frame, the Commission has been able to make its presence felt and it had to intervene on a
number of occasions to inform business and trade associations of the illegality of openly fixing prices or creating trade barriers.
The Commission has passed multiple orders against parties across sectors indulging in anti-competitive behavior. The
Monopolies and Restrictive Trade Practices Act, 1969 (MRTP Act) was the operative competition law of India until it was
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INTRODUCTION TO COMPETITION LAW
repealed in 2009. A discussion of the MRTP Act, 1969 is therefore, important at this juncture to determine the context in which
the Indian Legislature enacted new competition legislation, to discuss the kind of cases that were brought under MRTP Act,
1969 and to understand the competition law jurisprudence developed over the last four decades by the Supreme Court and the
Monopolies and Restrictive Trade Practices Commission (MRTPC).
1 CCI, Annual Report 2015/16, Available at :
http://www.cci.gov.in/sites/default/files/annual%20reports/annual%20report%202015-16.pdf. (last accessed in February 2019).
2 Para 17, Excel Crop Care Ltd v CCI, II (2017) CPJ 20
(SC) : 2017 (6) Scale 241 : [2017] 141 SCL 480
(SC).
3 CCI v Co-ordination Committee of Artists and Technicians of WB Film and Television,
AIR 2017 SC 1449 : (2017) 5 SCC 17 :
2017 (2) SCJ 655 : [2017] 140 SCL 655 (SC).
4 Brahm Datt v UOI, (2005) 2 SCC 431 .
End of Document
THE COMPETITION ACT, 2002
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > THE
COMPETITION ACT, 2002
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
THE COMPETITION ACT, 2002
( No. 12 of 2003 )
An act to provide, keeping in view of the economic development of the country for the establishment of a
Commission to prevent practices having adverse effect on competition, to promote and sustain competition in markets, to
protect the interests of consumers and to ensure freedom of trade carried on by other participants in markets, in India, and for
matters connected therewith or incidental thereto.
Be it enacted by Parliament in the Fifty-third Year of the Republic of India as follows:—
Competition Law is aimed at frowning upon the activities of those undertakings (whether natural persons or legal entities) who,
while undertaking their economic activities, indulge in practices which effect the competition adversely or take advantage of
their dominant position.5
The main objective of competition law is to promote economic efficiency using competition as one of the means of assisting the
creation of market responsive to consumer preferences. The advantages of perfect competition are three-fold: allocative efficiency,
which ensures the effective allocation of resources; productive efficiency, which ensures that costs of production are kept at a minimum;
and, dynamic efficiency, which promotes innovative practices. These factors, by and large, have been accepted all over the world as the
guiding principles for effective implementation of competition law.6
The Act is aimed at addressing the evils affecting the economic landscape of the country in which interest of the society and consumers
at large is directly involved.7
The Supreme Court in the case of Excel Crop Care Ltd v CCI8 outlined the benefits of competition policy as follows:
• Besides contributing to trade and investment policies, competition policy can accommodate other policy objectives
(both economic and social) such as the integration of national markets and promotion of regional integration, the
promotion or protection of small businesses, the promotion of technological advancement, the promotion of product
and process innovation, the promotion of industrial diversification, environment protection, fighting inflation, job
creation, equal treatment of workers according to race and gender or the promotion of welfare of particular consumer
groups.
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THE COMPETITION ACT, 2002
• competition policy may have a positive impact on employment policies, reducing redundant employment (which
often results from inefficiencies generated by large incumbents and from the fact that more dynamic enterprises are
prevented from entering the market) and favouring jobs creation by new efficient competitors.
• Competition policy complements trade policy, industrial policy and regulatory reform. Competition policy targets
business conduct that limits market access and which reduces actual and potential competition, while trade and
industrial policies encourage adjustment to the trade and industrial structures in order to promote productivity-based
growth and regulatory reform eliminates domestic Regulation that restricts entry and exit in the markets. Effective
competition policy can also increase investor confidence and prevent the benefits of trade from being lost through
anticompetitive practices. In this way, competition policy can be an important factor in enhancing the attractiveness of
an economy to foreign direct investment, and in maximizing the benefits of foreign investment.
• Competition plays an important role to play in improving productivity and, therefore, the growth prospects of an
economy. It is achieved in the following manner:
Pressure on firms to control costs: In a competitive environment, firms must constantly strive to lower their
production costs so that they can charge competitive prices, and they must also improve their goods and services
so that they correspond to consumer demands.
Easy market entry and exit: Entry and exit of firms reallocates resources from less to more efficient firms. Overall
productivity increases when an entrant is more efficient than the average incumbent and when an existing firm is
less efficient than the average incumbent. Entry and the threat of entry incentivises firms to continuously improve
in order not to lose market share to or be forced out of the market by new entrants.
Encouraging innovation: Innovation acts as a strong driver of economic growth through the introduction of new
or substantially improved products or services and the development of new and improved processes that lower the
cost and increase the efficiency of production. Incentives to innovate are affected by the degree and type of
competition in a market.
Pressure to Improve Infrastructure: Competition puts pressure on communities to keep local producers
competitive by improving roads, bridges, docks, airports, and communications, as well as improving educational
opportunities.
Benchmarking: Competition also can contribute to increased productivity by creating the possibility of
benchmarking. The productivity of a monopolist cannot be measured against rivals in the same geographic
market, but a dose of competition quickly will expose inferior performance. A monopolist may be content with
mediocre productivity but a firm battling in a competitive market cannot afford to fall behind, especially if the
investment community is benchmarking it against its rivals.
Productivity is increased through competition by putting pressure on firms to control costs as the producers strive
to lower their production costs so that they can charge competitive prices. It also improves the quality of their
goods and services so that they correspond to consumers’ demands.
Keeping in view the aforesaid objectives that needed to be achieved, Indian Parliament enacted Competition Act, 2002. The
need of such a law became all the more important in the wake of liberalisation and privatisation as it was found that the law
prevailing at that time, namely, MRTP Act, 1969 was not equipped adequately enough to tackle the competition aspects of the
Indian economy. The law enforcement agencies, which include CCI and COMPAT (now, NCLAT), have to ensure that these
objectives are fulfilled by curbing anti-competitive agreements.9 Competition law enforcement deals with anti-competitive
practices arising from the acquisition or exercise of undue-market power by firms that result in consumer harm in the forms of
higher prices, lower quality, limited choices and lack of innovation. Enforcement provides remedies to avoid situations that will
lead to decreased competition in markets.
Under the Competition Act, 2002, one of the key elements is economic development in India and the other is the protection of
consumers. Maintaining and sustaining competition in the markets in India is only for the benefit of the consumers. All these items are
mentioned in the Preamble to the Competition Act. The Preamble also talks of having freedom of trade for all the participants in India.
Freedom of trade means freedom of choice, lower switching costs and proper information system for the consumers to make the right
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THE COMPETITION ACT, 2002
choice. Freedom of trade amounts to the protection of consumers and participants in the market from anti-competitive agreements,
protection from cartels, from anti-competitive trade practices, control of markets, collusive bidding, refusal to deal, tie in arrangements
and abuse of dominance etc. Freedom of trade, equality before in law and liberty of thought are also incorporated in the Constitution of
India. Therefore the Competition Law expands the scope of Constitutional guarantees.10
GUIDING RULES OF CONSTRUCTION OF STATUTES
Language of the statute should be read as it is
The intention of the Legislature is to be gathered primarily from the language used, which means that attention should be paid
to what has been said as also to what has not been said.11 As a consequence, a construction which requires for its support,
addition or substitution of words or which results in rejection of words as meaningless has to be avoided.12
(a) Avoiding addition or substitution of words
As stated by the Privy Council:
We cannot aid the Legislature’s defective phrasing of an Act, we cannot add or mend and, by construction make up deficiencies which
are left there.13 It is contrary to all rules of construction to read words into an Act unless it is absolutely necessary to do so.14
Similarly, it is wrong and dangerous to proceed by substituting some other words for words of the statute.15
(b) Casus omissus
It is an application of the same principle that a matter which should have been but has not been provided for in a statute cannot
be supplied by courts, as to do so will be legislation and not construction.16 But there is no presumption that a casus omissus
exists and language permitting the court should avoid creating a casus omissus where there is none.
(c) Avoiding rejection of words
As on the one hand, it is not permissible to add words or to fill in a gap or lacuna, on the other hand effort should be made to
give meaning to each and every word used by the Legislature. “It is not a sound principle of construction”, said PATANJALI
SASTRI, CJ, “to brush aside words in a statute as being inapposite surplusage, if they can have appropriate application in
circumstances conceivably within the contemplation of the statute”.17 As pointed out by JAGANNADHADAS, J: “It is incumbent on
the court to avoid a construction, if reasonably permissible on the language, which would render a part of the statute devoid of
any meaning or application”.18 “In the interpretation of statutes”, observed by DAS GUPTA, J: “the courts always presume that
the Legislature inserted every part thereof for a purpose and the legislative intention is that every part of the statute should have
effect”.19 The Legislature is deemed not to waste its words or to say anything in vain,20 and a construction which attributes
redundancy to the Legislature will not be accepted except for compelling reasons.21
(d) Departure from the rule
In discharging its interpretative function, the court can correct obvious drafting errors and so, in suitable cases “the court will
add words, or omit words or substitute words”.22 But “before interpreting a statute in this way the Court must be abundantly
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THE COMPETITION ACT, 2002
sure of three matters: (1) the intended purpose of the statute or provision in question, (2) that by inadvertence, the draftsman
and Parliament failed to give effect to that purpose in the provision in question; and (3) the substance of the provision
Parliament would have made, although not necessarily the precise words Parliament would have used, had the error in the Bill
been noticed”.23
(e) Addition of words when permissible
As already noticed it is not allowable to read words in a statute which are not there, but “where the alternative lies between
either supplying by implication words which appear to have been accidentally omitted or adopting a construction which
deprives certain existing words of all meaning, it is permissible to supply the words”.24 A departure from the rule of literal
construction may be legitimate so as to avoid any part of the statute becoming meaningless.25 Words may also be read to give
effect to the intention of the Legislature, which is apparent from the Act read as a whole.26 Application of the mischief rule or
purposive construction may also enable reading of words by implication when there is no doubt about the purpose, which the
Parliament intended to achieve.27 But before any words are read to repair an omission in the Act, it should be possible to state
with certainty that these or similar words would have been inserted by the draftsman and approved by the Parliament had their
attention been drawn to the omission before the Bill passed into law.28
Explanation of the Rule
In the statement of the rule “the epithets “natural”, “ordinary”, “literal”, “grammatical” and “popular” are employed almost
interchangeably”,29 to convey the same idea. The word “primary” is also used in the same sense.30 When it is said that words
are to be understood first in their natural, ordinary or popular sense, what is meant is that the words must be ascribed that
natural, ordinary or popular meaning which they have in relation to the subject-matter with reference to which and the context
in which they have been used in the statute. BRETT, MR called it a “cardinal rule” that “Whenever you have to construe a statute
or document you do not construe it according to the mere ordinary general meaning of the words, but according to the ordinary
meaning of the words as applied to the subject-matter with regard to which they are used”.31
Exact meaning preferred to loose meaning
There is a presumption that words are used in an Act of Parliament correctly and exactly and not loosely and inexactly.32 In
ascribing to the word “contiguous” its exact meaning, i.e., “touching” in preference to its loose meaning, i.e., “neighbouring”,
LORD HEWART, CJ, stated:
It ought to be the rule, and we are glad to think that it is the rule, that words are used in an Act of Parliament correctly and exactly and
not loosely and inexactly. Upon those who assert that the rule has been broken, the burden of establishing their proposition lies heavily,
and they can discharge it only by pointing to something in the context which goes to show that the loose and inexact meaning must be
preferred.33
Regard to subject and object
As stated earlier and as approved by the Supreme Court:
The words of a statute, when there is doubt about their meaning, are to be understood in the sense in which they best harmonise with the
subject of the enactment and the object which the Legislature has in view. Their meaning is found not so much in a strict grammatical or
etymological propriety of language, nor even in its popular use, as in the subject or in the occasion on which they are used, and the
object to be attained.34
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THE COMPETITION ACT, 2002
Rule in Heydon’s case; Purposive Construction: Mischief Rule
When the material words are capable of bearing two or more constructions, the most firmly established rule for construction of
such words “of all statutes in general (be they penal or beneficial, restrictive or enlarging of the common law)” is the rule laid
down in Heydon’s case35 which has “now attained the status of a classic”.36 The rule which is also known as “purposive
construction” or “mischief rule”,37 enables consideration of four matters in construing an Act: (i) What was the law before the
making of the Act, (ii) What was the mischief or defect for which the law did not provide, (iii) What is the remedy that the Act
has provided, and (iv) What is the reason of the remedy. The rule then directs that the courts must adopt the construction which
“shall suppress the mischief and advance the remedy”.
Regard to consequences
If the language used is capable of bearing more than one construction, in selecting the true meaning regard, must be given to
the consequences resulting from adopting the alternative constructions. A construction that results in hardship, serious
inconvenience, injustice, absurdity or anomaly or which leads to inconsistency or uncertainty and friction in the system which
the statute purports to regulate has to be rejected and preference should be given to the construction which avoids such
results.38 This rule has no application when the words are susceptible to only one meaning and no alternative construction is
reasonably open.
Preamble of the Constitution
The drafting committee of the Constituent Assembly formulated the Preamble in the light of the Objectives Resolution but
restricted it “to defining the essential features of the new state and its basic socio-political objective”.39 The draft of the
Preamble was considered by the Assembly last after considering other parts of the Draft Constitution—“to see that it was in
conformity with the Constitution” and a motion was adopted by the Assembly that “the preamble stands part of the
Constitution”.40 The Preamble of the Constitution like the Preamble of any statute furnishes the key to open the mind of the
makers of the Constitution more so because the Constituent Assembly took great pains in formulating it so that it may reflect
the essential features and basic objectives of the Constitution. The Preamble is a part of the Constitution. The Constitution,
including the Preamble, must be read as a whole and in case of a doubt it should be interpreted consistent with its basic
structure to promote the great objectives stated in the Preamble.41 But the Preamble can neither be regarded as the source of
any substantive power nor as a source of any prohibition or limitation.42
Headings
The view is now settled that the headings or titles prefixed to sections or group of sections can be referred to in construing an
Act of the Legislature.43 But conflicting opinions have been expressed on the question as to what weight should be attached to
the headings. “A Heading”, according to one view, “is to be regarded as giving the key to the interpretation of the clauses
ranged under it, unless the wording is inconsistent with such interpretation;”44 and so the headings might be treated “as
preambles to the provisions following them”.45 But according to the other view, resort to the heading can only be taken when
the enacting words are ambiguous. So LORD GODDARD, CJ, expressed himself as follows:
While, however, the court is entitled to look at theheadings in an Act of Parliament to resolve any doubt they may have as to ambiguous
words, the law is clear that those headings cannot be used to give a different effect to clear words in the section where there cannot be
any doubt as to the ordinary meaning of the words.46
Similarly, it was said by PATANJALI SASTRI, J: “Nor can the title of a Chapter be legitimately used to restrict the plain terms of an
enactment”.47
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THE COMPETITION ACT, 2002
The courts are entitled to look at headings in an Act of Parliament to resolve any doubt they may have as to ambiguous words,
but headings cannot be used to give different effect to clear words in a section.48 “It is well settled that the headings prefixed to
sections or entries (of a Tariff Schedule) cannot control the plain words of the provision; they cannot also be referred to for the
purpose of construing the provision when the words used in the provision are clear and unambiguous; nor can they be used for
cutting down the plain meaning of the words in the provision. Only in the case of ambiguity or doubt the heading or sub-
heading may be referred to as an aid in construing the provision but even in such a case it could not be used for cutting down
the wide application of the clear words used in the provision”.49 Headings cannot be treated as rigid compartments.50 For the
role of headings see Forage & Co v Municipal Corp of Greater Bombay,51 a heading by itself does not control the meaning to
be given to the goods listed in a Schedule.52
Marginal notes
Although opinion is not uniform, the weight of authority is in favour of the view that the marginal note appended to a section
cannot be used for construing the section.53 LORD MACNAGHTEN emphatically stated:
It is well settled that marginal notes to the sections of an Act of Parliament cannot be referred to for the purpose of construing the Act.
The contrary opinion originated in a mistake, and has been exploded long ago. There seems to be no reason for giving the marginal
notes in an Indian statute any greater authority than the marginal notes in an English Act of Parliament.54
PATANJALI SASTRI, J, after referring to the above case with approval observed: “Marginal notes in an Indian statute, as in an Act
of Parliament cannot be referred to for the purpose of construing the statute”.55 At any rate, there can be no justification for
restricting the section by the marginal note,56 and the marginal note cannot certainly control the meaning of the body of the
section if the language employed therein is clear.57
Though in olden days it used to be thought that one could not have any regard to marginal notes in trying to ascertain the
meaning of a provision of an Act of Parliament, it was observed by the House of Lords in Director of Public Prosecutions v
Schildkamp,58 that it might be useful to “indicate the main subject with which the section deals though it is a poor guide to the
scope of the section (LORD REID) and as VISCOUNT DILHORNE pointed out, it is a convenient indication as to the main intention or
purpose of a section. But they warned that it cannot be a guide. In R v Kelt,59 LORD SCARMAN relied upon this decision. At any
rate, there can be no justification for restricting the section by the marginal note.60 The marginal note cannot certainly control
the meaning of the body of the section if the language employed therein is clear.61 In Balaji Textile Mills Pvt Ltd v Ashok
Kavle,62 it was observed that the marginal note does not in any way control the true scope and effect of section 41(2).
Punctuation
In England, before 1850, there was no punctuation in the manuscript copy of any Act, which received the Royal assent;
therefore, the Courts cannot have any regard to punctuation for construing the older Acts. Even as regards more modern Acts, it
is very doubtful if punctuation can be looked at for purposes of construction.63 The opinion on Indian statutes is not very much
different. Dealing with Regulation VIII of 1819, LORD HOBHOUSE stated: “It is an error to rely on punctuation in construing Acts
of the Legislature”.64
Illustrations
Illustrations appended to a section form part of the statute and although forming no part of the section, are of relevance and
value in the construction of the text of the section and they should not be readily rejected as repugnant to the section.65 But
illustrations cannot have the effect of modifying the language of the section and they can neither curtail nor expand the ambit of
the section, which alone forms the enactment.66
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Restrictive and extensive definitions
The Legislature has power to define a word even artificially.67 So the definition of a word in the definition section may either
be restrictive of its ordinary meaning or it may be extensive of the same. When a word is defined to “mean” such and such, the
definition is prima facie restrictive and exhaustive;68 whereas, where the word defined is declared to “include” such and such,
the definition is prima facie extensive.69
Proviso used as guide for construction of enactment
If the enacting portion of a section is not clear, a proviso appended to it may give an indication as to its true meaning. As stated
by LORD HERSCHELL:
Of course a proviso may be used to guide you in the selection of one or other of two possible constructions of the words to be found in
the enactment, and show when there is doubt about its scope, when it may reasonably admit of doubt as to having this scope or that,
which is the proper view to take of it.70
And LORD WATSON in the same case said:
I perfectly admit that there may be and are many cases in which the terms of an intelligible proviso may throw considerable light on the
ambiguous import of the statutory words.71
MUDHOLKAR, J, stated the rule thus:
There is no doubt that where the main provision is clear its effect cannot be cut down by the proviso. But where it is not clear, the
proviso, which cannot be presumed to be a surplusage can properly be looked into the ascertain the meaning and scope of the main
provision.72
At times added to allay fears
The general rule in construing an enactment containing a proviso is to construe them together without making either of them
redundant or otiose. Even if the enacting part’s clear effort is to be made to give some meaning to the proviso and to justify its
necessity. But a clause or a section worded as a proviso may not be a true proviso and may have been placed by way of
abundant caution. As was pointed out by LORD HERSCHELL:
I am satisfied that many instances might be given where provisos could be found in legislation that are meaningless because they have
been put in to allay fears when those fears were absolutely unfounded and no proviso at all was necessary to protect the persons at
whose instance they were inserted.73
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In such cases, the proviso has no effect whatsoever on the enactment and “cannot be relied on as controlling the operative
words”.74 But such a construction it appears will be reached only when the operative words of the enactment are abundantly
clear.
Distinction between proviso, exception and saving clause
A distinction is said to exist between the provisions worded as “proviso”, “Exception” or “Saving Clause”. “Exception” is
intended to restrain the enacting clause to particular cases; “Proviso” is used to remove special cases from the general
enactment and provide for them specially; and “Saving Clause” is used to preserve from destruction certain rights, remedies or
privileges already existing.75
Broad general rule of construction
The better rule appears to be to direct one’s attention to the substance rather than to the form adopted by the Legislature.
Explanation
An Explanation appended to a section to explain the meaning of words contained in the section. It becomes a part and parcel of
the enactment.76 The meaning to be given to an “Explanation” must depend upon its terms, and “no theory of its purpose can
be entertained unless it is to be inferred from the language used”.77 But if the language of the Explanation shows a purpose and
a construction consistent with that purpose can be reasonably placed upon it, that construction will be preferred as against any
other construction, which does not fit in with the description or the avowed purpose.
Natural Justice—Explained
Briefly stated “natural justice” means “fair play in action” and requirements of natural justice depend upon the facts of each
case. Therefore, in judging the validity of an order when the complaint is about non-compliance with the principles of natural
justice, in cases where the attack is not on ground of bias, a distinction has to be drawn between cases of “no notice” or “no
hearing” and cases of “no fair hearing” or “no adequate hearing”. If the defect is of the former category, it may automatically
make the order invalid, but if the defeat is of the latter category, it will have to be further examined whether the defect has
resulted in prejudice and failure of justice and it is only when such a conclusion is reached that the order may be declared
invalid.78 Even in cases of “no notice” or “no hearing”, the superior courts may in the exercise of their discretion decline to
interfere by judicial review (under Article 32 or 226 as the case may be) where on admitted or undisputed facts the view taken
by the impugned order is the only possible view and it would be futile to issue any writ to compel observance of natural
justice.79
It is a well-settled principle of administrative law that a quasi-judicial body should act according to the principles of natural
justice. “Natural justice is a great humanising principle intended to invest law with fairness and to secure justice and over the
years it has grown into a widely pervasive rule affecting large areas of administrative action”.80 By developing the principles
of natural justice, the courts have devised a kind of code of fair administrative procedure.81 According to LORD MORRIS,
“natural justice is but fairness writ large”.82 “The aim of the rules of natural justice is to secure justice or to put it negatively to
prevent miscarriage of justice. These rules can operate only in areas not covered by any law validly made. In other words, they
do not supplant the law of the land but supplement it. The concept of natural justice has undergone a great deal of change in
recent years. In the past, it was thought that it included just two rules”.83 But in the course of years, many more subsidiary rules
came to be added to the rules of natural justice. These and many other rules are merely extensions or refinements of the two
main principles which are the essential characteristics of natural justice and are the twin pillars supporting it, i.e., no man shall
be a judge in his own cause; and both sides shall be heard.
The requirements of natural justice vary with the varying constitutions of the different quasi-judicial authorities and the
statutory provisions under which they function. Hence, the question whether or not any rule of natural justice has been
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contravened in any particular case should be decided not under any pre-conceived notions, but in the light of the relevant
statutory provisions, the constitution of the Tribunal and the circumstances of each case.84 The extent and application of the
doctrine of natural justice cannot be imprisoned within the straitjacket of a rigid formula. The application of the doctrine
depends upon the nature of the jurisdiction conferred on the administrative authority, upon the character of the rights of the
persons affected, the scheme and policy of the statute and other relevant circumstances disclosed in the particular case.85
The Supreme Court has emphasised in KL Tripathi v State Bank of India,86
whether any particular principle of natural justice would be applicable to a particular situation, or the question whether there has been
any infraction of the application of that principle, has to be judged on the facts and circumstances of each case. The basic requirements
are that there must be fair play and the decision must be arrived at in a just and objective manner with regard to the relevance of the
materials and reasons .... the rules of natural justice are flexible and cannot be put on any rigid formula.
The requirement of acting judicially in essence is nothing but a requirement to act justly and fairly and not arbitrarily or capriciously.
The procedures which are considered inherent in the exercise of a judicial power are merely those which facilitate if not to ensure just
and fair decision. In recent years, the concept of quasi-judicial power has been undergoing a radical change. What was considered as an
administrative power some years back is now being considered as a quasi-judicial power.87
The writ of certiorari will lie where a judicial or quasi-judicial authority has violated the principles of natural justice even
though the authority has acted within its jurisdiction.
Rules of Natural Justice intend to invest law with fairness and secure justice. Negatively put, it prevents miscarriage of Justice.
They aim at preventing not only bias against any person but also the possibility of such bias.88
If the Authority hearing a matter is arbitrary, absent minded, unreasonable, or unspeaking, it cannot be denied that there is no
administration of fair play, i.e., natural justice.89
Not only should the affected know the case, which is made out against him, but he must also know what evidence has been
considered for drawing a presumption against him and he should be given a fair and real, i.e., not illusory opportunity to rebut
the same.90
Where there is violation of natural justice, no resultant or independent prejudice need be shown, as the denial of justice is, in
itself, sufficient prejudice and it is not an answer that even with observance of natural justice, the same conclusion would have
been reached.91
In brief, the essential requirement of natural justice is reasonable opportunity to the person charged and which in turn, means—
— a reasonable notice;
— an adequate notice;
— a fair consideration of the explanation;
— passing of a speaking order.
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These are plethora of cases decided by Indian High Courts and Supreme Court of India on the different facets of principles of
Natural Justice.92
Expression “As he deems fit; think necessary; consider necessary”
Where a statute provides for the grounds on which a person is entitled to a certain relief and confers power on a Tribunal to
pass orders “as it deems fit”, the exercise of the power to grant the relief is not dependent upon the discretion of the Tribunal.93
The words “as he deems fit” do not bestow a power to make any order on consideration de hors the statute which the
authorities consider best according to their notions of justice.94 Similarly, the words “shall take such action thereon as it may
think fit” do not give a discretion to take action outside the statute.95
The words “think necessary” or “consider necessary” have also been held to confer a discretion, but not an unfettered and
unlimited one96
Even where there is not much indication in the Act of the ground upon which discretion is to be exercised, it does not mean that
its exercise is dependent upon mere fancy of the Court or Tribunal or Authority concerned. It must be exercised in the words of
LORD HALSBURY,
according to the rules of reason and justice, not according to private opinion; according to law and not humour; it is to be not arbitrary,
vague and fanciful, but legal and regular.97
As stated by ROBSON:
Within certain limits, the individual who exercises discretion is quite free but if he ventures outside those frontiers his power ends, if he
takes into consideration matters ‘fantastic and foreign to subject-matter’, if he decides the matter, according ‘to his will and private
affections’, then he is regarded as having failed to exercise any discretion at all.98
Expression “Have regard to”
The words “Have regard to” when occurring in a statute should be construed in relation to the context and the subject matter.99
Ordinarily, these words are understood as “a guide and not a fetter”.100 They only oblige the authority on whom the power is
conferred “to consider as relevant data material to which it must have regard”.101 Therefore, when some statutory power is to
be exercised “having regard to” certain specified provisions, it only means that those matters must be taken into consideration.
But the statutory authority is not strictly bound by such provisions even if any of such provisions is worded in a negative form
and an exercise of the power does not become invalid or in excess of jurisdiction if those provisions are not strictly
followed.102
Conjunctive and disjunctive words “or” and “and”
The word “or” is normally disjunctive and “and” is normally conjunctive103 but at times they are read as vice versa to give
effect to the manifest intention of the Legislature as disclosed from the context.104 As stated by SCRUTTON, LJ: “You do
sometimes read “or” as “and” in a statute. But you do not do it unless you are obliged because “or” does not generally mean
“and” and “and” does not generally mean “or”“.105 Also, it was pointed out by LORD HALSBURY that the reading of “or” as
“and” is not to be resorted to, “unless some other part of the same statute or the clear intention of it requires that to be done”. if
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the literal reading of the words produces an unintelligible or absurd result “and” may be read for “or” and “or” for “and” even
though the result of so modifying the words is less favourable to the subject provided that the intention of the Legislature is
otherwise quite106 But clear.107 Conversely if reading of “and” as “or” produces grammatical distortion and makes no sense of
the portion following “and”, “or” cannot be read in place of “and”.108 The alternatives joined by “or” need not always be
mutually exclusive.109
Construction of general words
(a) General.—The normal rule is that, general words in a statute must receive a general construction unless there is something
in the Act itself, such as the subject matter with which the Act is dealing or the context in which the said words are used to
show the intention of the Legislature, that they must be given a restrictive meaning. of110 Their import to have wider effect
cannot be cut down by arbitrary addition or retrenchment in language.111 Since general words ordinarily have a general
meaning, the first task in construing such words, as in construing any word, is to give the words their plain and ordinary
meaning and then to see whether the context or some principle of construction requires any qualifications to be placed on the
meaning of that word.112
(b) Noscitur a Sociis.—The rule of construction noscitur a sociis as explained by LORD MACMILLAN means: “The meaning of a
word is to be judged by the company it keeps”.113 As stated by the Privy Council: “it is a legitimate rule of construction to
construe words in an Act of Parliament with reference to words found in immediate connection with them”.114 It is a rule
wider than the rule of ejusdem generis; rather the latter rule is only an application of the former. The rule has been lucidly
explained by GAJENDRAGADKAR, J in the following words:
This rule, according to MAXWELL,115 means that, when two or more words which are susceptible of analogous meaning are coupled
together, they are understood to be used in their cognate sense. They take as it were their colour from each other, that is, the more
general is restricted to a sense analogous to a less general. The same rule is thus interpreted in Words and Phrases.116 ‘Associated
words take their meaning from one another under the doctrine of noscitur a sociis, the philosophy of which is that the meaning of the
doubtful word may be ascertained by reference to the meaning of words associated with it; such doctrine is broader than the maxim
ejusdem generis’.
In fact, the latter maxim “is only an illustration or specific application of the broader maxim noscitur a sociis”. It must be
borne in mind that noscitur a sociis is merely a rule construction and it cannot prevail in cases where it is clear that the wider
words have been deliberately used in order to make the scope of the defined word correspondingly wider.
(c) Rule of ejusdem generis.—When particular words pertaining to a class, category or genus are followed by general words,
the general words are construed as limited to things of the same kind as those specified.117 This rule which is known as the rule
of ejusdem generis reflects an attempt “to reconcile incompatibility between the specific and general words in view of the other
rules of interpretation that all words in a statute are given effect if possible, that a statute is to be construed as a whole and that
no words in a statute are presumed to be superfluous”.118
(d) Reddendo Singula Singulis.—The rule may be stated from an Irish case in the following words:
Where there are general words of description, following an enumeration of particular things such general words are to be construed
distributively, reddendo singula singulis; and if the general words will apply to some things and not to others, the general words are to
be applied to those things to which they will, and not to those to which they will not apply; that rule is beyond all controversy.119
Legal proceedings under expired statute
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A question often arises in connection with legal proceedings in relation to matters connected with a temporary Act, whether
they can be continued or initiated after the Act has expired. The answer to such a question is again dependent upon the
construction of the Act as a whole.120 The Legislature very often enacts in the temporary Act a saving provision similar in
effect to section 6 of the General Clauses Act, 1897.121 But in the absence of such a provision, the normal rule is that
proceedings taken against a person under a temporary statute ipso facto terminate as soon as the statute expires.122 A person,
therefore, cannot be prosecuted and convicted for an offence against the Act after its expiration in the absence of a saving
provision; and if a prosecution has not ended before the date of expiry of the Act, it will automatically terminate as a result of
the termination of the Act.123 Contrary dicta, in this respect both by the CHIEF BARON LORD ABINGER and ALDERSON, B, JJ, in
Steavenson v Oliver124 have not been accepted as correct.125
Rule of conclusive evidence
The Legislature may make certain matters non-justiciable by enacting rules of conclusive evidence or conclusive proof. If by a
legislative command proof of A is made conclusive evidence or conclusive proof of B, the moment existence of A is established
the Court is bound to regard the existence of B as conclusively established and evidence cannot be let in to show the non-
existence of B. In effect, the existence or non-existence of B after proof of A ceases to be justiciable.126
Mens rea in Statutory Offences
General principles.—Existence of a guilty intent is an essential ingredient of a crime at common law and the principle is
expressed in the maxim—Actus non facit reum nisi mens sit rea.127 The Legislature may, however, create an offence of strict
liability where mens rea is wholly or partly not necessary.128 Such a measure is resorted to in public interest and moral
justification of laws of strict liability.
Provisions of General Clauses Act, 1897
(a) Recovery of fines.—Sections 63 to 70 of the Indian Penal Code (XLV of 1860) and the provisions of the Code of Criminal
Procedure, 1973 (Cr PC) for the time being in force in relation to the issue and the execution of warrants for the levy of fines
shall apply to all fines imposed under any Act, Regulation, rule or bye-law unless the Act, Regulation, rule or bye-law contains
an express provision to the contrary (section 25).
(b) Provision as to offences punishable under two or more enactments.—Where an act or omission constitutes an offence under
two or more enactments, then the offender shall be liable to be prosecuted and punished under either or any of those
enactments, but shall not be liable to be punished twice for the same offence (section 26).
Acts in pari materia
Acts are regarded to be in pari materia when they deal with the same person or thing or class. It is not enough that they deal
with a similar subject matter.129 The meaning of the phrase pari materia has been explained in an American case in the
following words: Statutes are in pari materia which relate to the same person or thing, or to the same class of persons or things.
The word par must not be confounded with the word simlis. It is used in opposition to it—intimating not likeness merely but
identity. It is a phrase applicable to public statutes or general laws made at different times and in reference to the same
subject.130 When the two pieces of legislation are of differing scopes, it cannot be said that they are in pari materia.131
Non obstante clause
The words “notwithstanding anything contained ... ”, characterise the non obstante clause. It is generally included to give an
overriding effect to one clause over another. If there is any inconsistency or departure between the non obstante clause and
another provision, it is the non obstante clause which will prevail.132
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Sometimes one finds two or more enactments operating in the same field and each containing a non obstante clause stating that
its provisions will have effect “notwithstanding anything inconsistent therewith contained in any other law for the time being in
force”. The conflict in such cases is resolved on consideration of purpose and policy underlying the enactments and the
language used in them. Another test that is applied is that the later enactment normally prevails over the earlier one.133 It is
also relevant to consider as to whether any of the two enactments can be described a special one; in that case the special one
may prevail over the more general one notwithstanding that the general one is later in time.134
The expression “notwithstanding in any other law” occurring in a section of an Act cannot be construed to take away the effect
of any provision of the Act in which that section appears.135
Deeming provisions
When a person is “deemed to be” something, the only meaning possible is that whereas he is not in reality that something, the
Act of Parliament requires him to be treated as if he were.136 It is a well-settled rule of interpretation that in construing the
scope of a legal fiction it would be proper and even necessary to assume all those facts on which alone the fiction can
operate.137
A note on deeming provisions can never be complete without reference to the following outstanding passage in East End
Dwellings Co Ltd v Finsbury Borough Council,138 per LORD ASQUITH:
If you are bidden to treat an imaginary state of affairs as real, you must surely, unless prohibited from doing so, also imagine as real the
consequences and incidents which, if the putative state of affairs had in fact existed, must inevitably have flowed from or accompanied
it. One of these in this case is emancipation from the 1939 level of rents. The statute says that you must imagine a certain state of
affairs; it does not say that having done so, you must cause or permit your imagination to boggle when it comes to the inevitable
corollaries of that state of affairs.
The word “deemed” refers to “what is supposed to be” and not “what actually is”. It rather suggests that something is being
assumed as true for certain purposes though it is not so in realty.139 The word “deemed” is used a great deal in modern
legislation. Sometimes it is used to give an artificial construction to a word or a phrase that would not otherwise prevail.
Sometimes it is used to put beyond doubt a particular construction that might otherwise be uncertain. Sometimes it is used to
give a comprehensive description that includes what is obvious, what is uncertain, and what is, in the ordinary sense,
impossible.140
Beneficial Legislation
A construction which will fructify the legislative intent is to be preferred.141 It is the duty of the court to interpret a beneficial
provision so liberally so as to give it a wider meaning instead of giving it a restrictive meaning, which would negate its very
object.142
Preamble—Purpose and Nature
The Preamble of a statute is its introductory part, which states the reasons and intent of the law. It contains, in a nutshell, the
ideals and the aspirations, and the objects sought to be achieved by the enactment of the statute. It portrays the intent of the
framers and the mischiefs to be remedied. It affords, in general, a key to the construction of the statute, a clue to discover the
plain object and general intention of the legislature in passing the Act and helps in finding a solution of doubtful points. Where
the Act is ambiguous, the Preamble affords an intrinsic aid in the interpretation of the Act.143 In Kamalpura Kochunni v State
of Madras,144 the Supreme Court pointed out that the Preamble may be legitimately consulted in case any ambiguity arises in
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the construction of an Act and it may also be useful to fix the meaning of words used so as to keep the effect of the statute
within its real scope.
Though the Preamble is a part of the statute, it is not an operating part thereof. The aid of the Preamble can be taken only when,
there is some doubt about the meaning of the operative part of the Act. Two propositions are quite clear, one, that the Preamble
affords useful light as to what a statute intends to reach, and another, that if an enactment is in itself clear and unambiguous,
then no Preamble can qualify or cut down the enactment. The Preamble, undoubtedly, throws light on the intent and design of
the Legislature and indicates the scope and purpose of the legislation itself, but it should not be read as a part of a particular
section of the Act. The enacting words of the Act are not always to be limited by the words of the Preamble and must, in many
instances, go beyond it, and where they do so, they cannot be cut down by reference to it. On the other hand, the Preamble does
not extend the provisions of the Act beyond what the enacting part of the Act contains. The function of the Preamble is to
explain and not to confer power.145 It cannot over-ride enacting part of the statute. Where the enacting part of the statute is not
exactly co-extensive with the Preamble, the former, if expressed in clear and unequivocal terms, will over-ride the latter.146
The words of the operating sections of the Act must be given effect to irrespective of inferences to be drawn from the Preamble
if the words themselves are clear and capable of only one meaning.147 The Preamble cannot be invoked for creating ambiguity
in the Act. It cannot also be invoked to determine the vires of the Act. In other words, it is well settled that the Preamble can
neither expand nor control the scope of application of the enacting clause, when the latter is clear and explicit.148
COMPETITION ACT, 2002
Statement of Objects and Reasons [As stated in the Competition (Amendment) Bill, 2007.
STATEMENT OF OBJECTS AND REASONS
[As stated in the Competition (Amendment) Bill, 2007]
The Competition Act was enacted in 2002 keeping in view the economic developments that resulted in opening up of the Indian
economy, removal of controls and consequent economic liberalisation which required that the Indian economy be enabled to allow
competition in the market from within the country and outside. The Competition Act, 2002 (hereinafter referred to as the Act) provided
for the establishment of a Competition Commission, (the Commission) to prevent practices having adverse effect on competition, to
promote and sustain competition in markets, to protect the interests of consumers and to ensure freedom of trade carried on by other
participants in markets in India, and for matters connected therewith or incidental thereto.
2. The Competition Commission of India was established on the 14 October 2003 but could not be made functional due to filing of a
writ petition before the Hon’ble Supreme Court. While disposing of the writ petition on the 20 January 2005, the Hon’ble Supreme
Court held that if an expert body is to be created by the Union Government, it might be appropriate for the Government to consider the
creation of two separate bodies, one with expertise for advisory and regulatory functions and the other for adjudicatory functions based
on the doctrine of separation of powers recognised by the Constitution. Keeping in view the judgment of the Hon’ble Supreme Court,
the Competition (Amendment) Bill, 2006 was introduced in Lok Sabha on the 9th March, 2006 and the same was referred for
examination and report to the parliamentary Standing Committee. Taking into account the recommendation of the Committee, the
Competition (Amendment) Bill, 2007 is being introduced.
3. The Competition (Amendment) Bill, 2007, inter alia, provides for the following:—
(a) to Commission shall be an expert body which would function as a market regulator for preventing and regulating anti-
competitive practices in the country in accordance with the Act and it would also have advisory and advocacy functions in its
role as a regulator;
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(b) for mandatory notice of merger or combination by a person or enterprise to the Commission within thirty days and to
empower the Commission for imposing a penalty of up to 1% of the total turnover or the assets, whichever is higher, on a
person or enterprise which fails to give notice of merger or combination to the Commission;
(c) for establishment of the Competition Appellate Tribunal, which shall be a three member quasi-judicial body headed by a
person who is or has been a Judge of the Supreme Court or the Chief Justice of a High Court to hear and dispose of appeals
against any direction issued or decision made or order passed by the Commission;
(d) for adjudication by the Competition Appellate Tribunal of claims on compensation and passing of orders for the recovery of
compensation from any enterprise for any loss or damage suffered as a result of any contravention of the provisions of the
Act;
(e) for implementation of the orders of the Competition Appellate Tribunal as a decree of a civil court;
(f) for filing of appeal against the orders of the Competition Appellate Tribunal to the Supreme Court;
(g) for imposition of a penalty by the Commission for contravention of its orders and in certain cases of continued contravention
a penalty which may extend to Rs. 25 crores or imprisonment which may extend to three years or with both as the Chief
Metropolitan Magistrate, Delhi may deem fit, may be imposed.
4. The Bill also aims at continuation of the Monopolies and Restrictive Trade Practices Commission (MRTPC) till two years after
constitution of Competition Commission, for trying pending cases under the Monopolies and Restrictive Trade Practices Act, 1969 after
which it would stand dissolved. The Bill also provides that MRTPC would not entertain any new cases after the Competition
Commission is duly constituted. Cases still remaining pending after this two year period, would be transferred to Competition Appellate
Tribunal or the National Commission under the Consumer Protection Act, 1986 depending on the nature of cases.
5. The Bill seeks to achieve the above objectives.
GENESIS AND SCOPE OF THE ACT
The intent of enacting a new law on competition was disclosed by the Government through the Finance Minister’s Budget
Speech, 1999/2000 (dated 27 February1999), as under:
The Monopolies and Restrictive Trade Practices Act has become obsolete in certain areas in the light of international economic
developments relating to competition laws. We need to shift our focus from curbing monopolies to promoting competition. Government
has decided to appoint a Committee to examine this range of issues and propose a modern competition law suitable for our conditions.
On 25 October 1999, the Government of India constituted a High Level Committee to examine the then existing provisions of
the MRTP Act, 1969 for shifting the focus of the law from curbing monopolies to promoting competition. The Committee was
requested to suggest a modern competition law in line with international developments to suit Indian conditions.
Constitution of the Committee and Terms of Reference
No: 1/9/99-CL- V
Government of India
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Ministry of Law, Justice and Company Affairs,
Department of Company Affairs
5th Floor, A wing, Shastri Bhavan,
New Delhi-110 001
Dated: 25 October 1999
Order
Subject: Constitution of a Committee to examine the provisions of the Monopolies and Restrictive Trade Practices Act, 1969
and to propose a modern Competition Law
I am directed to say that the Government has decided to constitute a Committee consisting of persons with knowledge of the
Monopolies & Restrictive Trade Practices Act, 1969 and modern competition laws to examine the existing MRTP Act, 1969 for
shifting the focus of the law from curbing monopolies to promoting competition and to suggest a modern competition law in
line with international developments to suit Indian conditions.
2. The terms of reference of this Committee would be to recommend:—
(a) a suitable legislative framework, in the light of international economic developments and the need to promote
competition, relating to competition law, including law relating to mergers and demergers. Such a legislative
framework could entail a new law or appropriate amendments to the MRTP Act, 1969:
(b) changes relating to legal provisions in respect of restrictive trade practices after reviewing the existing provisions and
ensuring clear demarcation between the jurisdiction of the MRTP Commission and the Consumer Courts under the
Consumer Protection Act, 1986 so as to avoid any overlapping of jurisdiction; and
(c) suitable administrative measures required in order to implement the proposed recommendations including
restructuring the MRTP Commission and the location of Benches outside Delhi for expeditious disposal of cases
pending before the Commission.
3. Committee will consist of:
(1) Shri S.V.S. Raghavan, Chennai Chairman
(2) Shri K.B. Dadiseth, Chairman, Hindustan Member
Lever Limited, Mumbai
(3) Shri Rakesh Mohan, Director General, Member
National Council Applied Economic
Research, New Delhi.of
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(4) Shri H.D. Shourie*, Consumer Activist, New Member
Delhi
(5) Dr. S. Chakravarthy, Retired Member, Member
MRTPC, New Delhi
(6) Shri Sudhir Mulji, Economic Journalist, Member
Mumbai
(7) Shri P.M. Narielvala, Chartered Accountant, Member
Calcutta
(8) Ms. Pallavi Shroff: Advocate/Solicitor, New Member
Delhi
(9) Shri G.P. Prabhu, Joint Secretary, DCA Member/Secretary
4. The Committee would function under the Chairman and would devise its own procedure of working under guidance of the
Chairman. The Committee may consult other Experts in the field as may be considered necessary. The Committee will also
consult Law commission and incorporate their views in the Report to be submitted to the Government.
5. The Committee will submit its report within a period of three months from the date of its first meeting.**
6. Secretarial assistance to the Committee will be provided by Department of Company Affairs.
Joint Secretary to the Govt. of India
Name Change of the Committee
No: 1/9/99-CL- V
Government of India Ministry of Law, Justice and Company Affairs,
Department of Company Affairs
5th Floor, A wing, Shastri Bhavan,
New Delhi-110 001
Dated: 27 April 2000
Order
Subject: Constitution of the Committee to examine the provisions of the MRTP Act, 1969 and to propose a modern Competition
Law.
In continuation of this Department Order of even number dated 25 October 1999 read with Corrigendum of even number dated
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15 December 1999 and Corrigendum Order of even number dated 3 April 2000, the name of this Committee is revised as “The
High Level Committee on Competition Policy and Law”.
Under Secretary to the Govt. of India
1. The Committee submitted its Report to the Central Government on 22 May 2000. The High-Level Committee in its Report,
in main, recommended for enactment of a Competition Law which should prohibit practices which have appreciable adverse
effect on competition, like:
• anti-competitive agreements between enterprises (like cartels)
• abuse of dominance
• undesirable “Combinations”—that is acquisitions/mergers/amalgamations of a certain size
Executive Summary of the Report of the Committee
In the absence of a generally accepted definition of the phenomenon of Competition, it has to be regarded as the object fostered
and protected by Competition Policy and Law. Competition, which is workable and effective, is generally characterised by a
sequence of pushing and pursuing acts of the agents in a particular market. Competition is the foundation of an efficiently
working market system, which has several advantages over a planned economy and constitutes the precondition which protects
freedom of decision and action of self-interested individuals or entities from leading to anarchy or chaos but rather to
economically optimal, socially fair and desirable market results.
Pre-requisites for a Competition Policy
Competition process is likely to run smoothly and thus, lead to desirable results, only if several pre-requisites are met. Micro-
industrial Governmental policies that may support or adversely impinge on the application of competition policy would
include:
• Industrial Policy
• Reservation for the Small Scale Industrial Sector
• Privatisation and Regulatory Reforms
• Trade Policy, including Tariffs, Quotas, Subsidies, Anti-dumping action etc.
• State Monopolies Policy
• Labour Policy
There could be serious conflicts between Trade Policy and Competition Policy. In this context, therefore, in respect of the
above policies, the Committee recommends as follows:—
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(a) The essence and spirit of competition should be preserved while positing the Competition Policy and seeking to
harmonise the conflicts between Competition Policy and Governmental Policy.
(b) The Industries (Development and Regulation) Act, 1951 may no longer be necessary except for location (avoidance of
urban-centric location), for environmental protection and for monuments and National heritage protection
considerations etc.
(c) There should be no reservation for the small-scale sector of products, which are on Open General Licence (OGL) for
imports. There should be a progressive reduction and ultimate elimination of reservation of products for the small-
scale industrial and handloom sectors. Cheaper credit in the form of bank credit rate linked to the inflation rate should
be extended to these sectors to enable them to become and be competitive. The threshold limit for the small-scale
industrial and small-scale-service sectors need to be increased.
(d) The economic reforms of liberalisation, deregulation and privatisation need to be further progressed and should be so
designed that they strengthen the Competition Policy and vice-versa.
(e) All trade policies should be open, non-discriminatory and rule-bound. They should fall within the contours of the
competition principles. All physical and fiscal controls on the movement of goods throughout the country should be
abolished.
(f) Government should divest its shares and assets in State monopolies and public enterprises and privatise them in all
sectors other than those subserving defence and security needs and sovereign functions. All State monopolies and
public enterprises will be under the surveillance of Competition Policy to prevent monopolistic, restrictive and unfair
trade practices on their part. Any form of discrimination in favour of the public sector and Government commercial
enterprises except where they relate to security concerns must be removed. However, care should be taken not to
create private monopolies out of public monopolies.
(g) The Industrial Disputes Act, 1947 and the connected statutes need to be amended to provide for an easy exit to the
non-viable, ill-managed and inefficient units subject to their legal obligations in respect of their liabilities
(h) Structures like BIFR need to be eliminated. It is better to repeal the Sick Industries Act itself.
(i) Concerns relating to, trade dimensions vis-a-vis WTO agreements and principles need to be squarely addressed.
(j) Urban Land Ceiling Act should be repealed.
(k) All our recommendations apply to all industrial and professional enterprises including those in the public as well as
private sector.
The Committee is of the view that the Government while enacting an appropriate Competition Law for the country needs to
address the pre-requisites as recommended above. In a manner of speaking, the pre-requisites will constitute a foundation over
which the edifice of Competition Policy and Competition Law needs to be built.
Contours of Competition Policy
The focus for most Competition Laws today in the world is in three areas:
• Agreement among enterprises
• Abuse of dominance
• Mergers or, more generally, Combinations among enterprises.
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Agreement among Enterprises
Agreements between firms have the potential of restricting competition. Most laws make a distinction between “Horizontal”
and “Vertical” agreements between firms. Horizontal agreements refer to agreements among competitors and vertical
agreements to an actual or potential relationship of buying or selling to each other.
The Committee is of the view that both these types of agreements should be covered by the Competition Law, if it is
established that they prejudice competition. Horizontal agreements relating to prices, quantities, bids (collusive tendering) and
market sharing are particularly anti-competitive. Vertical agreements like tie-in arrangements, exclusive supply/distribution
agreements and refusal to deal are also generally anti-competitive.
While vertical agreements are generally treated more leniently than horizontal agreements, the following approach is
recommended by the Committee:
• Certain anti-competitive practices should be presumed to be illegal.
• Agreements that contribute to the improvement of production and distribution and promote technical and economic
progress, while allowing consumers a fair share of the benefits, should be dealt with leniently.
• The “relevant market” should be clearly identified in the context of horizontal agreements.
• Blatant price, quantity, bid and territory sharing agreements and cartels should be presumed to be illegal.
Abuse of dominance
Dominance needs to be appropriately defined in the Competition Law in terms of “the position of strength enjoyed by an
undertaking which enables it to operate independently of competitive pressure in the relevant market and also to appreciably
affect the relevant market, competitors and consumers by its actions”. The definition needs to be also in terms of “substantial
impact on the market including creating barriers to new entrants”. The Committee does not consider it desirable to prescribe
any arithmetical figure like percentage of market share to define dominance, as a firm with a high market share may conduct
business ethically if there is a strong and effective rival in the relevant market and likewise, a firm with a small market share
may abuse its market power, if its competitors diffusedly hold the remaining market share.
Abuse of dominance rather than dominance should be the key for Competition Policy/Law. Abuse of dominance will include
practices like restriction of quantities, markets and technical development. Abuse of dominance which prevents, restricts or
distorts competition needs to be frowned upon by Competition Law. Relevant market needs to be an important factor in
determining abuse of dominance. Key questions for adjudication on abuse of dominance could include:
• How will the practice harm competition?
• Will it deter or prevent entry?
• Will it reduce incentives of the firm and its rivals to compete aggressively?
• Will it provide the dominant firm with an additional capacity to raise prices?
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• Will it prevent investments in research and innovation?
• Do consumers benefit from lower prices and/or greater product and service availability?
Predatory pricing, which is defined as the situation where a firm with market power prices below costs so as to drive
competitors out of the market, is generally prejudicial to consumer interest in the long run. This is because there is the
possibility that after the competitors are eliminated and the offending firm has recouped its losses (consequent to predatory
pricing) subsequently, it starts functioning as a monopolist. The Committee, however, feels that lower prices charged by the
firm may sometimes constitute a gain in social welfare for the consumers. Instead of always taking an adverse view, it is
desirable in the Committee’s view that predatory pricing may be treated as an abuse, only if it is indulged in by a dominant
undertaking.
By and large, abuse of dominance and exclusionary practices will need to be dealt with by the adjudicating Authority on the
rule of reason basis.
Mergers
Mergers need to be discouraged if they reduce or harm competition. The Committee, however, cautions against monitoring of
all mergers by the adjudicating Authority, for the reason that very few Indian companies are of international size and that in the
light of continuing economic reforms, opening up of trade and foreign investment. a great deal of corporate restructuring is
taking place in the country and that there is a need for mergers, amalgamations etc. as part of the growing economic process
before India can be on an equal footing to compete with global giants, as long as the mergers are not prejudicial to consumer
interest.
It is in this context that the Committee recommends that mergers beyond a threshold limit in terms of assets should require pre-
notification. The threshold limit suggested is the value of assets of the merged entity at Rs 500 crores or more and of the group
to which merged entity belongs at Rs 2000 crores or more both of which is linked to Wholesale Price Index. The Committee
feels that pre-notification of mergers above the specified threshold should be sufficient in the present economic milieu, as it
would most likely reduce the social costs of potential post-merger unscrambling. The potential efficiency losses from the
merger needs to be weighed against potential gains in adjudicating a merger. In respect of a merger requiring pre-notification, if
within a specified time period of 90 days, the adjudicating Authority does not, through a reasoned order, prohibit the merger, it
should be deemed to have been approved.
The Competition Law needs to be designed and implemented in terms of the contours enunciated above.
Competition Policy/Law needs to have necessary provisions and teeth to examine and adjudicate upon anti-competition
practices that may accompany or follow developments arising out of the implementation of WTO Agreements. In particular,
agreements relating to foreign investment, intellectual property rights (IPR), subsidies, countervailing duties, anti-dumping
measures, sanitary and phytosanitary measures, technical barriers to trade and Government procurement need to be reckoned in
the Competition Policy/Law with a view to dealing with anti-competition practices.
IPR and Competition Policy:149 All forms of Intellectual Property have the potential to raise Competition Policy/Law
problems. Intellectual Property provides exclusive rights to the holders to perform a productive or commercial activity, but this
does not include the right to exert restrictive or monopoly power in a market or society. Undoubtedly, it is desirable that in the
interest of human creativity, which needs to be encouraged and rewarded, Intellectual Property Rights need to be provided.
This right enables the holder (creator) to prevent others from using his/her inventions, designs or other creations. But at the
same time, there is a need to curb and prevent anti-competition behaviour that may surface in the exercise of the Intellectual
Property Rights.
There is, in some cases, a dichotomy between Intellectual Property Rights and Competition Policy/Law. The former endangers
competition while the latter engenders competition. There is a need to appreciate the distinction between the existence of a
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right and its exercise. During the exercise of a right, if any anti-competitive trade practice or conduct is visible to the detriment
of consumer interest or public interest, it ought to be assailed under the Competition Policy/Law.
Furthermore, the Committee recommends as follows regarding State Monopolies, Regulatory Authorities, Government
procurement, Foreign Companies, Professions and Standards:
• The State Monopolies, Government procurement and foreign companies should be subject to the Competition Law.
The Law should cover all consumers who purchase goods or services, regardless of the purpose for which the
purchase is made.
• All decisions of the Regulatory Authorities can be examined under the touchstone of Competition Law by the CCI.
• Bodies administering the various professions should use their autonomy and privileges for regulating the standard and
quality of the profession and not to limit competition. In the competitive and globalised environment there is need to
encourage size, growth and international affiliation of professional firms. This should be encouraged and restraints
should be removed.
• If quality and safety standards for goods and services are designed to prevent market access, such practices will
constitute abuse of dominance/exclusionary practices.
The Indian Competition Act
A new law called the Indian Competition Act may be enacted on the lines recommended in the report.
The MRTP Act, 1969 may be repealed and the MRTP Commission wound up. The provisions relating to unfair trade practices
need not figure in the Indian Competition Act, 2002 as they are presently covered by the Consumer Protection Act, 1986.
The pending UTP cases in the MRTP Commission may be transferred to the concerned Consumer Courts under the Consumer
Protection Act, 1986. The pending MTP and RTP cases in MRTP Commission may be taken up for adjudication by the CCI
from the stages they are in.
Competition Commission
A Competition Law Authority christened “Competition Commission of India” (CCI) may be established to implement the
Indian Competition Act, 2002. It will hear competition cases and also play the role of competition advocacy.
CCI should be a multi-member body comprised of eminent and erudite persons of integrity and objectivity from the fields of
Judiciary, Economics, Law, International Trade, Commerce, Industry, Accountancy, Public Affairs and Administration. The
investigative, prosecutorial and adjudicative functions will be separate.
There will be a collegium for choosing the Chairperson and Members of the CCI. The Chairperson can be from any of the
fields/disciplines listed above and should be an eminent person who has considerable exposure and knowledge in International
Trade, Commerce and complicated issues relating to Trade. The maximum age limit for the Chairperson may be at 70 years
and that of the members 65 years. The terms of the Chairperson and Members of the CCI may be five years at a time. The
Chairperson will hold the rank and status and be entitled to the pay and perquisites of a judge of the Supreme Court and the
Members, those of a judge of the High Court. They can be removed from the office by the Government only with the
concurrence of the Supreme Court. A code of ethics needs to be stipulated for observance by them.
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The Committee suggests that the Headquarters of the CCI may be located in a metropolitan city other than Delhi with
permanent Benches at Delhi, Calcutta, Mumbai and Chennai with further Benches to be decided by the Government from time
to time.
Two members of the CCI will constitute the Mergers Commission. CCI will have not less than 10 members including the
Chairperson. The Headquarters will have one Bench of two members Mergers Commission. It will also have another Bench of
two members to deal with the competition matters. All the other three metropolitan cities will have one bench of two members
each to deal with the competition matters.
Each Bench must have a judicial member
The CCI will have the power to formulate its own rules and regulations to govern procedure and conduct of its business and
also its administration. It will have powers to impose fines and sentences of imprisonment, to award compensation and to
review its own orders.
The trial before the CCI should be summary in nature. It will have limited powers of contempt. It will also have powers to
review the orders of other regulatory authorities on the touchstone of competition. There will be a provision for advance ruling.
The investigative and prosecutorial wings will be separate but headed jointly by the Director General (Investigation &
Prosecution).
All complaints will be made only to CCI. The Director General (Investigation & Prosecution) will only take up such cases
referred to him by CCI. He will not have suo motu powers of investigation.
General
The Committee recommends that its report needs to be dealt with as a whole and not in parts, as competition dimension is the
veneer running right through.
Outcome
The High Level Committee, under the Chairmanship of Sh SVS Raghavan, submitted its report to the Central Government on
22 May 2000. Based on the recommendations as well as the other suggestions, the Competition Bill, 2001 was introduced in
the Parliament and the Competition Act, 2002 was enacted. The Competition Act, 2002 received the assent of the President on
13 January 2003 and the provisions of the Competition Act, 2002 came into force on different dates as notified. The first such
set of provisions came into force on 31 March 2003. Notification was issued by the Central Government wherein, 31 March
2003 was specified as the appointed date. However, vide this notification, some of the provisions of the Competition Act, 2002,
and not all the provisions, were enforced. Many other provisions came into force vide notification dated 19 June 2003 and
thereafter, by notification dated 20 December 2007 some more provisions were notified. Section 3 of the Competition Act, 2002
along with many other provisions came into force on 20 May 2009 vide SO 1241(E) dated 15 May 2009 on which date the said
notification was published in the Gazette of India as well. Remaining provisions were notified by subsequent notifications. It is,
thus, a unique example where the entire Act was not enforced by one single notification but different provisions of the
Competition Act, 2002 were enforced in bits and pieces by issuing various notifications over a span of time. The Competition
Act, 2002 has been subsequently amended by the Competition (Amendment) Act, 2007 and the Competition (Amendment) Act,
2009.
SALIENT FEATURES OF THE COMPETITION ACT, 2002
The objectives of the Competition Act, 2002 is to provide for the establishment of a Commission to prevent practices having
adverse effect on competition, to promote and sustain competition in markets in India, to protect the interests of consumers, and
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to ensure freedom of trade carried on by participants in market in India and for matters connected therewith or incidental
thereto.
The Competition Act, 2002 mainly covers the following aspects:
(i) Prohibition of anti-competitive agreements;
(ii) Prohibition of abuse of dominance;
(iii) Regulation of Combinations (acquisitions, mergers and amalgamations of certain size);
(iv) Competition Advocacy.
150The Central Government may, by notification, exempt from the application of this Act, or any provision thereof, and for
such period as it may specify in such notification—
(a) any class of enterprises if such exemption is necessary in the interest of security of the state or public interest;
(b) any practice or agreement arising out of and in accordance with any obligation assumed by India under any treaty,
agreement or convention with any other country or countries;
(c) any enterprise which performs a sovereign function on behalf of the Central Government or a State Government.
(If the enterprise is engaged also in activity(ies) other than relating to sovereign function(s), the exemption would cover the
sovereign function(s), only).
The Competition Act, 2002 would curb those practices which would have an appreciable adverse effect on Competition. It
identifies three such practices, as under:
(i) Anti-competitive Agreements: (Horizontal Agreements, and Vertical Agreements).151
An agreement, as defined in the Competition Act, 2002, includes any arrangement, understanding or concerted action entered
into between parties. It need not be in writing or formal or intended to be enforceable in law.
An anti-competitive agreement is an agreement having appreciable adverse effect on competition. Anti-competitive agreements
include152:—
•
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• agreement to limit production & supply
• agreement to allocate markets
• agreement to fix price
• bid rigging or collusive bidding
• conditional purchase/sale (tie-in arrangement)
• exclusive supply/distribution arrangement
• resale price maintenance
• refusal to deal
(ii) Abuse of Dominance.153
Dominance refers to a position of strength which enables a dominant firm to operate independently of
competitive forces or to affect its competitors or consumers or the market in its favour. Abuse of dominant
position impedes fair competition between firms, exploits consumers and makes it difficult for the other players
to compete with the dominant undertaking on merit. Abuse of dominant position includes imposing unfair
conditions or price, predatory pricing, limiting production/market, creating barriers to entry and applying
dissimilar conditions to similar transactions.
(iii) Combination is achieved inter alia through acquisition of shares, voting rights, control or assets by an enterprise of
another enterprise, and amalgamation or merger between or amongst enterprises.154 The law is not against every
acquisition, merger or amalgamation, but it covers only those acquisitions, mergers and amalgamations which are of a
certain prescribed size—size in terms of; (a) assets or (b) turnover. Acquisition, merger or amalgamation would
become “Combination” when:155
THRESHOLDS FOR FILING NOTICE 58
ASSETS TURNOVER
ENTERPRISE LEVEL INDIA > 2000 INR CRORE OR > 6000 INR CRORE
WORLDWIDE WITH > USD 1 BN WITH > USD 3 BN WITH
INDIA LEG AT LEAST > 1000 AT LEAST > 3000
INR CRORE IN INDIA INR CRORE IN INDIA
OR
GROUP LEVEL INDIA > 8000 INR CRORE OR > 24000 INR CRORE
WORLDWIDE WITH > USD 4 BN WITH > USD 12 BN WITH
INDIA LEG AT LEAST > 1000 AT LEAST > 3000
INR CRORE IN INDIA INR CRORE IN INDIA
The Competition Act, 2002 provides for an adjudicating machinery by way of establishing the Competition Commission of
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India (CCI), which would be a Quasi-Judicial Body. CCI will have a Chairperson and not less than two and not more than
six156 other Members, as may be specified by the Central Government.
Enquiry may be initiated by the Commission into anti-competitive agreements/abuse dominance:
• On its own on the basis of information and knowledge in its possession; or
• On receipt of a reference from Central or State Governments or an Authority established under any Law; or
• On receipt of a complaint.
Complaint can be made by any person, consumer, consumer association or trade association can make a complaint against anti-
competitive agreements and abuse of dominant position. “Person” includes an individual, Hindu Undivided Family (HUF),
company, firm, association of persons (AOP), body of individuals (BOI), statutory corporation, statutory authority, artificial
juridical person, local authority and body incorporated outside India.
The CCI inter alia, has the following powers:
• to pass “Cease and Desist” Order;
• to modify agreement;
• to grant such interim relief, as would be necessary in each case;
• to impose fine on the delinquent party;
• division of enterprise, if it enjoys dominant position;
• to order costs, for frivolous complaints.
In addition to the adjudication function, the CCI will have the roles of advocacy, investigation and prosecution.
The Competition Act, 2002 provides for the post of Director General (and a host of his deputies in various places) to assist the
Competition Commission in its inquiries. The Director General will not have powers to initiate investigations suo motu.
The parties in person or through authorised representative or through a legal practitioner or a practicing Company
Secretary/Chartered Accountant/Cost and Works Accountant can represent before the Commission.
The Law provides for a Competition fund which shall be utilised inter alia for promotion of competition advocacy, creating
awareness about competition issues and training in accordance with the rules that may be prescribed.
The Commission shall give opinion on competition issues on a reference received from an authority established under any law
(statutory authority)/Central Government.
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REASONS FOR REPEAL OF MRTP ACT, 1969
In this regard, it has been stated that in view of the policy shift from curbing monopolies to promoting competition, there was a
need to repeal the MRTP Act, 1969. Hence, the present Competition Law, which has been, aimed at doing away with the rigidly
structured MRTP Act, 1969. The Competition Law is flexible and behaviour-oriented. Other reasons are as follows:
(a) MRTP Act, 1969 was based on the pre-reform scenario whereas the new Law isbased on the post-reforms scenario.
(b) MRTP Act, 1969 was based on the size as a factor whereas the new Law is based on the structure as a factor.
(c) MRTP Act, 1969 had 14 per se offences negating the principles of natural justice whereas the new law has four per se
offences, all the rest subjected to rule of reason.
(d) MRTP Act, 1969 provided for Registration of agreements as compulsory whereas in the new Law there is no
requirement of registration of agreements.
(e) Under the new Law, dominance per se is not bad but only the abuse of dominance is considered bad whereas under
the MRTP Law, dominance itself was bad.
(f) Combination Regulations mentioned in the Act, ensure that Competition is not reduced.
(g) The Concept of “Group” under the MRTP Act, 1969 had wider import and was unworkable whereas the concept has
been simplified in the Act.
Pending cases pertaining to Unfair Trade Practices other than those relating to tie in sales, purchases or cases falling under
clause (x) of sub-section (1) of section 36A of the MRTP Act, 1969 under the repealed Act were transferred to the National
Commission constituted under the Consumer Protection Act, 1986.
MRTP, 1969
This Act was enacted in 1969, consequent upon the recommendations made by the Monopolies Inquiry Commission which was
set up by the Government in 1964 vide Notification dated 16 April 1964 with the following terms of reference:
(a) to inquire into the extent and effect of concentration of economic power in private hands and the prevalence of
monopolistic and restrictive practices in important sectors of economic activity other than agriculture with special
reference to:
(i) the factors responsible for such concentration and monopolistic and restrictive practices;
(ii) their social and economic consequences and the extent to which they might work to the common detriment; and
(b) to suggest such legislative and other measures that might be considered necessary in the light of such enquiry,
including, in particular, any new legislation to protect essential public interests and the procedure and agency for
enforcement of such legislation.
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The Commission gave its Report in 1965.
MRTP Act, 1969 gave new dimension to the economic legislations of the post-independence era. This enactment imbibed the
social and economic philosophy enshrined in the Directive Principles of State Policy contained in the Indian Constitution,157
which lays down that the State shall strive to promote the welfare of the people by securing and protecting as effectively as it
may a social order in which justice—social, economic and political, shall inform all the institutions of the national life, and the
State shall, in particular, direct its policy towards securing:
(1) That the ownership and control of material resources of the community are so distributed as best to sub serve the
common good; and
(2) That the operation of the economic system does not result in the concentration of wealth and means of production to
the common detriment.
The principal objectives sought to be achieved through the MRTP Act, 1969 as stated in the Preamble to the Act were as
follows:
(i) Prevention of the concentration of economic power to the common detriment;
(ii) Control of monopolies;
(iii) Prohibition of monopolistic trade practices; and
(iv) Prohibition of restrictive trade practices.
The substantive provisions of the MRTP Act, 1969, as originally enacted in 1969, were contained in Chapters III, IV, V, and
VI; Chapter III-A was later added by the MRTP (Amendment) Act, 1984. Chapter III (which was comprised of three Parts A, B
and C), inter alia, sought to regulate the concentration of economic power by making it obligatory for undertakings with assets
of the total value of Rs 20 crores or more (later raised to Rs 100 crores or more by the MRTP (Amendment) Act, 1985) and
dominant undertakings with assets of the value of Rs 1 crore or more, to seek the approval of the Central Government before
effecting expansion of the undertaking, adding a new unit or division to the existing MRTP undertaking or setting up a new
undertaking which when established would become interconnected with the existing MRTP undertaking and for merger,
amalgamation or takeover of an undertaking.158 Chapter III-A regulated the acquisition and transfer of shares of, or by, certain
bodies corporate.159 Chapter IV dealt with monopolistic trade practices, and Chapters V and VI covered restrictive trade
practices. By the MRTP (Amendment) Act 1984, Chapter V was re-numbered as Chapter V-A, and a new Chapter V-B,
containing provisions to regulate unfair trade practices, was inserted. Though unfair trade practices were also covered by the
MRTP Act, 1969, the Preamble was not amended to specifically name them. It was, perhaps, felt that unfair trade practices
belong to the same genesis as monopolistic and restrictive trade practices. Unfair trade practices, as such, was a mere extension
of the concept of monopolistic and restrictive trade practices, and may have been considered as matters connected therewith or
incidental thereto for purposes of the Preamble to the MRTP Act.
Concentration of Economic Power.—This expression was not defined in the MRTP Act, 1969, although dealt with in Part A of
Chapter III (Omitted by the MRTP (Amendment) Act, 1991). It was also not easy to define this expression. The Monopolies
Inquiry Commission in its report had, however, attempted to state generally what the term means with reference to
concentration of economic power in the industrial field:
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There are different manifestations of economic power in different fields of economic activity. One such manifestation is the
achievement by one or more units in an industry of such a dominant position that they are able to control the market by regulating prices
or output or eliminating competition. Another is the adoption by some producers and distributors, even though they do not enjoy such a
dominant position, of practices which restrain competition and thereby deprive the community of the beneficient effects of the rivalry
between producers and producers, and distributors and distributors to give the best service. It is needless to say that such practices must
inevitably impede the best utilisation of the nation’s means of production. Economic power may also manifest itself in obtaining control
of large areas of economic activity, by a few industrialists by diverse means. Apart from affecting the economy of the country, this often
results in the creation of industrial empires, tending to cast their shadows over political democracy and social values. Clearly,
concentration of economic power is the central problem; monopolistic and restrictive practices may be appropriately considered to be
‘functions’ of such concentration. Two main kinds of concentration of economic power may be said to prevail in industries. The first is
where in respect of the production and distribution of any particular commodity or service the controlling power whether by reason of
ownership of capital or otherwise is in a single concern or comparatively limited number of concerns or though in a fairly large number
of concerns, these concerns themselves are controlled by only a single family or a few families or business houses; this may be called
product-wise concentration. Where the industry is engaged in the production of one product, it may be called also ‘industry-wise’
concentration. Again where a large number of concerns engaged in the production or distribution of different commodities are in the
controlling hands of one individual or family or group of persons, whether incorporated or not, connected closely by financial or other
business interest, concentration of economic power will also be clearly considered to exist. For lack of a proper term we can call this
kind of concentration ‘country-wise’ concentration.... Another fruitful source of concentration has been the investment of funds by one
corporation in acquiring assets or stocks or shares of another independent corporation. Where such investment is made in a corporation
in the same line of business, it tends to promote what we call ‘industry-wise’ concentration. Where the investment is made in a
corporation in a non-competing line of business, it helps the growth of ‘country-wise concentration’. The effect on competition is
particularly adverse where the investment is in a competing line of business. The effect is bound to be considerable also where the
investee company, though non-competing, is engaged in producing the raw materials used by the investor corporation, or in marketing
the goods of the investor corporation. Another device of forming a holding company has been the favourite modus operandi of
achieving concentration of economic power. The subsidiary comes under the control of the parent holding company. It is obvious that
by this method, a parent holding company may obtain control of large amounts of capital, on the strength of a comparatively small
amount of capital invested in the principal subsidiary. Even where investment in another corporation is not of an extent to give it a
control over the voting power, it is sometimes sufficient to enable it to have one or more directors on the Board of the investee
company. This helps to give the investor company some voice in the decisions of the investee and also makes important information
available to it. Where such interlocking of directors is achieved in a company in the same line of production, or a company engaged in
the distribution of its products or one engaged in the production of an allied product, or of raw materials, it has clearly a tendency to
increase concentration of economic power.
Common Detriment.—The above background highlighted two important principles: (i) securing the highest production possible,
and (ii) ensuring that it is achieved with the least damage to the public at large and secures to them the maximum benefit. As
per Monopolies Inquiry Commission Report, “these two principles indicate important considerations for the formulation of the
legislative policy, viz., we need not strike at concentration of economic power as such, but should do so, only when it becomes
a menace to the best production (in quality and quantity) or to fair distribution; monopolistic conditions in any industrial sphere
are to be discouraged, if this can be done without injury to the interests of the general public; and monopolistic and restrictive
trade practices must be curbed except when they conduce to the common good”. Clearly, what was directed to be guarded
against was not concentration of economic power per se but such concentration as may be to the common detriment, (which
expression continued to find place in the preamble of the MRTP Act, 1969 even after the deletion of Part A of Chapter III by
the Amendment Act, 1991) and was found contrary to the public interest. The determination of common detriment, therefore,
involved a process of weighing and balancing and also involved certain value judgments based on considerations of public
interest. The expression “common detriment” had been used in the Preamble in connection with concentration of economic
power and the expression “prejudicial” and “detrimental”—to “public interest” had been used in sections 27 and 27-A of the
MRTP Act, 1969. These two expressions were regarded as synonymous in the context of the objectives of the MRTP Act, 1969.
In fact, the expressions “common detriment” or “prejudicial to public interest” or “detrimental to public interest” and “common
good” were only the negative and positive aspects of the concept of “public interest”.
In the case of Raymond Woollen Mills Ltd v MRTP Commission,160 it was observed that:
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the basic feature and the paramount consideration which pervades throughout the statute are the public interest, the common good and
to keep a watch and control on the operation of the economic system of the country so that it does not result in the concentration of
economic power to the common detriment. The Government acts in public interest. The Commission acts in public interest. Public
interest is writ large in every act and function of the Commission and the Government. Reference to ‘common’ here, I mean in the
Preamble, I suppose, is to the common man, the weaker section of society, the have-nots, the consumer, but it does not intend to include
the manufacturer, supplier and distributor ....
The following are the observations of HIS LORDSHIP KRISHNA IYER, J in Carew & Co Ltd v UOI:161
The Constitution, in its essay in building up a just society, interdicting concentration of economic power to the detriment of the
community, has mandated the State to direct its policy towards securing that end. Monopolistic hold on the nation’s economy takes
many forms and to checkmate these manoeuvers, the administration has to be astute enough. Pursuant to this policy and need for
flexible action, the Act was enacted.
After referring to seemingly innocuous but really or potentially anti-social moves of dominant undertakings, His Lordship
remarked:
It is well known that backdoor techniques, and corporate conspiracies in the economic sense but with innocent legal veneer, have been
used by oligopolistic organisations and mere juridical verbalism cannot give the Court the clue unless there is insightful understanding
of the subject which, specialised fields like industrial economics, is beyond the normal ken or investigation of the Court or the area of
traditional jurisprudence.
Public Interest.—Public interest had several facets. In Chapter III, after the deletion of sections 20 to 26, this expression
continued to appear in sections 27 and 27-A, which dealt with division of undertakings and severance of inter-connected
undertakings, respectively. In the context of the MRTP Act, 1969, it covered consumers’ interest, as well. In dealing with cases
of restrictive and unfair trade practices, the Commission had given due weightage to this aspect.
Re Parry and Co Ltd,162 the MRTP Commission held that the consumers in the State, where the sales tax was lower or there
was no sales tax, should get the benefit and the differential pricing was considered a restrictive trade practice. Re JK Industries
Ltd,163 it was observed that:
The Commission would be most reluctant to interfere with a trade practice which results in relief to consumers unless there are
compelling considerations and conclusive evidence to show that the practice is motivated by predatory factors. To afford maximum
possible protection and relief to the consumers is one of the most important objectives of the MRTP Act. Therefore, the trade practice of
selling of tubes and flaps below the cost of production indulged by the J.K. Industries Ltd is not predatory in nature and therefore not a
restrictive trade practice.
Re All India Film Producers’ Council, Bombay,164 the Commission held that video screening of motion pictures will enable a
large section of the public to witness the motion pictures and it might even enable them in witnessing the pictures at a lower
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cost even if video screening of pictures is suitably regulated by the Government. The direction given by the respondent council,
prohibiting the film producers from selling the video rights was considered a restrictive trade practice against public interest.
Control of Monopolies.—The Preamble of the MRTP Act, 1969 stated that the Act sought to provide control of monopolies.
The said expression was neither defined in the Act nor, any specific regulatory measures, provided in the Act to curb
monopolies. In common parlance, monopoly power refers to the market power possessed by a monopolistic or oligopolistic
undertaking. The definition of “monopolistic undertaking” was omitted by the MRTP (Amendment) Act, 1984. Reference to
control of monopoly, therefore, could only be construed to mean the regulation of market power, actual or potential, enjoyed by
an undertaking, in the context of the provisions relating to monopolistic trade practice under Chapter IV of the MRTP
(Amendment) Act, 1984.
Prohibition of Monopolistic and Restrictive Trade Practices.—The Preamble of the MRTP Act, 1969 referred to the prohibition
of monopolistic and restrictive trade practices. The MRTP Act, 1969 was based on the principle of “abuse” and not
“prohibition”. The Act did not declare these trade practices illegal ipso facto. On the contrary, a balance was struck between the
injury caused as a result of such trade practice and the reasonableness thereof in the context of benefits accruing thereby in
support of which the savings and gateways provided in sections 32, 37(3) and 38 of the MRTP Act, 1969 could be pleaded.
Thus, though the Preamble referred to prohibition of such practices, in reality, the Act sought to regulate and control them. The
monopolistic and restrictive trade practices, which were applicable both to “Goods” and “Services”, become illegal only after
passing of a “cease and desist” order by the Central Government or the Commission, as the case may be. “Cease” means that
the practice shall be discontinued, and “desist” means that the practice shall not be repeated.
The MRTP Act, 1969 later regulated unfair trade practices also, which belonged to the same genesis as monopolistic and
restrictive trade practices and could be considered as matters connected therewith for purposes of the Preamble. As in the case
of restrictive-trade practice, it was only when a “cease and desist” order was passed by the MRTP Commission after inquiry
that such practice became illegal and could not be pursued.
Changes made by MRTP (Amendment) Act, 1991.—Far-reaching changes were made by MRTP (Amendment) Ordinance,
1991 promulgated on 27 September 1991, later replaced by the MRTP (Amendment) Act, 1991. In Chapter III, containing
provisions relating to concentration of economic power, pre-entry restrictions were removed with regard to prior approval of
the Central Government for establishment of a new undertaking, expansion of existing undertaking, amalgamation, merger,
take-over of undertakings and appointment of directors by deletion of sections 20 to 26 and 28 to 30 of the Act. Sections 27,
27-A and 27-B were only retained with certain changes. Section 27 empowered the Government to direct division of an
undertaking, if it was of the opinion that the working of the undertaking is prejudicial to public interest, or had led, or was
leading or was likely to lead to the adoption of any monopolistic or restrictive trade practices. Section 27-A provided for
severance of inter-connection between undertakings, if it was found to be detrimental to the interests of the principal
undertaking or its future development, or to the steady growth of the industry to which the principal undertaking pertains or to
the public interest. Since the concept of MRTP undertaking (based on the assets-criteria of Rs 100 crores or dominant
undertaking with assets of Rs 1 crore under the erstwhile section 20 had been removed, the aforesaid provisions of sections 27,
27-A and 27-B applied to any undertaking. The provisions of Chapter III-A (sections 30-A to 30-G) regarding restriction on
acquisition or transfer of shares were re-transferred to the Companies Act, 1956 as sections 108-A to 108-I. These provisions
applied in cases where the acquirer or transferor of shares was a dominant undertaking, as defined under the MRTP Act, 1969.
The main thrust under the Act, as it stood before the Amending Act of 1991, to prevent concentration of economic power to the
common detriment, then shifted to effectively curb monopolistic, restrictive and unfair trade practices.
Statement of Objects and Reasons appended to the then MRTP (Amendment) Bill 1991 is reproduced below:
1. The Monopolies and Restrictive Trade Practices Act, 1969 (in short, MRTP Act) came into force w.e.f. 1 June 1970.
The basic philosophy behind the MRTP Act was never to inhibit industrial growth in any manner but to ensure that
such growth is channelised for the public good and is not instrumental in perpetuating concentration of economic
power to the common detriment. With the growing complexity of industrial structure and the need for achieving
economies of scale for ensuring higher productivity and competitive advantage in the international market, the thrust
of the industrial policy has shifted to controlling and regulating the monopolistic, restrictive and unfair trade practices
rather than making it necessary for certain undertakings to obtain prior approval of the Central Government for
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expansion, establishment of new undertakings, merger, amalgamation, take over and appointment of Directors. It has
been the experience of the Government that pre-entry restriction under the MRTP Act on the investment decision of
the corporate sector has outlived its utility and has become a hindrance to the speedy implementation of industrial
projects. By eliminating the requirement of time consuming procedures and prior approval of the Government, it
would be possible for all productive sections of the society to participate in efforts for maximisation of production. It
is, therefore, proposed to re-structure the MRTP Act by omitting the provisions of sections 20 to 26 and transfer the
provisions contained in Chapter III-A regarding restrictions on acquisition and transfer of shares to the Companies
Act, 1956. The schedule to the MRTP Act is also consequently to be transferred with modification to the Companies
Act, 1956.
2. It is also proposed to enlarge the scope of inquiry by the MRTP Commission with a view to taking effective steps to
curb and regulate monopolistic, restrictive and unfair trade practices which are prejudicial to public interest. It is also
proposed to provide for deterrent punishment for contravention of the orders passed by the MRTP Commission and
the Central Government and empower the Commission to punish for its contempt. Certain other consequential
changes are also found necessary in the MRTP Act.
3. The criteria for determining dominance, applicable to acquisition and transfer of shares under newly inserted sections
108-A, 108-B and 108-C of the Companies Act, 1956, is proposed to be determined only on the basis of market share
of 25% of the total goods produced, supplied, distributed or services rendered in India or substantial part thereof.
Functions of MRTP Commission—The functions of MRTP Commission could be summarised as under:
(i) control of Restrictive Trade Practices;
(ii) control of Unfair Trade Practices;
(iii) control of Monopolistic Trade Practices; and
(iv) prevention of concentration of economic power as may be prejudicial/detrimental to public interest, by effecting
division of undertakings or division of trade of any undertaking and severance of inter-connection between
undertakings.
The first two functions were entirely within the Commission’s domain, and the Commission was fully empowered to regulate
restrictive and unfair trade practices.
In respect of Monopolistic Trade Practices and prevention of concentration of economic power, the MRTP Commission’s role
was of advisory nature, and the power to issue the final order in this regard vested in the Central Government. Under section
12-A, the Commission had, however, been empowered to grant temporary injunction, on its own, in the course of inquiry
before it in regard to monopolistic trade practice until the conclusion of such inquiry; and inquiry was deemed to have
commenced upon receipt by the Commission of any complaint, reference or application or as suo motu move. Also, under
section 12-B, the Commission had been vested with the power to award compensation for loss or damage caused to Central or
State Government, any trader or class of traders or any consumer, as a result of monopolistic trade practice carried on by any
undertaking or any person.
Scope of the MRTP Act, 1969
Undertakings owned or controlled by Government, Government Company and Statutory Corporation etc.—Prior to 27
September 1991, the undertakings owned or controlled by a Government Company,165 the Government, a corporation
established under any Central or State Act or a cooperative society as also any undertaking the management of which had been
taken over by any person or body of persons in pursuance of any authorisation made by the Central Government and financial
institutions166 were outside the purview of the MRTP Act, 1969. By a Notification dated 27 September 1991 such undertakings
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were brought within the purview of this Act, except those owned or controlled by a Government Company or the Government,
which were engaged in specified items of defence production, atomic energy and industrial units under the currency and
coinage division of the Ministry of Finance.167 Trade Unions, however, were kept out of the ambit of this Act.
Banking and Insurance Companies.—The provisions of the MRTP Act, 1969 as related to matters in respect of which specific
provisions exist in the Reserve Bank of India Act, 1934 or the Banking Regulation Act, 1949, State Bank of India Act, 1955 or
State Bank of India (Subsidiary Banks) Act, 1959 and Insurance Act, 1938 did not apply to a banking company, the State Bank
of India or its subsidiary banks or an Insurance Company as the case may be.
Government Departments Performing Non-Sovereign Functions.—The MRTP Commission had held that its jurisdiction
extended to Government Departments performing non-sovereign functions or services. Accordingly, grievances in respect of
restrictive, monopolistic or unfair trade practices resorted to in the course of services provided by the Government departments,
on payment of fee as consideration, in the areas of Telecommunication, Transport (including Railways) and Housing could be
looked into by the MRTP Commission. Providing irrigation facility by the UP Government to the farmers had been held to be
service covered under section 2(r) of the MRTP Act, 1969 since this facility was being provided after levying water rate in
terms of Northern India Canal and Drainage Act, 1873.168
Intellectual Property Rights.—The MRTP Commission had held, that the matters relating to “intellectual property rights” fell
within its purview and the Commission had complete and unfettered jurisdiction to entertain a complaint in regard thereto and
deal with it. If there was a misuse of an idea generated by the complainant on the part of the respondent, by manipulation,
distortion, contrivances and embellishments, the respondent lent itself open to action under section 36-A(1) of MRTP Act, 1969
for having indulged in unfair trade practice.169
Arbitration Clause in Agreement.—Re Bright Rubber Ltd,170 the MRTP Commission had held that the existence of an
arbitration clause in a trade agreement does not in any way affect the jurisdiction of the MRTP Commission in dealing with
matters relating to monopolistic, restrictive and unfair trade practices.
Concept of effect doctrine.—Following the judgment in Haridas Exports171 case in the context of section 36D read with
section 14 of MRTP Act, 1969, the Supreme Court,172 held that the effect doctrine would apply, where the supplier carried on
the business of manufacturing printing machines abroad in Germany and agreement for sale of machinery was entered into in
India, when “effect” amounted to “Restrictive Trade Practice” in India. Merely because effect of unfair trade practice was felt
in India would not confer the commission with jurisdiction unless “effect” is itself “Unfair Trade Practice” within India.
Termination of Dealership Agreement.—In Peico Electronics and Electricals v UOI,173 the Supreme Court of India has held
that normally, the Commission is not empowered to probe into the question whether the contract was validly terminated under
one clause or the other of the agreement. The Commission cannot assume the role of the civil court in this regard. It was further
held that although the Commission has incidental and ancillary power to consider whether the termination of the dealership was
a device to perpetuate the objectionable trade practices and whether such termination is closely inter-linked with the
continuance of restrictive trade practice, there has to be a specific finding which is to be recorded by the Commission in this
regard. In the absence of such finding, the Commission’s directions not to give effect to the termination letter and thereby
reviving the contract and direction to resume supplies to the dealer goes beyond the powers of the Commission.
Jurisdiction of commission—Absence of element of competition.—The Supreme Court of India in State of UP v Giri Prasad,174
had held that commission has no power to entertain complaint unless there is Restrictive Trade Practice, and in the absence of
the vital element of competition, the commission could not hold that there was any Restrictive Trade Practice involved.
Exemptions under MRTP Act, 1969
The MRTP Act, 1969 was not applicable in the following situations:—
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(a) the trade practices carried on in the State of Jammu and Kashmir [ Section 1(2) of the
MRTP Act, 1969 ];
(b) the undertakings owned or controlled by the Government or Government companies, as the case may be and engaged
in the production of arms and ammunition and allied items of defence equipment, defence aircraft and warships,
atomic energy, minerals specified in the Schedule to the Atomic Energy (Control of Production and Use) Order, 1953
and industrial units under the Currency and Coinage Division, Ministry of Finance, Government of India;175
(c) any trade union or other association of workmen or employees formed for their own reasonable protection as such
workmen or employees [ Section 3(d) of the MRTP Act, 1969 ];
(d) any monopolistic or restrictive trade practice necessary to safeguard the rights of patentees under the Indian Patents
Act in regard to certain infringements and in regard to conditions that may be laid down in the licence(s) [Section
15(a) & (b) of the MRTP Act, 1969];
(e) the monopolistic or restrictive trade practices relating exclusively to the production, supply, distribution or control of
goods for export [ Section 15(c) of the MRTP Act, 1969
];
(f) restrictive trade practice consequent to any agreement between buyers relating to goods bought by them for
consumption and not for resale whether in the same or different form, type, or specific constituent of some other
goods [ Section 37(3)(a) of the MRTP Act, 1969 ];
(g) any restrictive or unfair trade practice expressly authorised by any law for the time being in force [Section 37(3)(b);
36D(3) of the MRTP Act, 1969];
(h) a restrictive trade practice flowing from an agreement which has the approval of the Central Government or if Central
Government is a party to such agreement [ Section 33(3) of the MRTP Act, 1969
];
(i) a monopolistic trade practice which is expressly authorised by any enactment for the time being in force, or when it is
necessary to (i) meet the defence requirements of the Country, (ii) ensure maintenance of supply of essential goods
and services, or (iii) give effect to any agreement to which Central Government is a party [
Section 32 of the MRTP Act, 1969 ].
Contemporary legislations abroad
Today, a large number of industrially developed countries have laws dealing with unfair and restrictive trade practices. The
scope, content, mechanics and method of enforcement of these enactments are, however, diverse and varied. Some countries
have adopted the principle of per se illegality, whereas others have preferred the rule of “abuse” to that of “total prohibition”.
In the latter mentioned category of countries, an unfair or restrictive trade practice is condemned and prohibited, only after an
inquiry by the court or a quasi-judicial Tribunal or Authority. Under the Indian Competition Act, 2002, a middle path has been
adopted. While some of the anti-competitive practices, e.g., mutual determination of sale or purchase prices, limiting or
controlling production or technical development, etc., sharing of market and collusive bidding by enterprises engaged in
identical or similar trade of goods or provision of services (referred in section 3(3)) as also the abuse of dominance (referred in
section 4) have been declared per se illegal, the others, e.g., tie-in-sales, exclusive supply or distribution arrangements, re-sale
price maintenance and refusal to deal by enterprises at different levels of production chain [referred in section 3(4)] have been
subjected to the rule of reason.
Having regard to the aforesaid, it is proposed to briefly discuss the salient aspects of the legislation on this subject in the four
countries namely, USA, Britain, Canada and Australia and the judicial approach in this behalf in the respective countries.
Anti-trust Legislation in the USA
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United States is the forerunner in the field of modern legislation on monopolies and restrictive and unfair business practices.
This legislation is popularly known as anti-trust legislation, and it dates back to the 19th century. The US legislation, in spite of
being considered to be the most stringent in the world, has withstood the test of time and continues to be in full force even
today. Indeed, credit goes to the USA for setting the pace of evolution of anti-competitive and of anti-monopoly legislation and
Code of Fair Business Conduct in the realm of restrictive, monopolistic and unfair trade practices, in other countries of the
world, including ours.
Development of the Laws
Basic federal anti-trust and trade regulation law policy is set forth in the Federal Trade Commission Act, 1914 and the Clayton
Act, 1914 (as amended by the Robinson-Patman Act, and the Hart-Scott-Rodino Anti-trust Improvements Act, 1976), apart
from the Sherman Act, 1940. The laws were not enacted as a unit; they came into existence sporadically as need for each was
perceived.
Federal anti-trust policy was first announced in 1890 by the enactment of the Sherman Act, 1940. This law condemned
contracts, combinations, and conspiracies in restraint of trade, and monopolisation, attempted monopolisation, and
combinations and conspiracies to monopolise. Several amendments have been made in the Sherman Act, 1940 from time to
time and the notable ones being in the years 1937, 1952, 1955, 1974 and 1976.
In 1914, Congress enacted the Federal Trade Commission Act (FTC Act) with its administrative body for policy development
and to prevent unfair methods of competition and deceptive practices. The FTC Act remained unchanged until 1938, when it
was amended to include ban on unfair or deceptive acts or practices. Specific prohibitions against the false advertising of foods,
drugs, and cosmetics were also enacted. Numerous amendments to the Act were made in 1980.
As passed in 1914, the Clayton Act contains specific prohibitions against price discrimination, exclusive dealing arrangements,
corporate acquisitions of stock, and interlocking directorates. In 1936, the Clayton Act’s price discrimination prohibitions were
detailed and broadened with enactment of the Robinson-Patman Act. The corporate stock acquisition laws in the Clayton Act,
1914 were broadened in 1950 to include acquisition of assets. The Hart-Scott-Rodino Improvements Act, 1976, which has also
amended the Clayton Act, 1914, seeks to maintain the competition mission, which is the responsibility of the Federal Trade
Commission along with the Department of Justice.
General and Specific Laws
Two federal laws, viz., the Sherman Act, 1940 and FTC Act, 1914 are general in their prohibitions, while the other, viz., the
Clayton Act, 1914 (as amended) deals with more specifically designated conduct.
The general approach is contained in the Sherman and FTC Acts. The Sherman Act, 1940, said to be of Constitutional sweep,
aims at arrangements that restrain trade and at monopoly activity, while the FTC Act, 1914 condemns “unfair methods of
competition” and “unfair or deceptive acts or practices”. An extremely wide range of activity is embraced in these phrases.
The specific approach is seen in the supplementary Clayton Act, 1914 as also in the Robinson-Patman and Hart-Scott-Rodino
Improvements Acts. These seek to designate the conduct with which they are concerned, rather than generalising. The Clayton
Act, 1914, for example, governs acquisitions and mergers, interlocking directorates, and restrictive selling and leasing practices
that have specified consequences. The Robinson-Patman Act, 1936 (an amendment to the Clayton Act, 1914) deals with
discriminatory selling and buying and related discriminatory distributional and promotional practices. The Hart-Scott-Rodino
Anti-trust Improvements Act, 1976 requires persons meeting certain size requirements who are planning significant
acquisitions to file notification with the Commission, and to delay consummation for a prescribed period of time. The pre-
merger notification programme was enacted thereunder to provide the Commission and the Department of Justice with the
opportunity to review proposed transactions and to take enforcement action, if appropriate, to prevent consummation of
transactions that violate anti-trust laws. Any of the amended Clayton Act activities also are susceptible to coverage by the
general statutes.
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Sherman Act, 1940
Sections 1 and 3 of the Sherman Act, 1940 prohibit contracts, combinations, or conspiracies in restraint of trade, which
encompass a great many types of business activities or practices. For example, the law covers price fixing agreements,
agreements between competitors to allocate markets, acquisitions of stock or assets, exclusive dealing contracts, and tying
arrangements, etc.
Section 2 of the Sherman Act, 1940 declares it unlawful for any person to monopolise trade, attempt to monopolise trade, or
combine or conspire to monopolise trade.
Clayton Act, 1914
The Clayton Act, 1914 in contrast with the Sherman Act, 1940, prohibits specific mentioned practices or transactions.
Section 2 of the Clayton Act, 1914, as amended by the Robinson-Patman Act, 1936, prohibits discriminatory pricing and
related practices. Under section 2(a) of the Clayton Act, 1914, it is unlawful for a seller to discriminate in price between
different customers, when the discrimination has a prescribed competitive effect. Apart from prohibiting a seller from
discriminating in prices between different customers, section 2(f) of the Clayton Act, 1914, as amended by the Robinson-
Patman Act, 1936 declares it unlawful for a buyer knowingly to induce or receive discrimination in price. Section 3 of the
Robinson-Patman Act, 1936, not an amendment to the Clayton Act, 1914, makes it a criminal offence to be a party to or assist
in discriminations between competing purchasers. Also, it is declared a criminal offence for a seller to charge different prices
for his products in different parts of the country for the purpose of destroying competition or eliminating a competitor, or to sell
goods at prices, which are unreasonably low for that purpose.
Under particular circumstances, payment or receipt of brokerage, or discounts in lieu of brokerage, is prohibited under section
2(c) of the Clayton Act, 1914, as amended by the Robinson-Patman Act, 1936. Section 2(d) of the Clayton Act, 1914, as
amended by the Robinson-Patman Act, 1936, declares it unlawful for a seller to grant an allowance for a service or facility
furnished by any customer unless the allowance is made available on proportionally equal terms to all other competing
customers. Section 2(e) of the law contains a similar prohibition with respect to the furnishing of services or facilities by a
seller to a customer.
Practices covered by section 2 of the Clayton Act, 1914 and section 3 of the Robinson-Patman Act, 1936 also may be
condemned under, or constitute evidence of a violation of, the Sherman Act, 1940 and the FTC Act, 1914.
Section 3 of the Clayton Act, 1914 declares unlawful various types of agreements, arrangements, or conditions which have the
effect of preventing a purchaser or lessee of a product from using or dealing in the product of a competitor of the seller or
lessor. In main, the law is designed to protect a competitor of a person who sells or leases products under an arrangement
precluding the purchaser or lessee from using or dealing in the competitor’s product. Practices that may be unlawful under this
prohibition of the law include agreements not to handle a competitor’s product, agreements to deal exclusively in a product,
tying arrangements under which a lessee or purchaser is required to lease or buy one product as a pre-condition for leasing or
buying another product, and requirements contracts under which a lessee or buyer agrees to lease or purchase requirements or a
specified percentage of them, from a particular person. Although section 3 of the Clayton Act, 1914 expressly condemns these
practices, they also may be unlawful under the Sherman Act, 1940 and the FTC Act, 1914.
Corporate acquisitions and mergers are regulated by section 7 of the Clayton Act, 1914, which makes it unlawful for a
corporation to acquire all or any part of the capital stock or assets of another corporation when the acquisition has a specified
effect on competition. This law is aimed at mergers or consolidations of businesses and partial stock or asset acquisitions,
which may have harmful competitive effects. It also covers joint ventures. While this is the only express federal condemnation
of acquisitions or mergers in the anti-trust and trade regulation laws, they also may be attacked as a restraint of trade or a
monopoly under the Sherman Act, 1940 or as an unfair method of competition under the FTC Act, 1914.
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Interlocking directorates are prohibited under section 8 of the Clayton Act, 1914. In general, the law declares it unlawful, under
specified circumstances, for a person to serve as a director of two or more corporations at the same time. They also may be
attacked as unlawful under the Sherman Act, 1940.
Federal Trade Commission Act, 1914
Section 5 of the Federal Trade Commission, 1914 (FTC) Act declares unlawful “unfair methods of competition” and “unfair or
deceptive acts or practices”. Also, the FTC Act, 1914 contains a direct prohibition against the false advertisement of foods,
drugs, devices, and cosmetics.
The FTC Act’s condemnation of unfair methods of competition in commerce and unfair or deceptive acts or practices in
commerce, are the broadest of the prohibitions contained in the federal anti-trust and trade regulation laws. They may be
classified into two groups: first, practices that constitute or potentiate a violation of the Sherman Act, 1940, the Clayton Act,
1914, or the Robinson-Patman Act, 1936; that is, the basic anti-trust laws; and second, practices that in the main do not fall
within the types of conduct ordinarily condemned by the basic anti-trust laws but that have a direct impact on the consuming
public. Practices falling into the first group include price fixing, exclusive dealing, allocation of customers, and various
combinations and conspiracies; practices falling into the second group include misrepresentations, disparagement of
competitors or their products, and use of lottery devices.
Tests of Legality or Illegality
The “rule of reason” is the prime test used in determining the legality of activities and practices under the Sherman Act, 1940.
In sharp contrast to the Sherman Act’s rule of reason is its rule of “per se” illegality, a kind of rule of thumb that has developed
as to some agreements or practices. Among the practices falling into this category to one degree or another have been price
fixing, division of markets, group boycotts, and some tying arrangements.
The legality of a practice under the Clayton Act, 1914 is generally determined by its effect on competition. The Clayton Act,
1914 expressly sets forth the competitive injury a practice must cause before it can be condemned as unlawful.
The FTC Act, 1914 has its own tests of legality as well as those “judicially” borrowed from the Sherman Act, 1940 and other
anti-trust laws. For example, where a practice attacked as illegal under section 5 of the FTC Act, 1914 is the same as or similar
to a practice, which would violate the anti-trust laws, a competitive effects test is utilised. A competitive effects test may be
applied in determining the legality of other types of practices challenged under the FTC Act, 1914. In the deceptive practices
area, harmful-competitive effects is not the sole test. The test in this area is whether or not the practice has the capacity or
tendency to deceive the public. Also, for example, public policy may be the test of illegality, as in lottery cases. Section 12 of
the FTC Act, 1914, covering the false advertisement of foods, drugs, cosmetics and devices, contains specific tests.
Overlapping Prohibitions
A considerable overlap of coverage exists among the federal anti-trust and trade regulation laws.
The Sherman Act, 1940, in section 1, prohibits contracts, combinations, or conspiracies in restraint of trade. Many specific
types of activities or practices come within the scope of this general statutory prohibition. Thus, the law reaches price fixing
agreements, agreements between competitors to allocate markets, acquisitions of stock or assets, exclusive dealing contracts,
tying arrangements, and numerous other practices.
The same activities or practices may constitute, or be evidence of, a violation of section 2 of the Sherman Act, 1940, which
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declares it unlawful for any person to monopolise trade, attempt to monopolise trade, or combine or conspire to monopolise
trade.
The Clayton Act, 1914, as amended by the Robinson-Patman Act, 1936, prohibits price discrimination, exclusive dealing and
related arrangements, acquisitions of stock or assets, and interlocking directorates. These practices also may violate section 1 or
2 of the Sherman Act, 1940, or constitute evidence of a more general practice or activity violative of those provisions. The
Hart-Scott Rodino Anti-trust Improvements Act, 1976, which has also amended the Clayton Act, 1914, seeks to regulate
mergers and acquisitions. Failure to comply with the merger notification is punishable with penalties of up to $10,000 for each
day of violation continues. The enforcement agencies may require that the merger parties sell off some of their assets or they
may block the merger entirely.
The FTC Act, 1914, which prohibits unfair methods of competition and unfair or deceptive acts or practices, prohibits many
activities or practices of the type condemned under the Sherman Act, 1940. In fact, the Sherman Act, 1940 serves as a guide for
determining whether many practices are illegal under the FTC Act’s condemnation of unfair methods of competition. Similarly,
the prohibitions under the FTC Act, 1914 may embrace the specific practices covered in the Clayton Act, 1914, as amended by
the Robinson-Patman Act, 1936 and the Hart-Scott Rodino Anti-trust Improvements Act, 1976.
Functioning of the Federal Trade Commission (FTC)
FTC enforces a variety of federal anti-trust and Consumer Protection Laws. It seeks to ensure that the nation’s market functions
competitively, and is vigorous, efficient, and free of undue restrictions. It also works to enhance the smooth operation of the
market place by eliminating acts or practices that are unfair or deceptive.
The Bureau of Competition assists the Commission in fulfilling its mission of maintaining competition in the US economy. The
activities of the Bureau are divided into five major program areas: Pre-merger Notification, Mergers and Joint Ventures,
Horizontal Restraints, Distributional Arrangements and Single firm Violations (focussing primarily on monopolisation,
predation and practices that may facilitate collusion).
In fulfilling its consumer protection mission, the commission strives to maintain conditions in the market place that allow
consumers to make informed purchase choices. There are five substantive programmes within the consumer protection mission:
Advertising Practices; Service Industry Practices; Marketing Practices; Credit Practices; and Enforcement. Under Advertising
Practices programme, the Commission works to ensure that consumers can make informed purchases on the basis of truthful
information. Activities under Service Industry Practices programme focus on misrepresentation in sales of investment goods
and services such as precious metal, rare coins, art and mining projects; it also works to eliminate fraud in connection with
lottery application filing services. The fraudulent telemarketing of consumer goods and services is the primary focus of the
Marketing Practices programme; two important trade regulation rules, the Funeral Rule and Franchise Rules, are also enforced
under this programme. Under the Credit Practices programme Federal Laws are aggressively enforced to ensure the privacy of
the credit reports, equal access to credit, fair collection practices and truthful lending practices. Under the Enforcement
programme, the commission enforces its cease and desist orders, the majority of FTC trade regulation rules and special statutes
governing practices, such as the labeling of textile, wool, and fur products.
Mention may be also made of the following three other legislations in the Anti-trust field:
(1) National Co-operative Research and Production Act, 1993.—This Act establishes some Anti-trust protections for
certain joint research and development ventures by companies in the same industry when they file prior written
notifications with the Justice Department and the FTC.
(2) Webb-Pomerene Act.—This Act provides a limited Anti-trust exemption for formation and operation of associations
of otherwise competing businesses engaged in collective export sales.
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(3) International Anti-trust Enforcement Assistance Act, 1994.—This Law authorises the FTC and the Justice
Department to enter into mutual assistance Agreements with foreign Anti-trust authorities. Under such agreements,
US and foreign authorities may share, subject to certain restrictions, evidence of Anti-trust violations and assist each
other in investigations.
Legislation on Monopolies and Restrictive Trade Practices in the UK
Initially, the statute law on Monopolies and Restrictive Practices was contained in the Monopolies and Restrictive Practices
(Inquiry and Control) Act, 1948, the Monopolies and Restrictive Practices Commission Act, 1953, Restrictive Trade Practices
Act, 1956 and Resale Prices Act, 1964. The Monopolies and Restrictive Practices (Inquiry and Control) Act, 1948, as its title
implies, before the passing of the Restrictive Trade Practices Act, 1956 was concerned both with restrictive practices (in
relation to goods, buildings, structures, or exports) and with monopoly conditions. The functions of the Commission were
twofold. Firstly, the Commission was to investigate and report on the existence or otherwise of monopoly conditions with
respect to goods or the application of any process to goods sold or supplied in the UK or with respect to export of goods from
the UK. The other function of the Commission was to report on general questions in relation to Restrictive Practices in Industry
as a whole. The Board of Trade in this connection was empowered under the Monopolies and Restrictive Practices (Inquiry and
Control) Act, 1948 (vide section 15) to require the Commission to report on the general effect on public interest of practices of
a specified class if it appeared that they were commonly adopted as a result of, or for the purpose of preserving, monopoly
conditions. The report on collective discrimination made by the Commission in June 1955, pursuant to the general reference
made to it by the Board of Trade in December 1952 brought about the Companies Act, 1956 and the establishment of
Restrictive Trade Practices Court. The Companies Act, 1956 (vide section 28 thereof), which reconstituted the Monopolies
Commission and changed its name to Monopolies Commission, brought in the following principal reforms:
(a) Compulsory registration of restrictive trade agreements with the office of the Registrar of Restrictive Trade Agreements, (b)
Judicial investigation of restrictive trade practices by the newly formed Court and unless they fell within one of the gateways
and also passed the tail piece, declaration by the Court that the restrictions are contrary to the public interest and
consequentially passing of “cease and desist” order, and (c) prohibition of collective enforcement of resale price maintenance
conditions (which, however, may be read in conjunction with the Resale Prices Act, 1964). Thereafter, under the Restrictive
Trade Practices Act, 1956 information agreements, which were adopted in place of terminated restrictive agreements, were also
covered, and the enforcement of the Companies Act, 1956 was made more stringent.
The high rate of mergers, after the enforcement of the Restrictive Trade Practices Act, 1956 led to the passing of the
Monopolies and Mergers Act, 1965. This Act enabled the Board of Trade to refer to the Commission for investigation of
mergers when the resulting firm would have one-third or more of market, whether goods or services or where the assets taken
over exceeded £ 5 million in value. In case of large newspaper mergers, the merger was made unlawful and void without the
Board’s consent given after a report on the merger by the Commission.
The Fair Trading Act, 1973 repealed the Monopolies and Restrictive Practices (Inquiry and Control), 1948 and Monopolies and
Mergers, 1965 Acts and replaced them with an amended and consolidated Code. It, in particular, reduced the one-third
threshold limit to one quarter, extended the coverage by covering nationalised industries and renamed the Commission as
“Monopolies and Mergers Commission”. It enabled the Director General to make “Monopoly references”, restrictive and
information agreements to be called up for registration and for reference to the Court, and it also gave him other functions. In
the field of restrictive practices, he took over the functions of the Registrar of Restrictive Trade Agreements.
U K Competition law, thus, comprised of three principal Acts of Parliament. They were the Fair Trading Act, 1973, the
Restrictive Trade Practices Act, 1976 (as amended by Restrictive Trade Practices Act, 1977), and the Resale Prices Act, 1976.
Each one dealt with separate aspects of competition policy and each gave the Director General, the Monopolies and Mergers
Commission (MMC) or the Restrictive Practices Court different responsibilities.
— The Restrictive Trade Practices Act, 1976 was concerned with agreements between persons or companies that could
limit their freedom to operate independently.
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— The Resale Prices Act, 1976 covered attempts to impose minimum prices at which goods could be resold.
— The Fair Trading Act, 1973 dealt with mergers and monopolies.
These statutes were broadly divided it into two categories. In the case of the Restrictive Trade Practices Act, 1976 and the
Resale Prices Act, 1976, action was taken in the Courts, while the Fair Trading Act, 1973 was wholly administrative and
required the examination of any practice by the Director General, the MMC and the Secretary of State. Under the Restrictive
Trade Practices Act, 1976 and the Resale Prices Act, 1976, the MMC had no role and role of the secretary of state was also
limited.
Restrictive Trade Practices
The Restrictive Trade Practices Act, 1976 as amended by Restrictive Trade Practices Act, 1977, dealt with agreements which
had the effect of restricting competition and acting against the public interest. Agreements could take any form including the
spoken words and did not have to be legally enforceable or acted upon to come under the terms of the Act.
The Director General had the duty to keep registrable agreements on a public register, known as the Register of Restrictive
Trade Agreements, and to refer them to the Restrictive Trade Practices Court, which will strike down any restrictions found to
be against the public interest. In the proceedings before this court the onus is on the parties to demonstrate that the agreement is
beneficial, using any of the possible benefits set out in the Restrictive Trade Practices Act, 1976—the “gate ways”.
Monopolies
Under the Fair Trading Act, 1973, a monopoly was defined as a situation where a company supplies or purchases 25% or more
of all the goods or services of a particular type in the UK or in a defined part of it. Local monopolies could, therefore, be
examined.
The Fair Trading Act, 1973 defined a situation where a group of companies, which together had 25% or more of the market, all
behaved in some way that adversely affected competition as a “complex monopoly”. Complex monopolies could exist even if
the companies involved did not have an agreement to co-operate. Indeed, if there was an agreement that was registrable under
the Restrictive Trade Practices Act, 1976,176 the MMC was debarred from commenting upon its effects on the public interest.
The Director General kept an eye on UK markets and evaluated any allegations of monopoly abuse sent to his office. After
investigation as may be necessary, the Director General could advise the secretary of state to accept legally binding
undertakings from those involved which, in his view, would deal with any adverse effects on the public interest without first
making a reference to the MMC.
If he decided to refer the case to the MMC, he did not specify the names of particular companies or, usually, what practices the
MMC should investigate. Instead, he drew the MMC’s attention to a market as a whole, asked it to establish whether a
monopoly situation exists and, if so, in whose favour and whether a monopolist is attempting to exploit the situation. But the
reference was to be limited to asking the MMC to look at one specific practice in a market such as pricing policy.
MMC would then investigate and submit a report to the secretary of state with recommendations for remedial action if
necessary.
Mergers
Under the Fair Trading Act, 1973, a merger was said to take place when two or more companies “ceased to be distinct”. This
could happen even if the majority of the shareholdings in the companies concerned remained in separate hands. For example
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the purchase of a minority stake in a company that enabled the purchaser to materially influence the policy of that company
would come within the definition of the term “merger”.
The Fair Trading Act, 1973 laid down two tests to determine whether a particular merger is liable to investigation:
— The assets test: that the total gross assets of the company to be taken over exceed £ 70 million in value.
— The “market share” test: that, as a result of the merger, 25% or more of the supply or purchase of goods or services
of a particular description in the UK or a substantial part of it comes under the control of the merging enterprise, or a
25% share is increased.
Satisfying one or both of these tests would qualify a merger for examination and possible reference to the MMC, provided that
at least one of the enterprises is in the UK, or under the control of a UK company.
A reference by the secretary of State, at the instance of the Director General, started a detailed examination by the MMC which
must decide what effect the merger might have on the public interest. Parties to a proposed merger which was referred to the
MMC were prohibited from acquiring each other’s shares for the duration of the reference, except with the special consent of
the secretary of State. In the case of completed mergers, the Director General would seek undertakings from the parties to not
integrate their businesses. If the merger involved the purchase of a publicly-quoted company, the non-statutory-city code on
takeovers and mergers required that the bid to lapse at this point although it could be revived following the MMC’s report.
If the MMC concluded that the merger was against the public interest, on its recommendations the secretary of State had
powers to order divestment of shares or assets or impose conditions on the merger.
Resale-price maintenance
Resale-price maintenance is an attempt by manufacturers or suppliers to enforce a minimum price at which their goods can be
resold by dealers or retailers—was unlawful under the Resale Prices Act, 1976 except for goods granted an exemption. Goods
exempted at present are books and certain pharmaceuticals.
Under the Resale Prices Act, 1976 agreements between suppliers and dealers to establish minimum prices were held to be void
and it was unlawful to include or enforce such a clause in an agreement.
It was also unlawful to withhold supplies or to offer less favourable terms to dealers which the supplier believed to be
responsible for price cutting, or likely to introduce price cutting, and which were unwilling to enter into a price maintenance
agreement. A supplier was, however, entitled to withhold goods from a dealer who was pricing them as loss leaders.
The Resale Prices Act, 1976 applied only to the sale of goods, the supply of services being not subject to its provisions.
There was no prohibition on setting the maximum price at which a dealer could sell the goods involved or on recommending a
resale price.
In following up complaints of alleged breaches of the Resale Prices Act, 1976, the Director General had been empowered to
seek a court injunction ordering the parties involved to dissolve any minimum resale price agreement. A dealer adversely
affected by the operation of such an agreement could also sue the parties involved for damages.
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Anti-competitive Practices
Competition Act, 1980.— The aim of this Act was to prevent practices that could have adverse effects on competition. This Act
can be seen as a supplement to the Fair Trading Act, 1973, offering a way of investigating a particular practice of a particular
company, rather than a market as a whole. It amended various provisions of Fair Trading Act, 1973 and the Restrictive Trade
Practices Act, 1976.
Under the Competition Act, 1980, an anti-competitive practice was defined as any practice that had or was intended to have or
was likely to have the effect of restricting, distorting or preventing competition in some market in the UK. It is not the nature of
the practice itself but its effect on competition that was the crucial factor. The practices that may be acceptable in one market
where competition is strong may be unacceptable in another where competition is weak or absent. The judgment on whether a
practice is anti-competitive thus, depends on the position of a particular company in its market. As a result, it was impossible to
specify practices that were always anti-competitive.
In general, it was recognised that the ability to influence the market depended on the “market power” of the company
concerned. Market power can exist in a wide variety of circumstances but typically it derives from factors such as substantial
share of a market, possession of a leading brand name and significant barriers to entry to the market.
Companies were excluded from the provisions of the Competition Act, 1980 if they had a turnover of less than £10 million or if
they had less than 25% of a relevant market in the UK.
Once the possible existence of an anti-competitive practice was identified and if the Director General, after an initial informal
enquiry, concluded that the practice was anti-competitive in its effects, the two possible courses of action would be:
— The Director General could himself accept binding undertakings, which in his opinion will remedy the adverse effects
on competition, from any party who he believes has engaged in an anti-competitive practice.
— Where no acceptable undertakings are given, the practice could be referred to the MMC which must decide whether
the practice is anti-competitive and, if so, whether it operates against the public interest. Unlike a monopoly reference,
this kind of reference (known as a competition reference) will specify the company involved, the goods or services to
which it relates and the practice under investigation. The MMC could then make recommendations to the Secretary of
State who, with the advice of the Director General, could either make an order to amend or end the practice or ask the
Director General to obtain undertakings to that effect.
Competition Act, 1998 177
This Act prohibits:
— those agreements between undertakings, decisions by association of undertakings, e.g., trade associations, and
concerted practices which prevent, restrict or distort competitions, or are intended to do so, and which may affect
trade within the UK (known as Chapter I Prohibitions); and
— the abuse by one or more undertakings of a dominant position in a market which may affect trade within the UK (the
Chapter II Prohibitions).
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The Competition Act, 1998 is modelled on European Competition law, set out in Articles 101 [Ex Article 81] and 102 [Ex
Article 82] of the EC Treaty [TFEU], under which the European Commission examines agreements, business practices and
conduct which may affect trade between member states of the European Union. The UK Authorities must deal with the cases
under the Act in a way that ensures consistency with European Law.
Chapter I—Prohibition.—The Chapter I Prohibition applies to both informal and formal agreements, i.e., agreements,
decisions, or practices, whether or not they are set out in writing. Thus, there would be, for example, an informal understanding
where companies A and B agree to match the prices of company C and will be caught in the same way as a formal agreement
between competitors to set prices.
Although many different types of agreements may be caught by the prohibition, the Competition Act, 1998 lists specific
examples to which the prohibition is particularly applicable. These include:
— agreeing to fix purchase or selling prices or other trading conditions;
— agreeing to limit or control production, markets, technical development or investment;
— agreeing to share markets or supply sources;
— agreeing to apply different trade conditions to equivalent transactions, thereby pleasing some parties at a competitive
disadvantage;
— agreeing to make contracts subject to unrelated conditions.
Appreciable effect on competition.—Those agreements that don’t have any appreciable effect on competition will not be caught
by the prohibition.
Exemptions.—An agreement which would otherwise fall within the scope of the prohibition may be exempted if it satisfies
certain specified criteria.
There are three types of exemptions:
(i) Individual exemptions which may be granted for individual agreements and which must be applied for;
(ii) Block exemptions which apply automatically to certain categories of agreement; and
(iii) Parallel exemptions which apply where an agreement is covered by an EC individual or block exemption under
Article 81(3) of the EC Treaty or would be covered by an EC Block exemption if the agreement had an effect on trade
between member states of the European Union.
Chapter II Prohibition.—Chapter II “Prohibition” covers the abuse of dominant position by one or more undertakings in a
market. There is a two stage test to this prohibition, firstly, the undertakings must be in a dominant position, which will be
largely determined by the extent to which they can act independently of their competitors and customers; and secondly, they
must be abusing that position.
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In determining whether or not an undertaking is in a dominant position, the Office of Fair Trading (OFT) will first look at its
market share. Although it will vary from case to case, as a general rule an undertaking is unlikely to be considered dominant if
it has a market share of less than 40%. But, this does not exclude the possibility that an undertaking with a lower market share
may be considered dominant, if for example the structure of market enables it to act independently of its competitors. On
looking at the market structure the OFT will consider the number and size of the existing competitors as well as the potential
for new competitors to enter the market.
The Competition Act, 1998 gives examples of specific types of conduct that are particularly likely to be considered as abuse of
a dominant position. These include:
— imposing unfair purchase or selling prices;
— limiting production, markets or technical development to the prejudice of consumers;
— applying different trading conditions to equivalent transactions, thereby placing certain parties at a competitive
disadvantage; and
— attaching unrelated supplementary conditions to contracts.
Exclusions.—Certain categories of agreements and conduct are specifically excluded from the scope of the Competition Act,
1998. They include: agreements covered by a direction under section 21(2) of the Restrictive Trade Practices Act, 1976,
agreements and conduct that gives rise to merger situations under the merger provisions of the Fair Trading Act, 1973; and
agreements and conduct necessary to comply with planningobligations.
Leniency in Cartel cases
In its simplest term, a Cartel is an agreement between undertakings not to compete with each other. The agreement is usually
verbal. Typically, cartel members may agree on:
— output level;
— prices;
— discounts;
— credit terms;
— choice of customers to whom the supplies will be made;
— areas of supply;
— bid-rigging (i.e., who should win the contract);
Where an infringement of the Competition Act, 1998 involves cartel activities, penalty can amount upto 10% of an
undertaking’s UK. Turnover for each year of an infringement, subject to a maximum of three years. Under the leniency
programme members of cartels may have their financial penalty reduced substantially or may avoid a penalty altogether. Thus,
it offers an incentive to come forward with information, and facilitates the OFT’s task of uncovering and breaking up the
cartels.
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Total immunity from financial penalty
Total immunity is available to the first member of the cartel to come forward with relevant information. Immunity is automatic
if the information is provided before the OFT has begun an investigation and the OFT does not already have sufficient
evidence to establish that the cartel exists. It is discretionary if the OFT has already begun an investigation but the Director
General has not yet given written notice of his proposal to make a decision that the Chapter I prohibition has been infringed. In
both cases, the following conditions must also be met:
The undertaking must:
— provide the OFT with all the information, documents and evidence available to it regarding the existence and
activities of the cartel;
— maintain continuous and complete cooperation throughout the investigation;
— not be the instigator or leader of the cartel and not have compelled others to join; and
— cease its involvement in the cartel from the time it comes forward with information.
Enterprise Act, 2002
The Enterprise Act, 2002, which received Royal Assent on 7 November 2002, aimed to give more independence to the
competition authorities, to reform bankruptcy laws and to tackle trading practices that harm consumers.
Provisions of the Enterprise Act, 2002 significantly reformed areas of competition law and consumer law enforcement in the
UK. They were required to work alongside the Competition Act, 1998 and various pieces of consumer legislation, largely
replacing the Fair Trading Act, 1973.178
The Enterprise Act, 2002 established the Office of Fair Trading (OFT) as a corporate body replacing the former-statutory office
of the Director General of Fair Trading. The OFT was required to apply and enforce the new competition and consumer
measures alongside the competition commission, the sectoral regulators, the Competition Appeal Tribunal, Trading Standards
Department and others.
It replaced or amended legislation relating to the functions of OFT, merger control, investigation of markets, enforcement of
consumer legislation, appeals on points of competition law, Competition Commission Procedures. The Enterprise Act, 2002
also introduced new provisions relating to criminalisation of cartels, disqualification of directors for breaches of competition
law and super-complaints.
The provisions of the Enterprise Act, 2002 were largely complementary to those of the Competition Act, 1998 which remained
in force with some minor amendments.
The Department for Business Innovation and Skills (BIS) announced reforms to the UK consumer protection and
competition regimes. Under the provisions of the Enterprise and Regulatory Reform Act, 2013, the Competition and Markets
Authority (CMA) was established on 1 April 2014 combining many of the functions of the OFT and the Competition
Commission and superseding both Regulation for the consumer credit industry passed from the OFT to the new Financial
Conduct Authority (FCA) from April 2014. The CMA is responsible for the following:179
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• investigating under the Enterprise Act, 2002 mergers that could potentially give rise to a substantial lessening of
competition, and specifying measures that the merging parties must take to prevent or unwind integration between
them while the investigation takes place;
• conducting studies and investigations under the Enterprise Act, 2002 into particular markets where there are suspected
competition and/or consumer problems, or into practices that impact more than one market, and to require market
participants to take steps to address these problems;
• investigating individual businesses to determine whether they have breached UK or EU prohibitions against anti-
competitive agreements and abuse of a dominant position under the Competition Act, 1998;
• bringing criminal proceedings against individuals who commit cartel offences under the Enterprise Act, 2002;
• enforcing a range of consumer protection legislation, and bring criminal proceedings under the Consumer Protection
from Unfair Trading Regulations 2008 (CPRs); and
• conducting regulatory appeals and references in relation to price controls, terms of licences or other regulatory
arrangements under sector specific legislation (gas, electricity, water, post, communications, aviation, rail and health).
For details of this Act, see commentary under section 3.
European Economic Community (EEC) and UK Competition Law
The 1957 Treaty of Rome established the European Economic Community (EEC). The original name “European Economic
Community” was replaced as “European Community” by the Maastricht Treaty of 1992, which, in turn was subsumed in to the
European Union by the Lisbon Treaty of 2009. The Rome Treaty was renamed the Treaty on the Functioning of the European
Union (TFEU) by the Lisbon Treaty. The Lisbon Treaty also renumbered the Treaty Articles and renamed various institutions.
EU Competition law is contained in Chapter 1 of Title VII of Part Three of the TFEU, which consists of Article 101 to 109.
Article 101(1) [ex Article 81 TEC] prohibits agreements, decisions by associations of undertakings and concerted practices that
have as their object or effect the restriction of competition. Article 102 [ex Article 82 TEC] prohibits the abuse by an
undertaking/s of its dominant position. The European Commission first proposed merger control regulation in 1973. In 1989,
the Council of Ministers adopted Regulation 4064/1989. However, the 1989 Regulation was heavily amended by Regulation
1310/97 which was finally repealed and replaced by EU Merger Regulation (EUMR) in 2004.
Community Law is a separate legal order, which applies throughout European Community. Accordingly, both Governments
and private citizens, including companies, which operate within the community, are required to comply with the legal rules
established by community law. The market integration objective is the general aim of Treaty of Rome and has become an
important goal of community competition policy.
The basic rule of relationships between legal order established by EC Treaty/TFEU and the UK National Laws is that directly
applicable community rules, e.g., Community Competition Law, take precedence over National Laws. Accordingly, when a
conflict exists with UK domestic Competition Law, Community Competition Law is treated as Supreme, and the provisions of
UK Law cannot be relied upon. The European Community, however, seeks to set up a system ensuring that the competition in
the internal market of the member countries, like UK is not distorted.
Law in Canada
In Canada, the Combines Investigation Act, 1969 was the comprehensive code regulating competition and prohibiting unfair
trade practices. Misleading advertisements and other deceptive marketing practices were the axial provisions concerning
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consumer protection. It has since been replaced by the Competition Act, 1986 to make it more effective and to bring it into line
with the Canadian charter of rights and freedoms. Its salient features are detailed below:
Objective.—The Competition Act, 1986 provides a framework for business conduct in Canada and encourages competition to:
• promote the efficiency and adaptability of the Canadian economy;
• expand opportunities for Canadian participation in world markets while at the same time recognising the role of
foreign competition in Canada;
• ensure that small and medium-sized enterprises have an equitable opportunity to participate in the Canadian economy;
and
• provide consumers with competitive prices and product choices.
The Competition Act, 1986
How does it work?—The Act applies, with a few exceptions, to all businesses in Canada. Goods and services are collectively
referred to in the Act as “products” and goods alone are called “articles”.
The Competition Act, 1986 contains both criminal and non-criminal provisions. Criminal offences include conspiracy, bid-
rigging, discriminatory and predatory pricing, price maintenance and misleading advertising or deceptive marketing practices.
Prosecutions are brought before criminal courts where strict rules of evidence apply. Cases must be proven beyond a reasonable
doubt.
Non-criminal reviewable matters include mergers, abuse of dominant position, refusal to deal, consignment selling, exclusive
dealing, tied selling, market restriction and delivered pricing. These matters, when referred by the Director of Investigation and
Research (the Director), are reviewed by the Competition Tribunal (the Tribunal) under non-criminal law standards. The
Tribunal was established when the Act took effect and is governed by the Competition Tribunal Act. The Tribunal is chaired by
a judge and includes lay members to ensure a business perspective during proceedings. Other judicial members also serve on
the Tribunal.
Where competitive issues arise in regulated industries, the Director can appear before any federal board, commission or other
tribunal (such as the National Energy Board or Canadian Radio-Television and Telecommunications Commission) that carries
on regulatory activities. The Director can also appear before provincial regulators if requested.
Enforcement
The Director is responsible for enforcing the Competition Act, 1986 in a fair, effective and timely manner. The Director is head
of the Competition Bureau (the Bureau), part of Industry Canada. The Bureau provides the administrative and enforcement
support to carry out the Director’s Statutory responsibilities. All inquiries are conducted in private.
Once an inquiry begins, the Director has several investigative tools to rely upon. Information may be obtained from customers
and competitors. Search warrants may be issued by a judge, having reasonable grounds to believe that evidence regarding a
violation of the Competition Act, 1986 exists. Premises can be searched and business records seized. Search warrants can also
extend to computer systems. A court order can be obtained requiring any person having information to provide records and/or
to be examined under oath. Violations of the criminal provisions of the Act are prosecuted by the Attorney General of Canada.
Penalties include fines or imprisonment, or both. Individuals as well as companies can be charged. Prohibition orders (court
orders forbidding certain activities) and interim injunctions (temporary court orders forbidding certain activities until a hearing
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is held) may also be obtained from the court upon application by the Director. Non-criminal reviewable matters are resolved by
the Director’s application to the Tribunal for an interim injunction or order.
A private right of civil action also exists. Anyone who has suffered losses or damages may sue those who are engaged in anti-
competitive behaviour. Recovery can be equal to the loss or damage if proven by the person bringing the action. This remedy is
available if there has been a violation of the criminal provisions of the Competition Act, 1986 or a failure to comply with an
order of the Tribunal or court. There is a two-year limitation period for filing a private action under the Act.
Alternative case resolution
Some matters may be resolved quickly and easily without having a full inquiry or judicial proceeding. This reduces uncertainty,
saves time and avoids lengthy court actions.
Written undertakings (a commitment to do or not to do something) may eliminate the need to take further action. The Director
may accept an undertaking, if it remedies the effects of an anti-competitive activity. A consent order issued by the Tribunal can
be an effective way to resolve matters where the Director and other parties can agree on a satisfactory resolution of outstanding
matters.
Facilitating compliance
A useful way for business to “test the water” is by taking advantage of the Director’s Program of Advisory Opinions. Business
people can submit a proposed plan or practice to the Director, who may then provide an opinion on whether the situation
described raises competition concerns. Parties are not bound by the advice given and are free to adopt their plan or practice.
Similarly, the Director may take a second look if the facts change. Advance Ruling Certificates may also be issued when the
Director is satisfied that a proposed merger is consistent with the Act’s intent. These certificates reduce uncertainty over
whether the proposal would be the subject of an application before the Tribunal. The Director will not bring an application
provided the merger is completed within one year and is substantially the same as that for which the certificate is based.
Criminal Offences (Part VI of the Competition Act, 1986)
Conspiracy.—Conspiracy has been a criminal offence under Canada’s competition law since the original legislation was passed
in 1889. Penalties now include a fine of as much as $10 million or up to five years imprisonment, or both.
Any conspiracy, agreement or arrangement that would, if implemented, lessen competition unduly by, for example, fixing
prices or preventing new competitors from entering the market, is a criminal offence. Consideration is given to the
conspirators’ ability to control the market in question, but lessening competition unduly does not require total control of the
market.
Evidence of a conspiracy can be inferred from surrounding circumstances and direct evidence of communication between the
parties need not be shown. It is necessary to prove that a reasonable business person should have known that the agreement
would lessen competition unduly. It is also not necessary to show that the conspiracy, if carried into effect, would eliminate
essentially all competition in the market. Agreements relating to the export of products from Canada are generally exempted
from these provisions.
Bid-rigging
Bid-rigging is an agreement between parties whereby one or more bidders will refrain from submitting bids in response to a
call for tenders, or bids are submitted which have been arranged between the parties. If either situation is known to the person
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calling tenders, no offence occurs under this section. No effect on competition need be proven. Parties engaged in bid-rigging
are liable to a fine at the discretion of the court or imprisonment for up to five years, or both.
Bid-rigging eliminates free and open competition. It distorts the competitive process, resulting in inflated bids and escalated
costs. Whether this occurs on government projects or in the private sector, these increased costs are ultimately passed on to the
public.
Price discrimination and predatory pricing
Price discrimination exists when a supplier charges different prices to competitors who purchase similar volumes of an article.
Firms are competitors if they sell in the same market. The supplier must know that the purchasers are in competition and make
a practice of discrimination for this to be an offence. For example, a question would arise if a soft drink company provided a
volume discount on a regular basis to one convenience store but not to a competing store that purchased the same quality and
quantity of merchandise.
Predatory pricing infractions fall into two categories. The first is selling products in one region of Canada at prices lower than
in another region (after taking into account transportation costs) for the purpose of lessening competition substantially or
eliminating a competitor. The second is selling products at unreasonably low prices for the same purpose. A conviction under
either price discrimination or predatory pricing could result in imprisonment for up to two years.
Price maintenance
Price maintenance is an attempt by suppliers to influence upward prices charged by those supplied, or to discourage price
reduction, by agreement, threat or promise. It is also illegal to refuse to supply a product or to discriminate against any other
person because of their low pricing policy. Likewise, it is illegal to attempt to induce a supplier to engage in price maintenance.
It is only necessary to show an attempt to influence prices in this manner. Suppliers or producers who make suggestions
regarding resale prices must clearly state that customers are under no obligation to accept the suggested price. Price
maintenance penalties include a fine at the discretion of the court or imprisonment for a term not exceeding five years, or both.
Misleading advertising or deceptive marketing practices
The misleading advertising and deceptive marketing practices provisions in the Competition Act, 1986 help to ensure an honest
and effective functioning of the market. Representations which are false or misleading in a material respect are prohibited.
Unsubstantiated performance and durability claims, misleading warranties and misrepresentations as to regular price fall into
this category. Penalties include a fine at the discretion of the court or imprisonment for not more than five years, or both.
Promotional contests are subject to the Competition Act, 1986. The person conducting a promotional contest must ensure
disclosure of the number and approximate value of any prizes offered. There must also be disclosure of any facts known to the
advertiser that substantially affect the chances of winning. Distribution of prizes must not be unduly delayed. Selection of
participants or distribution of prizes must be made on the basis of skill or at random. Contravention of these provisions could
result in a fine at the discretion of the court or imprisonment up to five years, or both.
The Competition Act, 1986 also prohibits double ticketing (where the higher of two prices marked on the product is charged),
pyramid selling, sale above advertised price and bait and switch selling (when a product is advertised at a bargain price, but a
reasonable supply of it is not available). If an advertiser clearly indicates the approximate number of items for sale or takes
steps to obtain a reasonable quantity, no bait and switch offence is committed.
On 1 January 1993, the pyramid selling provisions of the Competition Act, 1986 were amended in order to address certain
deceptive practices associated with schemes of pyramid selling.
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Non-Criminal Reviewable Matters (Part VIII of the Competition Act, 1986)
Mergers.—The Competition Act, 1986 removed the merger provisions from the criminal law and made mergers a matter
reviewable by the Tribunal. A merger is essentially the acquisition of one or more business entities by another.
The Act applies to every merger in Canada (large or small) even if it involves foreign-owned or controlled companies.
Companies are obliged to notify the Bureau of a proposed merger when two thresholds are met. (Notification helps to lay the
groundwork for a meaningful evaluation of large business mergers). The parties (and any affiliates) must have total assets in
Canada or gross annual revenues from sales in, from or into Canada of over $400 million. As well, the value of the assets to be
acquired or gross revenues from sales generated by those assets must exceed $35 million. In the case of a corporate
amalgamation, the second threshold is $70 million.
There are also notification provisions for a proposed acquisition of voting shares of a corporation. Following notification, the
parties are required to wait for either seven or 21 days before completing the transaction depending upon the filing made. The
Director conducts an examination during this period to determine, if the proposal raises any competition concerns.
A merger that the Director believes will prevent or lessen competition substantially may be taken to the Tribunal for review any
time up to three years after completion of the transaction. Any factors relevant to competition may be considered in evaluating
whether a proposed merger would prevent or lessen competition substantially, but the finding of the Tribunal cannot be based
solely on concentration or market share.
Factors expressly referred to in the Competition Act, 1986 include:
(i) the amount of foreign competition;
(ii) whether a party to the merger has failed or is likely to fail;
(iii) the availability of substitute products;
(iv) any barriers preventing new competition from entering the market;
(v) the extent to which effective competition remains in the market;
(vi) the likelihood of removal of a vigorous and effective competitor; and
(vii) the nature and extent of change and innovation in a relevant market.
If the Tribunal finds that a merger prevents or substantially lessens competition, it may order the dissolution of the merger or
the disposition of assets or shares. In the case of a proposed merger, the Tribunal may order that the merger not proceed, or
prohibit the parties, should the merger be completed, from doing anything that prevents or substantially lessens competition.
The Tribunal will not make an order, if it finds a merger or proposed merger is likely to bring about gains in efficiency. These
gains must clearly offset the effects of any prevention or lessening of competition. It must also be shown that the gains in
efficiency would not likely be attained if an order were made.
Abuse of dominant position
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The Act provides remedies where dominant firms engage in anti-competitive behaviour. Examples of such behaviour include:
(i) acquisition of a customer who would otherwise be available to a competitor to impede a competitor’s entry into the
market;
(ii) use of product brands on a temporary basis to discipline or eliminate a competitor;
(iii) purchase of products to prevent the reduction of existing price levels; and
(iv) selling articles at a price lower than the acquisition cost to discipline or eliminate a competitor.
For this provision to apply, one or more persons must substantially control a class of business in Canada. They must have
engaged in, or currently be engaging in anti-competitive acts having the effect of preventing or lessening competition
substantially. Consideration is given to whether or not the anti-competitive activity is the result of a business’s superior
competitive performance.
Refusal to deal
The Tribunal may issue an order if it finds a party is substantially affected or precluded from carrying on business due to its
inability to obtain adequate supplies of a product because of insufficient competition among suppliers.
For example, a question would arise if an ice cream parlor was unable to obtain regular delivery of milk because of the lack of
competition among dairies, resulting in closure three days a week.
The party must be willing and able to meet the usual trade terms and the product must be in ample supply. The Tribunal may
order that one or more suppliers accept that party as a customer on the usual trade terms.
Consignment selling
Provisions exist in the Competition Act, 1986 for the Tribunal to make an order against a supplier engaged in consignment
selling. Consignment selling is the practice of supplying products to a dealer who only pays for what sells and is permitted to
return unsold products without penalty. The Tribunal must find that the practice was introduced to control the price at which a
dealer supplies the product or to discriminate between consignees and other dealers.
Exclusive dealing, tied selling and market restriction
Exclusive dealing is the practice of a supplier requiring or inducing a customer to purchase products primarily from him/her or
to refrain from dealing in another product.
Tied selling is a practice whereby a supplier requires a customer to acquire a second product from him/her as a condition of
being granted a supply of the first product or where the supplier requires the customer to refrain from distributing, in
conjunction with the tying product, another product not manufactured by that supplier. For example, a question would arise if a
company renting photocopiers insisted that its customers only buy paper from that company.
If the Tribunal finds that exclusive dealing or tied selling is being engaged in, with the result that competition is lessened
substantially, it may issue a remedial order prohibiting the supplier from continuing the practice. The Tribunal may also issue
any other order that, in its opinion, is necessary to restore or stimulate competition.
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Market restriction is a practice whereby a supplier of a product, as a condition of supplying the product, requires the customer
to offer the product in a defined geographic market only or the supplier extracts a penalty if the customer breaches this
condition. Before the Tribunal makes an order prohibiting market restriction, it must be shown that the practice is likely to
lessen competition substantially in relation to the product.
The Tribunal will not make an order where exclusive dealing or market restriction is engaged in for a reasonable period of time
to facilitate entry of a new supplier or product into the market. Tied selling may be allowed when there is a technological
relationship between products (such as computer hardware and software) or when it is engaged in by a person in the business of
lending money to secure loans.
The key factor about exclusive dealing, tied selling and market restriction is that the practice will only be challenged if it has a
substantial impact on competition.
Delivered pricing
Delivered pricing is the practice of refusing a customer delivery of an article on the same trade terms as other customers in the
same location.
Before the Tribunal makes an order prohibiting suppliers from engaging in delivered pricing, the customer must be denied an
advantage (such as delivery of goods at wholesale prices) that is available to other customers of the supplier. The customer
must be prepared to take delivery on the same trade terms as others. The Tribunal shall not make an order against a supplier
where it finds that the supplier could not accommodate any additional customers without making significant capital
investments.
Specialisation agreements
A specialisation agreement typically involves a situation where two parties manufacture the same two articles and each agrees
to discontinue producing one article in order to individually specialise in the production of the other. For example, one
chemical manufacturer phases out production of fertiliser to specialise in house paint while a second business does the
opposite. Specialisation agreements are exempted from the conspiracy and exclusive dealing provisions of the Competition Act,
1986 if the agreement is registered with the Tribunal. An agreement will be registered provided efficiency gains offsetting any
prevention or lessening of competition is realised. It must be shown that the gains in efficiency would not be likely to be
attained if the agreement were not implemented.
Law in Australia
Australia has a Federal Constitution and as such, the commonwealth Parliament is empowered to legislate only on matters set
out in the Constitution; residue of legislative powers rest with the States. The State can legislate on any matter not already
covered by the law of commonwealth Parliament unless and until the commonwealth legislation is enacted which covers the
same subject-matter. The competition law of the commonwealth Parliament was initially contained in the Trade Practices Act,
1974 (No. 51 of 1974).
Trade Practices Act, 1974—A brief account
Trade Practices Act, 1974 specified its objective in the following words:
The object of this Act is to enhance the welfare of Australians through the promotion of competition and fair trading and provision for
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Consumer Protection. For the purpose a commission named as Australian Competition and Consumer Commission has been established
[Section 6A]. Competition is defined as to include competition from imported goods or from services rendered by persons not resident
or not carrying on business in Australia.
Goods included (a) Ships, aircraft and other vehicles, (b) animals, including fish, (c) minerals, trees and crops, whether on,
under or attached to land or not; and (d) gas and electricity. Services include any rights (including rights in relation to, and
interests in, real or personal property), benefits, privileges or facilities that are or are to be provided, granted or conferred in
trade or commerce, and without limiting the generality of the foregoing, includes rights, benefits, privileges or facilities that are
to be provided, granted or conferred under:
(a) a contract for or in relation to:
(i) the performance of work (including work of a professional nature), whether with or without the supply of goods;
(ii) the provision of, or the use or enjoyment of facilities for, amusement, entertainments recreation or instruction; or
(iii) the conferring of rights, benefits or privileges for which remuneration is payable in the form of a royalty, tribute,
levy or similar exaction;
(b) a contract of insurance;
(c) a contract between a banker and a customer of the banker entered into in the course of carrying on the business of
banking by the banker; or
(d) any contract for or in relation to the lending of monies;
but does not include rights or benefits being the supply of goods or the performance of work under a contract of
service.
The Competition and Consumer Act (CCA), 2010
In 2010, the Australian Parliament passed a new legislation to replace the Trade Practices Act of 1974.The competition law
provisions are contained in Part IV of CCA. In addition, separate prohibitions have been created in relation to anti-competitive
conduct in the telecommunications industry and a regime for access to essential facilities has been developed. The following
provides a brief overview of the core elements of Australia’s competition policy –
Cartel: Cartel conduct is prohibited by a new Div 1 of Part IV of the CCA. It is prohibited civilly and it constitutes a criminal
offence. Cartel conduct is defined in section 44ZZRD as including four forms of activity: price fixing (defined in the same way
as the former section 45A), market division, restricting outputs and bid rigging. This conduct is prohibited where made or given
effect to in a “contract, arrangement or understanding” and two or more of the parties involved are competitors (or would be
but for the conduct). In relation to price fixing the provision must have the “purpose or effect” of price fixing; in relation to the
other forms of conduct, the provision must have the requisite “purpose”. Criminal penalties of up to $220,000 per offence or up
to 10 years’ imprisonment will be available for individuals found to have committed a cartel offence. The civil penalties for
making or giving effect to a cartel provision are the same as those currently available for other contraventions of Part IV. A
limited defence is available for joint venture contracts.
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Anti-competitive agreements: Section 45 of CCA prohibits contracts, arrangements or understandings containing a provision
which has the purpose, effect or likely effect of substantially lessening competition.
Boycotts: Section 45 prohibits exclusionary provisions per se. This is in addition to the prohibition on output restrictions
contained in the new cartel prohibitions. Exclusionary provisions are defined broadly in section 4D. A limited defence is
available in relation to joint venture agreements that do not substantially lessen competition.
Misuse of Market Power: Section 46(1) prohibits a corporation with substantial market power from taking advantage of that
market power for a prohibited anti-competitive purpose.
Exclusive Dealing: Section 47 of CCA prohibits various forms of exclusive dealing. Broadly, it captures two types of anti-
competitive vertical transactions: (1) the conditional supply (or acquisition) of goods or services (conditions may relate to the
ability to re-supply, exclusivity, limits on ability to acquire from competitors etc.); (2) refusing to supply for specified reasons
(e.g., because purchaser refuses to agree to a conditional supply).
Resale Price Maintenance: Section 48 of CCA prohibits a corporation from engaging in the practice of resale price
maintenance. Resale price maintenance is defined in Part VIII. It captures various forms of minimum RPM, both in relation to
goods and services (including withholding supply as a result of failure to agree to or adhere to a RPM requirement). Maximum
RPM is not prohibited (even if it substantially lessens competition). A person does not engage in RPM merely by providing a
statement of recommended prices (section 97).
Mergers: Mergers are prohibited if it can be demonstrated that they will have the effect or likely effect of substantially
lessening competition in a market (section 50 CCA). It is possible to obtain clearance (formal or informal) or authorisation for
proposed mergers, but there is no mandatory notification process.
Administration
Australian Competition and Consumer Commission: The Australian Competition and Consumer Commission (ACCC) is an
independent Commonwealth statutory authority whose role is to enforce the Competition and Consumer Act, 2010 and a range
of additional legislation, promoting competition, fair trading and regulating national infrastructure for the benefit of all
Australians. The major role of ACCC is to:
• maintain and promote competition and remedy market failure;
• protect the interests and safety of consumers and support fair trading in markets;
• promote the economically efficient operation of, use of and investment in monopoly infrastructure;
• increase engagement with the broad range of groups affected by what they do;
• promote consumer education in regional and rural areas and with indigenous communities.
Apart from private enforcement, the ACCC, a semi-judicial body may commence proceedings for pecuniary penalties,
injunctions, divestiture in the case of mergers and it may accept understandings (section 87B) designed to alleviate competition
concerns. It has powers to obtain evidence pursuant to section 155 and, subject to obtaining a search warrant, has search and
seizure powers to assist in its investigations. The ACCC has the power to grant “authorisation” of conduct that would otherwise
contravene Part IV (other than for mergers in which it plays an advisory role) on public benefit grounds.
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Australian Competition Tribunal (ACT): The Australian Competition Tribunal was established under the Trade Practices Act,
1965 and continues under the Competition and Consumer Act, 2010. Prior to 6 November 1995, the Tribunal was known as the
Trade Practices Tribunal.
• The Tribunal is a review body. A review by the Tribunal is a re-hearing or a re-consideration of a matter (albeit on
limited material for some reviews).
• The Tribunal may perform all the functions and exercise all the powers of the original decision-maker for the
purposes of review. It can affirm, set aside or vary the original decision.
• The Tribunal hears applications for review of determinations of the Australian Competition and Consumer
Commission (ACCC) granting or revoking authorisations. Authorisations are granted by the ACCC permitting
conduct and arrangements to be carried on that would otherwise be prohibited under the Competition and Consumer
Act, 2010 because of their anti-competitive effect.
• In relation to company mergers and acquisitions the Tribunal has a two-fold role. It hears applications for review of
determinations of the ACCC granting or refusing clearances for company mergers and acquisitions. It also hears
applications for authorisation of company mergers and acquisitions which would otherwise be prohibited under the
Act.
• The Tribunal hears applications for review of certain decisions of the Minister or the ACCC in access matters. The
Act establishes a legislative regime to facilitate third party access to the services of certain essential facilities of
national significance, such as electricity grids, natural gas pipelines or telecommunications services.
• The Tribunal also hears applications for review of certain determinations of the ACCC in relation to notices given by
it under section 93 of the Competition and Consumer Act, 2010 regarding exclusive dealing.
• The Tribunal also has the power to inquire into and report to the Minister on whether a non-conference ocean carrier
has a substantial degree of market power on a trade route.
Commonwealth Director of Public Prosecutions (CDPP): The CDPP was established under the Director of Public Prosecutions
Act, 1983 (the DPP Act) and began operations on 5 March 1984. The Office is under the control of the Director, who is
appointed for a term of up to seven years. The office of the CDPP is an independent prosecution service established by
Parliament to prosecute alleged offences against Commonwealth law. It aims to provide an effective, ethical, high quality and
independent criminal prosecution service for Australia in accordance with the Prosecution Policy of the Commonwealth. It
determines which matters it will prosecute as a “cartel offence”. The ACCC will make recommendations to the CDPP about
which matters it considers appropriate to pursue criminally and the CDPP will make a determination based on the MOU
between the ACCC and CDPP and on the Prosecution Policy of the Commonwealth. The CDPP may also grant immunity from
prosecution for whistle-blowers meeting set criteria.
National Competition Council (NCC): The National Competition Council is a research and advisory body which was
established in 1995 by agreement of the Council of Australian Governments (COAG). The Council’s main function is to
recommend on the regulation of third party access to services provided by monopoly infrastructure. Section 29B of the
Competition and Consumer Act, 2010 sets out the functions and powers of the Council.
World Trade Organisation
Anti-dumping in the course of multi-lateral trade.—World Trade Organisation came into existence on 1 January 1995. It is
the successor to General Agreement on Tariffs and Trade (GATT), whose erstwhile members signed an agreement in
Marrakesh, Morocco to establish WTO. The WTO, as a permanent inter-governmental body, governing and regulating
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international trade in goods and services, aims at providing a framework for furthering multi-lateral agreements which may be
either purely trade related or affecting/influencing trade in some manner. For the purpose, it performs the following:
(1) Acting as a forum for trade negotiations;
(2) Administering Trade Agreements;
(3) Reviewing National Trade Policies;
(4) Setting of trade disputes.
Provisions in the GATT allow member countries to take action against Unfair Trade Practices. The Anti-dumping Agreement
under the GATT/WTO is one such safeguard agreement to regulate multi-lateral trading system.
In India, section 9A of the Customs Tariff Act, 1975 provides for levy of anti-dumping duty on dumped article. The said
provisions are independent of the provisions of the Competition Act, 1986 e.g. on anti-competitive agreements in section 3
thereof.
The provisions of the Customs Tariff Act, 1975 contained in section 9A etc. thereof, are relevant where any article is exported
from any country to India at less than its normal value; and then the Central Government may impose an anti-dumping duty,
albeit, not exceeding the margin of dumping in relation to such article.180
What is dumping? An exporting country is said to be dumping when it sells goods abroad for a price lower than it would sell
domestically, or if it sells these goods abroad at a price lower than the per unit cost of the good(s). This is often done with the
intention of capturing foreign market and eliminating competition. Dumping is considered as an Unfair Trade Practice in
International Trade and GATT authorises counter-action by the importing country if dumping causes or threatens material
injury to a domestic industry. Apart from other measures, an anti-dumping action may invite imposition of anti-dumping duty
by the importing country on the dumped goods imported.
The economics of dumping is relevant for consideration in the context of definition of goods in section 2(i)(c) of the
Competition Act, 2002 which speaks of goods imported into India read with provisions of sections 3 and 4 of the 2002 Act,
relating to Anti-competitive Agreements and Abuse of dominant position.
Competition Policy at WTO: Key events
Singapore Ministerial Conference (1996): The Singapore Ministerial Conference of the WTO (1996) set up the Working
Group on the Interaction between Trade and Competition Policy “to study issues raised by Members relating to the interaction
between trade and competition policy, including anti-competitive practices, in order to identify any areas that may merit further
consideration in the WTO framework”.181
Doha Ministerial Conference (2001): At the WTO Ministerial Conference in Doha (2001), Ministers “recognised the case for a
multilateral framework to enhance the contribution of competition policy to international trade and development, and the need
for enhanced technical assistance and capacity-building in this area”.182 They “agreed that negotiations will take place after the
Fifth Session of the Ministerial Conference on the basis of a decision to be taken, by explicit consensus, at that Session on
modalities of negotiations”.183 They instructed the Working Group to focus, until the WTO Ministerial Conference in Cancún
(2001), “on the clarification of:
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• core principles, including transparency, non-discrimination and procedural fairness;
• provisions on hard-core cartels;
• modalities for voluntary cooperation; and
• support for progressive reinforcement of competition institutions in developing countries through capacity building”.
Cancún Ministerial Conference (2003): At the Ministerial Conference in Cancún (2003), no consensus could be reached on
modalities for negotiations in this area, although Ministers “reaffirmed all the Doha Declarations and Decisions and
recommitted themselves to working to implement them fully and faithfully”.184
The “July Decision” (2004): In the “July 2004 package” adopted on 1 August 2004, the WTO General Council decided that the
issue of competition policy
will not form part of the Work Programme set out in that Declaration and therefore, no work towards negotiations on any of these issues
will take place within the WTO during the Doha Round.185
The Working Group is currently inactive.
Export Competition Pact of WTO: The WTO’s 10th Ministerial Conference was held in Nairobi, Kenya, during 15–19
December 2015. It culminated in the adoption of the “Nairobi Package”. A center-piece of the Nairobi Package is a Ministerial
Decision on Export Competition. A number of countries are currently using export subsidies to support agriculture exports. The
legally-binding decision would eliminate these subsidies and prevent Governments from reverting to trade-distorting export
support in the future. India has asserted that there is little convergence of views among members of the global trade body on
this issue and objected to any such pact without a permanent solution to farm subsidies. Further, developed countries which
give huge trade distorting farm subsidies want emerging nations like India to take greater commitments in terms of reducing
their export support. Export competition is one of the pillars of agriculture negotiations, which are finely balanced on the three
pillars of market access, export competition and domestic support. Dislocation of one pillar may upset the balance.
ASEAN
ASEAN Regional Guidelines on Competition Policy186 lists out the major objectives and benefits of competition policy as:
1. Economic efficiency: Economic efficiency refers to the effective use and allocation of the economy’s resources.
Competition tends to bring about enhanced efficiency, in both a static and a dynamic sense, by disciplining firms to
produce at the lowest possible cost and pass these cost savings on to consumers, and motivating firms to undertake
research and development to meet customer needs.
2. Economic growth and development: Economic growth-the increase in the value of goods and services produced by an
economy is a key indicator of economic development. Economic development refers to a broader definition of an
economy’s well-being, including employment growth, literacy and mortality rates and other measures of quality of
life. Competition may bring about greater economic growth and development through improvements in economic
efficiency and the reduction of wastage in the production of goods and services. The market is therefore able to more
rapidly reallocate resources, improve productivity and attain a higher level of economic growth. Over time, sustained
economic growth tends to lead to an enhanced quality of life and greater economic development.
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3. Consumer Welfare: Competition policy contributes to economic growth to the ultimate benefit of consumers, in terms
of better choice (new products), better quality and lower prices. Consumer welfare protection may be required in
order to redress a perceived imbalance between the market power of consumers and producers. The imbalance
between consumers and producers may stem from market failures such as information asymmetries, the lack of
bargaining position towards producers and high transaction costs. Competition policy may serve as a complement to
consumer protection policies to address such market failures.
5 Received the assent of the President of India on 13 January 2003. Sections 1, 2 [clauses
(d), (g), (j), (k), (l) and (n)] 8 to 10, 14, 16, 17, sub-section (1) of section 63 and clauses (a), (b), (d), (e), (f) and (g) of sub-section
(2) of section 63 enforced w.e.f. 31 March 2003, vide Notification No SO 340(E), dated 31 March 2003. Sections 2 [except clauses
(d), (g), (j), (k), (l) and (n)], 7, 11 to 13, 15, 22, 23, 36, 49 to 62, 63 [except clauses (a), (b), (d) to (g) and (n) of sub-section (2) of
section 63], 64 and 65 enforced w.e.f. 19 June 2003, vide Notification No SO 715(E), dated 19 June 2003. Sections 53C, 53D, 53E,
53F, 53G, 53H, 53-I, 53J, 53K, 53L and 53M enforced with effect from 20 December 2007, vide SO 2167(E), dated 20 December
2007.
The provisions of sections 3, 4, 18, 19, 21, 26, 27, 28, 32, 33, 35, 38, 39, 41, 42, 43, 45, 46, 47, 48, 54, 55
and 56 enforced w.e.f. 20 May 2009, vide SO 1241(E), dated 15 May 2009.
The provisions of section 66 enforced with effect from 1 September 2009, vide SO 2204(E), dated 28
August 2009.
Sections 5, 6, 20, 29, 30 and 31 enforced with effect from 1 June 2011, vide SO 479(E), dated 4 March
2011.
Section 43A enforced with effect from 1 June 2011, vide SO 1230(E), dated 30 May 2011.
Section 44 enforced with effect from 1 June 2011, vide SO 1231(E), dated 30 May 2011. CCI v Co-
ordination Committee of Artists and Technicians of WB Film and Television, AIR 2017 SC 1449
.
6 CCI v Steel Authority of India, [2010]
98 CLA 278 : (2011) 2 Mad LJ 271 (SC).
7 Para 22, Excel Crop Care Ltd v CCI, II
(2017) CPJ 20 (SC) : 2017 (6) Scale 241 :
(2017) 141 SCL 480 (SC).
8 Para 18, Excel Crop Care Ltd v CCI, AIR
2017 SC 2734 .
9 See, para 21, Id.
10 Pravahan Mohanty v HDFC Bank Ltd, Chennai, Case No 17/2010,
dated 23 May 2011 per R PRASAD, MEMBER (DISSENTING).
11 Gwalior Rayon Silk Mfg (Wvg) Co Ltd v Custodian of Vested Forests,
AIR 1990 SC 1747 , p 1752 :
1990 (2) JT 130 ; Mohammad Alikhan v Commissioner of Wealth Tax,
AIR 1997 SC 1165 , p 1167 : 1997 (3) SCC 511
; Institute of Chartered Accountants of India v Price Waterhouse, AIR 1998 SC 74
, p 90 : (1997) 6 SCC 312 .
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12 Shyam Kishori Devi v Patna Municipal Corp,
AIR 1966 SC 1678 , p 1682 : 1966 (3) SCR 466
(the words of a statute never should, in interpretation, be added to or subtracted from without almost a necessity);
Management, Shahdara (Delhi) Saharanpur Light Rly Co Ltd v SS Rly Workers Union, AIR 1969
SC 513 , p 518; S Narayanaswami v G Panneerselvam, AIR 1972
SC 2284 , p 2289; UOI v Sankalchand, AIR 1977 SC 2328
, p 2337 : (1977) 4 SCC 193 ; AR Antulay v Ramdas
Srinivas Nayak, (1984) 2 SCC 500 , pp 518, 519 :
AIR 1984 SC 718 ; Mohammad Alikhan v Commissioner of Wealth Tax,
AIR 1997 SC 1165 : 1997 (3) SCC 511
; Institute of Chartered Accountants of India v Price Waterhouse, AIR 1998 SC 74
: (1997) 6 SCC 312 ; State of Maharashtra v Nanded
Prabhani Operator Sangh, AIR 2000 SC 725 , p 727 :
(2000) 2 SCC 69 .
13 Crawford v Spooner, (1846) 6
Moo Ind App PC 1 , pp 8, 9 : 4 Moo Ind App 179, p 187 (PC); referred to in Lord Howard de
Walden v IRC, (1948) 2 All ER 825 , p 830 (HL);
Nalinakhya Bysack v Shyamsunder Halder, AIR 1953 SC 148
, p 152 : 1953 SCR 533 ; PK Unni v Nirmala
Industries, AIR 1990 SC 933 , p 936 :
(1990) 1 SCR 482 at p 488; State of MP v GS Dall and
Flour Mills, AIR 1991 SC 772 , p 785. See further
UOI v Deoki Nandan Aggarwal, AIR 1992 SC 96 , p 101 :
1991 SCR (3) 873 ; State of Gujarat v Dilipbhai
Nathjibhai Patel, JT 1998 (2) SC 253 , p 255 :
1998 (2) Scale 145 , p 147.
14 Renula Bose v Rai Manmathnath Bose,
AIR 1945 PC 108 , p 110; Stock v Frank Jones (Tiptan) Ltd,
(1978) 1 All ER 948 , p 951 (HL); Grunwick Processing Laboratories
Ltd v Advisory Conciliation and Arbitration Service, (1978) 1 All ER 338
, p 368 (HL); Assessing Authority-Cum-Excise and Taxation Officer v East India Cotton Mfg Co Ltd,
AIR 1981 SC 1610 , p 1615 :
(1981) 3 SCC 531 ; Director General, Telecommunication v TN
Peethambaram, AIR 1987 SC 162 :
(1986) 4 SCC 348 , p 349.
15 Pinner v Everett, (1969) 3
All ER 257 , p 259 (HL); Brutus v Cozens, (1972) 2
All ER 1297 , pp 1299, 1303, 1304 (HL) (We have been warned time and again not to
substitute other words for the words of a statute. And there is very good reason for that. Few words have exact synonyms. The
overtones are almost always different. This is especially true in case of an ordinary English word of common use for “the easiest
word, whatever it may be, can never be translated into one more easy”); Seramco Ltd Superannuation Fund Trustees v CIT,
(1976) 2 All ER 28 , p 35 (PC) :
(1977) AC 287 : (1976) 2 WLR 986
(In case of an ordinary word, there should be no attempt to substitute or paraphrase for general application.
Attention should be confined to what is necessary for deciding the particular case); Murray v Foyle Meats Ltd,
(1999) 3 All ER 769 , p 773 (HL) :
(1999) 3 WLR 356 (The temptation of substituting other expressions for the words of the statute by
way of explaining what it is thought the legislature is endeavouring to say is to be discouraged); Re Gilligan,
(2000) 1 All ER 113 , p 122 (HL); Northern Securities Co v US, 193 US 197, p
400 per HOLMES, J, (much trouble is made by substituting other phrases assumed to be equivalent, which then are reasoned from
as if they were in the Act).
16 ansraj Gupta v Dehra Dun Mussoorie Electric Tramway Co Ltd,
AIR 1933 PC 63 , p 65; Kamalranjan Roy v Secretary of State,
AIR 1938 PC 281 , p 283; Hiradevi v District Board, Shahjahanpur,
AIR 1952 SC 362 , p 365 :
1952 SCR 1122 ; Nalinakhya Bysack v Shyamsunder, AIR 1953
SC 148 , p 152 : 1953 SCR 533 ;
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Lord Howard de Walden v IRC, (1948) 2 All ER 825 ,
p 830 (HL); Magor & St Mellans Rural District Council v Newport Corp, (1951) 2 All ER 839
, pp 841, 846, 850 (HL); S Narayanaswami v G Panneeoselvam,
AIR 1972 SC 2284 , p 2289 (para 10) : 1973 SCR
(1) 172 ; Dhoom Singh v Prakash Chandra Sethi, AIR 1975
SC 1012 , p 1016 : (1975) 1 SCC 597
; Commissioner of Sales Tax, Uttar Pradesh v Parson Tools and Plants, Kanpur,
AIR 1975 SC 1039 , p 1043 : 1975 SCC (Tax) 185 : (1975) 4
SCC 22 ; Commissioner of Sales Tax v Mangal Sen Shyamlal,
AIR 1975 SC 1106 , p 1110 : 1975 SCC (Tax) 201; Tarulata Syam v CIT, West Bengal,
AIR 1977 SC 1802 , p 1811 :
(1977) 3 SCC 305 ; Johnson v Moreton, (1978) 3 All ER 37
, p 41 (HL); Waliram Waman Hiray (Dr) v B Lentin J,
AIR 1988 SC 2267 , p 2283 : (1988) 4 SCC 419
.
17 Aswini Kumar Ghose v Arabinda Bose,
AIR 1952 SC 369 , p 377 : 1953 SCR 1
.
18 Rao Shiv Bahadur Singh v State of UP,
AIR 1953 SC 394 , p 397 : 1953 SCR 1188
.
19 JK Cotton Spinning & Weaving Mills Co Ltd v State of UP,
AIR 1961 SC 1170 , p 1174; Mohammad Alikhan v The
Commissioner of Wealth Tax, AIR 1997 SC 1165 ,
p 1167 : (1997) 3 SCC 511 .
20 Quebec Railway, Light, Heat & Power Co v Vandry,
AIR 1920 PC 181 , p 186.
21 Ghanshyamdas v Regional Asstt Commr, Sales Tax,
AIR 1964 SC 766 , p 722 : 1964 (4) SCR 436
; See further CIT v Kanpur Coal Syndicate, AIR 1965 SC 325
, p 327 : 1964 (8) SCR 85 ; State of
Rajasthan v Leela Jain, AIR 1965 SC 1296 , p 1299;
Bhanu Pratap Singh (Raja) v Asstt Custodian, E P, Bahraich, AIR 1966 SC 245
, p 247; CIT v Moon Mills, AIR 1966 SC 870 ,
p 873 : 1974 (3) SCC 554 ; DR Jerry v UOI,
AIR 1974 SC 130 , p 133 : 1974 (3) SCC 554
; Balaganeshan Metals v Shanmugham Chetty, (1987) AIR 1987 SC 1668
: 2 SCC 707, p 713; State of UP v Radhey Shyam,
AIR 1989 SC 682 , pp 689, 690 : 1989 (1) SCC 591
; State of Maharashtra v Santosh Shankar Acharya, (2000) 7 SCC 463
, p 469; Borosil Glass Works Ltd Employees Union v DD Bambode,
AIR 2001 SC 378 , p 380.
22 Inco Europe Ltd v First Choice Distribution (a firm),
(2000) 2 All ER 109 , p 115 (HL) : 74 Con LR 55.
23 Ibid.
24 Craies, Statute Law, 7th Edn, p 109. See further Ranjit Singh Kalara
v UOI, (1991) 2 SCC 87 (para 19); HC Suman v Rehabilitation
Ministry Employees Co-op House Building Society Ltd, AIR 1991 SC 2160
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, pp 2167, 2168 : (1991) 4 SCC 485 ; MJ
Exports Ltd v Customs Excise and Gold (Control) Appellate Tribunal, AIR 1992 SC 2014
, p 2024 : 1992 (3) JT 398
.
25 Siraj-ul-Haq v Sunni Central Board of Waqf, UP,
AIR 1959 SC 198 : 1959 SCR 1287
.
26 Hameedia Hardware Stores v B Mohan Lal Sowear,
AIR 1988 SC 1060 , p 1067 :
1988 (2) SCC 513 ; HC Suman v Rehabilitation Ministry Employees Co-op House Building Society
Ltd, AIR 1991 295 : 1990 SCR Supp (2) 552 : 1990 Scale (2) 942
supra.
27 Pickstone v Freemans Plc, (1988) 2
All ER 803 , pp 813, 817 (HL) : (1989) AC 66
; Lister v Forth Drydock and Engineering Co Ltd, (1989) 1
All ER 1134 (HL) : (1989) 2 WLR 634
.
28 Jones v Wrotham Park Settled Estates,
(1979) 1 All ER 286 , p 289 (HL) (LORD DIPLOCK) :
(1980) AC 74 ; Inco Europe Ltd v First Choice Distribution (a firm),
(2000) 2 All ER 109 , p 115
(HL) : 74 Con LR 55 supra.
29 CRAIES, Statute Law, 7th Edn, p 65.
30 Ibid.
31 Lion Insurance Association v Tucker, (1883–84) 12 QBD 176, p 186.
See further Bidie (deceased), Bidie v General Accident, Fire and Life Assurance Corp Ltd,
(1948) 2 All ER 995 , p 998 (LORD GREENE, MR); Captain Subhash Kumar v Principal
Officer, Mercantile Marine Dept, AIR 1991 SC 1632 , p 1638 :
1991 (2) SCC 449 .
32 Prithipal Singh v UOI, AIR 1982
SC 1413 , p 1419 : (1982) 3 SCC 140 ;
Member Secretary, Andhra Pradesh State Board for Prevention and Control of Water Pollution v Andhra Pradesh Rayons Ltd,
AIR 1989 SC 611 , p 615 : (1989) 1
SCC 44 .
33 Spillers Ltd v Caradix Assessment Committee & Pritchard,
(1931) 2 KB 21 : (1931) All
ER Rep 524 , pp 528, 529. Distinguished in Attorney-General’s Reference (No 1 of 1988),
(1989) 2 All ER 1 (HL).
34 Workmen of Dimakuchi Tea Estate v Management of Dimakuchi Tea
Estate, AIR 1958 SC 353 , p 356 :
1958 SCR 1156 ; State of UP v C Tobit, AIR 1958 SC 414
, p 416 : 1958 SCR 1275 ; Santa
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Singh v State of Punjab, AIR 1976 SC 2386 , p 2389 :
1976 SCC (Cri) 546 .
35 Heydon’s case, (1584) 3 Co Rep 7a, p 7b : 76 ER 637.
36 Kanailal Sur v Paramnidhi Sadhukhan,
AIR 1957 SC 907 , p 910 : 1958 SCR 360
.
37 Anderton v Ryan, (1985) 2 All ER 355
, p 359 (HL). The Law Commission (UK) in 1969 disapproved of the term “mischief” being
archaic and preferred a “purposive” approach to construction; CROSS, Statutory Interpretation, 3rd Edn, pp 17, 18.
38 Workmen of Dimakuchi Tea Estate v Management of Dimakuchi Tea
Estate, AIR 1958 SC 353 , p 356 :
1958 SCR 1156 ; State of UP v C Tobit, AIR 1958 SC 414
, p 416 : 1958 SCR 1275 ; Santa Singh v
State of Punjab, AIR 1976 SC 2386 , p 2389 :
1976 SCC (Cri) 546 .
In the judicial process. Those courts who declare vigorously that they are completely indifferent to the consequences of what
they decide and would decide as they do though the heaven fell, merely mean that they do not believe that the consequences
will be seriously harmful. If they meant what they said, and acted on it, they would be taking a long step towards the
destruction of our judicial system. (33 Calif. L. Rev. 219 p 228) Brij Gopal v State of MP,
(1978) MPLJ 70 , p 75 : AIR 978 MP 122, p 131 (GP SINGH, J).
39 SHIVA RAO, The Framing of India’s Constitution, A Study, p 128.
40 Constituent Assembly Debates, vol X, pp 429–56.
41 Kesavananda v State of Kerala,
AIR 1973 SC 1461 : (1973) 4 SCC 225
; Minerva Mills Ltd v UOI, AIR 1980 SC 1789 :
1980 (3) SCC 625 . See further Behram Khurshid Pesikaka v State of Bombay,
AIR 1955 SC 123 , p 146 : 1955 (1) SCR 613
; Re Kerala Education Bill, 1957, AIR 1958 SC 956
, p 965; Basheshar Nath v CIT, AIR 1959 SC 149 , pp 158, 160 :
1959 Supp (1) SCR 528 . These cases are noticed by SHELAT and
GROVER, JJ. In Kesavananda, supra, at p 1579. The contrary opinion expressed in the reference on the Agreement relating to
Berubari Union and Exchange of Enclaves, AIR 1960 SC 845 , p 856
was overruled in Kesavananda, supra.
42 Indira Nehru Gandhi v Raj Narain,
AIR 1975 SC 2299 (para 666) : 1975 Supp SCC 1
; Raghunathrao Ganpatrao v UOI, AIR 1993 SC 1267 , pp
1307, 1308 : 1993 (1) JT 374 .
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43 Hammer Smith d’ City Ry v Brand,
(1869) LR 4 HLC 171; Ingils v Robertson, (1898) AC
616 , pp 624, 629 (HL); Toronto Corp v Toronto Ry, (1907) AC
315 , p 324 (PC); Martins v Fowler, (1926) AC 746
, p 750 (PC); Qualter Hall d’ Co Ltd v Board of Trade, (1961) 3 All ER 389
, pp 392, 394 (CA); Bhinka v Charan Singh, AIR 1959 SC 960
, p 966 : 1959 SCR Supp (2) 798; Director of Public Prosecutions v Schildkamp,
(1969) 3 All ER 1640 (HL).
44 Toronto Corp v Toronto Ry Co,
(1907) AC 315 , p 324 (PC) (LORD COLLINS); referred to Re Ralph George Cariton,
(1945) 1 All ER 559 , p 562; Qualter Hall d’ Co v Board of Trade,
(1961) 3 All ER 389 , pp 392, 394 (CA), supra, p 392.
45 Martins v Fowler, 194 N.W.2d 524 : 36 Mich. App. 725 supra p 750;
referred to in Qualter Hall d’ Co v Board of Trade, supra, p 392.
46 R v Surrey (North Eastern, Area) Assessment Committee,
(1947) 2 All ER 276 , pp 278, 279.
47 CIT v Ahmedbhai Umarbhai,
AIR 1950 SC 134 , p 141 : 1950 SCR 335
.
48 R v Surrey Assessment Committee,
(1947) 2 All ER 276 , 278, 279.
49 Frick India Ltd v UOI, AIR 1990
SC 689 , p 693.
50 Real Value Appliances Ltd v Canara Bank,
AIR 1998 SC 2064 : (1998) 5 SCC 554
: (1998) 93 Com Cas 26 .
51 Forage & Co v Municipal Corp of Greater Bombay,
AIR 2000 SC 378 .
52 Municipal Corp for the City of Thane v ASMACO Plastic Industries,
AIR 1998 SC 2440 .
53 HALSBURY, Laws of England, vol 36, 3rd Edn, p 373. In two cases,
marginal notes were used by Court of Appeal as an aid to construction. See Stephens v Cuckfield Rural District Council,
(1960) 2 All ER 716 , p 720 (CA); and Re Cohen (a Bankrupt),
(1961) 1 All ER 646 , p 656 (CA). But in Chandler v Director of
Public Prosecutions, (1962) 3 All ER 142 , pp 145, 146
(HL), LORD REID expressed the view that marginal notes cannot be used as an aid to construction.
In Director of Public Prosecution v Schildkamp, (1969) 3 All ER 1640
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, p 1641 (HL), LORD REID again stated that a side-note is a poor guide to the scope of a section for it can do no
more than indicate the main subject with which the section deals.
In the same case LORD UPJOHN said (p 1657):
A side-note is a very brief precis of the section and therefore, forms a most unsure guide to the construction of the enacting
section, but it is as much a part of the Bill as a cross-heading and I can conceive of cases where very rarely it might throw
some light on the intentions of Parliament just as a punctuation mark. And LORD DILHORNE (p 1650) also agreed with this
view.
54 Balraj Kunwar v Jagatpal Singh, ILR 26 All 393, p 406 (PC).
55 CIT v Ahmedbhai Umarbhai & Co,
AIR 1950 SC 134 , p 141 : 1950 SCR 335
; Board of Muslim Waqfs, Rajasthan v Radhakishan, AIR 1979 SC 289
, pp 295, 296 : (1979) 2 SCC 468 ; Kalawati Bai v Soiryabai,
AIR 1991 SC 1581 , p 1586 :
1991 SCR (2) 599 . But see Uttam Das Chela Sunderdas v Shiromani Gurdwara Prabandhak
Committee, AIR 1996 SC 2133 p 2137 :
1996 (4) Scale 608 , pp 613, 614 (para 16) where contrary view is expressed. But it appears that
the court in this case was dealing with “Heading” and not “Marginal note” and no final opinion was expressed.
56 Emperor v Sadashiv, AIR 1947
PC 82 , p 84.
57 Nalinakhya Bysack v Shyam Sundar Haddar,
AIR 1953 SC 148 , p 150 : 1953 SCR 533
; Western India Theatres Ltd v Municipal Corp, Poona, AIR 1959 SC 586
, p 589 : 1959 Supp (2) SCR 71 , Nandini
Satpathy v PC Dani, AIR 1978 SC 1025 , p 1039 :
1978 (2) SCC 424 .
58 Director of Public Prosecutions v Schildkamp,
(1969) 3 All ER 1640 : (1970) 40 Com Cas 1034
(HL).
59 R v Kelt, (1977) 3 All ER 1099
(CA).
60 Emperor v Sadashiv, AIR 1947
PC 82 .
61 Western India Theatres Ltd v Municipal Corp, Poona,
AIR 1959 SC 586 : 1959 Supp (2) SCR 71
.
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62 Balaji Textile Mills Pvt Ltd v Ashok Kavle,
(1989) 66 Com Cas 654 , 665 (Kant).
63 IRC v Hinchy, (1960) 1 All ER 505
, p 510 (HL) (LORD REID). In Director of Public Prosecutions v Schildkamp,
(1969) 3 All ER 1640 , p 1641 (HL). LORD REID says
Punctuation can be of some assistance in construction. In Hanlon v Law Secretary, (1980) 2
All ER 199 , p 221 (HL).
LORD LOWRY observed:
I consider that not to take account of punctuation disregards the reality that literate people such as parliamentary draftsman,
punctuate when they write, if not identically at least with grammatical principles. Why should not other literate people such as
judges look at the punctuations in order to interpret the meaning of the legislation as accepted by Parliament?
64 Maharani of Burdwan v Krishna Kamini Dasi, ILR 14 Cal 365, p 372
(PC).
65 Mahomed Sydeol Ariffin v Yeah Oai Gark, 43 IA 256, p 263 :
(1916) 2 AC 575 , p 581 (PC); Muralidhar Chatterjee v International Film
Co, AIR 1943 PC 34 , p 38; Sopher v Administrator General of
Bengal, AIR 1944 PC 67 , p 69; Jumma Masjid v Kodimaniandra Deviah,
AIR 1962 SC 847 , p 851 :
1962 Supp (2) SCR 554 . But see Mahesh Chandra Sharma v Raj Kumari Sharma,
AIR 1996 SC 869 , p 877 : (1996) 8
SCC 128 where it is said that “illustrations to the section are parts of the section and help to elucidate the
principle of the section”.
66 Bengal Nagpur Railway Co Ltd v Ruttanji Ramji,
AIR 1938 PC 67 , p 70; Aniruddha Mitra v Administrator General of Bengal,
AIR 1949 PC 244 , p 250; Shambhu Nath Mehra v State of Ajmer,
AIR 1956 SC 404 , p 406 : 1956 SCR
199 .
67 Kishanlal v State of Rajasthan,
AIR 1990 SC 2269 , p 2270 : 1990 SCR (2) 142
; CIT Madras v Sundaram Spinning Mills, AIR 2000 SC 490
p 491 : (2000) 1 SCC 466 .
68 Vanguard Fire d’ General Insurance Co Ltd, Madras v Fraser d’
Ross, AIR 1960 SC 971 , p 975; Inland Revenue Commissioner v Joiner,
(1975) 3 All ER 1050 , pp 1060, 1061 (HL) :
[1975] 1 WLR 1701 ; Kasilingam v PSG College of Technology,
1995 (2) Scale 387 , p 394 : AIR 1995 SC 1395
, p 1400.
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69 Dilworth v Commissioner of Stamps,
(1899) AC 99 , p 105 (PC); Reynolds v John, (1956) 1 All
ER 306 , p 309; State of Bombay v Hospital Mazdoor Sabha, AIR 1960
SC 610 , p 614 : 1960 SCR (2) 866 ;
Ardeshir H Bhiwandiwala v State of Bombay, AIR 1962 SC 29 , p 30 :
1962 SCR (3) 592 ; Sant Ram v Labh Singh,
AIR 1965 SC 314 , p 316; CIT, AP v Taj Mahal Hotel, Secunderabad,
AIR 1972 SC 168 , p 170 : 1971 (3) SCC 550
; Inland Revenue Commissioner v Joiner, supra; Doypack Systems Pvt Ltd v UOI,
AIR 1988 SC 782 , p 803 : 1988 (2) SCC 299
; Kishan Lal v State of Rajasthan, AIR 1990 SC 2269 , p 2270
: 1990 (1) JT 550 ; Municipal Corp of Greater Bombay v Indian
Oil Corp, AIR 1991 SC 686 , p 689 : 1990 SCR Supp (3) 365;
Regional Director Employees’ State Insurance Corp v High Land Coffee Works of PFX Saldanha d’ Sons,
AIR 1992 SC 129 , p 131 : 1991 (3) SCC 617
; Kasilingam v PSG College of Technology, AIR 1995 SC 1395
, p 1400 : 1995 (2) Scale 387 , p 394.
70 West Derby Union v Metropolitan Life Assurance Society,
(1897) AC 647 , p 655 (HL), referred to in Jennings v Kelly,
(1940) AC 206 : (1939) 4
All ER 464 , p 470 (HL).
71 West Derby Union v Metropolitan Life Assurance Society,
(1897) AC 647 , p 655 (HL) supra, p 652, referred to in Hindustan
Ideal Insurance Co v Life Insurance Corp, AIR 1963 SC 1083
, p 1087 : 1963 (2) SCR 56 .
72 Hindustan Ideal Insurance Co Ltd v Life Insurance Corp of India,
AIR 1963 SC 1083 , p 1087 :
1963 (2) SCR 56 .
73 West Derby Union v Metropolitan Life Assurance Society,
(1897) AC 647 , p 656 (HL). See further Director of Public
Prosecutions v Good Child, (1978) 2 All ER 161 , p 165
(HL) : [1979] QB 276 .
74 SMKR Meyappa Chetty v SN Subramanian Chetty,
(1916) 43 IA 113 , p 122 : 35 IC 323, p 326 (PC).
75 HORACK, Cases and Materials on Legislation, 2nd Edn, p 572.
76 Bengal Immunity Co Ltd v State of Bihar,
AIR 1955 SC 661 , p 733 : 1955 (2) SCR 603
.
77 Krishna Ayyangar v Nattaperumal Pillai, ILR 43 Mad 550, p 564
(PC); Dattatraya Govind Mahajan v State of Maharashtra, AIR 1977 SC 915
, p 928 : 1977 (2) SCC 548 ; Aphali Pharmaceuticals Ltd v State of
Maharashtra, AIR 1989 SC 2227 , p 2238 :
1989 (4) SCC 378 ; Keshavji Raoji and Co v CIT, AIR 1991
SC 1806 , p 1818 : 1990 (2) SCC 231 .
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78 State Bank of Patiala v SK Sharma,
AIR 1996 SC 1669 , pp 1683, 1684 : 1996 (3) SCC 364
. See further UOI v Mustafa & Najibai Trading Co, AIR 1998 SC 2526
: 1998 (6) SCC 79 :
JT 1998 (5) SC 16 , pp 36, 37.
79 Aligarh Muslim University v Mansoor Ali Khan,
AIR 2000 SC 2783 pp 2787, 2788 : (2000) 7
SCC 529 ; MC Mehta v UOI, AIR 1999 SC 2583
: JT 1999 (5) SC 114 ; SL Kapoor v Jagmohan,
1980 (4) SCC 379 ; Venkateshwara Rao v Government of AP,
1966 (2) SCR 172 .
80 Maneka Gandhi v UOI, AIR 1978
SC 597 (625) : 1978 (1) SCC 248 , per
BHAGWATI, J.
81 HWR WADE, Administrative Law, 5th Edn.
82 Furnell v Whangarei High Schools Board,
(1973) AC 660 , 697.
83 AK Kraipak v UOI, AIR 1970
SC 150 , 156 : 1970 (1) SCR 457 .
84 Suresh Koshy v University of Kerala,
AIR 1969 SC 198 : 1969 (1) SCR 317
, per HEGDE, J.
85 UOI v PK Roy, AIR 1968 SC 850
, 858 : 1968 (2) SCR 186 , per
RAMASWAMI, J.
86 KL Tripathi v State Bank of India,
AIR 1984 SC 273 : 1984 (1) SCC 43
.
87 Kraipak (AK) v UOI, AIR 1970
SC 150 at 154 : 1970 (1) SCR 457 ,
followed in Baburao Vishwanath Mathpati v State, AIR 1996 Bom 227
at 241 : 1995 (2) Bom CL 498.
88 J Mohapatra v State of Orissa,
AIR 1984 SC 1572 : 1984 (4) SCC 103
.
89 Ibrahim Kunju v State of Kerala,
AIR 1970 Ker 65 : 1969 Ker LT 230
.
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90 Mohinder Singh Gill v Chief Election Commissioner,
AIR 1978 SC 851 : 1978 SCR (3) 272
.
91 Union Carbide Corp v UOI,
AIR 1992 SC 248 : (1991) 3 Comp LJ SC 213
. See also Kapoor v Jagmohan, AIR 1981 SC 136 :
1980 (4) SCC 379 .
92 Maccla Bux v State, AIR 1990
Cal 318 : 94 Cal WN 650; KL Shepard v UOI, AIR 1988 SC 686
; CWT v Jagdish Prasad, (1995) 211 ITR 472
(Pat); Fakruddin v Principal Consolidation Training Institute, (1995) 4 SCC 533
; Vijay Kumar Sharma v Appropriate Authority, (1996) 220 ITR 509
(All); Nirmal Laxmi Narayan Grover v Appropriate Authority, (1997) 223
ITR 572 (Bom) : 1995 (2) Mah LJ 775
; Sona Builders v UOI, (2001) 170 CTR (SC) 180 : (2001) 251 ITR 197
(SC); HEH Nizam’s Jewellery Trust v Asstt CWT, (1997) 227 ITR 52
(AP); Grindlays Bank v Central Govt Industrial Tribunal, AIR 1981 SC 606
: 1981 SCR (2) 341 ; M Varalakshmi v AP State
Consumer Disputes Redressal Comm, (1997) 89 Comp Cases 586 : 1997 (2) All LT 95; Sagarmal Spg Mills Ltd v CBDT,
(1972) 83 ITR 130 (MP); Mandu Distillaries Pvt Ltd v MP Pradushan
Nitwaran Mandal, AIR 1995 MP 57 ; UOI v ML Kapoor,
1974 SC 87 .
93 R v Boteler, (1864) 33 LJMC 101, p 103; referred to in Raja Ram
Mahadeo Paranjype v Aba Maruti Mali, AIR 1962 SC 753 , p 757 :
1962 Supp (1) SCR 739 .
94 Raja Ram Mahadeo Paranjype v Aba Maruti Mali,
AIR 1962 SC 753 , p 757 : 1962 Supp (1) SCR
739 supra, p 758.
95 Akshaibar Lal (Dr) v Vice-Chancellor,
BHU , AIR 1961 SC 619 , p 626 :
1961 (3) SCR 386 .
96 George v Devan County Council,
(1988) 3 All ER 1002 , p 1006 (HL).
97 Sharpe v Wakefield, (1886–90)
All ER Rep 651 , p 53 (HL); Hindusthan Tin Works Pvt Ltd v Employees of Hindusthan Tin Works
Pvt Ltd, AIR 1979 SC 75 , p 78 :
(1979) 2 SCC 80 ; Sant Raj v O p Singla, (1985) AIR 1985
SC 617 : 2 SCC 349, p 352. In a Government of Laws there is nothing like unfettered discretion
immune from judicial reviewability; Khudiram v State of WB, AIR 1975 SC 550
, p 558 : (1975) 2 SCC 81 ; Manager,
Government Branch Press v DB Belliappa, AIR 1979 SC 429 ,
p 434 : (1979) 1 SCC 477 ; Re Special Courts Bill,
AIR 1979 SC 478 , p 519 : (1979) 1 SCC 380
; Kumari Shrilekha Vidyarthi v State of UP, AIR 1991 SC 537
, p 554 : 1990 SCR Supp (1) 625.
98 Robson, Justice and Administrative Law, 3rd Edn, p 407. See DS
Chellammal Anni v Masanan Samban, AIR 1965 SC 498 , p 502
(para 10) : 1964 (7) SCR 197 ; Gudi Kanti Narsimhulu v
Page 69 of 76
THE COMPETITION ACT, 2002
Public Prosecutor, AIR 1978 SC 429 , pp 432, 433 :
(1978) 1 SCC 577 ; Babu Singh v State of UP,
AIR 1978 SC 527 , p 529 : (1978) 1 SCC 579
.
99 Ryots of Garabandho v Zamindar of Parlakimedi,
AIR 1943 PC 164 , p 180; Sitaram Sugar Co Ltd v UOI,
AIR 1990 SC 1277 , p 1290 : 1990 (1) SCR 909
.
100 Perry v Wright, (1908) 1 KB 441
, p 458 (CA); State of Karnataka v Ranganath Reddy, AIR 1978 SC 215
, p 227 : 1978 SCR (1) 641 ; Sitaram Sugar
Co Ltd v UOI, AIR 1990 SC 1277 , pp 1290, 1291 :
1990 SCR (1) 909 .
101 Saraswati Industrial Syndicate Ltd v UOI,
AIR 1975 SC 460 , p 462 : 1975 SCR (1) 956
; State of UP v Renusagar Power Co, AIR 1988 SC 1737
: 1988 SCR Supp (1) 627; Sitaram Sugar Co Ltd v UOI, AIR 1990 SC 1277
, p 1291 : 1990 (3) SCC 223 .
102 Ryots of Garabandho v Zamindar of Parlakimedi,
AIR 1943 PC 164 , p 180; Mysore State Electricity Board v Bangalore Woollen,
Cotton & Silk Mills, AIR 1963 SC 1128 , p 1136 : 1963 SCR Supp
(2) 127; Saraswati Industrial Syndicate Ltd v UOI, AIR 1975 SC 460
, p 462 : 1975 SCR (1) 956 ; State of UP v Renusagar Power Co,
AIR 1988 SC 1737 , p 1762 : 1988 SCR Supp (1) 627; Sitaram Sugar Co Ltd
v UOI, AIR 1990 SC 1277 , p 1290 :
1990 SCR (1) 909 . See further Karam Singh Sobti v Pratap Chand,
AIR 1964 SC 1305 , p 1310; May v City of London Real Property,
(1982) 1 All ER 660 , p 670 (HL) : [1921] 1 KB 49
.
103 Hyderabad Asbestos Cement Product v UOI,
JT 1999 (9) SC 505 , p 510 : 2000 (1) SCC 426
.
104 Ishwar Singh Bindra v State of UP,
AIR 1968 SC 1450 , p 1454 : 1969 SCR (1) 219
; Municipal Corp of Delhi v Tek Chand Bhatia, AIR 1980 SC 360
, p 363 : (1980) 1 SCC 158 ; RS Nayak v AR Antulay,
AIR 1984 SC 684 : (1984) 2 SCC 183
, pp 224, 225; M Satyanarayana v State of Karnataka, AIR 1986 SC 1162
: (1986) 2 SCC 512 , p 515.
105 Green v Premier Glynrhonwy Slate Co,
(1928) 1 KB 561 , p 568; Nasiruddin v State Transport Appellate Tribunal,
AIR 1976 SC 331 , p 338 : (1975) 2 SCC 671
; Municipal Corp of Delhi v Tek Chand Bhatia,
1980 AIR 360 : 1980 SCR (1) 910
supra; State (Delhi Administration) v Puran Mal, AIR 1985 SC 741
: (1985) 2 SCC 589 .
106 Mersey Docks and Harbour Board v Henderson Bros,
(1888) 13 AC 595 , p 603 (HL). See further Puran Singh v State of MP,
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THE COMPETITION ACT, 2002
AIR 1965 SC 1583 , p 1584, (para 5) : 1965 SCR
(2) 853 ; Municipal Corp of Delhi v Tek Chand Bhatia, AIR 1980
SC 360 , p 363 : (1980) 1 SCC 158 supra.
107 AG v Beauchamp, (1920) 1 KB 650
; R v Oakes, (1959) 2 All ER 92 .
108 Sahney Steel & Press Works Ltd, Hyderabad v CIT, Andhra Pradesh,
JT (1997) 8 SC 173 , p 188 :
1997 (7) SCC 764 .
109 J Jayalalitha v UOI, AIR 1999
SC 1912 , p 1919 : (1999) 5 SCC 138 .
110 Beckford v Wade, (1805) 34 ER 34
, p 35 (PC) : (1805) 17 Ves Jun 87; Phillips v Poland, (1866) LR 1
CP 204, p 207.
111
BECKFORDVWADE,(1805)34ER34,p35(PC)supra,p35;LIVERPOOLJUSTICES,(1883)11QBD638,p649;SmithvEast
ElloreRuralDistrictCouncil,(1956) 1AllER855,p870(HL):(1956)AC736;FelixvThomas,(1966)3AllER21, p 27 (PC).
112 Gardiner v Admiralty Commrs,
(1964) 2 All ER 93 , p 97 (HL) (LORD UPJOHN); AG for Ontario v Mercer,
(1883) 8 AC 767 , p 778 (PC). See for example HK Choudhury v Issardas,
AIR 1965 SC 1647 , p 1651 (paras 13 and 14) :
1965 (3) SCR 78 ; words “claims to properties—in West Pakistan” were not construed to
exclude claims in respect of agricultural lands.
113 Law and Other Things, p 166; referred to in Salmond, Jurisprudence,
11th Edn, p 153. Rohit Pulp and Paper Mills Ltd v Collector of Central Excise, AIR 1991 SC 754
, p 761 : 1990 (3) SCC 447 .
114 Angus Robertson v George Day,
(1879) 5 AC 63 , p 69 (PC); referred to in MK Ranganathan v Govt of Madras,
AIR 1955 SC 604 , p 609 : 1955 (2) SCR 374
.
115 MAXWELL, Interpretation of Statutes, 11th Edn, p 321.
116 Words and Phrases, vol XIV, p 207.
117 Kavalappara Kottarathil Kochuni v State of Madras, AIR 1960, SC
1080, p 1103 : 1960 (3) SCR 887 ; Thakur Amarasinghji v State of
Rajasthan, AIR 1955 SC 504 , p 523 :
1955 (2) SCR 303 ; Brownsea Haven Properties v Pools Corp,
(1958) 1 All ER 205 , pp 213, 214 (CA); Siddeshwari Cotton Mill Pvt Ltd v UOI,
AIR 1989 SC 1019 , p 1023; Housing Board of Haryana v Haryana Housing
Board Employees Union, AIR 1996 SC 434 , p 441 :
1995 (6) Scale 139 , p 150; State of Karnataka v Kempaiah,
AIR 1998 SC 3047 , p 3050 : 1998 (6) SCC 103
.
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THE COMPETITION ACT, 2002
118 Tribhuwan Prakash Nayyar v UOI,
AIR 1970 SC 540 , p 545 : (1969) 3 SCC 99
; Siddeshwari Cotton Mills Pvt Ltd v UOI, supra; Housing Board of Haryana v Haryana Housing Board Employees
Union, supra; Lokmat Newspapers Pvt Ltd v Shankar Prasad, AIR 1999 SC 2423
, p 2444 : 1999 (6) SCC 275 :
JT 1999 (4) SC 546 , p 579.
119 M’Neill v Crommelin, (1858) 9 IrCLR 61 : 62 Digest, p 672. In
Koteswar Vittal Kamnath v KRangappa Baliga & Co, AIR 1969 SC 504
, p 511 : (1969) 1 SCC 255 , the Supreme Court quoted the
rule from BLAck, Interpretation of Laws, as follows :
When a sentence in a statute contains several antecedents and several consequences, they are to be
read distributively, that is to say each phrase or expression is to be referred to its appropriate objects.
120 R v Wicks, (1946) 2 All ER 529
, pp 531, 532.
121 Gopichand v Delhi Administration,
AIR 1959 SC 609 : 1959 Supp (2) SCR 87
; State of Orissa v Bhupendra Kumar, AIR 1962 SC 945
, p 953 : 1962 Supp (2) SCR 380 ; Wicks v Director of Public
Prosecutions, (1947) 1 All ER 205 , pp 206, 207 (HL). For
example see section 1(4) TADA and Abdul Aziz v State of WB, AIR 1996 SC 3305
: 1995 (5) Scale 169. Because of section 1(4) bail cannot be granted even after expiry of TADA contrary to its
provisions; Mohammad Iqbal Madar Sheikh v State of Maharashtra, 1996 (1) Scale 123
: 1996 (1) SCC 722 .
122 S Krishnan v State of Madras,
AIR 1951 SC 301 , p 304 : 1951 SCR 621
; State of UP v Jagmanderdas, AIR 1954 SC 683 , p 685 :
1954 Cr LJ 1736 ; Gopichand v Delhi Administration, supra, p
615; State of Orissa v Bhupendra Kumar, supra, p 953.
123 R v Wicks, supra, (1997) 2 All ER 801
: (1997) 2 WLR 876 , pp 531, 532;
State of UP v Jagmanderdas, AIR 1954 SC 683
, supra; State of Orissa v Bhupendra Kumar,
1962 AIR 945 : 1962 SCR Supp (2) 380, supra, p 953.
124 Steavenson v Oliver, (1841) 15
ER 1024 .
125 Spencer v Hooten, (1920) 37 Tax LR, 280; R v Ellis, (1921) 125 IT,
397; R v Wicks, (1946) 2 All ER 529 , pp 531, 532.
126 Lilavati Bai v Bombay State,
AIR 1957 SC 521 , pp 527, 528; Somvanti v State of Punjab,
AIR 1963 SC 151 , p 162; Izhar Ahmad v UOI, AIR 1962
SC 1052 : 1962 Supp (3) SCR 235 ; Suffolk
County Council v Mason, (1979) 2 All ER 369 , p 377 (HL)
[Conclusive evidence clause positively establishing the existence of a fact and negatively establishing the non-existence of
another].
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127 Mens rea is the state of mind stigmatised as wrongful by the criminal
law which when compounded with relevant prohibited conduct constitutes a particular crime. Crimes involving mens rea are of two
types (i) crimes of basic intent and (ii) crimes of specific intent. In the former class of crimes, the mens rea does not go beyond the
actus reus. In the second category of crimes mens rea goes beyond the contemplation of the prohibited act and foresight of its
consequences and has a purposive element; Director of Public Prosecutions v Majewski, (1976) 2 All
ER 142 , pp 146, 147, 153, 155 (HL). Mens rea may mean different things in relation to different crimes;
Director of Public Prosecutions v Morgan, (1975) 2 All ER 347
, p 361 (HL). Mens rea refers to the criminality of the act in which the mind is engaged, not to its moral character. Absence of
moral fault does not necessarily negative the necessary mental element of the offence; R v Kingston,
(1994) 3 All ER 353 , pp 360, 361 (HL). A drug enforcement officer intending to
participate in commission of the crime for breaking the drug ring under orders of superior officers has the necessary mens rea to be
a co-conspirator although he may not be prosecuted if the plan succeeded for under the criminal law there was no general defence
of superior orders or of Crown or Executive fiat; Yip Chiu-Cheung v R, (1994) 2 All ER 924
(PC). But the position is different when a law enforcement officer pretends to join a conspiracy to
gain information without any intention of taking part in the planned crime. In such a case the officer lacks the necessary mens rea to
be a co-conspirator; R v Anderson, (1985) 2 All ER 961 , p 965
(HL).
128 Vane v Yiannopoullos, (1964) 3 All
ER 820 , p 829 (HL); Warner v Metropolitan Police Commr, (1968) 2 All
ER 356 , p 360 (HL); Sweet v Parsley, (1969) 1 All ER 347
, p 349 (HL); R v Sheppard, (1980) 3 All ER 899
, p 909 (HL); R S Joshi v Ajit Mills, AIR 1997 SC 2279 , p
2287. In R v Miller, (1983) 1 All ER 978 , p 980 (HL) it
was observed:
(1) It would be conducive to clarity if instead of the Latin expressions actus reus and mens rea one were to use the words
conduct of the accused and his state of mind at the time of that conduct; (2) The General principles of criminal law,
unless expressly modified or excluded, are intended to be applicable by Parliament to a statutory offence.
129 Maxwell, Interpretation of Statutes, 12th Edn, p 66.
130 United Society v Eagle Bank, (1829) Connecticut 157, p 470, as cited
in CRAIES, Statute Law, 7th Edn, p 134. See further Shah & Co, Bombay v State of Maharashtra,
AIR 1967 SC 1877 , pp 1883, 1884; The Sirsilk Ltd v The Textiles Committee,
AIR 1989 SC 317 , p 330.
131 State of Punjab v Okara Grain Buyers Syndicate Ltd, Okara,
AIR 1964 SC 669 , pp 684, 685.
132 K Parasuramaiah v Pakuri Lakshman,
AIR 1965 AP 220 : (1965) 1 Andh WR 253.
133 Sarvan Singh v Kasturilal, AIR 1977
SC 265 , pp 274, 275 : 1977 (2) SCR 421 ;
Kumaon Motor Owner’s Union v State of UP, AIR 1966 SC 785 :
1966 (2) SCR 121 ; Ashoka Marketing Ltd v Punjab National Bank,
AIR 1991 SC 855 , pp 878, 879 : [1992] 74 Comp Cases 482.
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134 Sanwarmal Kajriwal v Vishwa Co-op Housing Society Ltd,
AIR 1990 SC 1563 , p 1575 : 1990 (2) JT
200 .
135 Virudhachalam Pvt) v Management of Lotus Mills,
AIR 1998 SC 554 , pp 561, 562 : 1998 (1) SCC 650
; Benny TD v Registrar of Co-op Societies, AIR 1998 SC 2012
: 1998 (5) SCC 269 .
136 CIT v Bombay Trust Corp, AIR 1930
PC 54 , 55.
137 CIT v Teja Singh, AIR 1959 SC 352
: 1959 (1) Mad LJ (SC) 154.
138 East End Dwellings Co Ltd v Finsbury Borough Council,
(1951) 2 All ER 587 (HL).
139 AC Goel v First National Bank Ltd,
AIR 1960 P&H 476 : (1960) 30 Com Cas 317
, 321.
140 LORD RADCLIFFE in St Anbyn v AG (No 2),
1952 AC 15 , p 53 quoted in Barclays’ Bank Ltd v IRC,
(1962) 32 Com Cas 308 , 325 : (1960) 2 All ER 817
(HL).
141 Transport Corp of India v ESI Corp,
AIR 2000 SC 238 : 2000 (I) LLJ 1
:.
142 Madan Singh Shekhawat v UOI,
AIR 1999 SC 3378 : (1999) 6 SCC 459
.
143 Re EM Chak, (1954) 2 Mad LJ 737.
144 Kamalpura Kochunni v State of Madras,
AIR 1960 SC 1080 : 1960 (3) SCR 887
.
145 SUTHERLAND, Statutory Construction, 3rd Edn, vol 2, Article 4804,
p 346.
146 Manilal Singh v Calcutta Improvement Trust, ILR 45 Cal 343.
147 Ramireddi v Sreeramullu, AIR 1933
Mad 120 , 122.
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148 GK Roy v RK Rai, 61 C 259, 261 (Cal).
* Shri H.D. Shourie was substituted by Ms. Mala
Banerjee in the Department of Company Affairs Corrigendum No 1/9/99-CL-V dated 15 December 1999.
** The term of the Committee was extended upto 31 May 2000 in
Department of Company Affairs’ Order No. l/9/99-CL-V dated 3 April 2000.
149 5.1.7–5.1.8, Report of the High Level Committee on Competition
Policy and Law, SVS Raghavan Committee. Available at : http://www.ccr.org.in/reports.html (last accessed in February 2019).
150 Section 54.
151 Section 3.
152 It should be noted here that all these agreements are not per se anti-
competitive. For more discussion on horizontal and vertical agreements, see section 3.
153 Section 4.
154 Sections 5, 26.
155 See, Notification No SO 675(E) dated 4 March 2016, Available at :
http://www.cci.gov.in/sites/default/files/whats_newdocument/Revised%20thresholds.pdf. (last accessed in February 2019).
156 Substituted by Competition (Amendment) Act, 2007. Earlier section 8
read as :
(1) The Commission shall consist of a Chairperson and not less than two and not more than 10 other Members to be appointed by
the Central Government :
Provided that the Central Government shall appoint the Chairperson and a Member during the first year of the
establishment of the Commission.
(2) The Chairperson and every other Member shall be a person of ability, integrity and standing and who has been, or is qualified
to be a judge of a High Court, or, has special knowledge of, and professional experience of not less than fifteen years in
international trade, economics, business, commerce, law, finance, accountancy, management, industry, public affairs,
administration or in any other matter which, in the opinion of the Central Government may be useful to the Commission.
(3) The Chairperson and other Members shall be whole-time Members.
157 Articles 38 and 39 of the Constitution of India.
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158 Parts A and C of Chapter III were deleted by the MRTP (Amendment)
Act, 1991.
159 Deleted by the MRTP (Amendment) Act, 1991.
160 Raymond Woollen Mills Ltd v MRTP Commission, (1979) 49 Comp
Cases 686 (Bom).
161 Carew & Co Ltd v UOI, AIR 1975
SC 2260 : 1975 (2) SCC 791 .
162 Parry and Co Ltd, RTP Enquiry No 17 of 1981.
163 Re JK Industries Ltd, RTP Enquiry No 28 of 1984.
164 Re All India Film Producers’ Council, Bombay, RTP Enquiry No 25
of 1981.
165 As defined in section 617 of the Companies Act, 1956.
166 As defined in section 2(da) of the MRTP Act, 1969.
167 Notification G.S.R.605(E), dated 27 September 1991.
168 Giri Prasad v Irrigation Department of Uttar Pradesh Government,
(1996) 3 Comp LJ 286 (MRTPC).
169 Manju Bhardwaj v Zee Tele Films Ltd,
(1996) 20 CLA 229 ; Also see Dr Vallat Peruman v Godfrey Phillips (India) Ltd,
(1995) 16 CLA 201 .
170 Bright Rubber Pvt Ltd v Thermax Ltd, CA 274/1993 dated 16
November 1995.
171 Haridas Exports v All India Fluel Glass Manufacturers Assn,
(2002) 49 CLA 307 (SC).
172 Man Rolland Druckima Chiner v Multi Colour Offset Ltd,
II (2004) CLT 30 (SC).
173 Peico Electronics and Electricals v UOI,
II (2004) CPJ 3 (SC).
174 State of UP v Giri Prasad, II (2004)
CPJ 1 (SC).
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THE COMPETITION ACT, 2002
175 Section 3(a) & (b) read with Notification G.S.R.
605(E), dated 27 September 1991.
176 See, section 8, Restrictive Trade Practices Act, 1976.
177 The Competition Act, 1998 replaced the Restrictive Trade Practices
Act, 1976, the Resale Prices Act, 1976, and majority of the Competition Act, 1980.
178 Most of the office of Fair Trading’s Powers under the Fair Trading
Act, 1973 were repeated with the Commencement of the Enterprises Act, 2002 on 1 April 2003 and 20 June 2003. Fair Trading
Act, 1973, however, still has an ongoing effect.
179 CMA Guidance, “Towards the CMA”, 15 July 2013. Available at :
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/212285/CMA1_-_Towards_the_CMA.pdf (last
accessed in February 2019).
180 For detailed study see BN Gururaj: Guide to the Customs Act—Law,
Practice and Procedure, Wadhwa & Company.
181 Para 20, Singapore WTO Ministerial 1996: Ministerial Declaration,
WT/MIN(96)/DEC, adopted on 18 December 1996. Available at :
https://www.wto.org/english/thewto_e/minist_e/min96_e/wtodec_e.htm
https://www.wto.org/english/thewto_e/minist_e/min96_e/wtodec_e.htm (last accessed in February 2019).
182 Para 23–25, Doha WTO Ministerial 2001: Ministerial Declaration,
WT/MIN(01)/DEC/1, adopted on 14 November 2001. Available at :
https://www.wto.org/english/thewto_e/minist_e/min01_e/mindecl_e. htm (last ccessed in February 2019).
183 Doha WTO Ministerial 2001: Ministerial Declaration,
WT/MIN(01)/DEC/1, adopted on 14 November 2001. Available at :
https://www.wto.org/english/thewto_e/minist_e/min01_e/mindecl_e.htm (last accessed in February 2019).
184 Concluding Ministerial Statement, Cancún Ministerial Conference,
WT/MIN(03)/20, 10–14 September 2003. Available at
:https://www.wto.org/english/thewto_e/minist_e/min03_e/min03_14sept_e.htm. (last accessed in February 2019).
185 Decision adopted by the General Council on 1
August 2004, Text of the “July package” — the General Council’s post-Cancún decision, Doha Development Agenda : Doha Work
Programme, WT/L/579, 1 August 2004. Available at :
https://www.wto.org/english/tratop_e/dda_e/draft_text_gc_dg_31july04_e.htm (last accessed in February 2019).
186 Chapter 2, “Objectives and Benefits of Competition Policy”,
ASEAN Regional Guidelines on Competition Policy, 2010, Available at :
https://www.icao.int/sustainability/Compendium/Documents/ASEAN/ASEAN-RegionalGudelinesonCompetitionPolicy.pdf. (last
accessed in February 2019). Also see, Excel Crop Care Ltd v CCI, AIR 2017 SC 2734
.
End of Document
[s 1] Short title, extent and commencement
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > CHAPTER I
PRELIMINARY
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
CHAPTER I PRELIMINARY
[s 1] Short title, extent and commencement
(1) This Act may be called the Competition Act, 2002 (12 of 2003).
(2) It extends to the whole of India except the State of Jammu and Kashmir.
(3) It shall come into force on such date as the Central Government may, by notification in the Official Gazette,
appoint:
Provided that different dates1 may be appointed for different provisions of this Act and any reference in any such
provision to the commencement of this Act shall be construed as a reference to the coming into force of that provision.
LEGISLATIVE BACKGROUND
The Competition Act, 2002
The Competition Act, 2002 has been enacted by the Indian Parliament, on repeal of the Monopolies and Restrictive Trade
Practices Act, 1969 (MRTP Act), to prevent practices having adverse effect on competition; to promote and sustain
competition in markets; to protect the interest of consumers and to ensure freedom of trade.
The various provisions of the Competition Act, 2002 deal with the establishment, powers and functions as well as
discharge ofadjudicatoryfunctions bythe Competition Commission of India (Commission). Under the scheme of the Act,
the Commission is vested with inquisitorial, investigative, regulatory, adjudicatory and to a limited extent, even advisory,
jurisdiction. Vast powers have been given to the Commission to deal with the complaints or information leading to
invocation of the provisions of sections 3 and 4 read with section 19 of the Act. In exercise of the powers vested in it under
section 64, the Commission has framed regulations called The Competition Commission of India (General) Regulations,
2009. The Act and the Regulations framed thereunder clearly indicate the legislative intent of dealing with the matters
related to contravention of the Act, expeditiously and in a time bound programme.
The present Competition Act, 2002 is quite contemporary to the laws presently in force in the USA as well as in the UK. In
other words, the provisions of the present Act and Clayton Act, 1914 of the USA, The Competition Act, 1988 and
Enterprise Act, 2002 of the UK have somewhat similar legislative intent and scheme of enforcement. However, the
provisions of these Acts are not quite pari materia to the Indian legislation. The competition laws and their enforcement in
Page 2 of 10
[s 1] Short title, extent and commencement
US and UK are progressive, applied rigorously and more effectively. The deterrence objective in these anti-trust
legislations is clear from the provisions relating to criminal sanctions for individual violations, high upper limit for
imposition of fines on corporate entities as well as extradition of individuals found guilty of formation of cartels. This is
so, despite the fact that there are much larger violations of the provisions in India in comparison to the other two countries,
where at the very threshold, greater numbers of cases invite the attention of the regulatory/adjudicatory bodies. Primarily,
there are three main elements which are intended to be controlled by implementation of the provisions of the Act, which
have been specifically dealt with under sections 3, 4 and 6 read with sections 19 and 26 to 29 of the Act. They are anti-
competitive agreements, abuse of dominant position and regulation of combinations which are likely to have an
appreciable adverse effect on competition.2
Statement of Objects and Reasons[As stated in the Competition Bill, 2001]
1. In the pursuit of globalisation, India has responded by opening up its economy, removing controls and resorting
to liberalisation. The natural corollary of this is that the Indian market should be geared to face competition from
within the country and outside. The Monopolies and Restrictive Trade Practices Act, 1969 has become obsolete
in certain respects in the light of international economic developments relating more particularly to competition
laws and there is a need to shift our focus from curbing monopolies to promoting competition.
2. The Central Government constituted a High Level Committee on Competition Policy and Law. The Committee
submitted its report on the 22 May 2000 to the Central Government. The Central Government consulted all
concerned including the trade and industry, associations and the general public. The Central Government after
considering the suggestions of the trade and industry and the general public decided to enact a law on
Competition.
3. The Competition Bill, 2001 seeks to ensure fair competition in India by prohibiting trade practices which cause
appreciable adverse effect on competition in markets within India and, for this purpose, provides for the
establishment of a quasi-judicial body to be called the Competition Commission of India (hereinafter referred to
as CCI) which shall also undertake competition advocacy for creating awareness and imparting training on
competition issues.
4. The Bill also aims at curbing negative aspects of competition through the medium of CCI. CCI will have a
Principal Bench and Additional Benches and will also have one or more Mergers Benches. It will look into
violations of the Act, a task which could be undertaken by the Commission based on its own knowledge or
information or complaints received and references made by the Central Government, the State Governments or
statutory authorities. The Commission can pass orders for granting interim relief or any other appropriate relief
and compensation or an order imposing penalties etc. An appeal from the orders of the Commission shall lie to
the Supreme Court. The Central Government will also have powers to issue directions to the Commission on
policy matters after considering its suggestions as well as the power to supersede the Commission if such a
situation is warranted.
5. The Bill also provides for investigation by the Director-General for the Commission. The Director-General would
be able to act only if so directed by the Commission but will not have any suo motu powers for initiating
investigations.
6. The Bill confers power upon the CCI to levy penalty for contravention of its orders, failure to comply with its
directions, making of false statements or omission to furnish material information, etc. The CCI can levy upon an
enterprise a penalty of not more than 10% of its average turn-over for the last three financial years. It can also
order division of dominant enterprises. It will also have power to order demerger in the case of mergers and
amalgamations that adversely affect competition.
7. The Bill also seeks to create a fund to be called the Competition Fund. The grants given by the Central
Government, costs realised by the Commission and application fees charged will be credited into this Fund. The
pay and allowances and the other expenses of the Commission will also be borne out of this Fund. The Bill
provides for empowering the Comptroller and Auditor-General of India to audit the accounts of the Commission.
The Central Government will be required to lay the annual accounts of the Commission, as audited by the
Page 3 of 10
[s 1] Short title, extent and commencement
Comptroller and Auditor-General and also the annual report of the Commission before both the Houses of
Parliament.
8. The Bill aims at repealing the Monopolies and Restrictive Trade Practices Act, 1969 and the dissolution of the
Monopolies and Restrictive Trade Practices Commission. The Bill provides that the cases pending before the
Monopolies and Restrictive Trade Practices Commission will be transferred to the CCI except those relating to
unfair trade practices which are proposed to be transferred to the relevant fora established under the Consumer
Protection Act, 1986.
9. The Bill seeks to achieve the above objectives.
New Delhi
ARUN JAITLEY
24 July 2001
The Competition (Amendment) Act, 2007
While disposing the writ petition in Brahm Dutt v UOI,3 the Hon’ble Supreme Court held that, if an expert body is to be
created by the Union Government, it might be appropriate for the Government to consider the creation of two separate
bodies, one with expertise for advisory and regulatory functions and the other for adjudicatory functions based on the
doctrine of separation of powers recognised by the Constitution. In view of the said judgment, the Competition Act, 2002
was amended in 2007 to provide inter-alia for establishment of Competition Appellate Tribunal for hearing appeals against
the orders passed by the Competition Commission of India (CCI). The Act originally provided for appeal to the Supreme
Court against the orders of CCI. The Amendment Act also provided for continuation of MRTP Commission for two years
for dealing with pending cases before it under the MRTP Act, 1969. The “Statement of Objects and Reasons” appended to
the Competition (Amendment) Bill, 2007 summed up the proposal as under:
(a) the Commission shall be an expert body which would function as a market regulator for preventing and
regulating anti-competitive practices in the country in accordance with the Act and it would also have advisory
and advocacy functions in its role as a regulator;
(b) for mandatory notice of merger or combination by a person or enterprise to the Commission within thirty days
and to empower the Commission for imposing a penalty of up to 1% of the total turnover or the assets, whichever
is higher, on a person or enterprise which fails to give notice of merger or combination to the Commission;
(c) for establishment of the Competition Appellate Tribunal, which shall be a three member quasi-judicial body
headed by a person who is or has been a Judge of the Supreme Court or the Chief Justice of a High Court to hear
and dispose of appeals against any direction issued or decision made or order passed by the Commission;
(d) for adjudication by the Competition Appellate Tribunal of claims on compensation and passing of orders for the
recovery of compensation from any enterprise for any loss or damage suffered as a result of any contravention of
the provisions of the Act;
(e) for implementation of the orders of the Competition Appellate Tribunal as a decree of a civil court;
(f) for filing of appeal against the orders of the Competition Appellate Tribunal to the Supreme Court;
Page 4 of 10
[s 1] Short title, extent and commencement
(g) for imposition of a penalty by the Commission for contravention of its orders and in certain cases of continued
contravention, a penalty which may extend to rupees twenty-five crores or imprisonment which may extend to
three years or with both as the Chief Metropolitan Magistrate, Delhi may deem fit, may be imposed.
The Bill also aimed at continuation of the Monopolies and Restrictive Trade Practices Commission (MRTPC) till two
years after constitution of Competition Commission, for trying pending cases under the MRTP Act, 1969 after which it
would stand dissolved.
The Bill also provided that the MRTPC would not entertain any new cases after the due constitution of the Competition
Commission. Cases still remaining pending after this two year period would be transferred to the Competition Appellate
Tribunal or the National Commission under the Consumer Protection Act, 1986 depending on the nature of cases.
The Competition (Amendment) Act, 20094
The Competition (Amendment) Ordinance, 2009 was promulgated by the President of India on 14 October 2009 to amend
section 66 of the Competition Act, 2002. As per Amendment Act, 2007 this section was amended to provide for
continuation of MRTP Commission for 2 years to deal with pending cases under the MRTP Act, 1969. This section was
again amended by the Ordinance with the objective to immediately dissolve the MRTP Commission on repeal of the
MRTP Act, 1969, and to empower the Competition Appellate Tribunal to hear and dispose of pending Monopolies and
Restrictive Trade Practices cases under the MRTP Act, 1969 and pending Unfair trade practices cases under the said Act
stood transferred to National Commission established under the Consumer Protection Act, 1986.
The Competition Commission of India (CCI) was established on 14 October 2003 but became fully functional only in
April 2009. The CCI has been hearing and disposing of new cases filed under the Competition Act, 2002 since then.
Title
Modern Statutes generally contain a section stating that the Act may be cited by a short title ending with the year in which
it is enacted. Section 28 of the General Clauses Act, 1897 lays down that an Act may be cited by reference to the title or
short title conferred thereon. The title and the Preamble can be used to determine the scope and the object of the
legislation. While it is admissible to use the full title of an Act to throw light upon its purpose and scope, it is not open to
give any weight in this regard to the short title which is chosen merely for the sake of convenience. The object of the short
title is identification, and not description.5
Competition Act, 2002
Notes on clauses of the Bill stated, thus:
Notes on clauses
This clause, inter alia, seeks to extend the provisions of the Bill to the whole of India excluding the State of Jammu and Kashmir.
[Clause 1 of the Competition Bill, 2001].
Jurisdiction
Page 5 of 10
[s 1] Short title, extent and commencement
The Act extends to whole of India, except the State of Jammu and Kashmir.
Jammu and Kashmir
The State of Jammu and Kashmir is a part of Indian Territory and is included in the list of States in the First Schedule of the Indian
Constitution. Under Article 370 of the Constitution, the Legislative authority of the Union Parliament in respect of this State is,
however, limited to those matters in the Union and Concurrent List, which are so declared by the President, in consultation with the
Government of the State, to conform to the terms of the Instrument of Accession. The Competition Act having not been extended
so far to this State; it remains outside its purview.
FOREIGN COMPANIES
Under erstwhile MRTP Act, 1969
Companies incorporated outside India under a foreign law, which do not have any business activity in India, fell outside
the purview of the MRTP Act. In Security Printers of India Pvt Ltd v Deputy Secretary to the Government of India,6 the
Allahabad High Court, while rejecting the contention of the Central Government, held that Security Printers of India Pvt
Ltd (SPI) and other two companies, viz., Metal Box India Ltd (MBI) and its subsidiary Kosmek Plastics Manufacturing
Ltd could not be held to be inter-connected within the meaning of section 2(g) of the Act, merely because WW Sprague
Ltd a foreign company holding 40% of the shares in SPI and another foreign company Metal Box Co Overseas Ltd, which
was the holding company of MBI holding 60% of its shares, were inter se inter-connected as holding-subsidiary
companies. The Court, inter alia, observed that:
(i) the two share-holding companies were foreign companies being registered in U.K. to which provisions of the Act did not
apply, and the MRTP Act had no control over them, and (ii) the foreign holding company did not hold or exercise any
voting power by itself, or together with its subsidiaries, on any matter relating to both of the Indian companies.
Under the Competition Act, 2002
Section 32 of the Competition Act, 2002 specifically provides for jurisdiction of the Commission to enquire into any
activity covered by sections 3, 4 and 5 even though the party concerned is based outside India. Acts taking place outside
India but having an appreciable adverse effect on competition in India will also come within the ambit of the Act.
COMPETITION ACT, 2002 VIS-À-VIS CONSUMER PROTECTION ACT, 1986
The main thrust of the Competition Act, 2002 is to prevent practices having appreciable adverse effect on Competition, to
promote and sustain competition in markets, to protect the interest of consumers and to ensure freedom of trade. The Act
has been so structured to bring within its ambit (i) anti-competitive agreements, (ii) abuse of dominant position and (iii)
combinations.
Page 6 of 10
[s 1] Short title, extent and commencement
The Consumer Protection Act, 1986 seeks to provide simplified, inexpensive and speedy remedy for redressal of the
grievances of consumers in regard to (i) defects in goods bought and/or deficiency in service, (ii) charging price in excess
of that fixed under any law, (iii) sale of goods which are hazardous to life and safety, (iv) certain restrictive trade practices
and (v) unfair trade practices.
Restrictive Trade Practices covered by the Consumer Protection Act, 1986 are akin to practices termed as “anti-
competitive agreements” in the Competition Act. To that extent, therefore, there is some overlapping between these two
enactments.
Raghavan Committee Report
Despite the differences in the MRTP Act and the Consumer Protection Act, 1986, there is indeed a significant overlap in
their provisions and jurisdictions. For instance, the definition of “unfair trade practice” is literally the same in both the
enactments. There is now a total overlap in the jurisdiction of the MRTP Commission and the redressal agencies set up
under the Consumer Protection Act, 1986 in regard to curbing of unfair trade practices. An aggrieved consumer can thus,
approach the MRTP Commission or the Consumer Redressal Agency set up under the Consumer Protection Act, 1986, for
redress of his/her grievance.
Consumer Protection Act, 1986, as originally framed in 1986 did not cover complaints against restrictive trade practices
and did not provide redressal to the consumers against such practices. The Consumer Protection Act, 1986, was however,
amended in 1993, when the jurisdiction of the Act was extended by covering the restrictive trade practice relating to tie-in
sales. In so far as the restrictive trade practice relating to tie-in sales is concerned, now there is concurring jurisdiction in
the MRTP Commission and the Consumer Disputes Redressal Authorities set up under the Consumer Protection Act,
1986. Thus, an aggrieved person can approach any of these two fora for redressal of his/her grievance.7
The anti-competitive agreements in the Competition Act seem to have a broader coverage with identification thereof; (as
was the case with the erstwhile MRTP Act, and wherein the anti-competition agreements were referred to as Restrictive
Trade Practices); whereas under the Consumer Protection Act the restrictive trade practices have been generally explained
in section 2(nnn) thereof, identifying in particular, only two practices in clauses (a) and (b) thereof that follow.
Section 2(nnn) of the Consumer Protection Act defines restrictive trade practices in the following words:
restrictive trade practice” means a trade practice which tends to bring about manipulation of price or its conditions of delivery or to
affect flow of supplies in the market relating to goods or services in such a manner as to impose on the consumers unjustified costs
or restrictions and shall include—
(a) delay beyond the period agreed to by a trader in supply of such goods or in providing the services which has led or is
likely to lead to revision prices;
(b) any trade practice which requires a consumer to buy, hire or avail of any goods or, as the case may be, services as
condition precedent to buying, hiring or availing of any other goods or services.
In contradistinction, such practices under the Competition Act, 2002 named as “Anti-competitive agreements”, have been
classified in two categories, viz., horizontal agreements in sub-section (3) and vertical agreements in sub-section (4) of
Page 7 of 10
[s 1] Short title, extent and commencement
section 3. The general nature of such practices, referring them as Anti-competitive agreements is elaborated in sub-section
(1) of section 3 in following words:
No enterprise or association of enterprises or persons or associations of persons shall enter into any agreement in respect of
production, supply, distribution, storage, acquisition or control of goods, or provision of services, which causes or is likely to cause
an appreciable adverse effect on competition within India.
The salient features of difference as between these two enactments, viz., the Competition Act and the Consumer Protection
Act, are briefly discussed below:—
(1) Under the Competition Act, the Commission is the only Authority [Section 7] to enquire into the allegation of
Restrictive trade practices (referred to as Anti-competitive Agreements, therein). Appeal against the order of the
Commission can be made to the Competition Appellate Tribunal.
Under the Consumer Protection Act, there is three-tier set up, viz., District Forums, State Commissions and
the National Commission [Section 9], with each of the three Authorities having its own original pecuniary
jurisdiction. The complaint lies before the District Forum where the value of the goods or services and the
compensation claimed does not exceed Rs 20 lakhs. The jurisdiction of the State Commission and the
National Commission is in cases where the value of goods or services and the compensation, if any, claimed
is over Rs 20 lakhs but less than Rs 1 crore and exceeding Rs 1 crore, respectively. Further, the State
Commission and the National Commission set up under the Consumer Protection Act, apart from having
original jurisdiction, have appellate jurisdiction also, i.e., to say, hear appeals against the order of the District
Forum and the State Commission, respectively [Sections 15 and 19]. Appeal against the order of the National
Commission can be preferred before the Supreme Court [Section 23].
(2) Under section 54, Central Government may exempt certain class of enterprises from the application of the
Competition Act. In contrast, no such provisions exist in the Consumer Protection Act.
(3) Under section 3 of the Competition Act, Horizontal trade agreements, specified therein are treated as per se
actionable while vertical agreements specified therein are actionable if such agreements cause appreciable
adverse effect on competition. No such distinction exists in the Consumer Protection Act.
(4) The thrust of the definition of Restrictive Trade Practice (RTP) in section 2(nnn) of the Consumer Protection Act
(which, it seems, is based on section 2(o) of erstwhile MRTP Act) is on the effect of the trade practice primarily
on the Consumer Interest. Section 33(1) of the MRTP Act laid down in specific terms various practices which
statutorily were deemed to be RTPs.
Under the Consumer Protection Act, Restrictive Trade Practice which brings about manipulation of price or
conditions of delivery, arising from delay in supply indulged of goods or services which led to increase in
price and tie-in arrangement included in by a trader can only become the subject-matter of complaint before
the Consumer Dispute Redressal Authority set up under the Consumer Protection Act [Section 2(1)(nnn)].
On the other hand, the definition of Restrictive Trade Practices, named as anti-competitive agreements in the Competition
Act, is competition-oriented.
Page 8 of 10
[s 1] Short title, extent and commencement
(5) A complaint relating to restrictive trade practice can be made before Commission under section 19 of
Competition Act read with section 3(4) thereof or also before the concerned Consumer Dispute Redressal
Authority under section 2(1)(c) of the Consumer Protection Act.
In view of the definition of “Consumer” in section 2(1)(d) of the Consumer Protection Act, a buyer who
obtains goods for resale or for a commercial purpose is, however, not regarded as a consumer, and he cannot
therefore, invoke the jurisdiction under that Act and become a complainant thereunder. There is no such bar
for invoking the jurisdiction of the Competition Commission by such a buyer of goods, i.e., to say one who
buys goods for resale and/or for commercial purpose can also seek redressal against the restrictive trade
agreements from the Commission.
(6) Under the Competition Act, Commission may suo motu initiate an inquiry [Sections 19 and 21].
The Consumer Dispute Redressal Authorities are more akin to judicial authority in their functioning and they
cannot suo motu initiate any inquiry in matters falling within the purview of the Consumer Protection Act,
e.g., defects in goods, deficiency in service, or unfair or restrictive trade practice.
(7) Under the Competition Act, investigation machinery is available with the Commission and for that purpose, the
Central Government is empowered to appoint a Director General (DG). Before issuing any process on the basis
of a complaint, the Commission may require DG to make a preliminary investigation and to submit a report to the
Commission [Sections 16 and 26]. No such machinery is available to the Consumer Redressal Authorities under
the Consumer Protection Act.
(8) Complaint under the Consumer Protection Act can be filed by a buyer of goods (other than a person who buys
goods for commercial purpose or for resale) [Section 2(1)(d)]. There is no such bar under the Competition Act, in
respect of a person who buys goods for resale and/or for commercial purpose.
(9) The definition of “goods” in the Consumer Protection Act is narrower than that contained in the Competition Act.
The Consumer Protection Act merely says: “Goods” means goods defined in the Sale of Goods Act, 1930
[Section 2(1) (i)]. On the other hand, the definition of “goods” in the Competition Act, inter alia, covers shares,
debenture, stock and shares after allotment and products manufacture, processed or mined as also goods imported
into India [Section 2(i)].
(10) Under the Consumer Protection Act, a complaint would lie if goods, which will be hazardous to life and safety
when used, are offered for sale to the public in contravention of any law requiring the traders to display
information in regard to the contents, manner and effect of use of such goods [Section 2(1)(c)(v)]. There is no
such provision in the Competition Act.
(11) Under the Consumer Protection Act, the Consumer Redressal Authority is empowered to direct that (i) hazardous
goods shall not be offered for sale, and (ii) hazardous goods offered for sale shall be withdrawn from the market
[Section 14(1) (g) & (h)]. No such power stands expressly vested in the Competition Commission under the
Competition Act.
(12) Both, the Competition Commission [Section 34] and the Consumer Dispute Redressal Authorities [Sections
14(d), 18 and 22] have been empowered to award compensation. Under the Consumer Protection Act, the
compensation can, however, be awarded to the consumer as defined in the said Act (i.e., to say the buyer who
does not buy goods for commercial purpose or for resale) only for “any loss or injury suffered by the consumer
arising out of negligence of the opposite party”.
Under the Competition Act, the compensation may be sought by any person, including any trader or class of
traders or any consumer for any loss or damage caused to them, inter alia, as a result of contravention of
provisions of Chapter II.
Page 9 of 10
[s 1] Short title, extent and commencement
Under the Competition Act negligence of the opposite party is not the necessary pre-requisite to seek
compensation. Further, the Competition Act does not refer to “injury”; it speaks of “loss or damage”.
(13) The Consumer Protection Act lays down limitation period of 2 years within which the complaint ought to be
lodged by the complainant consumer [Section 24A]. There is no such limitation period prescribed under the
Competition Act, except that the Commission shall not initiate any enquiry under section 5 after the expiry of one
year from the date on which such contravention has taken effect [Section 20(1)].8
(14) Under the Consumer Protection Act, the Consumer Redressal Authority shall decide about the complaint, as far
as possible, within a period of three months from the date of notice received by the opposite party where
complaint does not require analysis or testing of commodities and within five months if it requires analysis or
testing of commodities [Section 13].
No such time frame has been prescribed under the Competition Act for the Competition Commission, except
as laid down in sections 24 and 31 (relating to combinations).
(15) An order passed under the Competition Act is final as soon as it is passed by the Competition Commission.
Under the Consumer Protection Act, the order of the Consumer Dispute Redressal Authority shall be final, if
no appeal there against has been preferred. Thus, the finality of the order of the Redressal Authority has to
await the expiry of the prescribed period of 30 days allowed for filing the appeal; also when the appeal is
filed, the order appealed against would not be deemed to be final till such time the appeal is decided [Section
24].
(16) Under the Competition Act, the Competition Commission has the power to regulate the procedure and conduct its
own business [Section 64]. Under the Consumer Protection Act, the procedure has been laid down in the Act
itself [Sections 12, 13, 14 and 18 & 22]. Section 30A also empowers the National Commission to make
regulation, with the previous appeal of the Central Government.
(17) If any person, without reasonable cause, fails to comply with the orders or directions of the Commission, he shall
be punishable with fine which may extend to Rs 1 lakh for each day during which such non-compliance occurs,
subject to a maximum of Rs 10 crore, as the Commission may determine. Also, if any person does not comply
with the orders or directions issued, or fails to pay the fine imposed, he shall, be punishable with imprisonment
for a term which may extend to three years, or with fine which may extend to Rs 25 crore, or with both [Section
42].
Under the Consumer Protection Act, where a trader or a person against whom a complaint is made, fails or omits to
comply with any order made by the District Forum, the State Commission or the National Commission, as the case may
be, such trader or person shall be punishable with imprisonment for a term which shall not be less than one month but
which may extend to three years, or with fine which shall not be less than Rs 2,000 but which may extend to Rs 10,000, or
with both [Section 27].
1 The provisions of section 1, clauses (d), (g), (j), (k), (l) and (n) of section 2, sections 8, 9,
10, 14, 16, 17, 63(1) and clauses (a), (b), (d), (e), (f) and (g) of sub-section (2) section 63 came into force with effect from 31 March
2003, vide S.O. 340(E), dated 31 March 2003.
Page 10 of 10
[s 1] Short title, extent and commencement
The provisions of section 2 (except clauses (d), (g), (j), (k), (l) and (n), sections 7, 11, 12, 13, 15, 22, 23, 36,
49 to 62, 63 [except clauses (a), (b), (d), (e), (f), (g) and (n) of sub-section (2)], sections 64 and 65 came into force with effect from
19 June 2003, vide S.O. 715(E), dated 19 June 2003;
Sections 53C, 53D, 53E, 53F, 53G, 53H, 53-I, 53J, 53K, 53L and 53M enforced with effect from 20
December 2007, vide S.O. 2167(E), dated 20 December 2007.
The provisions of sections 3, 4, 18, 19, 21, 26, 27, 28, 32, 33, 35, 38, 39, 41, 42, 43, 45, 46, 47, 48, 54, 55 and
56 came into force with effect from 20 May 2009, vide S.O. 1241(E), dated 15 May 2009;
The provisions of section 66 came into force with effect from 1 September 2009, vide S.O. 2204(E), dated 28
August 2009.
Sections 5, 6, 20, 29, 30 and 31 enforced with effect from 1 June 2011, vide S.O. 479(E), dated 4 March 2011.
Section 43A enforced with effect from 1 June 2011, vide S.O. 1230(E), dated 30 May 2011.
Section 44 enforced with effect from 1 June 2011, vide S.O. 1231(E), dated 30 May 2011.
2 CCI v Steel Authority of India Ltd,
(2010) 10 SCC 744 : [2010] 103 SCL 269
(SC) : [2010] 11 SCR 112 : (2011) 2
Mad LJ 271 (SC) : 2010 (5) ALLMR (SC) 934 : 2010 CompLR 61 (SC) : (2010) 4 Comp LJ 1
(SC) : JT 2010 (10) SC 26
: 2010 (9) Scale 291 :
2010 (8) UJ 4093 .
3 Brahm Dutt v UOI, WP (Civil) 490 of 2003, decided on 20 January
2005, AIR 2005 SC 730 :
(2005) 3 Comp LJ 358 .
4 The Competition (Amendment) Ordinance, 2009 was converted into
the Competition (Amendment) Bill, 2009 which was passed by Rajya Sabha on 16 December 2009 and by Lok Sabha on 14
December 2009 and assent of President of India was received on 22 December 2009.
5 DN Roy v Jogendra Narain Deb,
1913 AC 516 .
6 Security Printers of India Pvt Ltd v Deputy Secretary to the
Government of India, (1980) 50 Comp Cases 690 (All). (See also, Re Tribeni Tissues Ltd, Company Petition No. 14/1979, order
dated 31 January 1983 and Roplas (India) Ltd v UOI, [1989] 22 ECR 449
(Bom): AIR 1989 Bom 183 , order
dated 2 July 1987, where, however, the question of territorial jurisdiction of the MRTP Act, was not raised).
7 Paras 7.3.4 and 7.3.5 of the Raghavan Committee Report.
8 It should be noted however, that the COMPAT has
recently recognised applicability of limitation principles in the case of Nitin Radhey Shyam v CCI, Appeal No. 108 of 2015, decided
on 14 December 2015.
End of Document
[s 2] Definitions
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > CHAPTER I
PRELIMINARY
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
CHAPTER I PRELIMINARY
[s 2] Definitions
In this Act, unless the context otherwise requires,—
(a) “acquisition” means, directly or indirectly, acquiring or agreeing to acquire—
(i) shares, voting rights or assets of any enterprise; or
(ii) control over management or control over assets of any enterprise;
(b) “agreement” includes any arrangement or understanding or action in concert,—
(i) whether or not, such arrangement, understanding or action is formal or in writing; or
(ii) whether or not such arrangement, understanding or action is intended to be enforceable by legal proceedings;
9[(ba) [“Appellate Tribunal” means the National Company Law Appellate Tribunal referred to in sub-section (1) of
section 53A;]
(c) “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;
(d) “Chairperson” means the Chairperson of the Commission appointed under sub-section (1) of section 8;
(e) “Commission” means the Competition Commission of India established under sub-section (1) of section 7;
(f) “consumer” means any person who—
(i) buys any goods for a consideration which has been paid or promised or partly paid and partly promised, or
under any system of deferred payment and includes any user of such goods other than the person who buys
such goods for consideration paid or promised or partly paid or partly promised, or under any system of
deferred payment when such use is made with the approval of such person, whether such purchase of goods
is for resale or for any commercial purpose or for personal use;
(ii) hires or avails of any services for a consideration which has been paid or promised or partly paid and partly
promised, or under any system of deferred payment and includes any beneficiary of such services other than
the person who hires or avails of the services for consideration paid or promised, or partly paid and partly
promised, or under any system of deferred payment, when such services are availed of with the approval of
the first-mentioned person whether such hiring or availing of services is for any commercial purpose or for
personal use;
(g) “Director General” means the Director General appointed under sub-section (1) of section 16 and includes any
Additional, Joint, Deputy or Assistant Directors General appointed under that section;
Page 2 of 125
[s 2] Definitions
(h) “enterprise” means a person or a department of the Government, who or which is, or has been, engaged in any
activity, relating to the production, storage, supply, distribution, acquisition or control of articles or goods, or the
provision of services, of any kind, or in investment, or in the business of acquiring, holding, underwriting or
dealing with shares, debentures or other securities of any other body corporate, either directly or through one or
more of its units or divisions or subsidiaries, whether such unit or division or subsidiary is located at the same
place where the enterprise is located or at a different place or at different places, but does not include any activity
of the Government relatable to the sovereign functions of the Government including all activities carried on by
the departments of the Central Government dealing with atomic energy, currency, defence and space.
Explanation.—For the purposes of this clause,—
(a) “activity” includes profession or occupation;
(b) “article” includes a new article and “service” includes a new service;
(c) “unit” or “division”, in relation to an enterprise, includes—
(i) a plant or factory established for the production, storage, supply, distribution, acquisition or control of
any article or goods;
(ii) any branch or office established for the provision of any service;
(i) “goods” means goods as defined in the Sale of Goods Act, 1930 (8 of 1930) and includes—
(A) products manufactured, processed or mined;
(B) debentures, stocks and shares after allotment;
(C) in relation to goods supplied, distributed or controlled in India, goods imported into India;
(j) “Member” means a Member of the Commission appointed under sub-section (1) of section 8 and includes the
Chairperson;
(k) “notification” means a notification published in the Official Gazette;
(l) “person” includes—
(i) an individual;
(ii) a Hindu undivided family;
(iii) a company;
(iv) a firm;
(v) an association of persons or a body of individuals, whether incorporated or not, in India or outside India;
(vi) any corporation established by or under any Central, State or Provincial Act or a Government company as
defined in section 617 of the Companies Act, 1956 (1 of 1956);
(vii) any body corporate incorporated by or under the laws of a country outside India;
(viii)a co-operative society registered under any law relating to co-operative societies;
(ix) a local authority;
(x) every artificial juridical person, not falling within any of the preceding sub-clauses;
(m) “practice” includes any practice relating to the carrying on of any trade by a person or an enterprise;
(n) “prescribed” means prescribed by rules made under this Act;
(o) “price”, in relation to the sale of any goods or to the performance of any services, includes every valuable
consideration, whether direct or indirect, or deferred, and includes any consideration which in effect relates to the
sale of any goods or to the performance of any services although ostensibly relating to any other matter or thing;
(p) “public financial institution” means a public financial institution specified under section 4A of the Companies
Act, 1956 (1 of 1956) and includes a State Financial, Industrial or Investment Corporation;
(q) “regulations” means the regulations made by the Commission under section 64;
(r) “relevant market” means the market which may be determined by the Commission with reference to the relevant
product market or the relevant geographic market or with reference to both the markets;
Page 3 of 125
[s 2] Definitions
(s) “relevant geographic market” means a market comprising the area in which the conditions of competition for
supply of goods or provision of services or demand of goods or services are distinctly homogenous and can be
distinguished from the conditions prevailing in the neighbouring areas;
(t) “relevant product market” means a market comprising all those products or services which are regarded as
interchangeable or substitutable by the consumer, by reason of characteristics of the products or services, their
prices and intended use;
(u) “service” means service of any description which is made available to potential users and includes the provision
of services in connection with business of any industrial or commercial matters such as banking, communication,
education, financing, insurance, chit funds, real estate, transport, storage, material treatment, processing, supply
of electrical or other energy, boarding, lodging, entertainment, amusement, construction, repair, conveying of
news or information and advertising;
(v) “shares” means shares in the share capital of a company carrying voting rights and includes—
(i) any security which entitles the holder to receive shares with voting rights;
(ii) stock except where a distinction between stock and share is expressed or implied;
(w) “statutoryauthority” means any authority, board, corporation, council, institute, university or any other body
corporate, established by or under any Central, State or Provincial Act for the purposes of regulating production
or supply of goods or provision of any services or markets therefor or any matter connected therewith or
incidental thereto;
(x) “trade” means any trade, business, industry, profession or occupation relating to the production, supply,
distribution, storage or control of goods and includes the provision of any services;
(y) “turnover” includes value of sale of goods or services;
(z) words and expressions used but not defined in this Act and defined in the Companies Act, 1956 (1 of 1956) shall
have the same meanings respectively assigned to them in that Act.
LEGISLATIVE BACKGROUND
The Competition Act, 2002
Notes on clauses.—This clause defines various expressions used in the Bill. [Clause 2 of the Competition Bill, 2001].
The Competition (Amendment) Act, 2007
Notes on clauses.—This clause seeks to amend section 2 of the Competition Act, 2002 relating to definitions. It is proposed
to define the expression “Appellate Tribunal” used in the Bill [Clause 2 of the Competition Bill, 2007].
MEANING OF DEFINITION CLAUSE
It is a well-established principle of law that a particular term defined in the definition clause or section is subject to
anything repugnant in the context of the other provisions of the statute.10
In the words of WANCHOO, J:
It is well settled that all statutory definitions or abbreviations must be read subject to the qualification variously expressed in the
definition clauses which created them and it may be that even where the definition is exhaustive inasmuch as the word defined is
Page 4 of 125
[s 2] Definitions
said to mean a certain thing, it is possible for the word to have a somewhat different meaning in different sections of the Act
depending upon the subject or context. That is why all definitions in statutes generally begin with the qualifying words, similar to
the words used in the present case, namely ‘unless there is anything repugnant in the subject or context’. Therefore, in finding out
the meaning of the word ‘Insurer’ in various sections of the Act (Insurance Act, 1938) the meaning to be ordinarily given to it is
that given in the definition clause. But this is not inflexible and there may be sections in the Act where the meaning may have to be
departed from on account of the subject or context in which the word had been used and that will be giving effect to the opening
sentence in the definition section, namely ‘unless there is anything repugnant in the subject or context’. In view of this
qualification, the Court has not only to look at the words but also to look at the context and the object of such words relating to
such matter and interpret the meaning intended to be conveyed by the use of the words under the circumstances.11
The meaning of the words used in any portion of the statute must depend upon the context in which they are placed. By
“context” is meant not only the textual context arising out of the other provisions of the statute, but also factual context
including the mischief to be remedied and the circumstances under which the statute was passed. It is no sound principle of
construction to interpret expressions used in one Act with reference to their use in another Act. The meaning of words and
expressions used in an Act must take their colour from the context in which they appear. The ordinary rule of grammar
cannot be treated as an invariable rule, which must always and in every case be accepted without regard to the context. If
the context definitely suggests that the relevant rule of grammar is inapplicable, then the requirement of the context must
prevail over the rule of grammar. It is a fundamental principle in the construction of statutes that the whole and every part
of the statute must be considered in the determination of the meaning of any of its parts. In construing a statute as a whole,
the Courts seek to achieve two principal results; to clear up obscurities in the law and to make the whole of the law and
every part of it harmonious and effective. It is presumed that the Legislature intended that the whole of the statute should
be significant and effective. Different sections, amendments and provisions relating to the same subject must be construed
together and read in the light of each other. Words are generally used in the same sense throughout in a statute unless there
is something repugnant in the context. Same word in a section should bear the same meaning in both places unless there is
something in the context to the contrary. Where in a statute, a word is not defined, but is used in different sections, it ought
to be interpreted in the same sense throughout, unless the context in any particular section plainly requires that it should be
understood in a different sense. The same words used in different statutes on the same subject are interpreted to have the
same meaning. Words defined in a statute may have the same meaning in another statute, which is in pari materia
therewith. The statutes are in pari materia which relate to the same person or thing or to same class of persons or things. It
has long been a well-established principle to be applied in the consideration of an Act of Parliament that when a word of
doubtful meaning has received a clear judicial interpretation, the subsequent statute which incorporates the same word or
the same phrase in a similar context, must be so construed so that the word or phrase is interpreted according to the
meaning that has previously been assigned to it. When the Legislature uses technical language in its statutes, it is supposed
to attach to it its technical meaning unless the contrary manifestly appears. Where words have been used which have
acquired a legal meaning, it will be taken, prima facie, that Legislature has intended to use them with that meaning unless a
contrary intention clearly appears from the context.12
“Mean and include”
Where in defining a word, expression “mean” is used, the definition is explanatory and prima facie restrictive. On the other
hand, when in the definition of a word, expression “include” is used, the definition is extensive. The word “include” or
“includes” is used as a word of enlargement and ordinarily implies that something else has been included which falls
outside the general language and to add to the general clause or species which does not naturally belong to it.13 Sometimes
the definition contains the words “mean and include”. This inevitably raises a doubt as to interpretation.14 It is an
established principle of construction that statutory interpretation clauses or definitions should be read subject to
qualifications therein expressed. This is so even, where the definition is exhaustive. So where the defined word means or
includes a certain thing, it may well be otherwise if the subject or context in any part of the statute so requires.15
When there exists, a statutory definition in respect of an expression, the dictionary meaning thereof cannot be applied.
When a statutory definition uses the word “includes”, it provides an extended meaning thereto but the words are required
to be construed in terms of the legislative intent. If the words are general and not precise, their interpretations are to be
restricted to the fitness of the matter. As by reason of the provisions of the Monopolies and Restrictive Trade Practices
Act, 1969, the rights of traders can be controlled or restricted, the provisions thereof must receive a strict construction.16
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“Proviso”
The normal function of a proviso is to except something or qualify something enacted. The general rule has been stated by
HIDAYATULLAH, J, in the following words:
As a general rule, a proviso is added to an enactment to qualify or create an exception to what is in the enactment and ordinarily, a
proviso is not interpreted as stating a general rule.17
The Supreme Court in S Sundaram v R Pattabhiraman18 discussed at length the case law relating to the function of a
proviso in an enactment. FAZAL ALI J summed up the position by observing that a proviso may serve four different
purposes, namely, (1) Qualifying or excepting certain provisions from the main enactment, (2) it may entirely change the
very concept of the intendment of the enactment by insisting on certain mandatory conditions to be fulfilled in order to
make the enactment workable, (3) it may be so embedded in the Act itself as to become an integral part of the enactment,
and thus, acquire the tenor and colour of the substantive enactment itself, and (4) it may be used merely to act as an
optional addenda to the enactment with the sole object of explaining the real intendment of the statutory provision.
“Explanation”
An Explanation is appended to a section to explain the meaning of words contained in the section. It becomes a part and
parcel of the enactment.19 An Explanation, normally, should be so read as to harmonise with and clear up any ambiguity
in the main section and should not be so construed as to widen the ambit of the section.20
The Supreme Court has stated the object of an Explanation to be as follows: (a) to explain the meaning and intendment of
the Act itself; (b) where there is any obscurity or vagueness in the main enactment, to clarify the same so as to make it
consistent with the dominant object which it seems to subserve; (c) to provide an additional support to the dominant object
of the Act in order to make it meaningful and purposeful; (d) an Explanation cannot in any way interfere with or change
the enactment or any part thereof, but, where some gap is left which is relevant for the purpose of the Explanation, in order
to suppress the mischief and advance the object of the Act it can help or assist the court in interpreting the true purport and
intendment of the enactment; and (e) it cannot, however, take away a statutory right with which any person under a statute
has been clothed or set at naught the working of an Act by becoming an hindrance in the interpretation of the same.21
The role of an Explanation has been thus explained by GP SINGH in Principles of Statutory Interpretation,22 when a section
contains a number of clauses and there is an Explanation at the end of the section, it should be seen as to which clause it
applies and the clarification contained in it applied to the clause.23 An Explanation may be added to include something
within or to exclude something from the ambit of the main enactment or the connotation of some word occurring in it.
Even a negative Explanation, which excludes certain types of a category from the ambit of the enactment, may have the
effect of showing that the category leaving aside the excepted types is included within it.24 An Explanation, normally,
should be so read as to harmonise with and clear up any ambiguity in the main section and should not be so construed as to
widen the ambit of the section.25 If on a true reading an Explanation widens the scope of the main section, effect must be
given to it.26 It is also possible that an Explanation may have been added in a declaratory form to retrospectively clarify a
doubtful point in law and to serve as a proviso to the main section or ex abundanticautela to allay groundless
apprehensions.27
“Acquisition”
The expression “acquisition” has been defined to mean, directly or indirectly, acquiring or agreeing to acquire (i) by
acquiring shares, voting rights or assets of an enterprise; and (ii) by acquiring control over management or assets of the
enterprise. This definition is relevant in respect of acquisition or control of goods and services in anti-competitive
agreements and combinations under sections 3 and 5, respectively.
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Acquisition, in common parlance, means acquiring ownership and/or possession from another. In the context of an
enterprise it could be by acquiring controlling shares and/or voting rights. Another mode of acquisition may be by
acquiring control over assets or control over management by virtue of any contract or understanding or arrangement and
the two enterprises then become associated by bond of common interest. Such relationship may be reflected in economic,
executive or financial areas or by way of functional control or control over policy matters. The right or power to control
the management may be de facto or de jure. It would be de jure where controlling shares are acquired by purchaser.
A reading of the provisions shows that while section 2(a) defines the term “acquisition”, section 5 identifies the nature of
acquisition, which can be treated as combination provided that the conditions specified in clauses (a), (b) and (c) are
satisfied.28
Control over management
“Control over management” means participation in management; management control means administrative control of the
enterprise.29 The controlling or directing powers may be referred to as the “head and the brain”.30
Directly or indirectly
Acquisition of an enterprise may be direct or indirect. It is direct when it is acquired directly by the acquirer and indirect
when it goes through one (or more) intermediaries. If it is direct, it is readily discernible, since there is direct evidence of
such acquisition. Indirect acquisition is one which has to be inferred from the attendant facts and circumstances. For
example, if one provides funds and the other acquires the shares in his name, it can be held they have acted in concert to
acquire the shares.31
In CIT v Jubilee Mills Ltd,32 the Supreme Court observed:
The test is not whether they have actually acted in concert but whether the circumstances are such that human experience tells us
that it can safely be taken that they must be acting together. It is not necessary to state the kind of evidence that will prove such
concerted acting. Each case must necessarily be decided on its facts.
In Reghuvanshi Mills Ltd v CIT,33 it was stated that:
in deciding if there is such a controlling interest, there is no formula applicable to all cases. Relationship and position as director
are not by themselves decisive. If relatives act, not freely, but with others, they cannot be said to belong to that body, which is
described as ‘public’ in the Explanation.
Accordingly, whether or not two (or more) persons have acted in concert, their relationship, their conduct, their common
interest have all to be considered; and on the basis of such factual position, the authority concerned may infer whether they
have acted in concert.
Agreeing to acquire
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“Acquisition” as defined includes agreeing to acquire shares, voting rights, assets or management control. Such an
agreement, formal or otherwise devoid of legal formalities, is also an acquisition.34 Agreeing to acquire may not be in law
but in equity. Thus, the transferee of shares, when his name is not recorded in the Register of Members of the company,
can exercise the rights of the member of the company through the transferor, and who would be regarded as constructive
trustee, in law.35 In Shirish Finance and Investment Pvt Ltd v M Shreenivasulu Reddy,36 the Court observed:
It is, therefore, possible to give to the words ‘who holds shares’ a meaning different than the one assigned to it under the
Companies Act, as including a person who hold shares by reason of his having purchased the same with a right of registration of
those shares on the strength of blank transfer forms, but in whose favour the shares have not actually been registered.
“Agreement”
This definition is an inclusive one and covers not only an agreement as understood in the conventional sense under the
Indian Contract Act, 1872 but any arrangement or understanding or action in concert between two (or more) parties. The
agreement may be oral or in writing or may be enforceable by legal proceedings or not. Thus, an agreement not
enforceable at law is also covered by the definition. The inclusive definition of the expression “agreement” which covers
“arrangement” would make a person beneficially entitled to the arrangement, a party thereto, notwithstanding the fact that
the said beneficiary itself is not the executant of the agreement. Under the Competition Act, 2002, agreement includes
“understanding”, and arrangement in addition to “action in concert”, and, thus, further amplifies the scope of the term
“agreement”. The term “agreement” essentially involves express or overt meeting of minds and acceptance of restrictions.
Under a statutory fiction, an agreement made by a trade association is deemed to be made by all the members of the
association. Likewise, the members of a trade association are deemed to be under the obligation to comply with the
recommendations made to them by the association or on its behalf and the agreement for the constitution of the
association, therefore, also falls within the purview of the Act.
It is generally accepted that in cases of secret or clandestine understanding, it is difficult to get hold of a written plan, well-
documented piece of evidence showing agreement and understanding among the parties of such agreement. The provisions
of section 2(b) of the Competition Act, 2002 therefore, do not restrict agreement to mean a written form of agreement only.
As per the provisions of the section, agreement includes even an arrangement, understanding or action in concert which is
not formal or in writing, so that in absence of evidence of a written agreement, the Commission is not handicapped to
establish the fact of existence of an agreement or understanding or action in concert since reliance can also be placed upon
other available credible evidences. The Competition Act, 2002 envisages civil liability. Thus, the standard of proof required
to prove an understanding or an agreement would be on the basis of “preponderance of probabilities” and not “beyond
reasonable doubt”. There is rarely any direct evidence of action in concert and in such situations, the Commission has to
determine whether those involved in such dealings had some form of understanding and were acting in cooperation with
each other.37
Arrangement
The word “arrangement” suggests a common course of conduct or behaviour involving some sort of communication or
exchange of views between the parties, each of whom is led to expect that the other or others will act in a certain way. The
essence of an arrangement is the meeting of minds or coming into accord. An arrangement may also include mutual
representation by conduct.38 Where, however, an arrangement does not indicate that the parties to it accepted mutual rights
and obligations, it would not tantamount to an arrangement.39 Merely following a price leader and adopting the price
announced by him would not imply an arrangement as it lacks mutuality. Adoption of parallel business behaviour, may be
admissible as circumstantial evidence, cannot be taken to establish an arrangement and would require something more to
justify such a contention.40 Re Mileage Conference Group of the Tyre Manufacturers Conference Ltd,41 the court of
appeal explained the meaning of the word “arrangement” in the following words:
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The law is not so subtle or unrealistic as to lead to the conclusion that while an arrangement can come into being as a result of
information as to one another’s intentions supplied in words or writing or by a nod or wink, it cannot come into being as a result of
information as to one another’s intentions derived from their actual and continuing conduct towards one another. There must be an
opportunity for the conduct to be observed and its implications recognised. Where all that has happened is that a number of people
separately and individually have decided to try to operate a scheme which involves mutuality, it may well be that at that stage there
is no arrangement. But when, thereafter, it became clear to each of them by the acts of all of them that all had decided to operate
the scheme and were in fact operating it and the essence of its operation and the only basis on which it can operate rested in the
acceptance of mutual obligations by all the participants towards each other, the scheme thereupon becomes an arrangement.
Re British Basic Slag Ltd,42 it was observed that:
All that is required to constitute an arrangement not enforceable in law is that the parties to it shall have communicated with one
another in some way and that as a result of the communication each has intentionally aroused in the other an expectation that he
will act in a certain way.
In the suo-motu case against LPG cylinder manufacturers,43 the Commission made a reference to the case of RRTA v WH
Smith and Sons Ltd,44 where LORD DENNING aptly remarked:
People who combine together to keep up prices do not shout it from the housetops. They keep it quiet. They make their own
arrangements in the cellar where no one can see. They will not put anything into writing nor even into words. A nod or wink will
do. Parliament as well is aware of this. So it included not only an ‘agreement’ properly so called, but any ‘arrangement’, however
informal.
Understanding
The definition of “agreement” is an inclusive definition and includes any “arrangement” or “understanding” or “action in
concert”. The understanding between parties especially in cartel cases may be tacit and therefore the definition covers
situations where the parties act on the basis of a “nod or a wink”. There is rarely any direct evidence of action in concert
and in such situations, the Commission has to determine whether those involved in such dealings had some form of
understanding and were acting in co-operation with each other. In light of the definition of the term “agreement”, the
Commission has to assess the evidence on the basis of benchmark of preponderance of probabilities.45
The term “understanding” implies some sort of behavioural communication between two (or more) parties resulting in
adoption of a particular course of conduct by them. Where a party makes a representation as to his own future conduct with
the expectation and intention that such conduct on his part will operate as an inducement to another to act in a particular
way, such representation as regards his own conduct operates as an inducement to the other party to act in the particular
way; whether it is sufficient to constitute an agreement or not in the ordinary sense, it certainly operates as an
understanding even though the parties never actually contacted each other.46 The understanding may be tacit, and the
definition covers situations where the parties act even on the basis of a nod or a wink.47
In the context of the Anti-Competitive Agreements prohibited by the Competition Act, 2002:
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• No formal, i.e., legally enforceable agreement is necessary to constitute an arrangement, or understanding;
• it is not the form of understanding, arrangement or agreement or for that matter particular means used which is
the essence, but the result sought to be achieved which deserves prime consideration;
• the essentials of conspiracy or combination may be located in action or dealings and/or other circumstances, e.g.,
the exchange of words or at meetings or in informal exchange of correspondence;
• it is not essential that the means adopted to accomplish the unlawful objective(s) are in itself unlawful.
Definition under the erstwhile Monopolies and Restrictive Trade Practices (MRTP) Act, 1969
Section 2(a) of MRTP Act, 1969 defined “agreement” to include any arrangement or undertaking, whether or not it is
intended that such agreement shall be enforceable (apart from any provision of this Act), by legal proceedings. Scope of
the said definition has been extended under the Competition Act, 2002 to bring within its ambit acting in concert and any
arrangements or understanding formal or informal apart from oral agreements or in writing.
Action in concert
The definition of the term “agreement” in Section 2(b) of the Competition Act, 2002 also includes “action in concert”,
which may be less formal than arrangement or understanding. In CIT v East Coast Commercial Co Ltd,48 the Supreme
Court considered what may constitute as an action in concert and observed:
The question whether two or more persons have acted in concert has to be considered having regard to their relation etc.; their
conduct and common interest and on the basis of such evidence, that it may be inferred that they must be acting in concert.
Evidence of actual concerted acting is normally difficult to obtain, and is not insisted upon.
The same view was reiterated by a three Judge Bench in Technip SA v SMS Holdings Pvt Ltd,49 in which the Supreme
Court interpreted the expression of “acting in concert” used in Section 2(1)(e) of the Securities and Exchange Board of
India (SEBI) (Substantial Acquisition of Shares and Takeovers (SAST)) Regulations, 1997 (now replaced by SEBI (SAST)
Regulations, 2011). The same provision was again interpreted in Daiichi Sankyo Co Ltd v Jayaram Chigurupati50 by
another three Judge Bench which observed as follows:
48. To begin with, the concept of “person acting in concert” under Regulation 2(1)(e) (1) is based on a target company on the one
side, and on the other side two or more persons coming together with the shared common objective or purpose of substantial
acquisition of shares etc. of the target company. Unless there is a target company, substantial acquisition of whose shares etc. is the
common objective or purpose of two or more persons coming together there can be no “persons acting in concert”. For, dehors the
target company the idea of “persons acting in concert” is as irrelevant as a cheat with no one as victim of his deception. Two or
more persons may join hands together with the shared common objective or purpose of any kind but so long as the common object
and purpose is not of substantial acquisition of shares of a target company they would not comprise “persons acting in concert”.
49. The other limb of the concept requires two or more persons joining together with the shared common objective and purpose of
substantial acquisition of shares, etc. of a certain target company. There can be no “persons acting in concert” unless there is a
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shared common objective or purpose between two or more persons of substantial acquisition of shares, etc. of the target company.
For, dehors the element of the shared common objective or purpose the idea of “person acting in concert” is as meaningless as a
criminal conspiracy without any agreement to commit a criminal offence. The idea of “persons acting in concert” is not about a
fortuitous relationship coming into existence by accident or chance. The relationship can come into being only by design, by
meeting of minds between two or more persons leading to the shared common objective or purpose of acquisition or substantial
acquisition of shares, etc. of the target company. It is another matter that the common objective or purpose may be in pursuance of
an agreement or an understanding, formal or informal; the acquisition of shares, etc. may be direct or indirect or the persons acting
in concert may cooperate in actual acquisition of shares, etc. or they may agree to cooperate in such acquisition. Nonetheless, the
element of the shared common objective or purpose is the sine qua non for the relationship of “persons acting in concert” to come
into being.51
MRTP Commission on “Arrangement” and “Understanding”
There are several decisions of the MRTP Commission wherein the meaning of the expressions “arrangement” and
“understanding” has been discussed and decided. The MRTP Commission’s approach was almost similar to that of the
courts in the UK. The notable amongst these are: Re Delhi Automobiles Pvt Ltd52 and Re Coates of India Ltd.53 In the first
mentioned case, it was held that the joint advertisements by the dealers offering uniform sale price for certain brand of cars
was an arrangement or understanding, though there was no formal agreement. In the later mentioned case, the MRTP
Commission also held that the grant of discount by the printing ink manufacturers to their distributors and dealers on
reaching a target of purchase amounted to acting in concert and was an arrangement covered by the term “Agreement” as
defined in the Competition Act, 2002. A similar view must be presumed Re Kasturi and Sons Ltd,54 where the publishers
of newspapers were restrained by the MRTP Commission from acting in concert in fixing, maintaining or increasing the
prices of newspapers. Re Hindustan Times Ltd,55 the Commission, however, took a contrary view that the raise in the price
of their publications by the newspaper publishers did not amount to an arrangement for concerted action, as the raise in
price resulted from certain economic factors. An agreement or arrangement between a holding company and its subsidiary
would also fall within the ambit of the Act, and all what is necessary to be seen is that a trade practice has been adopted
and which is restrictive in the context of section 2(o) of the Act.56
Definition under the Competition Act, 2002
There are several decisions of the Commission where it has followed the earlier understanding on the definition of
“Agreement” for the purposes of the Competition Act, 2002. In the Tyre Manufacturers case,57 the Commission observed
that “Agreement” as defined under section 2(b) is a wide and inclusive definition which not only includes formal written
agreement which is enforceable in law but also informal “understanding” and “arrangement” in the widest possible
meaning.58 Thus, the static and dynamic elements of agreement are taken into account. An agreement however, always
envisages more than one person or an enterprise.59
Existence of a written agreement is not necessary to establish common understanding,60 common design, common motive,
common intent or commonality of approach among the parties to an anti-competitive agreement. These aspects may be
established from the activities carried on by them, from the objects sought to be achieved and evidence gathered from the
anterior and subsequent relevant circumstances. The same can be inferred from the intention or conduct of the parties. In
the cases of conspiracy or existence of any anti-competitive agreement, proof of formal agreement may not be available
and the same may be established by circumstantial evidence alone.61 The concurrence of parties or the consensus amongst
them can, therefore, be gathered from their common motive and concerted conduct. In the light of the definition of the term
“agreement”, the Commission has to find sufficiency of evidence on the basis of benchmark of “preponderance of
probabilities”.62 For instance, in the Uniglobe case,63 it was held that Travel Agents Federation of India, Travel Agents
Association of India and IATA Agents Association of India acted in concert to enforce the decision of the boycott of
Singapore Airlines tickets. In the case of Automobiles Dealers Association, Hathras, UP.,64 letter of intent between Global
Automobiles Ltd (GAL) and its dealers was held to be an agreement.
Parallel behaviour, alone in price or sales is not indicative of a coordinated behavior among participants in a market.
However, the definition is designed in such a way as to produce a vast and sweeping coverage for joint and concerted anti-
competitive actions.65 If any of the elements of an arrangement or an understanding or action in concert exists, it can be
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said that there was an agreement. Therefore, for a cartel investigation under the Competition Act, 2002, the first issue to be
established is as to whether there was an agreement and then the behaviour of the members of the cartels has to be seen
with reference to the said agreement. On the basis of the behaviour of the members of the alleged cartels, an agreement can
be presumed. No doubt the parties to such an agreement may offer their own sets of explanations behind the existence of
circumstantial evidence. The firms often tend to justify the parallel behaviour in prices, production, dispatch or supplies
conduct in prices by explaining the fundamentals of the market forces such as demand, increasing cost of production and
other economic factors.66 However, it also remains a fact that parties to an anti-competitive agreement will not come out
in open and reveal their identity to be punished by the competition agencies. This is also the reason that the Legislature in
its wisdom has made the definition of “agreement” inclusive and wide enough and not restricted it only to documented and
written agreement among the parties. Thus, the Commission is not impeded from using circumstantial evidences for
making inquiries into act, conduct and behaviour of market participants.67 In the Cement Cartel Case,68 the Commission
noted:
6.5.9..... looking at the position in other jurisdictions, it is found that circumstantial evidences have been used in the News Paper
Cartel Case (1999) of Brazil. Similarly in case of High Fructose Corn syrup Antitrust Litigation of US; Atlantic Sugar Case of
Canada [Att. Sugar Refineries Co v A.G. Can., (1980) 2 S.C.R. 644 ],
circumstantial evidences were relied upon. In Latvia – in Hen’s eggs case also, infringement has been found based upon
circumstantial evidence. It is noteworthy that OECD in its paper ‘Prosecuting Cartels without Direct Evidence of Agreement’
(February 2006) has held: ‘Circumstantial evidence is of no less value than direct evidence for it is the general rule that the law
makes no distinction between direct and circumstantial evidence in order to prove the conspiracy, it is not necessary for the
government to present proof of verbal or written agreement.69
Amongst set of circumstantial evidences, evidences of communication among the participants to an anti-competitive
agreement may give an important clue for establishing any contravention.70 Communication evidences might prove that
contravening parties met and communicated with each other to determine their future or present behaviour.
In the case of Yashoda Hospital and Research Centre Ltd,71 R Prasad used his dissenting opinion in Neeraj Malhotra v
Deustche Post Bank,72 Home Finance to observe:
It has been a contentious issue as to what constitutes an agreement to come within the ambit of competition enquiry. In the CFI
judgment in Volkswagen AG v Commission,73(2003), it has been held that there is no need for an explicit agreement in writing but
there should be consensus between the parties concerned also referred to as meeting of minds or concurrence of wills. It has further
been held in Commission v Bayer AG,74 that it is sufficient that the parties to the agreement have expressed their joint intention to
conduct themselves in the market in a specific manner. As regards the form in which the common intention is expressed, it is
sufficient for a stipulation to be the expression of the parties’ intention to behave in the market in accordance with its terms.
However, there have been practical difficulties to establish the existence of an anti-competitive agreement between the firms. The
fact is the firms engaging in anti-competitive behavior have developed sophisticated mechanics of hiding their behavior so that
they escape the liability under the anti-trust laws. Lord Denning in RRTA v W.H. Smith and Sons Ltd observed: People who
combine together to keep up prices do not shout it from the house tops. They keep it quite. They make their own arrangements in
the cellar where no one can see. They will not put anything into writing nor even into words. A nod or wink will do.
From the above discussion, it can be concluded that if following conditions are present, then it can be said that there is an
agreement:
• Any formal or informal arrangement or understanding.
• No need to have an explicit agreement in cases of conspiracy where joint and collaborative action is pervasive in the
initiation, execution and fulfillment of the plan.
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• No need for an explicit agreement in writing but a consensus, between the parties concerned which referred to as meeting
of minds or concurrence of wills, is sufficient.
• It is sufficient that the parties to the agreement have expressed their joint intention to conduct themselves in the market in
a specific manner.
• As regards the form in which the common intention is expressed, it is sufficient for a stipulation to be the expression of
the parties’ intention to behave in the market in accordance with its terms.
• No need to have anything in writing or even in words. A nod or a wink will do.
Section 3(1) is the covering section for the entire chapter on “Prohibition of agreements” and it is the broader provisions
which cover both section 3(3) and section 3(4). In fact, in section 3(1), two situations, i.e., as under sections 3(3) and 3(4)
have been envisaged. It means that for any contravention of sections 3(3) and 3(4), the contravention of section 3(1) has to
be there. Section 3(1) is inherent and implicit in sections 3(3) and 3(4). It also cannot be concluded that “practices carried
on” or “decision taken by” as provided in section 3(3) can be without any “agreement”. Agreement is a necessary element
in all the sub-sections provided under section 3. It is the crux of the chapter “Prohibition of agreements”. Unless there is an
agreement, there can’t be prohibition of agreements. Thus, a contravention of section 3(3) without having an agreement
cannot be visualised. This presumption is further strengthened by the fact that in section 19(3) it is clearly mentioned that
while determining whether an agreement has an appreciable adverse effect on competition (AAEC) under section 3, due
regard must be had to all or any of the following factors, namely (a) to (f).
“Appellate Tribunal”
Competition Appellate Tribunal (COMPAT) was established by the Competition (Amendment) Act, 2007 to hear and
decide appeals against orders passed by Competition Commission of India (CCI). In terms of section 66 of the Act, the
Appellate Tribunal also heard and disposed pending monopolies and restrictive trade practices complaints under the
repealed MRTP Act, 1969. Appeal against the decisions of the Appellate Tribunal lied to the Supreme Court.
The Finance Act, 2017
In the attempt to bring efficiency, the Central Government in its wisdom decided to bring down the number of appellate
tribunals across sectors, COMPAT being one of them. Accordingly, section 17175 of the Finance Act, 2017 amended
sections 53A and 2(ba) of the Competition Act, 2002 to the effect that the COMPAT has ceased to exist as the Appellate
Tribunal, effective from 26 May 2017. The National Company Law Appellate Tribunal (NCLAT) will now be the
Appellate Tribunal against the orders of the CCI. There will be a transition phase during which all pending matters before
the COMPAT stands transferred to the NCLAT. During this period, all such matters will be heard afresh by the NCLAT.
Considering the low disposal rate of cases by NCLAT, Questions, on whether the NCLAT is equipped to handle cases
under the Competition Act, 2002 in an effective manner have also been raised. Whether, this move of the Government of
the day will bear any fruits or it adds to existing legislative confusion, only time will tell. However, scrapping of the
Tribunal which is less than a decade old and which had just started full functioning leaves many questions unanswered.
“Cartel”
Cartels were not defined in the MRTP Act, 1969, but the understanding of cartels could possibly be drawn from the section
2(o) of the MRTP Act, 1969, i.e., restrictive trade practice. The Competition Act, 2002 explicitly defines “cartels” under
section 2(c) of the Act. It is an inclusive definition which includes agreement amongst the association of producers,
distributors or service providers to limit, or control the production, distribution, sale or price of goods, terms of sale of
goods, or conditions for provision of services.76 The Organisation for Economic Co-operation and Development (OECD)
defines a “hard-core” cartel as “an anti-competitive agreement, anti-competitive concerted practice, or anti-competitive
arrangement by competitors to fix prices, make rigged bids (collusive tenders), establish output restrictions or quotas, or
share or divide markets by allocating customers, suppliers, territories or lines of commerce”.77 A “cartel” is usually
understood to be formed by a group of sellers or buyers who bond together and try to eliminate competition. The economic
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term for bonding together is “collusion”. There are two forms of collusion: express and tacit collusion, and in economics,
the difference is of limited importance, however, in the legal parlance, there is a stark difference between the two.
Acting in concert has to be considered having regard to their relation, conduct, common interest and evidence in this
behalf. Evidence of actual concert is generally difficult to secure and is not to be insisted up on.78
Cartel is a non-technical term for various forms of co-operation between companies as understood under the Competition
Act, 2002 in section 3(3) thereof in the context of anti-competitive agreements. The main aim of the participants of the
cartel is to agree to act together in the market and in effect possess the same unified threat to the market as a monopolist.
Cartels – Presumed Injurious
Agreements between enterprises engaged in identical or similar trade of goods or provision of services (commonly known
as horizontal agreements) including cartels, of four types specified in the Competition Act, 2002 are presumed to have
AAEC and, therefore, are anti-competitive and void. However, horizontal agreements entered into by way of joint ventures
are not presumed to have AAEC and are excluded from the above provisions of section 3, sub-section (3) of the Act if they
increase efficiency in production, supply, distribution, storage, acquisition or control of goods or provision of services.
Conditions conducive to formation of Cartels79
If there is effective competition in the market, cartels would find it difficult to be formed and sustained. Some of the
conditions that are conducive to cartelisation are:
— high concentration – presence of few competitors80
— high entry and exit barriers
— homogeneity of the products (similar products)
— similar production costs
— excess capacity
— high dependence of the consumers on the product
— history of collusion
— active trade association.
Reasons for Cartel behaviour
The reason behind the firms colluding can be best explained by referring to the “game-theory”81 and the “Prisoner’s
Dilemma”82 game. The success of the collusion will depend upon two major factors: (i) whether the firms are able to reach
an agreement and (ii) whether the coordination can be sustained over a period of time. The coordination can last for a long
period only if the “cheating firms” accrue huge benefits.83 In a market with an elastic demand, firms colluding on price
might not be of much help because the customers will not tolerate the price above the competitive level and will source
from the other suppliers. For, the existing competitors who are not a part of the cartel will tend to increase their output if
the cartelists increase their price, thus it would facilitate new entry into the market. The economic theory tells us that
cartels will be inherently unstable since there will always be an incentive to cheat. It is likely to be stable where the
benefits to cheat are small.
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Difficulty of detecting Cartel cases
Cartels are by their nature hidden and secret.84 Cartels are tricky to identify and unless the sanctions are tough, colluders
may develop the impression that the benefits that will arise from the cartel behavior will outweigh the danger of penalty.
The logic goes that the fines imposed must exceed the profits incurred out of the cartel activity. Prosecution of cartelists
acts as a deterrent. Some of the cartelists take the cover of consumer benefits for their action, however, this is will not be
taken into account by most of the legal establishments as they regard this to be confronting the very objective of
competition law. Cartel cases are difficult to investigate and detect because of the scope and complexity of many cartels. It
is really difficult to establish whether actually a cartel existed. The conspiracy can be established through both direct and
indirect evidence. Often it is only the participants who know exactly how the cartel is working.
Treatment under the Competition Act, 2002
“Cartels” are included in the category of agreements, which are presumed to have AAEC.85 Cartels are agreements amid
enterprises (together with alliance of enterprises) not to compete on price, product (including goods and services) or
customers. The purpose of a cartel is to increase the price beyond competitive levels, ensuing in injury to consumers and
the financial system.
The three ingredients to constitute “Cartel” are:—
(i) An agreement which includes arrangement or understanding;
(ii) Agreement amongst producers, sellers, distributors, traders or service providers, i.e., parties engaged in identical
or similar trade of goods or provision of service; and
(iii) Agreement aims to limit, control or attempt to control the production, distribution, and sale or price of, or, trade
in goods or provision of services.
The question that is raised is why a “Cartel” is presumed to have AAEC. In a common man’s understanding, any
competition regime tends to or strives to promote, maintain and sustain competition in market, being advantageous to
different stakeholders in the market. In these types of activity or more so collusion, competitors decide not be compete on
price, product, customers, etc. since in the case of a cartel, direct competitors concur to give up competition and choose for
collusion, the consumers and business houses lose the benefits of competition. Thus, cartels are inherently harmful. Since
competitors know that they are indulging in something that is prohibited under law, they will avoid getting in to any sort of
formal agreement. Moreover, the best evidence against “Cartel” is usually in possession of the charged parties, which are
not likely to easily part with it and make it available to the investigator or enquiring authority. These compulsions seem to
have persuaded the law makers to prescribe that “Cartel” is presumed to have AAEC.
Identifying Cartel Formation
Certain practices need to be identified to establish the existence of a cartel under the Competition Act, 2002: (i) fixing of
prices, (ii) agreement by way of concerted action suggesting conspiracy, and (iii) intent to gain monopoly or
restrict/eliminate competition.
Cartels are covered in section 3 of the Competition Act, 2002 under Anti-competitive Agreements. The Competition Act,
2002 frowns upon an agreement, which causes or is likely to cause an AAEC within India. Four types of agreements
between enterprises involved in the same or similar manufacturing or trading of goods or services are presumed to have an
AAEC, namely: agreements determining prices; agreements limiting or controlling quantities; agreements to share or
divide markets; and agreements to rig bids. These agreements define the contours of a cartel activity.
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Defence for Cartelisation86
Price parallelism is often used as an effective defence, posing a challenge for competition authorities. “US and European
courts have adopted a “parallelism plus” approach which requires showing the existence of “plus factors” beyond merely
the firms” parallel behaviour, in order to prove that an antitrust violation has occurred. This has been adopted in some
cases in Brazil as well. In all these jurisdictions, there is an inclination to consider parallel behaviour as a first clue
pointing to the presence of collusion. Even though parallelism does not suffice to prove unlawful conduct, it may
contribute to forming a suspicion of illegality.”87
Presence of gateways
There is no public interest gateway present in the Competition Act, 2002. Cartel activity is “presumed” to have an AAEC,
and the onus would be on the accused to justify that the practice did not have any significant impact on competition in the
market. They would then have to consider the factors listed in the Act and other circumstantial evidence to assess this
defence.
Explanation of one’s own action of cartelisation on the foundation that the accused is itself a dominant actor in the
market: In a buyer-supplier relationship, if, for example, the buyer-firm happens to be a dominant firm, the supplier-firms
may have an incentive to enter into a cartel-type agreement to counter the dominant position of the buyer. However, in
such cases, the Commission needs to impress upon the supplier firms that instead of entering into an agreement, they could
approach the Commission, should the buyer firm abuse its dominant position. Establishment of an Anti-competitive
Agreement to counter another potential anti-competitive practice cannot be allowed. Two wrongs do not make a right.
Powers of the Commission
The MRTP Commission was not empowered to impose penalties. Section 27 of the Competition Act, 2002 empowers the
CCI with powers to impose stringent orders and fines on detection of cartel activities. Accordingly, the Commission shall
impose a penalty equivalent to three times of the amount of profits made out of such agreement by the cartel or 10% of the
average turnover of the cartel for the last preceding three financial years, whichever is higher. The Competition Act, 2002
empowers the Commission to penalise a person for making false statement or for not co-operating in the investigation.
This could provide sufficient disincentives for not co-operating. Under section 33 of the Act, during the pendency of an
inquiry, the Commission may temporarily restrain any party from continuing with the alleged contravention, until
conclusion of the inquiry or until further orders, without giving notice to such party, where it deems it necessary.
Leniency Scheme
Under the erstwhile Monopolies and Restrictive Trade Practices Act, 1969 (the MRTP), the MRTP Commission could
only pass cease-and-desist orders to stop the operation of any cartels. However, under the Competition Act, 2002 the
Commission can, apart from making cease-and-desist orders, also impose heavy fines. However, the Competition Act,
2002 also has a leniency provision. This applies to any producer, seller, distributor, trader or service provider included in
any cartel that has allegedly violated the Competition Act, 2002 provisions regarding anti-competitive agreements and who
makes a full and true disclosure in respect of the alleged violation. There are, however, four other conditions: (1) the
disclosure must be vital; (2) the disclosing party must continue to co-operate with the Commission until the completion of
the proceedings; (3) the disclosing party must not have concealed, destroyed, manipulated or removed the relevant
documents in any manner that may contribute to the establishment of a cartel; and (4) the disclosure should be made before
the report of the investigation by the Director General (DG), as directed by the Commission, has been received. This
leniency provision can be a powerful tool in the detection and destabilisation of cartels. It encourages parties to disclose a
cartel’s existence to the competition authorities.88 We have witnessed an increase in the leniency applications in the last
couple of years where in some of the cases penalty exemption up to 100% has also been granted by the CCI.
To carry out the leniency provisions in the Competition Act, 2002 section 64 empowers the Commission to draft
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regulations for matters in respect of which provision is to be made by regulations. In pursuance of such powers, the
Competition Commission of India (Lesser Penalty) Regulations, 2009 were brought out in August 2009.89 These
regulations provide the framework in which the Commission can lower punishments than statutorily provided in the case
of cartel membership. There are three main components of the leniency programme, such as: a set of conditions to be
satisfied for benefits under the leniency programme; the procedure for grant of lesser penalty; and the quantum of penalties
that are waived when lenient treatment is meted out to cartel members who cooperate with the Commission.
Is profits proof of collusion?
There is a very thin (and blurred line) of difference between lawful collaboration and illegitimate collusion. It may be
wrong to presume that companies with high profit rates are involved in cartelisation or some type of collusive behaviour
and the higher earnings may be owed to better efficiencies or other market factors such as sudden increase in demand.
“The UK Office of Fair Trading (OFT) guidelines (adopted by Competition and Market Authority Board) on the
assessment of market power suggests that the following conditions need to exist before a firm can be held to be making
excessive profits in an anti-competitive sense: (1) the profit should be substantially above the cost of capital and earned on
a persistent basis; and (2) there is no evidence that new entry is likely to undermine such profits in the medium-term.”90
The existence of cartels depends on the peculiarities of the dynamics of each market. Some of the notable features of the
market that favour collusive behaviour are as follows:
(a) Inelastic demand of the goods: Price elasticity of demand is defined as the measure of responsiveness in the
quantity demanded for a commodity as a result of a change in price of the same commodity.91 It is a measure of
how consumers react to a change in price. In other words, it is percentage change in quantity demanded by the
percentage change in price of the same commodity. It is measured as elasticity, viz. it measures the relationship
as the ratio of percentage change between quantity demanded of a goods item and changes in its price. Demand
for a product can be said to be very inelastic if consumers will shell out almost any price for the product, and very
elastic if consumers will only pay a certain price, or a narrow range of prices, for the product. Inelastic demand
means a producer can raise prices without hurting demand for its product very much, and elastic demand means
that consumers are sensitive to the price at which a product is sold and will not buy it if the price rises by what
they consider to be too much.
In markets like oil and gas, cement, steel, power and other essential products linked to the automobile or
construction sectors, where the demand is inelastic, there is greater scope for huge profits by price rise and
collusive behaviour.92
(b) Small number of players in the market: The number of firms in an industry is inversely related to the probability
of cartel in that industry as it becomes cumbersome to monitor individual members. Further, the higher the
number of players, the stronger the implication that there will be fewer profits accruing to each member of the
cartel.93
(c) Higher barriers to entry: In a market where there are low barriers to entry, it is generally difficult to sustain a
cartel since the market is open for a new maverick player with greater efficiencies and low marginal cost which
can undermine the cartelised price.
(d) Stable demand: A stable demand over a period of time encourages the formation of a cartel. In the event that the
demand is variable, members would like to deviate from the cartel behaviour to get a larger share of the profits. It
is worth observing that while it may be easy to form a cartel, it can be harder to sustain it.94
Evidences in cartel cases
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a. Direct evidence: Common types of direct evidence include a document or documents (including email messages)
essentially embodying the agreement, or parts of it, and identifying the parties to it; oral or written statements by
co-operative cartel participants describing the operation of the cartel and their participation in it.
b. Circumstantial evidence:
a. Communication Evidence:
i. One is evidence that cartel operators met or otherwise communicated but does not describe the
substance of their communications. It includes records of telephone conversations between competitors
(but not their substance), or of travel to a common destination or of participation in a meeting, for
example, during a trade conference.
ii. Other evidence that the parties communicated about the subject, e.g., minutes or notes of a meeting
showing that prices, demand or capacity utilisation were discussed; internal documents evidencing
knowledge or understanding of a competitors pricing strategy, such as an awareness of a future price
increase by a rival.
b. Economic Evidence: Economic evidence identifies primarily firm conduct that suggests that an agreement
was reached, but also conduct of the industry as a whole, elements of market structure which suggest that
secret price fixing was feasible, and certain practices that can be used to sustain a cartel agreement.
i. Conduct evidence: this is the single most important type of economic evidence. Observation of certain,
suspicious conduct frequently triggers an investigation of a possible cartel; to identify behaviours that
can be characterised as contrary to the parties’ unilateral self-interest and which therefore supports the
inference of an agreement. Conduct evidence includes, first and foremost:
1. Parallel pricing: changes in prices by rivals that are identical, or nearly so, and simultaneous, or
nearly so. It includes other forms of parallel conduct, such as capacity reductions, adoption of
standardised terms of sale, and suspicious bidding patterns, e.g., a predictable rotation of winning
bidders.
2. Industry performance: it includes abnormally high profits; stable market shares; a history of
competition law violations.
ii. Evidence related to market structure can be used primarily to make the finding of a cartel agreement
more plausible, even though market structure factors do not prove the existence of such an agreement.
Relevant economic evidence relating to market structure includes: high concentration; low concentration
on the opposite side of the market; high barriers to entry; high degree of vertical integration;
standardised or homogeneous product. [The evidentiary value of structural evidence can be limited,
however. There can be highly concentrated industries selling homogeneous products in which all parties
compete. Conversely, the absence of such evidence cannot be used to show that a cartel did not exist.
Cartels are known to have existed in industries with numerous competitors and differentiated products.]
iii. Facilitating practices: practices that can make it easier for competitors to reach or sustain an agreement.
It is important to note that conduct described as facilitating practices is not necessarily unlawful. But
where a competition authority has found other circumstantial evidence pointing to the existence of a
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cartel agreement, the existence of facilitating practices can be an important complement. They can
explain what kind of arrangements the parties set up to facilitate the formation of a cartel agreement,
monitoring, detection of defection, and/or punishment, thus supporting the ‘collusion story’ put together
by the competition law enforcer. Facilitating practices include information exchanges; price signalling;
freight equalisation; price protection and most favoured nation ecessaril policies; unny restrictive
product standards.
Buyers’ Cartel
The creation of “buyer power” through joint purchasing agreements may lead to direct benefits for consumers in the form
of lower prices bargained by the buyers. On the allegation of existence of a buyer/purchase cartel in floating joint tenders
while procuring that although the Competition Act, 2002 covers buyers’ cartel within the purview of section 3(1) read with
section 3(3) of the Act, treating buyers’ arrangement/cartel at par with sellers’ cartel may not be appropriate. For
assessment of such cases, it is imperative to first look at the potential theories of harm and then the conditions necessary
for infliction of competitive harm need to be examined.
Cases under the Competition Act, 2002
Cartel behaviour is not new to Indian market and has been seen active in many sectors including cement, steel, tyres,
trucking, family planning device (Copper T), etc., along with the effect of foreign cartel formations in sectors like soda
ash, bulk vitamins, petrol, etc. The effect is that, the presence of these collusions, increase the price or diminish the
alternatives of consumers. Not only consumers, but the presence of foreign cartels can cause huge losses to corporate or
business undertakings which have to procure the inputs at enhanced cost or choices are controlled making them
uncompetitive, unviable or they have to be content with fewer profits. It is in this backdrop that “Cartels” are regarded as
most grave competition infringements and “supreme evil of antitrust”.95
— In the case of Soda Ash Cartel,96 the American Natural Soda Ash Corporation (ANSAC) comprising of six
American producers of soda ash attempted to shift the consignment of soda ash at cartelised price to India.
Though, the MRTP Commission, based on the ANSAC membership agreement, held it to be a prima facie cartel
and granted interim injunction in exercise of its powers under section 14 of the MRTP Act, 1969 the order was set
aside by the Supreme Court, inter alia, on the ground that section 14 of the MRTP Act, 1969 did not give any
extra territorial jurisdiction to the MRTP Commission. This lacuna in law has now been removed, as section 32
of the Competition Act, 2002 confers extra territorial jurisdiction to the CCI in respect of such anti-competitive
agreements, which though executed outside India may have an effect on competition in the relevant market in
India.
— The Trucking Cartel case of 1984 caught up members of the Bharatpur Truck Operators Union and the Goods
Truck Operators Union, Faridabad that colluded to fix freight rates. Restricting competition in the market by
swindling the freight rates without independence to the members of the truck operator union to negotiate freight
rates individually is common in the trucking industry. The MRTP Commission passed a “cease and desist” order
against Bharatpur Truck Operators Union,97 Goods Truck Operators Union, Faridabad.98 In the absence of any
penalty provision, however, no fines could be imposed.99
— In the LPG Cartel100 case, Indian Oil Corporation Ltd had invited bids for supply of 105 lakh, 14.2 Kg capacity
cylinders to various bottling plants in 2009. Out of 63 bidders, 50 were qualified for opening of price bids. The
bids of large number of parties were exactly identical or near to identical which indicated some sort of agreement
and understanding between the bidders. The CCI investigated the case suo moto. Out of 50 bidders, 37 belonged
to different groups so it was usual to get such identical bids in different states. On investigation, it was found that
the LPG cylinder manufactures met in a hotel in Mumbai before the date of submission of price bids and
discussed tenders. The manufacturers were held responsible for cartels and infringement of section 3(3) of the
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Competition Act, 2002. The Commission imposed a penalty at the rate of 7% of the average turnover of the each
company.101
— For establishing cartel like conduct, action in concert or taking of joint decisions, the investigation does not have
to define any relevant market. Existence of cartel like conduct is sufficient to attract the mischief of section 3(3)
of the Competition Act, 2002. In the case of FICCI-Multiplex Association of India,102 the respondents namely
United Producers/Distributors Forum (UPDF), The Association of Motion Pictures and TV Programme
Producers (AMPTPP) and the Film and Television Producers Guild of India Ltd (FTPGI) were held to be
behaving like a cartel. Members of the UPDF who were competitors and controlling almost 100% of the market
for production and distribution of Hindi pictures in multiplexes in India were acting in concert to fix prices in
infringement of section 3(3)(a) of the Competition Act, 2002 and also limiting or controlling supply by refusing
to release Hindi films for exhibition in multiplexes to members of the informant, hence, violating section 3(3)(b).
It was further, alleged that UPDF and its members had collectively boycotted the multiplex cinema operators in
violation of section 3(3)(c) of the Competition Act, 2002. After a dispute on the revenue sharing ration, UPDF
through letters had instructed all producers and distributors including those who were not the members of UPDF,
not to release any new film to the members of the informant for the purposes of exhibition at the multiplexes
operated by the members of the informant.
The Commission agreed with the DG report and held the respondents to be in violation of section 3. The Commission held
that the boycott of multiplexes by the opposite party was a blatant act of limiting or controlling of production, distribution,
etc. of films and that the members of the UPDF, AMPTPP and FTPGI who controlled almost 100% of the market for the
production and distribution of Hindi Motion Pictures which are exhibited in multiplexes in India were acting in concert to
fix sales prices by fixing the revenue share ratio in violation of section 3(3)(a) of the Competition Act, 2002. The
Commission also observed that a cartel need not necessarily meet every day or do something daily to be said to exist. Even
a single series of meetings or concerted action with the clear intent to limiting output or fixing prices is sufficient condition
for a cartel. As long as the reigning prices and market conditions exist due to the actions of the cartel, the cartel itself
would be considered to be continuing.
— In the Deustche Post Bank Home Finance Ltd case,103 it was alleged that levy of pre-payment penalty charges
(PPC) by few banks/Housing Finance Companies (HFCs) was anti-competitive and the banks were behaving like
a cartel. Although the allegation was levelled against four banks, the DG enlarged the scope of the inquiry (by
issuing notices to 12 other banks/HFCs) considering the wide range of players functioning in the home loan
market charging PPC in the range of 1%–4% on the loan amount. The DG in its report concluded that levy of
PPC was in contravention to section 3(3)(b) of the Competition Act, 2002. It also observed that levy of PPC
creates a barrier for a new entrant in the market in the way that if the new entrant is providing competitive
interest rates, better services, etc. Levying of PPC by banks makes the exit expensive; thus, it acts as a deterrent
for a borrower in availing the best prevailing interest rate of other banks/HFCs. The Commission, however, in its
majority decision observed that there was no agreement or action in concert on the part of banks/HFCs which led
to levy of PPCs. It also gave detailed reasoning to justify its decision that PPCs are not anti-competitive, simply
on the basis of lack of evidence to establish that the banks acted in concert and compulsion of asset-liability
management. The Commission observed that “the word “agreement” for the purposes of the Act has wide
connotations as defined under section 2(b). However, it is imperative that existence of such an “agreement” is
unequivocally established”.104
— The Commission, in the Tyre Cartel case,105 stressed on the importance of circumstantial evidence in
prosecuting cartels.106 The Commission noted that parallel behaviour in prices, dispatch, supply accompanied
with some other factors indicating coordinated behaviour among the firms may become a basis for finding
contravention or otherwise of the provisions relating to anti-competitive agreement of the Competition Act,
2002.107 It also noted that circumstantial evidences have been used in other jurisdictions in cases like the News
Paper Cartel case (1999) of Brazil, High Fructose Corn Syrup Antitrust Litigation of US, Atlantic Sugar
Refineries case of Canada,108 and Hen’s eggs case in Latvia. The Commission, however, taking into
consideration the act and conduct of the Tyre companies/Automotive Tyre Manufacturers’ Association (ATMA),
held that on a superficial basis the industry displayed some characteristics of a cartel but there was no substantive
evidence of the existence of a cartel.109 The Commission found signs of parallelism in terms of prices, capacity
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utilisation and dispatch but did not conclude that the parallelism was a result of collusion and noted extraneous
factors which could explain such parallelism.
— However, in the Cement Cartel case,110 the Commission noted that parallelism in prices, production and
dispatch was a result of a cartel agreement. The Commission found that the prices, capacity utilisation and
dispatch of cement of various manufacturers moved in parallel. The Commission considered such parallelism to
be a result of conscious co-ordination amongst the cement manufacturers and not a reflection of non-collusive
oligopolistic market conditions. The Commission observed that parallel behaviour in prices, dispatch, supply,
accompanied with some other factors indicating coordinated behaviour among the firms may become a basis for
finding contravention or otherwise, of the provisions relating to Anti-competitive Agreement of the Competition
Act, 2002111. This approach to establishing collusive price-fixing without direct evidence of an agreement is
known internationally as the doctrine of “parallelism-plus”. The Commission found several “plus factors”
documented in the DG’s report to be persuasive. The Cement Manufacturer’s Association (CMA) member-firms
had been collecting and sharing information on wholesale and retail prices all over the country, which would
have facilitated price coordination between them. Also, prices had increased soon after two CMA meetings.
Capacity utilisation had fallen, and the growth rates of cement production and dispatches had been much less than
that of the construction industry, the major user of cement. These facts indicated that the firms had been limiting
supplies in order to create scarcity and increase prices. The Commission held that all these factors, in conjunction
with the high correlation between firms’ prices, production and dispatch in each region, were adequate to
establish that the cement companies had “acted in concert” and formed a cartel.112
Not enough circumstantial evidence to prove cartel
The Maharashtra State Warehousing Corporation invited online tenders for transportation of food grains. The tenders of all
the petitioners were rejected on the ground that they had formed a cartel. In the writ petitions113 filed by the tendering
companies, it was claimed that the opinion of formation of cartel in the minds of Maharashtra State warehousing
corporation was based on flimsy grounds like similar IP address of the tenderers and similar timing of submission of
tenders. Further, it was claimed that the commercial/financial bids were never opened and they were disqualified at the
time of opening of technical bid. The High Court observed that the Corporation should have arrived at subjective
satisfaction based on objective assessment of the circumstances present before it. Similar IP address was noted not to be
evident enough to assume cartel formation. Thus, the said decision of the Maharashtra Warehousing Corporation was set
aside by the court for being decided on shaky grounds.114
Other cases
— In Indian Sugar Mills Association (ISMA) v Indian Jute Mills Association (IJMA),115 the movement of Gunny
Trade Association (GTA) Daily Price Bulletin (DPB) was found “not to be governed by the market price, but
controlled manually by the GTA and its members in a concerted manner, by meeting and applying their minds,
publishing and disseminating to the interested parties”.116 The Commission was of the opinion that acts/conduct
of IJMA and GTA were in contravention of the provisions of section 3(1) read with section 3(3)(a) or 3(3) (b) of
the Competition Act, 2002. Further, the impugned activities were also held to fall within the meaning of “cartel”
in terms of section 2(c) of the Act in as much as they were found to be controlling the price of A-Twill jute bags.
The Tribunal117 however, in July 2016 set aside the order of the Commission and held that there was no
evidence on record to prove that there was an agreement between GTA and IJMA about fixation of price of
A-Twill jute bags or that the price of such bags was fixed by GTA after discussion with IJMA. The
COMPAT held that the finding of violation of sections 3(3)(a) and 3(3)(b) were unsustainable and deserved
to be set aside. The COMPAT noted:
93. In the light of the above noted principles, it is to be seen whether IJMA had formed a cartel with GTA or
entered into an agreement for fixing the price of A-Twill Jute bags and thereby violated section 3(3)(b) of the
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Act. A careful scrutiny of the record shows that neither the informants produced nor the DG could collect any
substantive evidence to prove that there was an agreement between GTA and IJMA about fixation of price of
A-Twill jute bags or that the price of such jute bags was fixed by GTA after discussing the matter with the
members of IJMA or non-members jute mills or that there was a meeting between the representatives of the
two entities. Rather, the facts brought on record to show that none of the 30 members of IJMA, who are also
the members of GTA, was on the sub-committee constituted by GTA for DPB. The material produced by the
informants or collected by the DG unmistakably show that neither there was any meeting between the
representatives of the two entities, namely, IJMA and GTA and no deliberation had taken place between their
members on the issue of fixation of price of A-Twill jute bags.118
— Transport Congress119 was held to be acting in a “cartel like” manner by asking its members to effect 15%
increase in freight charges across the country, the actual effect of the diesel price hike. As such, the act of All
India Motor Transport Congress (AIMTC) was considered to be in contravention of the provisions of section
3(3)(a) of the Competition Act, 2002. “The Commission held that even de hors the written circular or directions if
the material on record indicates a concerted action, it may be enough to hold contravention of the provisions of
the Act.” The COMPAT,120 however by its order dated 18 April 2016 set aside the order of CCI by ruling that
the findings recorded by the DG were based on pure conjecture and assumption as also misreading of the record
and were not based on any tangible evidence. Further it was held that the Commission committed grave error by
approving the findings recorded by the DG and, as such, the impugned order was held to be legally unsustainable.
The grounds on which the Commission’s order was set aside are as follows:
• DG gave undue importance to the identity of replies given by some transport companies and completely
ignored the contents of the replies of almost all the transport companies which categorically denied receipt of
any diktat/directive/instruction from or on behalf of the appellant to increase the truck freight by 15%.
• DG and CCI did not factually verify the actual increase in rates pursuant to the alleged announcements/press
releases.
• No evidence of the fact that the truck rental/freight was increased by the transporters by 15% across the
board with effect from 14 September 2012 or immediately thereafter.
• CCI and the DG based their finding on the uncorroborated and unsubstantiated news reports, treating the
evidence despite the vehement denial of the same by AIMTC and its two-office bearers.
— In Indian Broadcasting Foundation,121 there was allegation of formation of cartel formation by the members of
Indian Broadcasting Foundation as the members wanted to shift from practice of gross billing basis to a net
billing to advertising agencies and were forcing advertising agencies to agree to the new mechanism. It was
further alleged that they collectively boycotted and did not broadcast advertisements on their channels for two
days. The Commission while noting that there was collective action observed:
... primarily, trade associations are for building consensus among members on policy/other issues affecting
industry and to promote these policy interests with Government
and with other public/private players. Such activities may not necessarily lead to competition law violation.
To perceive otherwise will render trade association bodies as completely redundant, being opposed to
competition law. The trade association provides a forum for entities working in same industry to meet and
discuss common issues. They carry out many valuable and lawful functions which provide a public benefit
e.g. setting common technical standards for products or interfaces; setting standards for admission to
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membership of a profession; arranging education and training for those wishing to join industry; paying for
and encouraging research into new techniques or developing a common response to changing government
policy. Therefore, membership and participation in collective activities of a trade association cannot by itself
amount to violation of competition law as such. However, when these trade associations transgress their legal
contours and facilitate collusive or collective decision making with intention of limiting or controlling
production, distribution, sale, price or trade in goods or provision of services as defined in section 2(c) of Act,
by its members, it will amount to violation of the provisions of Act.122
— In a suo moto123 case taken up on an anonymous complaint against the four public sector insurance companies,
viz. National Insurance Co Ltd, New India Assurance Co Ltd, Oriental Insurance Co Ltd and United India
Insurance Co Ltd the Commission held that these companies did not form a “single economic entity” and they
rigged the tender floated by the Government of Kerala on 18 November 2009 for selecting insurance service
provider for implementation of the “Rashtriya Swasthya Bima Yojna” (“RSBY”) for the year 2010/11. It was
also held that, they formed a cartel and quoted higher premium rates in response to the aforementioned tender.
The Commission relied on (a) minutes of the meeting held by companies on 7 December 2009 at Kochi to
discuss the “Tender Notice on RSBY dated 18 November 2009 of Government of Kerala to discuss about sharing
of business and submission of quotation for the above business”; (b) the financial bids submitted by OPs prior to
finalisation of the tender; and (c) the business sharing arrangement concluded subsequently after finalisation of
the tender. Accordingly, a cease and desist order along with a penalty at the rate of 2% of their average turnover
of the last three financial years was imposed. The Tribunal124 while noting that the arrangement arrived at by the
companies leading to bid rigging was in the nature of cover bidding whereby NICL, NIACL and OICL submitted
bids higher than that of UIICL, creating a false impression of genuine competition, approved the order of the
Commission.
— The Commission in November 2015,125 imposed a fine of Rs 258 crore on three leading airlines — Jet Airways,
IndiGo and Spice Jet, after finding them guilty of cartel-like behaviour in overcharging cargo freight in the garb
of fuel surcharge. It, essentially, found that the three airlines had fixed a fuel surcharge at a uniform rate on the
very same date and they all increased the surcharge at the same time without any analogous rise in fuel prices.
Such conduct was found to have resulted in indirectly determining the rates of air cargo transport and thereby
contravening section 3 of the Competition Act, 2002. Linking the fine to the airlines’ turnover, the Commission
asked Jet to pay Rs 151.7 crore, IndiGo Rs 63.7 crore and Spice Jet Rs 42.5 crore, within 60 days. The
Commission held that fixing and revising fuel surcharge on cargo and courier parcels undermined economic
development of the country and ultimately acted to the detriment of end-consumers. The complaint filed by
Express Industry Council of India also named Air India and GoAir, apart from the three airlines, but the
Commission did not find them guilty.
The COMPAT, however, in 2016126 set aside the order of the Commission on grounds of violation of principles of natural
justice. The order noted that the commission’s failure to cite reasons for disagreement with DG report and lack of an
effective opportunity to the airline companies to show that they had not formed any cartel for jacking up fuel surcharge
from time to time not only resulted in gross violation of principles of natural justice but has also caused prejudice. The case
was referred back to Commission for probing suspected cartelisation by airlines in fixing fuel surcharges. The Commission
in its order of March 2018 has again held that the opposite parties acted in parallel and the only plausible reason for
increment of FSC rates by the airlines was collusion amongst them. Such a conduct resulted into indirectly determining the
rates of air cargo transport in terms of the provisions contained in section 3(3)(a) of the Competition Act, 2002. However,
taking into account the losses incurred by the airlines at the relevant time and the fact that FSC constituted about 20% to
30% of domestic cargo revenue of the Airlines, the Commission decided to impose a penalty of at the rate of 3 % of their
average turnover earned from levy of FSC on the volume of cargo handled during the last three financial years based on
the financial statements filed by them. Consequently, penalties of 39.81 crore, 9.45 crore, 5.10 crore was imposed upon Jet
Airways (India) Ltd, InterGlobe Aviation Ltd and Spice Jet Ltd respectively.127
“Chairperson”
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Chairperson has been defined to mean the Chairperson of the CCI appointed under sub-section (1) of section 9 by the
Central Government on the recommendation of Selection Committee.
“Commission”
Commission has been defined to mean the CCI established under sub-section (1) of section 7 by the Central Government.
It shall be a body corporate having perpetual succession and common seal. Being a body corporate, it has the power to
acquire property, both immovable and moveable and to be sued in its own name.
“Consumer”
Consumer has been defined to mean any person who buys goods or avails any service for a consideration. A person who
purchases the goods for re-sale or for any commercial purposes or for personal use or a person who hires or avails the
services for any commercial purpose or for personal use is also a consumer.
User of such goods or services by a person with the approval of the person who paid and for promised to party the
consideration is also a consumer, as defined.
This clause is on the lines of the definition of “Consumer” under section 2(d) of the Consumer Protection Act, 1986, except
that under that Act a person who obtains goods for resale or for any commercial purpose and a person who avails of any
service for any commercial purpose is not a “consumer”. In Morgan Stanley Mutual Fund v Kartick Das,128 the expression
“consumer” in the Consumer Protection Act, 1986 was explained to mean:
the consumer as the term implies is one who consumes. As per the definition, a consumer is one who purchases goods for private
use or consumption. The meaning of the term ‘consumer’ is broadly stated in the above definition so as to include anyone who
consumes goods or services. The comprehensive definition aims at covering every man who pays money as the price or cost of
goods and services. The consumer deserves to get what he pays for in real quantity and true quality. In every society, the consumer
remains the centre of gravity of all business and industrial activity. He needs protection from the manufacturer, producer, supplier,
wholesaler and retailer.
Under section 18, the Competition Commission is duty bound to protect the interest of consumers and ensure freedom of
trade carried on by other participants in the market. Under section 19(1)(a), a consumer may make a complaint to the
Commission to inquire into any alleged contravention of the provisions contained in section 3 or section 4.
Following Divisional Bench ruling of High Court of Delhi in the case of Ballarpur Industries Ltd v DG (I&R),129 under
the erstwhile MRTP Act, 1969 the definition of “consumer” contained in the Consumer Protection Act, 1986 was to be
adopted for the purposes of MRTP Act, 1969. Section 2(d) of the Consumer Protection Act, 1986, however, excludes from
its purview the definition of “Consumer”, a person who purchases goods for resale or for commercial purpose.130 In the
case of Modern Radios v Bestavision Electronics Ltd,131 the Tribunal observed that a bare reading of section 2(d) of the
Consumer Protection Act, 1986 shows that a person who obtains goods for resale or for any commercial purpose is not a
consumer except when the goods are sold for the purposes of earning livelihood by means of self-employment. Further, the
Tribunal added that the definition of “consumer” given in section 2(f) of the Competition Act, 2002 does not exclude a
person who purchases goods for resale or any commercial purpose.132
Cases under the Competition Act, 2002
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— In the case of Jindal Steel v SAIL,133 Indian Railways (IR), as a purchaser of RDSO compliant rails was held to
be under the definition of “consumer” given in the Competition Act, 2002 in respect of the relevant market
(market of RDSO compliant rails in India). IR was noted to be able to operate free of competitive forces as a
purchaser because it was the sole consumer and a State monopoly. However, since there were no competitors of
IR the question of influencing competitors in its favor did not arise. Being the consumer itself, and the MOU
being an expression of consumer preference, the question of influencing the consumer in its favor did not arise
for this relevant market. it was held that being a consumer in the delineated market, as consumer, IR was well
within its consumer rights to try to influence the market in its favour and get the best deal in its own view.
— In the case of Belaire Owners’ Association,134 it was complained that DLF Ltd was abusing its dominant
position by imposing highly arbitrary, unfair and unreasonable conditions on the apartment allottees of the
Housing Complex “The Belaire”. It was contended by the DLF that as “sale of an apartment” can neither be
termed as sale of goods nor sale of service, section 4(2)(a)(ii) was not relevant and applicable in the present case
because it can be invoked only when there is purchase or sale of either goods or service. Further, it was argued
that no apartment owner can be described as “Consumer” under section 2(f)(ii) of the Competition Act, 2002 as
the agreement did not relate to hiring or availing of any service. The Commission rejected the argument and
relying on decisions in Bhim Sen v Delhi Development Authority,135 Jaina Properties Pvt Ltd,136 Lucknow
Development Authority v MK Gupta,137 where it was held that definition of “service” under section 2(r) of the
MRTP Act, 1969 envisaged dealings in real estate and housing activities undertaken by the development
authorities are covered under the ambit of term “service”, observed:
Construction of a house or flat is for the benefit of person for whom it is constructed. He may do it himself or
hire services of a builder or a contractor. The latter being for consideration is service as defined in the Act.
Similarly when a statutory authority develops land or allots a site or constructs a house for the benefit of
common man it is as much service as by a builder or a contractor. The one is contractual service and other is
statutory service. If the service is defective or it is not what was represented then it would be unfair trade
practice as defined in the Act. Any defect in construction activity would be denial of comfort and service to a
consumer. When possession of property is not delivered within stipulated period the delay so caused is denial
of service. Such disputes or claims are not in respect of Immovable property as argued but deficiency in
rendering of service of particular standard, quality or grade.
It was further held that the purchasers of flats, houses or plots are covered under the definition of consumer. The
definitions of “consumer” given in section 2(f) and “service” in section 2(u) of the Competition Act, 2002 are wider than
the definition of these terms provided in the Consumer Protection Act, 1986. It is, thus, seen that dealings in real estate or
housing construction has always been taken as service whether it be the MRTP Act, 1969 or the Consumer Protection Act,
1986 or the competition Act, 2002.138
— In the case of Travel Agents Association of India,139 it was alleged that the Government Memorandum wherein it was directed
that the Government officials to purchase travel tickets/tour exclusively from two named Tour operators was in contravention of
provision of section 4 of the Competition Act, 2002 and as such the Government had position of dominance and the same was
being used only in favour of the two agencies which resulted in denial of market access to majority of travel agents at large. It was
observed by the Commission that when the Government has to secure the services, it becomes a consumer receiving those services
with a choice to select the entity to provide those services and merely because it is a Government, there is nothing in law from
prohibiting it to be a consumer. Government like any other person must have choice to choose the travel agencies with which it has
to do the business. However, since there was no evidence to suggest that the two named operators would cost more in case the
Government takes their services, the Commission did not find anything wrong with the questioned Government Memorandum. The
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basic principle reiterated by the Commission was that every consumer must have a choice to decide from whom it would receive
the services.
“Director-General”
The expression “Director-General” has been defined to mean the Director General appointed under section 16 by the
Central Government and includes Additional, Joint, Deputy or Assistant Director-General. The main function of DG is to
conduct investigation into contravention of the provisions of Act, or any rules or regulations made thereunder as specified
in section 41. The DG has all the powers as are conferred on the Commission vide section 36(2). Without prejudice
thereto, the provisions of section 240 and 240-A of the Companies Act, 1956 [now section 217 and 220 of Companies Act,
2013] as to powers of inspector appointed thereunder shall be available to DG.
“Enterprise”
The term “enterprise” has been defined to mean; (i) a person or (ii) a department of the Government who or which is or has
been engaged in any activity relating to—
(a) production, storage, supply, distribution or acquisition or control of goods or articles; or
(b) provision of services of any kind;
(c) investment;
(d) business of acquiring, holding, underwriting or dealing with shares, debentures or other securities of any body
corporate the aforesaid activities may be carried out either directly or indirectly, e.g., through one of its units or
divisions or subsidiaries, whether located at the place where enterprise located or elsewhere.
Person has been defined, in a comprehensive manner, in clause (l) of section 2 to include even cooperative society, local
authority and foreign companies.
The department of Government is also an enterprise. However, sovereign functions of the Government including its
activities carried on by the departments of the Central Government dealing with atomic energy, currency defence or space
shall be outside the scope of the definition of “enterprise”.
The definition of “enterprise” is very wide and takes within its fold a person or a department of the Government engaged
in any activity relating to the production, storage, supply, distribution, acquisition or control of articles or goods or the
provision of services of any kind or, investment, or in the business of acquiring, holding, underwriting or dealing with
shares, debentures or other securities of any other body corporate, either directly or through one or a more of its unit or
divisions or subsidiary. It is further seen that the definition does not only cover those institutions connected with activities
relating to goods but also covers activities relating to provision of services of “any kind” which gives a very broad
connotation to the gamut of activities that can be covered in the definition of services.
The exclusion part of the definition relates to any activity of the Government relatable to its sovereign functions and
activities carried on by the departments of the Central Government dealing with atomic energy, currency, defence and
space.140 Therefore, unless the petitioner’s aforesaid activity can be classified as “relatable to the sovereign functions of
the Government including all activities carried on by the departments of the Central Government dealing with atomic
energy, currency, defence & space”, it cannot avoid being classified as an “enterprise” under section 2(h) of the
Competition Act, 2002.141 For instance, the Commission has held that the activity performed by Uttar Pradesh Avas Avam
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Vikas Parishad (UPAVP) constituted under Uttar Pradesh Avas Evam Vikas Parishad Adhiniyam, 1965, of development
and sale of flats for a charge, is not an inalienable function of the Government of Uttar Pradesh and falls within the
definition of the term “enterprise”.142
A bare reading of this provision clearly shows that Government departments which are engaged in the stated activities are
covered by the definition of enterprise. As far as exclusion is concerned, there are two possibilities. Firstly, the activities of
the Government relating to sovereign functions of the Government are excluded. This again is a matter of situation-specific
facts as to what activities can be considered as relatable to the sovereign functions. The second exclusion is categorical,
i.e., activities covered by the departments of Central Government dealing with atomic energy, currency, defence and
space.143 In Bangalore Water Supply and Sewage Board v A Rajappa,144 a seven judge Bench of the Supreme Court
while interpreting the term “Industry” as defined in section 2(j) of the Industrial Disputes Act, 1947 exempted only
sovereign functions from the ambit of industrial law. The Court held that “only primary, inescapable, inalienable and non-
delegable functions of a Government should qualify for exemption within the meaning of sovereign functions of the
Government and welfare, commercial and economic activities are not covered within the meaning of sovereign function.”
In PWD Employees Union v State of Gujarat,145 it was observed that the welfare activities or economic adventure
undertaken by the Government or statutory bodies do not qualify for being treated as sovereign functions. Further, in N
Nagendra Rao & Co v State of AP,146 the Supreme Court held that the State is immune only in cases where its officers
perform primary or inalienable functions such as defense of the country, administration of justice, maintenance of law and
order.147
Sovereign functions
Although, the term “sovereign function” has not been defined in the Constitution or the Act, but the same has acquired a
definite meaning. It has been repeatedly held by the Courts that sovereign functions of the State/Government are those that
are inalienable. These include enactment of laws, the administration justice, the maintenance of law and order, signing of
treaties, meeting punishment to those found guilty committing crime. None of these and similar functions of the State can
be delegated or performed by a third party or a private agency. In contrast, any activity relating to trade, business,
commerce or like is a non-sovereign function because the same can be performed by any private party/entity. To put it
differently, the functions which are integral part of the Government and which are inalienable are “sovereign functions”
and commercial actions/trading activities and actions, which can either be delegated or performed by the third parties are
alienable and are not treated as “sovereign functions”.148 Formulation of policies does not fall in the realm of commercial
or economic activity as envisaged under the definition of the term “enterprise”. The Commission for instance, has thus
held that the Ministry of Coal, while formulating policies, is not engaged in any of the activities specified in section 2(h) of
the Competition Act, 2002 which defines “enterprise”.149
However, when the State or its agency, who are vested with exclusive rights or monopoly rights, conducts trade or
business, per se such activity cannot fall within the description of or cannot be characterised as sovereign functions.150 For
instance, liquor business conducted by the State is not a sovereign function and is amenable to the jurisdiction of
Commission.151 Similarly, railways is amenable to the jurisdiction of Commission.152
“Any activity relating to”
The expression “relating to” is synonymous with the expressions “pertaining to” or “concerning with”. “Pertaining to”
does not mean forming part of.153 This expression does not admit of any restrictive meaning.154 In Mansukhlal Dhanraj
Jain v Eknath Vithal Ogale,155 the Supreme Court observed that this expression is of widest import.156
For an entity to fall within the definition of the term enterprise it must be engaged in any activity which is relatable to the
economic and commercial activities specified therein. The COMPAT in the case of The Malwa Industrial & Marketing
Ferti-Chem Cooperative Society Ltd v CCI held that even though the Registrar, Cooperative Societies, Punjab had issued
circulars in the purported exercise of his powers under the Punjab Cooperative Societies Act, 1961 and the Rules and
Regulations framed thereunder, the fact remains that the same were definitely relating to the goods which could be
purchased by Primarily Agricultural Societies from Respondent No. 6 only. Therefore, the Registrar would fall with the
ambit of term “enterprise” as defined in section 2(h) for the purpose of the Competition Act, 2002 and will be amenable to
the jurisdiction of the Commission.157
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The Supreme Court in the case of Competition Commission of India v Co-ordination Committee of Artists and Technicians
of WB Film and Television158 observed:
40. The notion of enterprise is a relative one. The functional approach and the corresponding focus on the activity, rather than the
form of the entity may result in an entity being considered an enterprise when it engages in some activities, but not when it engages
in others. The relativity of the concept is most evident when considering activities carried out by non-profit-making organisations
or public bodies. These entities may at times operate in their charitable or public capacity but may be considered as undertakings
when they engage in commercial activities. The economic nature of an activity is often apparent when the entities offer goods and
services in the marketplace and when the activity could, potentially, yield profits. Thus, any entity, regardless of its form,
constitutes an ‘enterprise’ within the meaning of section 3 of the Act when it engages in economic activity. An economic activity
includes any activity, whether or not profit making, that involves economic trade.
Therefore, an “enterprise” status as an entity does not depend upon profit motive alone. The defining feature of the concept
“enterprise” is that it engages in an economic activity covered within the ambit of section 2(h) of the Competition Act,
2002. If a person is engaged in any such activity, no matter with or without profit motive, it would be considered an
enterprise as it interfaces with the market and hence, with other alternatives for the product or service in question.
“Engagement in Business”
The expression “Business” connotes some real and organised course of an activity with a definite object and purpose.159 It
includes anything which occupies time, attention and labour of a person for the purpose of earning profit.160
Activity
In view of Explanation (a), activity covers the activities relating to any profession or occupation like doctors, advocates,
chartered accountants, etc. Thus, the scope of definition extends to all professions and occupations having any business
activity. In order that any entity falls within the meaning of enterprise as per section 2(h) of the Competition Act, 2002, it is
necessary that it is or has been “engaged in any activity” of the nature defined therein. The activities mentioned in the said
section have to be economic and commercial in nature. Furthermore, the words “engaged in” preceding the words “any
activity” reflect both regularity and continuity of the activities mentioned in the section.161
Miscellaneous Issues
The Competition Act, 2002 has brought about certain special features in the definition of enterprise and the same are
discussed below:—
(1) Unit division or Subsidiary: The definition of enterprise covers not only the enterprise itself, but all its divisions or
units or subsidiaries, wherever located. By virtue of clause (z) of section 2, meaning of subsidiary would be as stated in
section 4 of the Companies Act, 1956 [now section 2(87) of the Companies Act, 2013], in the absence of this expression
bearing no definition in the Competition Act, 2002 and it could be wholly owned or particularly owned, or with no
shareholding of holding company but only by virtue of power to control the composition of the Board of Directors by the
other (holding) company.
Plant or factory: Under Explanation (c)(i) appended to the definition of “enterprise” section 2(h) of the Competition Act,
2002, unit or division in relation to an enterprises includes a “plant” or “factory” established for the production, storage,
supply, distribution, acquisition, or control of any article or goods, These expressions have, not been defined in the
Competition Act, 2002. “Plant” in its ordinary sense includes whatever apparatus is used by a businessman for carrying on
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his business, not his stock in trade, which he buys or makes for sale, but all goods and chattel, fixed or moveable, alive or
dead, which he keeps for permanent employment in his business.162 All the material permanently used for the purposes of
a trade, as distinguished from the fluctuating stock, are commonly included in the term “plant”. It consists sometimes of
things which are fixed, as, for example, counters, heating, gas and other apparatus and things of that kind, and in other
cases of horses, locomotives, and the like, which are in this sense only fixed that they form a part of the permanent
establishment intended to be replaced when dead or worn out, as the case may be.163 Machinery includes everything
which by its action produces or assists in production, so “plant” may be regarded as that without which production cannot
go on. It is, so to speak, dead stock; it does not itself act, but is that through, and by means of, and in which, action takes
place, and includes such things as brewers, pipes, vats, and the like.164 According to Webster’s Dictionary, the word
“plant” means: “the machinery, apparatus, fixtures, etc. employed in carrying on a trade or a mechanical or other industrial
business”.
“Factory” has been defined in section 2(m) of the Factories Act, 1948 to mean any premises, including the precincts
thereof and in any part of which a manufacturing process is being carried on with or without the aid of power, or is
ordinarily so carried on, but does not include a mine or a railway running shed. In Delhi Cloth & Gen Mills Co Ltd v
Regional Provident Fund Commissioner,165 it was held that:
if only one kind of goods is manufactured at one place, the whole shall constitute one factory or establishment and such factory or
establishment would be engaged in only one industry. But if the industrial undertaking manufactures goods or articles of more than
one kind as in the present case sugar, power alcohol and confectionery, the three shall constitute three establishments or factories,
if they are from the point of view of employment, complete units by themselves. But if it is found that some of the employees are
working not only for the sugar factory but also for the distillery, and confectionery, “one establishment or factory” shall be a larger
unit. In other words, if the same staff, may be a few, work for all the three, namely the sugar factory, distillery and confectionery,
the unit, i.e. one establishment or factory, shall include all the three and three shall be its departments. Consequently, the important
test for determination of one establishment or factory for purposes of the Act (Employees Provident Fund Act) shall be, as one may
call, the unit of employment.
In Black’s Law Dictionary, the meaning of the word “factory” is given as:
A building or group of buildings appropriated to the manufacture of goods, including the machinery necessary to produce the
goods, and the engine or other power by which machinery is propelled; the place where workers are employed in fabricating goods,
wares, utensils ... Any mill, workshop, or any manufacturing or business establishment, and all buildings sheds, structures, or other
places used for or in connection therewith, where one or more persons are employed as labour ... Any premises where steam,
water, or other mechanical power is used in the aid of any manufacturing process without reference to whether it is enclosed in a
building.
The terms “plant” and “factory” have been used as synonymous expressions for the purposes of the Competition Act, 2002.
They could only mean establishment(s) engaged in the production or manufacture of goods. Storage, supply, distribution,
acquisition or control of any article or goods is incidental and ancillary to any production activity. Therefore, in essence,
the expression “plant” or “factory” would mean an establishment for production of goods.
(2) Branch or office: Under Explanation (c)(ii) appended to definition of “enterprise” under section 2(h) of the
Competition Act, 2002, “unit” or “division” in relation to an enterprise includes any branch or office established for the
provision of any service. While speaking of “branch or office” the Competition Act, 2002 does not mention about goods,
its sale, distribution, or storage, etc. The expression “branch” or “office” has not been defined in the Act. However,
“branch office”, in relation to a company has been defined in section 2(14) of the Companies Act, 2013 and which by
virtue of clause (z) of section 2 applies to Competition Act, 2002 to mean any establishment described as a branch by the
company.166
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(3) Investment Company: The definition of enterprise includes a Company engaged in the business of acquisition,
underwriting or dealing in shares, debentures and other securities.
(4) Acquisition of Goods: An “enterprise” has been defined, inter alia, to mean an enterprise engaged in acquisition or
control of articles or goods. An enterprise engaged in real estate business is outside the scope of section 2(h), as “goods”
defined in section 2(i) does not include land and/or other immoveable property. In case a company, having real estate
business as its main object, makes investment in the shares or securities of another company (which is not mentioned under
the main objects in its Memorandum of Association), it cannot be said that it is engaged in the acquisition of “goods”
merely because “goods”, as defined, includes shares and stocks. Investment in shares, etc., made by a company, formed for
the purpose of carrying on real estate business, cannot be said to be engaged in acquisition of goods, if the investment in
shares, etc., is made by it pursuant to a provision in this regard under the head “objects incidental or ancillary to the
attainment of the main objects” in the Memorandum of Association. This is so as the activity(ies) mentioned under the
head “matter considered necessary in furtherance of the objects for which the company is proposed to be incorporated” in
terms of section 4(1)(c) of the Companies Act, 2013, as independent object(s), which a company is authorised to carry on.
Thus, merely because a company engaged in real estate business has made some investment in shares, etc., to utilise its
surplus funds should not bring such a company within the ambit of the definition of “enterprise” as contained in clause (h)
read with clause (i) of section 2 of the Competition Act, 2002. Further, the words “which is, or has been, engaged in”,
contained in section 2(h), which defines “enterprise”, would mean a continuing activity or an activity which is proposed to
be continued, and that such acquisition of goods is in the regular course of its business, eventually resulting in sale or
supply of good so acquired. Thus, for example, if the investment in shares, etc., is made as a trade investment or which is
an isolated transaction to establish, so to say a holding-subsidiary relationship, it would not be acquisition of goods for the
purpose of section 2(h) of the Competition Act, 2002. Any other interpretation of the expression “acquisition of goods”
would not be in consonance with the letter and spirit of the definition of “enterprise”.
New article and new service: The purpose and purport of these expressions in clause (b) of the Explanation is not quite
clear; it was relevant to be considered when reading the erstwhile MRTP Act, 1969 albeit before repeal of chapter III
therein.
“Undertaking” under the MMTP Act, 1969
Under section 2(v) of MRTP Act, 1969, the term “undertaking” was defined as under:—
(v) “undertaking” means an enterprise which is, or has been, or is proposed to be, engaged in the production, storage,
supply, distribution, acquisition or control of articles or goods, or the provision of services, of any kind, either
directly or through one or more of its units or divisions, whether such unit or division is located at the same place
where the undertaking is located or at a different place or at different places.
Explanation I.—In this clause,—
(a) “article” includes a new article and “service” includes a new service;
(b) “unit” or “division”, in relation to an undertaking includes,—
(i) a plant or factory established for the production, storage, supply, distribution, acquisition or control of
any article or goods;
(ii) any branch or office established for the provision of any service.
Explanation II.—For the purposes of this clause, a body corporate, which is, or has been, engaged only in the
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business of acquiring, holding, underwriting or dealing with shares, debentures or other securities of any
other body corporate shall be deemed to be an undertaking.
Explanation III.—For the removal of doubts, it is hereby declared that an investment company shall be
deemed, for the purposes of this Act, to be an undertaking.
This definition was the subject-matter of considerable controversy and litigation. In Carew & Co Ltd v UOI,167 the
Supreme Court observed that “the word “undertaking” is a coat of many colours as it has been used in different sections of
the Act to convey different ideas. In some of these sections, the word has been used to denote the enterprise itself while in
many other sections it has been used to denote the person who owns it”. The definition as was initially provided in the Act,
stressed the aspect of an undertaking being currently engaged in production, sale or control of goods, etc. It did not take
into account undertakings that have not been commissioned and are in embryonic stage and are designed to go into
production at a future date. In the above cited case, the Supreme Court held that acquisition of even 100% shares of a new
company which is not yet engaged in the production, distribution, etc., of goods did not amount to acquisition or takeover
within the meaning of section 23(4) of the MRTP Act, 1969. In UOI v Tata Engg & Locomotive Co Ltd,168 it was held that
an investment company is not engaged in providing any service to potential users or its shareholder and is not an
“undertaking”. The MRTP (Amendment) Act, 1984 redefined the expression on the suggestions made by the Sachar
Committee to include not only the undertakings which are currently engaged in any economic activity but also those which
had for some reasons stopped such activity for the time being or which are in the process of starting such activity. The
definition also sought to clarify that the undertaking would not only be the enterprise itself but all its divisions and units
which may be identified in accordance with each of the activities pursued. It was expressly provided for the removal of
doubts, that an investment company shall be deemed to be an undertaking.
Cases under the Competition Act, 2002
For the purposes of ascertaining whether an entity is an enterprise or not within the meaning of section 2(h) of the
Competition Act, 2002, it is essential to examine the nature of the activity undertaken by the entity. Further, the assessment
of whether an entity is an “enterprise” or not is to be done based on the facts of every case and the conclusion may vary
from case to case depending upon the activity under consideration.
Association of Enterprises
In the case of Reliance Big Entertainment Ltd v Karnataka Film Chamber of Commerce (KFCC),169 the issue was whether
KFCC and other associations were “enterprise” within the meaning of section 2(h) of the Competition Act, 2002 and if yes,
could their acts and conduct be said to be violative of provisions of section 4 of the Act? The Commission noted that to
qualify as an enterprise, it is required that any person or department of the Government is, or has been, engaged in any
activity, relating to the production, storage, supply, distribution, acquisition or control of articles or goods, or the provision
of services, of any kind, or in investment, or in the business of acquiring, holding, underwriting or dealing with shares,
debentures or other securities of any other body corporate, either directly or through one or more of its units or divisions or
subsidiaries. The associations comprised of the members who were producers, distributors or exhibitors. The associations
themselves were not producing or distributing or exhibiting any film. These activities were being performed by their
constituent members who in turn were the producers, distributors and exhibitors. And the associations were only providing
a platform to the constituent members engaged in economic activities and are regulating their affairs. The Commission
further remarked that it was possible that some associations on their own might be engaged in some activity as mentioned
in section 2(h) and in that case their conduct would also become liable for examination under section 4 of the Act.
However, in the instant cases, the associations were not engaged in any economic activity on their own and so they did not
qualify to be “enterprise”. Once the associations are not “enterprise” in terms of section 2(h), their conducts also cannot be
examined under section 4 of the Act since it is only the conduct of an “enterprise” or a group of enterprise as defined in
section 5 of the Act, which is subject matter of examination as is apparent from wordings of section 4(1). However, the
decisions taken by association of enterprises can still be scrutinised under section 3(3) of the Act.170
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Further, it was argued that since KFCC and other similar bodies were an association of persons or a body of individuals,
they were “persons” within the meaning of section 2(l) of the Competition Act, 2002 and since KFCC and other similar
bodies are held to be persons, they are covered by the provisions of section 2(h) of the Competition Act, 2002 as an
“enterprise” since definition of enterprise covers within it the persons named in section 2(l). The Commission held that
KFCC and other associations were indeed persons within the meaning of section 2(l) of the Act and persons are also
included in definition of enterprise. The Commission, however, noted that not that all the persons can be said to be
enterprise since section 2(h) specifies clearly that only those persons can be called as “enterprise” who are engaged in
some kind of activity as mentioned in section 2(h). Thus, while all enterprises are persons, it is not true that all persons
would also necessarily be enterprise. The legislature has intended to distinguish between the two; otherwise there was no
need of defining them separately in the Act. The distinction is more obvious through section 4, which talks only about
“enterprise” and not a “person”. Since the provision of section 4 envisages assessment of dominance or otherwise of an
entity at a market place, it is natural that such an entity should have some market share, economic strength to enable it to
influence the competitive forces in the market and only those entities would have these which are engaged in some
economic or commercial activity. The Commission observed that what was important in this regard was to ascertain
whether the associations which were indeed persons as per section 2(i), were also engaged in any activity in any manner as
provided in section 2(h) of the Act to be called “enterprises”. The activity in explanation (a) to section 2(h) has been given
an inclusive definition to include profession or occupation. The Commission ruled that the associations were not engaged
in any activity of the nature, by virtue of which they may be called “enterprise” within the meaning of section 2(h) of the
Act and therefore, their acts and conducts are also not liable for examination under section 4 of the Act.171
Similarly, in the case of Santuka Associates Pvt Ltd,172 the Commission held that All India Organisation of Chemists and
Druggists (AIOCD), Indian Drug Manufacturers’ Association (IDMA) and Organisation of Pharmaceutical Producer of
India (OPPI) were associations of enterprises and their constituent enterprises were engaged in activities mentioned in
section 2(h) of the Competition Act, 2002. But, AIOCD, IDMA and OPPI themselves were not engaged in any activity
mentioned in section 2(h) of the Act and therefore, cannot be held to be “enterprises” under section 2(h) of the Act.
Therefore, they cannot be said to be part of a vertical chain as envisaged under section 3(4) of the Act and consequently
agreement in form of MoU does not fall under the ambit of section 3(4) of the Act.173
In the case of Shivam Enterprises,174 the issue was whether Kiratpur Sahib Truck Operators Co-operative Transport
Society Ltd can be seen as an “enterprise” under the Competition Act, 2002. The Commission noted that the Society was a
“person” within the meaning of the term as given in section 2(l) of the Act. However, to qualify as “enterprise”, it must be
engaged in any activity relating to, inter alia, the provision of services, of any kind in terms of the provisions contained in
section 2(h) of the Act. The Commission further noted that normally associations themselves do not engage in any such
economic activities and were therefore, not held as enterprise. The Commission relying on the DG’s report held the
Society to be an enterprise as it was engaged in activities relating to provision of services of freight transport by trucks.
The Society took the contracts in its own name and got them executed through its members and the customers had no
choice or control over the various members of the Society directly. Further, the customer made payment for the services to
the Society which then got passed to the members after cutting the commission and administrative charges. The
Commission, therefore, held the Society to be engaged in activities relating to provision of freight transport services and as
such was an “enterprise” within the meaning of the term as given in section 2(h) of the Act. In another case, the
Commission has held that Indian Sugar Mills Association (ISMA) whose primary activity is to provide a platform to its
constituent members to discuss matters of common interest related to the sugar industry and is engaged in making
representations in the form of correspondence and presentations with/before the various Government of India authorities
and agencies relating primarily to matters of policy and procedures governing the sugar industry, is not an enterprise for
the purposes of the Act.175
Other cases
— India Bulls Financial Services Ltd (IFSL), a company registered under the Companies Act, 1956 and engaged in
provision of financial services like consumer finance, housing finance, commercial loans, life insurance, asset
management and advising services, etc., was held to be an “enterprise” under section 2(h) of the Competition Act,
2002.176
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— Sports Association as Enterprise – In the case of Sh Dhanraj Pillay v Hockey India,177 the issue was whether
Hockey India (HI) and International Hockey Federation (FIH) were enterprises within the meaning of section
2(h) of the Competition Act, 2002. The DG in its report held that the activities carried out by HI as well as FIH in
respect of grant of franchise rights, media rights, TV rights, sponsorship rights and various other rights yielded
revenue which are different from a charitable non-profit activity because the revenues were in the commercial
field. Further, HI and FIH fell within the meaning of person defined under section 2(l) of the Act. Thus, the DG
relying on the decision of the Delhi High Court in the case of Hemant Sharma v UOI178 reported that the
economic activities carried out by HI and FIH bring it within the ambit of the definition of enterprise as defined
in the Act. Also, even though FIH was a society registered outside India, it was still a person under the
Competition Act, 2002 and in light of section 32 of the Act, the Commission had the authority to examine the
conduct of FIH, if it had an effect in India. The Commission agreed with the DG’s report and held FIH and HI to
be enterprises within the meaning of section 2(h) of the Act.
Sovereign functions
— The Delhi High Court in the Railways Case179 held that unless the activity (provision of services, inter alia, of
transportation of goods by rail road) was classified as relatable to the sovereign functions of the Government
including all activities carried on by the departments of the Central Government dealing with atomic energy,
currency, defence and space, the petitioner could not avoid being classified as an “enterprise” under section 2(h)
of the Competition Act, 2002. The High Court also noted that there was no notification by the Central
Government in relation to the services rendered by the IR to exempt it from the application of the Act, indicating
to the fact the Central Government does not consider any of the activities of the petitioner as relatable to
sovereign functions. The High Court relied on various cases180 to conclude that running of railways as an
activity will come within the expression “business” and even when the Government runs the Railways for
providing quick and cheap transport for people and goods and for strategic reasons, it cannot be said that it is
engaged in an activity of the state as a sovereign body. The High Court also relied on the Supreme Court’s
decision in Common Cause v UOI181 and Agricultural Produce Market Committee v Ashok Harikuni,182 to
stress on the principle that only primary, inalienable and non-delegable functions of a constitutional Government
(viz. taxation, eminent domain and police power) should qualify for exemption within the meaning of “sovereign
functions” of the Government under section 2(h) of the Competition Act, 2002. Welfare, commercial and
economic activities, therefore, will not be covered within the meaning of “sovereign functions” and the state
while discharging such functions is as much amenable to the jurisdiction of competition regulator as any other
private entity discharging such functions.
— In the case of Lucknow Development Authority v M K Gupta,183 the Supreme Court was deciding the issue of
jurisdiction of the National Commission, the State Commission and the District Forum under the Consumer
Protection Act, 1986. [The definitions of “service” and “consumer” in the Consumer Protection Act, 1986 are
similar to the in the Competition Act, 2002] An extract from the judgement is reproduced as under:—
... When private undertakings are taken over by the Government or corporations are created to discharge what
is otherwise State’s function, one of the inherent objectives of such social welfare measures is to provide
better, efficient and cheaper services to the people. Any attempt, therefore, to exclude services offered by
statutory or official bodies to the common man would be against the provisions of the Act and the spirit
behind it. It is indeed unfortunate that since enforcement of the Act there is a demand and even political
pressure is built up to exclude one or the other class from operation of the Act. How ironical it is that official
or semi-official bodies which insist on numerous benefits, which are otherwise available in private sector,
succeed in bargaining for it on threat of strike mainly because of larger income accruing due to rise in number
of consumers and not due to better and efficient functioning claim exclusion when it comes to accountability
from operation of the Act. The spirit of consumerism is so feeble and dormant that no association, public or
private spirited, raises any finger on regular hike in prices not because it is necessary but either because it has
not been done for sometime or because the operational cost has gone up irrespective of the efficiency without
any regard to its impact on the common man. In our opinion, the entire argument found on being statutory
bodies does not appear to have any substance. A Government or semi-Government body or a local authority is
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as much amenable to the Act as any other private body rendering similar service. Truly speaking it would be a
service to the society if such bodies instead of claiming exclusion subject themselves to the Act and let their
acts and omissions be scrutinised as public accountability is necessary for healthy growth of society.184
— In the case of Indian Sugar Mills Association v Indian Jute Mills Association,185 it was held that the
conduct/functioning/administration of the Ministry of Textiles in discharge of its statutory duties under the Jute
Packaging Materials (Compulsory use in Packing Commodities) Act, 1987 does not render the Ministry as
“enterprise” within the meaning of the term as given in section 2(h) of the Competition Act, 2002. Further, the
Ministry was not found involved in respect of purchase/sale of jute bags (A-Twill) for the sugar industry. It was
held that the Ministry could not be stated to be dominant in relevant market as it was not a stakeholder.
— In the case of Jindal Steel and Power Ltd v Steel Authority of India Ltd,186 debate was over the status of IR as an
“enterprise” under the Competition Act, 2002. A distinction was made between Ministry of Railways (MoR) and
IR. It was noted that IR performed its activities under section 2(31) of the Railways Act, 1989, as a departmental
undertaking of MoR. The Commission further noted that MoR had a supervisory role for the entire railway
operations in India while the economic role of enterprise remained with IR. The Commission, therefore,
concluded that IR was an “enterprise” under section 2(h) of the Act.
— In the BCCI case,187 the Commission held the Board of Control for Cricket in India (BCCI) to be an
“enterprise”. The Commission held that the “not-for-profit” society form as claimed by the BCCI did not take it
out of the definition of the enterprise and the activities of BCCI would be tested for its status as an enterprise. It
was held that the engagement of sports federation in regulatory activities such as framing rules and undertaking
measures to preserve the integrity of the sport does not alter its status as an enterprise if it is pursuing income
generating economic activities alongwith. The Commission referred to the ECJ decision in the case against ELPA
(the authority participating in authorisation by a public body of motor cycling events and also responsible for
organising motor sports competitions in Greece) and held that the activities of BCCI centered both on
“custodian” and “organiser” role. BCCI was involved in selection of Team India to represent India in
international events, to work for development of cricket by arranging training camps, etc., as well as organising
the game. These activities fell under the custodian function of BCCI, however, the aspect of “organisation”
brought in activities contributing to the revenues of BCCI such as grant of media rights, sale of tickets, etc. The
activities of “organising events” were economic activities as there was a revenue dimension to the organisational
activities of BCCI. The Grand Chamber of ECJ in the case against ELPA had also observed on the question of
whether sports constituted economic activity and observed:
It should be borne in mind in this regard that any activity consisting in offering goods or services on a given
market is an economic activity.188 Provided that that condition is satisfied, the fact that an activity has a
connection with sport does not hinder the application of the rules of the Treaty189 including those governing
competition law190 ... [Source C-49/07, Motosykletistiki Omospondia Ellados NPID (MOTOE) v Elliniko
Dimosio]
The Commission accordingly, held that all Sports Associations are to be regarded as an enterprise in so far as their
entrepreneurial conduct is concerned and treated at par with other business establishments. It also referred to the Delhi
High Court decision where it held All India Chess Federation (AICF) to be an “enterprise”.191 Further, the Commission
has observed that in terms of section 2(h) of the Competition Act, 2002 a person would be an enterprise, irrespective of
whether the activities mentioned therein are carried out directly or indirectly through units, divisions or subsidiaries. Thus,
if AICF conducts chess events through or in collaboration with the state associations/club, these would be deemed to have
been organised by AICF making it an enterprise.192
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— In Royal Energy Ltd,193 the Commission noted that the Government owned more than 50% equity in each of the
OMCs (Indian Oil Corporation, Hindustan Petroleum and Bharat Petroleum) which it held as a trustee for the
people of India. Under the Business Allocation Rules, the Ministry of Petroleum and Natural Gas (P&NG) had
the charge of the entire petroleum sector and the three OMCs were under the administrative control of the
Ministry of P&NG. Thus, the ownership right in the OMCs was exercised by the Government through the
Ministry of Petroleum and Natural Gas which is a part of the Government. It was held that the OMCs and the
Ministry of P&NG formed a group of enterprises in accordance with the definition of group in explanation (b) of
section 5 read with explanation (c) of section 4 of the Competition Act, 2002 with a market share of 95% in
petroleum and related products.
— The COMPAT in the case of Biswanath Prasad Singh v Director General of Health Services (DGHS), Ministry
of Health and Family Services,194 held that DGHS which provided curative healthcare services to Central
Government employees through empanelled several hospitals will be covered in the definition of enterprise under
section 2(h) of the Competition Act, 2002. The Tribunal relied on various cases195 to stress that only primary,
inescapable, inalienable and non-delegable functions of a Government would qualify for exemption and welfare,
commercial and economic activities will not be covered within the meaning of sovereign function. The Tribunal
reiterated that all governmental functions cannot be construed as either primary or inalienable sovereign functions
and even if some of the functionaries under the Act could be said to be performing sovereign functions of the
Government, that by itself would not make the dominant object of the Act to be sovereign in nature. Further, it
was held that Central Government Health Scheme (CGHS) which provided healthcare services to the target group
was an enterprise.
— The Commission has held that procurement of soil testing services by the Department of Agriculture and Farmers
Welfare, Government of Haryana as an economic activity. It was held to be engaged in procurement and
provision of various services to the farmers in the state of Haryana.196
Not held to be Enterprise
— In the case of Eastern India Motion Picture Association (EIMPA), Kolkata,197 the Commission noted that the
Central Board of Film Certification (CBFC) was a statutory body formed under the Cinematograph Act, 1952 and
functioned as per the said Act and the Cinematograph (Certification) Rules, 1983. The Board worked under the
Ministry of Information & Broadcasting, Government of India. Every film desirous of public exhibition in India
was required to take CBFC certificate before its release. On the basis of the facts involved in the matter and
functions attributable to CBFC, the Commission held that CBFC was not engaged in the activities mentioned in
section 2(h) of the Competition Act, 2002. And therefore, cannot be held as an “enterprise” within the meaning of
section 2(h).
— In the case of Taj Pharmaceuticals Ltd,198 the Commission held that the Department of Sales Tax/Professional
Tax was a department of Government of Maharashtra and its activity dealing with “taxes on professions, trades,
callings and employments” was a sovereign function of Government and as such was not engaged in any
economic activity to be covered within definition of an enterprise.
— In the case of Red Giant Movies,199 the Commission held that the Commercial Taxes and Registration
Department of the Government of Tamil Nadu would not constitute an “enterprise” within the meaning of the
said term as defined in section 2(h) of the Competition Act, 2002 pointing out that the activities relatable to
sovereign functions have been exempted from the purview of the Act.
— In the case of Rajat Verma v Public Works (B&R) Department,200 the Commission held that the Public Works
Department (PWD) was one of the departments of the Government of Haryana, entrusted with the responsibility
of construction and maintenance of roads, bridges and Government buildings in the state and it had set up of
offices and bodies such as Haryana State Roads and Bridges Development Corporation Ltd, Haryana Rural Roads
and Infrastructure Development Agency (HRRIDA), Haryana State Buildings & Roads Academy of Research
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and Training to accomplish the said task. Since the Department was not directly engaged in any economic and
commercial activities and was limited to provide infrastructural facilities to the people without any commercial
consideration, it was not held to be an “enterprise”.201The Tribunal, however, disagreed with the observation of
the Commission and held the PWD as “enterprise”.202
— It was held that the Ministry of Agriculture and Cooperation cannot be scrutinised under section 3 or section 4,
and it cannot be termed as “enterprise” in terms of section 2(h) of the Competition Act, 2002.203
— In the case of Dilip Modwil v Insurance Regulatory Development Authority of India (IRDA),204 the Commission
held that IRDA while discharging its regulatory and statutory mandate cannot be said to fall within the purview
of the term “enterprise” as defined in section 2(h) of the Competition Act, 2002. The Commission noted that
regulatory actions are not per se amenable to the jurisdiction of the Commission.205
— In the case of Prem Prakash v DG, Bureau of Indian Standards (BIS),206 the Commission held that BIS is not an
enterprise under section 2(h) of the Competition Act, 2002. The Commission noted that the activity of BIS is of
“prescribing of criteria for recognition of laboratories under LRS” with a purpose to ensure quality in laboratory
testing services by outside laboratories, which would provide product certification under its product certification
scheme and assist BIS in carrying out its statutory duties/functions under the Bureau of Indian Standards Act,
1986. The Commission noted that BIS is a statutory body established under the Bureau of Indian Standards Act,
1986 with the objective of harmonious development of the activities of standardisation, marking and quality
certification of goods and for matters connected therewith or incidental thereto. Thus, the activity carried out by
BIS is under the mandate vested in it under the Bureau of Indian Standards Act, 1986. The nature of activity of
BIS was thus held to be not an economic activity as envisaged under section 2(h) of the Competition Act, 2002.
— Similarly, the Commission in the case of Re Applesoft207 held that the activity of prescribing the use of “Nudi”
Kannada language software in all government departments’ computers to carry out the administrative functions
of the Government of Karnataka was not in the nature of an economic activity and the opposite party was held to
be merely carrying out the policy functions of the Government. Since the opposite parties were not suppliers of
service in competition with other players in the market for development of Kannada language software but had
merely engaged a third party for development of software for the government’s use and improvement of the
government’s administrative processes, to further the objective of digitalisation/computerisation in the
administrative processes and procedures, they cannot be called as “enterprise” for the purposes of the
Competition Act, 2002.
— However, it has also to be noted that although in the matter related to Madhya Pradesh public works
department,208 the Commission held the opposite party to be not an enterprise on the very ground that it was not
doing any economic activity or operating in the relevant market, it was overruled by COMPAT.209 It was alleged
in the instant case that by incorporating the condition that materials used for construction should be tested by
laboratories accredited only by NABL, the opposite parties had imposed arbitrary and unreasonable condition of
eligibility, which was adversely affecting the competition in the relevant market. The COMPAT in its order dated
17 February 2016 referred to its earlier order in Rajat Verma v Haryana Public Works (B&R) Department
(Appeal no. 45 of 2015) dated 16 February 2016, noted that in Rajat Verma’s case, while considering the issue of
whether the PWD of the Government of Haryana is an “enterprise” under the Competition Act, 2002 it referred to
the observations made in the dissent note of Member Augustine Peter at length observed as follows:
17. If the term ‘enterprise’ as defined in section 2(h) is read in conjunction with the definition of the term
‘person’ and ‘service’ it becomes clear that the legislature has designedly included Government departments
in relation to any activity relating to storage, supply, distribution, acquisition or control of articles or goods, or
the provision of services of any kind. The width of the definition of ‘enterprise’ becomes clear by the
definition of the term ‘service’. The inclusive part of the definition of ‘service’ takes within its fold service
relating to construction and repair. These two words are not confined to construction and repair of buildings
only. The same would include all types of construction and repair activities including construction of roads,
highways, subways, culverts and other projects etc. It is thus evident that if a department of the Government is
engaged in any activity relating to construction or repair, then it will fall within the definition of the term
‘enterprise’. We may add that there is nothing in section 2(h) and (u) from which it can be inferred that the
definitions of ‘enterprise’ and ‘service’ are confined to any particular economic or commercial activity. The
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only exception to the definition of the term ‘enterprise’ relates to those activities which are relatable to
sovereign functions of the Government and activities carried by the four departments of the Central
Government, i.e., atomic energy, defence, currency and space.
19. In the execution of work relating to construction of roads, bridges etc., the contractor may be a service
provider qua the department but the beneficiary of these activities is undoubtedly the general public qua
whom the department acts as a service provider. The roads and bridges etc. constructed by the Haryana Public
Works Department or HSRDC either by themselves or through private agencies are used by the general public
in more than one ways including travelling and carriage of goods. In other words, the Public Works
Department is a provider of service to the public and from that perspective it clearly falls within the ambit of
term ‘enterprise’ ...
20. Whether the activity of procuring construction services is with a view to make profit is not the concern of
the Act. What is important is that the Public Works Department by inviting tenders for award of contract for
construction of roads, bridges etc. is interfacing with the wide market of road and bridge construction services
in the State. Therefore, there is no escape from the conclusion that it is an enterprise within the meaning of
section 2(h) of the Act ...
22. It is neither the pleaded case of the respondents nor Shri A.P. Singh has argued and in our opinion rightly
so that the activities of the Public Works Department, Government of Haryana are relatable to sovereign
functions of the Government. Any such argument would have been rejected in view of the law laid down by
the Supreme Court in Bangalore Water Supply and Sewerage Board v A. Rajappa (supra) and N. Nagendra
Rao and Co v State of A.P. (supra) and other decisions referred to in the dissenting note. On the basis of the
above observations, the COMPAT held that the Public Works Department, Government of Haryana fell
within the definition of the term ‘enterprise’ under section 2(h) of the Act and that the same would be the
position qua Public Works Department of other States as also the Central Public Works Department.
In view of the above order passed in Rajat Verma’s case, the COMPAT held that the view taken by the Commission on the
maintainability of the information filed by the Appellant in the present case was legally unsustainable and that the
impugned order was liable to be set aside. As a result, the COMPAT allowed the appeal and remitted the matter back to the
Commission for considering whether the allegations contained in the information filed by the Appellant made out a prima
facie case requiring investigation under section 26(1) of the Competition Act, 2002.
The Commission has similarly held Ghaziabad Development Authority (GDA), a statutory body created under the Urban
Planning and Development Act, 1973 of Uttar Pradesh and engaged in the activity of development and sale of real estate in
Ghaziabad district of Uttar Pradesh to be an “enterprise”. The Commission observed that the functions of GDA with
respect to acquisition of land, construction of buildings, selling properties, executing work in relation to supply of water,
electricity, etc., are commercial activities.210
Goods
The definition of “goods” contained in the Sale of Goods Act, 1930 has been adopted. “Goods” under that Act means every
kind of moveable property other than actionable claims and money and includes stocks and shares, growing crops, grass
and things attached to, or forming part of, land which can be severed under an agreement before sale or under contract of
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sale. Definition also covers products manufactured, processed or mined in India as well as debentures, shares and stocks
after allotment. Goods imported in India have also been covered in relation to goods supplied, distributed or controlled in
India. The definition of “goods” as provided in this clause does not include land and other immovable property.211
The Supreme Court in UOI v Delhi Cloth and General Mills Co Ltd212 held that to become “goods” an article must be
something which can ordinarily come to the markets to be bought and sold.
Goods—Products manufactured, processed
The term “manufacture” indicates the concept of change effected to a basic raw material, causing the emergence of, or
transformation into, a new commercial commodity,213 wherein meaning of the term “manufacture” stands explained. In
the case UOI v JG Glass Industries Ltd,214 the Supreme Court observed that:
A two-fold test emerges for deciding whether the process is that of ‘manufacture’. First, whether by the said process, different
commercial commodity comes into existence or whether the identity of the original commodity ceases to exist; Secondly, whether
the commodity which was already in existence will serve no purpose but for the said purpose.
Following the dictum, the court held that printing of names or logos on bottles did not bring into existence a new
commercial commodity; plain bottles themselves are commercial commodities and the basic character does not change as a
result of printing of names or logos on them.
A product could be said to have been processed when it is subjected to some special process of treatment. The commodity
which is subjected to “processing” continues to possess its original character and identity; and process is for making them
fit for further or better use and/or for marketing.215
Goods imported into India
For the purposes of the Competition Act, 2002, it is only the goods actually imported into India which are covered by the
definition. Any intention to import is not covered. As long as import has not taken place, they would not fall under the
definition of “goods”.
“Goods” under the MRTP Act, 1969
Under section 2(e) of the MRTP Act, 1969, the term “goods” was defined as under:
(e) “goods” means goods as defined in the Sale of Goods Act, 1930 (8 of 1930) and includes—
(i) products manufactured, processed or mined in India;
(ii) shares and stocks including issue of shares before allotment;
(iii) in relation to goods supplied, distributed or controlled in India, goods imported into India;
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The definition of “goods” included stock and shares, but not the debentures. Under sub-clause (ii), the actionable claims
are excluded from the definition. In CERC v TTK Pharma Ltd,216 the Full Bench was dealing with a public issue of equity
shares, which were linked to secured redeemable non-convertible debentures. The question raised for determination was
whether the linkage of the shares with the debentures is not tied up sale within the meaning of section 33(1)(b) of the
MRTP Act, 1969 which prohibits such sales. The MRTP Commission held that shares before allotment do not come into
existence and are not covered with the definition of “goods”. After analysing the definition of the term “trade” and “trade
practice” in sections 2(s) and 2(u) of the MRTP Act, 1969, the Commission opined that since the companies are not dealing
in shares, they are not carrying on the trade in shares whether with or without linking with debentures. The definition of
“trade practice” shows that it must be a practice relating to carrying on of any trade. It can relate to manufacture, business
or industry, etc. The practice of linking of debentures is only a mode to raise capital with the aid of which a company has
to carry on its trade and thus that practice has no relation with the mode or method or process of carrying on the trade.
Even the issue of shares is a mode to raise capital, because, as defined in section 2(46) of the Companies Act, 1956 which
definition is applicable to the provisions of the MRTP Act, 1969 in view of section 2(y) of the said Act, a share is a share in
the capital and thus, issuing of the same is for building of capital. Raising capital is making arrangements for the carrying
on of trade and is not a practice relating to the carrying on of any trade. It is just like purchasing furniture or appointing
employees which are necessary arrangements for trade but has no connection with the mode or method of carrying on a
trade.
One of the issues which came up for consideration in JP Sharma v Reliance Petrochemicals Ltd217 was whether
debentures came into existence even prior to their allotment. Relying on the dictum laid down in TTK Pharma case (supra)
which had ruled that shares are not goods within the meaning of section 2(e) as they do not come into existence until
allotment, the Commission held that the provisions relating to restrictive trade practices cannot be brought into play with
respect to the allotment of debentures.
The Full Bench of the Commission considered these issues Re Deepak Fertilizers and Petrochemicals Corp Ltd,218 and
held that where a debenture is secured by mortgage in respect of specific property, debentures would constitute actionable
claims and would, therefore, go outside the purview of the definition of “goods”. Debentures before allotment are not
goods within the meaning of section 2(e) of the MRTP Act, 1969 and it makes no difference whether debentures are
convertible or ordinary. Even assuming that debentures are goods even prior to their allotment, no trade or trade practice is
involved where the company merely offers the issue for subscription to the public by way of raising capital. No service
within the meaning of section 2(r) of the MRTP Act, 1969 is also provided or made available to the prospective investors
for consideration where the company simply issues the debentures for subscription. In the context of the Consumer
Protection Act, 1986 the Supreme Court held the same view in Morgan Stanley Mutual Fund case219 that it is only after
allotment of shares that rights may arise as per the Articles of Association, but certainly not before allotment. An
application for allotment of shares is only a prospective investor of future goods. On a parity of reasoning, the ratio will
apply with greater validity to debentures as these are issued primarily to raise loan capital.
Sub-clause (ii) of section 2(e) was amended by MRTP (Amendment) Act, 1991 by adding thereto the words “including
issue of shares before allotment”. This amendment, it appears, was effected to overcome the difficulty in dealing with
cases of restrictive or unfair trade practice relating to raising of share capital by companies.
The decisions of the MRTP Commission, cited supra, relate to public issues made before the amendments made by the
MRTP (Amendment) Act, 1991. Even assuming that shares are “goods” even prior to allotment, the Commission held that
no “trade” or “trade practice” is involved for subscription of the public issues, nor the same is covered under the definition
of “service”. In Deepak Fertilizers case, the Commission has opined that even under the amended law, the position of
debentures before allotment shall remain the same so far as the issue whether they constitute “goods” is concerned. Being
actionable claims, ordinary debentures would stand automatically excluded from the definition of “goods” upon the plain
terms of section 2(7) of the Sale of Goods Act, 1930. Thus, for all practical purposes any restrictive or unfair trade practice
connected with public issues in the capital market remained outside the jurisdiction of the Commission.
Thus, the cases relating to capital market instruments, viz., shares and debentures fell outside the purview of the MRTP
Act, 1969 in view of the decisions of the MRTP Commission to the effect that: (i) “Debentures” before allotment are not
goods within the meaning of section 2(e) and that it makes no difference whether the debentures are convertible or not, (ii)
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Till the Debentures are allotted and delivered to the debenture-holders; they are but an instrument of debt or loan, whereby
the company issuing it merely acknowledges its indebtedness and obligation to repay the debenture-holder. Further, except
where a debenture is secured by mortgage in respect of a specific property, debentures would constitute actionable claims
and, therefore, would fall outside the purview of the definition of “goods”, (iii) Even if it is assumed that debentures are
“goods”, no “trade” or “trade practice” is involved where the company merely offers the issue for subscription to the
public by way of raising capital for its trade or business, (iv) Although money raised by the debentures becomes a part of
the company’s capital structure, it does not become share capital; Debentures cannot, therefore, be equated with shares, (v)
Raising of capital by way of issue of shares or debentures does not amount to carrying on of a trade and accordingly the
MRTP Commission has no jurisdiction to deal with share or debenture issues, (vi) Issue of debentures or shares does not
fall within the purview of “Service”. The activity of inviting public to participate in the share capital or to subscribe to
debentures offered by a company by making an application for allotment does not involve provision of any facility.
Accordingly, grievances of false and misleading claims in a prospectus for raising capital through share or debenture issues
cannot be voiced before the Commission and compensation and/or injunction applications are not maintainable before it.
The amendment in 1991 to the definition of “goods” in section 2(e) of the MRTP Act, 1969, is not explanatory or
clarificatory in nature. By reason thereof, the definition of “goods” was sought to be enlarged with prospective operation.
The very fact that Parliament in its wisdom sought to enlarge the definition of goods by including the issue of shares by
allotment as also the service is a clear pointer to the fact that thereby the mischief which was existing in the said provision
was sought to be remedied. It is, therefore, axiomatic that before the said definition of “goods” was amended, the matter
relating to issue of shares before allotment was not included therein. Shares pending allotment, in view of the provisions of
law as existing prior to 1991, could not be said to be goods.220
The controversy has, however, been set at rest by sub-clause (B) under clause (i) in section 2 of the Competition Act, 2002
by specifically providing that debentures, stocks and shares after allotment will only fall in the definition of “goods”.
“Goods” under the Consumer Protection Act, 1986
Section 2(i) of the Consumer Protection Act, 1986 states that “goods” means goods as defined in the Sale of Goods Act,
1930. This is what was contained in the MRTP Act, 1969 before its amendment in 1991; in addition thereto, in the MRTP
Act, 1969 it was provided that goods included (i) products manufactured, processed or mined in India, (ii) shares and
stocks, and (iii) goods imported in India, all of which do not find place in the Consumer Protection Act, 1986. To
overcome the difficulty in dealing with cases of restrictive or unfair trade practice relating to raising of share capital by
companies, arising from the Court’s decision in Gopal Jalan’s case whereby shares before allotment were held not to
constitute “goods”, MRTP Act, 1969 was amended in 1991 to specifically provide the words “including issue of shares
before allotment” after the words “shares and stocks”.
It may thus, be noted that “Goods” as defined in the Consumer Protection Act, 1986 does not cover “Shares and debentures
before allotment” and the “investor” is not covered by the term Consumer as defined in the Consumer Protection Act, 1986
and hence cannot be a complainant before the Consumer Dispute Redressal Authorities.
Cases under the Competition Act, 2002
In the case of Sunil Bansal v Jaiprakash Associates Ltd (JAL),221 it was contended that for the investigation to fall within
the jurisdiction of the Commission, the sale of residential units including apartments should either amount to sale of
“goods” or provision of “services”. It was argued that the activity of sale of the residential units by JAL amounts to sale of
immovable property and not “goods” since the term “goods” as defined under section 2(i) of the Competition Act, 2002
makes reference to the Sale of Goods Act, 1930 which expressly excludes immovable property from its ambit. As such, it
was sought to be canvassed that the sale of the residential units in the instant case would also not amount to sale of goods.
The Commission, however, rejected the argument and noted that in a catena of cases the Supreme Court has held that
housing activities undertaken by development authorities are services and are covered within the definition of service.
Though the said ruling was given in the context of the Consumer Protection Act, 1986, the same was fully applicable under
the scheme of the Competition Act, 2002 as well. [The Tribunal has remanded the matter back to the Commission for fresh
decision on account of the fact that the impugned order was vitiated due to violation of the fundamental principle of natural
justice. ]222
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— In the case of Neeraj Malhotra v North Delhi Power Ltd, BSES Rajdhani Power Ltd and BSES Yamuna Power
Ltd,223 there were allegations of abuse of dominance and anti-competitive agreement by and between the
opposite parties with respect to the supply of electricity which is a service as defined in section 2(u) of the
Competition Act, 2002 and “meters” which are covered under the definition of goods provided in section 2(i) of
the Act respectively. The Commission noted that section 2(i) of the Act provides an inclusive definition of
“goods”. It held that both the supply of electricity and meters was within the purview of the Act and, therefore,
the Commission was not precluded from delving into matters pertaining to electrical meters in so far as they
involve competition concerns.
Whether Patents are “goods”
The definition of goods is extremely wide and takes within its fold every kind of movable property. The word “property” is
defined by virtue of section 2(11) of the Sale of Goods Act, 1930 to mean “the general property in goods, and not merely a
special property.” The expression “movable property” has not been defined under the Sale of Goods Act, 1930. Thus, in
absence of such definition, one would have to turn to the General Clauses Act, 1897 which defines “movable property” to
mean “property of every description, except immovable property”. Section 3(26) of the General Clauses Act, 1897 defines
“immovable property” to “include land, benefits to arise out of land, and things attached to the earth, or permanently
fastened to anything attached to the earth”. Thus, plainly, the word “goods” would encompass all kinds of property other
than land, benefits to arise out of land and things attached to the earth, or permanently fastened to anything attached to the
earth. The Delhi High Court in the Ericsson case,224 after a detailed discussion around the meaning of the term “property”,
held that patents could be classified as “goods”, even though they could be differentiated from the tangible property to the
extent that a patent could only grant a right to exclude without a further right to use. The Court further observed that the
nature of patent rights – right to exclude without the right to use – does not in any manner exclude patent rights from the
scope of “goods” as defined under the Sale of Goods Act, 1930. All kinds of property (other than actionable claims, money
and immovable property) would fall within the definition of “goods” and this would also include intangible and
incorporeal property such as patents.225 Thus, it was held that the proceedings initiated by the CCI cannot, at the
threshold, be held to be without jurisdiction on account of Ericsson not being an enterprise under section 2(h) of the
Competition Act, 2002.
“Member”
“Member” means the Member of the Commission appointed by the Central Government under section 9. Sub-section (1)
of section 9 provides that chairperson and every member shall be appointed by the Central Government on the
recommendation of the Selection Committee. It is clarified as per this definition that Chairperson is also a Member of the
Commission.
“Notification”
The expression “notification” has been defined to mean a notification published in the Official Gazette. This expression
has been defined as the word “notification published in the Official Gazette” has been used in the Competition Act, 2002 at
several places, to avoid repetition.
“Person”
The definition of “person” is very wide and is relevant for purposes of the Competition Act, 2002. It not only includes an
individual but also a Hindu undivided family (HUF), a firm, a company and other legal entities, including a local authority
and any artificial juridical person. Contravention of the provisions of the Act by any such person can be enquired into and
dealt with by the Competition Commission in accordance with the Act. In the case of Travel Agents Association of
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India,226 the Tribunal held that the definition of “person” is an inclusive definition and the term cannot be unnaturally
restricted. There cannot be a narrow interpretation of the term “person”. Once that view is taken, the Government can be
treated to be a person and also the consumer. Thus, once it was held that Government of India itself is a consumer, it could
not be said to be a dominant enterprise in the relevant market.
Hindu Undivided Family
It is well known that a Joint Hindu Family firm acting through its “karta” is also a person, though as regards his
coparcenary property, the “karta” counts as “person”. A Joint Hindu family has always been treated as a juristic
person.227
Association of persons
Broadly speaking, the term may include any aggregate of persons which has been or is incorporated under some statute and
which exists as a legal entity distinct from its members constituting it, and having perpetual succession and common seal.
The definition of “person” is inclusive and it includes an association of persons or body of individuals whether
incorporated or not and whether in India or outside India. In order to make definition vast, other artificial juridical persons
not falling within different sub-clauses of 2(l) have been included by clause 2(l)(x).228
Body corporate or corporation
The term “body corporate” is wider than the expression “company” and denotes not only a company incorporated in India
under the Companies Act, 2013 but also a foreign company. It also includes a corporation formed under any special law of
India or a foreign country. It also includes all financial institution included in section 2(72) of the Companies Act, 2013 as
well as the nationalised banks incorporated under section 3(4) of the Banking Companies (Acquisition and Transfer of
Undertakings) Act, 1970.
The words “body corporate” are not equivalent to the words “incorporated company”. An incorporated company is a body
corporate but many bodies corporate are not incorporated companies.229
Co-operative Society
A society registered under the Societies Registration Act, 1860 is a legal person capable of holding property and becoming
a member of a company.230 It does not come within the term “body corporate” under section 2(11) of the Companies Act,
2013.
The Commission in the case of Sh Dhanraj Pillay v Hockey India,231 held that both International Hockey Federation (FIH)
and Hockey India (HI) which were the international and national authorities running the sport of hockey (societies
registered under the Swiss and Indian laws respectively) were ‘persons’ in accordance with the provisions of section 2(l) of
the Competition Act, 2002.232
Firm
A firm name is nothing more than a mere description of the individual partners who compose the firm. Since it is not a
legal entity, the shares of a company cannot be allotted in the firm’s name but individually to its partners.
Corporation Sole
A Corporation Sole is a single person constituted as a corporation in respect of some office or function such as President of
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India, a bishopric or other ecclesiastical office or a public trustee, and is a legal person and can be a member of a
company.233 Corporation Sole is, however, not a body corporate.
Local authority
A local authority will include the Municipal Board or Corporation and is a legal entity.
Trade Union
A Trade Union or other association of workman or employees formed for their reasonable protection as such workman or
employees, has not been specifically excluded from the purview of the Competition Act, 2002 as was the case under the
erstwhile MRTP Act, 1969-.
Jurisdiction of the Commission: The Competition Act, 2002 versus The Trade Union Act, 1926
In the Kerala Films case,234 it was contended by the opposite parties that since they were registered Trade Unions, the
disciplinary actions taken by them against their members, in accordance with their bye-laws, do not raise any competition
concern and accordingly, cannot be looked into by the Commission. Further, it was contended that the Commission had no
jurisdiction to adjudicate on trade union disputes which do not find mention in the Competition Act, 2002 but which has
been specifically included under the Industrial Dispute Act, 1947. The Commission, however, rejected the argument and
observed:235
7.9 Trade Associations provide an important platform for betterment of a particular trade, for establishing code of conduct, for
laying down standards for fair trade, for facilitating legitimate co-operative behaviour in case of negotiations with government
bodies etc. However, when the activities of the trade association transgress the thin line between legitimate trade activities and
anti-competitive practices, the competition regulator is well within its jurisdiction to interfere and take cognizance of such anti-
competitive actions/practices. It is true that right to form an association is recognised under Article 19 of the Constitution of India.
However, such right is neither unfettered nor absolute in nature. Fundamental rights enshrined under Article 19 of the Constitution
of India are accompanied by reasonable restrictions, which are recognised by the Hon’ble Supreme Court in catena of judgments.
7.10 Similarly, the associations governed under different laws are amenable to the jurisdiction of the Commission, if they are found
to be indulging in any of the activity prohibited under the Act. The OPs have relied upon section 62 of the Act to contend that the
jurisdictions of the Commission is not available when there is a ‘trade dispute’ between the association and one of its members, in
view of remedy provided under the Trade Unions Act. The Commission notes that section 62 of the Act clearly provides that ‘the
provision of the Act shall be in addition to and not in derogation of the provisions of any other law for the time being in force’.
Hence, the issues covered under the ambit of the Act have to be enforced in true spirit and there is no prohibition under any other
law to avoid the enforcement of the Act merely because such law is applied albeit in different context and purpose. In the instant
case, the operation of two statutes is not confronting with each other. On the contrary, they are complementing each other, one
(Trade Unions Act, 1926) is created with the objective of protecting legitimate trade union activities and the other (Competition
Act, 2002) is created to protect fair competition in the markets.236
“Practice”
Any practice which relates to carrying on any trade by a person or enterprise is considered a “practice”. The definition is
wide enough to include any trade practice in relation to any trade, as comprehensively defined in clause (x) of section 2.
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Though section 3(1) employs the term “agreement”, the provisions of section 3(3) use different phraseology, viz.
“agreement entered into”/”practice carried on”/”decision taken”. Hence, it is evident that the Legislature provided a very
wide definition of the term “agreement” in the Competition Act, 2002 in contradistinction to the agreements as understood
under civil law and the same is also reflected by the usage of the aforesaid phraseology, viz. practice/decision, etc., in
section 3(3) of the Act.237
“Trade practice” under MRTP Act, 1969
Section 2(u) of MRTP Act, 1969 defined “Trade practice” as under:
“Trade practice” means any practice relating to the carrying on of any trade, and includes—
(i) anything done by any person which controls or affects the price charged by, or the method of trading of, any
trader or any class of traders,
(ii) a single or isolated action of any person in relation to any trade.
Any practice which relates to the carrying on of any trade was considered a trade practice. Trade practice also included; (i)
anything done by a person who controls or affects the price charged by, or the method of trading of, any trader or any class
of traders, (ii) a single or isolated action of any person in relation to any trade. In Hindustan Lever Ltd v MRTP
Commission,238 it was held that:
it is clear from a bare perusal of the abovementioned definition that it is not only the actual practice of a restriction under a clause
which is struck by the provision of the Act, but also a ‘trade practice’ which ‘may have’ the effect of restrictions falling within the
mischief provided for. In other words, if the introduction of the clause in itself is a trade practice and could be used to prevent,
distort or restrict competition ‘in any manner’ it may be struck down ...
To raise capital by making public issue by a company means making arrangements for carrying on the trade. It is not a
practice relating to the carrying on of any trade.239
Re Ambalal Sarabhai Enterprises Ltd,240 the Commission held that there is no trade practice involved in an agreement,
under which know-how is supplied by the respondent and the complainant has consented to manufacture the product for
the respondent as per the requirement of the respondent. The arrangement is in the nature of a work contract whereby the
most important ingredient for the production is provided by the respondent and the complainant cannot be permitted to sell
the products in the open market for the obvious reason that know-how is the sole property of the respondent. The
complainant is only entitled to profit of 13% and the aforesaid arrangement does not in any way prevent, distort or restrict
the competition within the meaning of section 2(o).
Re Auto Agents and Bajaj Auto Ltd,241 the Commission held that “practice” means that it must be a conduct repetitive in
nature; if it had happened in one particular case for which there is some explanation, it cannot be said to be a practice.
Cases under the Competition Act, 2002
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— In the case of Jyoti Swaroop Arora v Tulip Infratech Ltd,242 the parties tried to ratiocinate their parallel conduct
by passing the same off as common industry practice. The Commission while agreeing to the fact that every
industry seeks to evolve common standards and terms for efficient functioning of the markets and for the benefit
of all the stakeholders, held that such practices are usually not intrinsically frowned upon unless the same are
demonstrably against the interest of one set of stakeholders and against the letter and spirit of a statutory
framework. Practices which are plainly exploitative and in contravention of the extant laws and which lead to
decrease in productivity, innovation, higher prices, decrease of the freedom of choice and increasing switching
costs have to be classified as anti-competitive or causing adverse effect on competition. Thus, when the markets
are not functioning or distortions are created through collusive or exclusionary/exploitative conduct or practices,
it is incumbent upon the Commission to take appropriate measures in exercise of its enforcement, regulatory and
advocacy remit.
— Re Domestic Air Lines243 case, it was held that the practice of shifting seats from lower buckets to higher buckets
did not emanate out of any association of enterprises or association of persons or insisted upon by Federation of
Indian Airlines, which was the forum where the individual Indian domestic airlines normally interacted. The
practice was held to be a business model of pricing which was followed not only in India but internationally.
— In Shri V Ramachandran Reddy v HDFC Ltd,244 it has been held that increase in the interest rates cannot be
attributed to any agreement or practice which leads to contravention of section 3(3) of the Competition Act, 2002.
Requirement of meeting of mind
“Appreciable adverse effect on competition”, vide section 3(3) is presumed from such agreement; (i) determining price;
and, broadly, (ii) limiting or controlling availability of goods or services. However, section 3(3) while providing so,
besides to “agreement” refers also to “practice carried on” or “decision taken”. The word “decision” again connotes
meeting of minds of those engaged in identical or similar trade of goods or provision of services. The question which
arises is, whether the words “practice carried on” refers to a situation resulting even without meeting of minds. If that were
to be so, then the second question which would arise is, whether a practice carried on by those engaged in same trade even
without any meeting of minds to carry on such a practice would be covered. The Delhi High Court in Jyoti Sawroop Arora
v The Competition Commission of India245 noted that section 2(m) defines a “practice” as including relating to the
carrying on of any trade. However, what is peculiar is that section 3(3) which contains the words “practice carried on” is
only raising a presumption as to what the same words in section 3(1) mean. Section 3(3) by itself is neither prohibitory nor
a voiding provision as sections 3(1) and 3(2) respectively are. Thus, the words “practice carried on” have to be understood
as a practice of trade in pursuance to meeting of minds.
“Prescribed”
The term has been defined to mean prescribed by rules made under the Competition Act, 2002. Under section 63 of the
Act, rule-making power has been vested in the Central Government to carry out the purposes of the Act. Rules form part of
subordinate legislation. The purpose of the rules is to provide for procedural matters which are subsidiary to the provisions
of the Act. They may in some cases explain the provisions of the Act and it might in certain cases be legitimate to read the
rules along with the provisions of the Act in order to find out the true intention of the Legislature in enacting the latter, but
no rules can ever be construed to override the specific provisions of the Act itself.
“Price”
“Price” means what a person would get for the sale of his goods or the provision of some service whether it is in the form
of money or some other consideration. The words “although ostensibly relating to any other matter or thing” are intended
to cover cases where a portion of the price of any goods or services may be concealed as something else, though really it is
part of the price. This clause ensures that price to be taken into account is the real price although a part of it may be
camouflaged by a different name or behind a different transaction. Price is one of the criteria with reference to which cases
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of anti-competitive agreements under section 3(3)(a) and dominant position under section 4(2) (a)(ii) of the Competition
Act, 2002 are evaluated.
“Public Financial Institution”
The expression is relevant for purposes of section 6(5) of the Competition Act, 2002.
It covers, apart from public financial institutions mentioned in section 4A of the Companies Act, 1956 [now section 2(72)
of Companies Act 2013, State Financial, Industrial and Investment Corporation. The definition does not include
nationalised banks, State Bank and its subsidiaries, General Insurance Corporation of India and Industrial Reconstruction
Corporation of India, additionally, included in the definition of financial institution under section 2(da) of MRTP Act,
1969. It may be mentioned that subsidiary companies of General Insurance Corporation of India, Life Insurance
Corporation of India and non-nationalised banks are not covered by this definition.
Section 2(72) of the Companies Act, 2013 names the following as public financial institutions:
(i) the Life Insurance Corporation of India, established under section 3 of the Life Insurance Corporation Act, 1956
(31 of 1956);
(ii) the Infrastructure Development Finance Company Limited, referred to in clause (vi) of subsection (1) of section
4A of the Companies Act, 1956 (1 of 1956) so repealed under section 465 of this Act;
(iii) specified company referred to in the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002 (58 of
2002);
(iv) institutions notified by the Central Government under sub-section (2) of section 4A of the Companies Act, 1956
(1 of 1956) so repealed under section 465 of this Act;
(v) such other institution as may be notified by the Central Government in consultation with the Reserve Bank of
India:
Provided that no institution shall be so notified unless—
(A) it has been established or constituted by or under any Central or State Act; or
(B) not less than fifty-one per cent. of the paid-up share capital is held or controlled by the Central Government
or by any State Government or Governments or partly by the Central Government and partly by one or more
State Governments;
Section 4-A of the Companies Act, 1956 named the following as public financial institutions:
(i) Industrial credit and Investment Corporation of India Ltd;
(ii) Industrial Finance Corporation of India (established under section 3 of the Industrial Finance Corporation Act,
1998—since transformed into a company;
(iii) Industrial Development Bank of India;
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(iv) Life Insurance Corporation of India;
(v) Unit Trust of India;
(vi) Infrastructure Development Finance Company Ltd;
(vii) Securitisation Company or Reconstruction Company which has obtained a certificate of registration under sub-
section (4) of section 3 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security
Interest Ordinance, 2002 (since replaced by the Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002).
“Regulations”
The term has been defined to mean the regulations made by the CCI under section 64 of the Competition Act, 2002. The
regulations made must be consistent with the provisions of the Act and the rules made thereunder to carry out the purposes
of the Act, regulations form part of subordinate legislation to provide for procedural matters.
“Relevant market”
Market means where the buyers and sellers have access to each other. The relevant market is the area of effective
competition.246 The Supreme Court in the case of Competition Commission of India v Co-ordination Committee of Artists
and Technicians of WB Film and Television247 has explained the meaning and contours of “relevant market” under
competition law as follows:
31. Market definition is a tool to identify and define the boundaries of competition between firms. It serves to establish the
framework within which competition policy is applied by the Commission. The main purpose of market definition is to identify in
a systematic way the competitive constraints that the undertakings involved face. The objective of defining a market in both its
product and geographic dimension is to identify those actual competitors of the undertakings involved that are capable of
constraining those undertakings behaviour and of preventing them from behaving independently of effective competitive pressure.
Therefore, the purpose of defining the ‘relevant market’ is to assess with identifying in a systematic way the competitive
constraints that undertakings face when operating in a market. This is the case in particular for determining if undertakings are
competitors or potential competitors and when assessing the anti-competitive effects of conduct in a market. The concept of
relevant market implies that there could be an effective competition between the products which form part of it and this
presupposes that there is a sufficient degree of interchangeability between all the products forming part of the same market insofar
as specific use of such product is concerned.
32. While identifying the relevant market in a given case, the CCI is required to look at evidence that is available and relevant to
the case at hand. The CCI has to define the boundaries of the relevant market as precisely as required by the circumstances of the
case. Where appropriate, it may conduct its competition assessment on the basis of alternative market definitions. Where it is
apparent that the investigated conduct is unlikely to have an adverse effect on competition or that the undertaking under
investigation does not possess a substantial degree of market power on the basis of any reasonable market definition, the question
of the most appropriate market definition can even be left open.
33... The relevant product and geographic market for a particular product may vary depending on the nature of the buyers and
suppliers concerned by the conduct under examination and their position in the supply chain. For example, if the questionable
conduct is concerned at the wholesale level, the relevant market has to be defined from the perspective of the wholesale buyers. On
the other hand, if the concern is to examine the conduct at the retail level, the relevant market needs to be defined from the
perspective of buyers of retail products.
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34. It is to be borne in mind that the process of defining the relevant market starts by looking into a relatively narrow potential
product market definition. The potential product market is then expanded to include those substituted products to which buyers
would turn in the face of a price increase above the competitive price. Likewise, the relevant geographic market can be defined
using the same general process as that used to define the relevant product market.248
In any case of alleged abuse of dominant position, delineation of the relevant market is of significance as it sets out the
boundaries for competition analysis. Proper delineation of relevant market is necessary to identify, in a systematic manner,
the competing alternatives available to the consumers and accordingly, the competitive constraints faced by the enterprise
under scrutiny. The process of defining the relevant market is in essence a process of determining closely the substitutable
goods or services as also to delineate the geographic scope within which such goods or services compete. It is within the
defined product and geographic boundaries that the competitive effects of a particular business conduct are to be
assessed.249 The purpose of defining market in abuse of dominance cases is primarily to ascertain the extent of market
power enjoyed by the party in question and determines whether the same confers upon it a position of strength to operate
independently of the market forces or affect its competitors or consumers or the relevant market in its favour. The
definition must capture the economic realities so as to appreciate the competitive constraints prevailing in the market.250
The term has been defined to mean the market which may be determined by the Competition Commission with reference
to the relevant product market or geographic market. Sub-sections (6) and (7) of section 19 specify the different factors
which may be considered by the Commission while determining the relevant market.
One of the leading cases in USA on the issue of “relevant market” is that of United States v EL Du Pont De Nemours &
Co.251 Du Pont produced 75% of the cellophane sold in the US market, which, however, constituted less than 20% of all
the flexible packaging materials sold. The relevant market for determining the extent of market control by Du Pont, it was
held by the Trial Court (and affirmed by the Supreme Court of the United States of America) was that for flexible
packaging material and the other substitutes prevented Du Pont from possessing any monopoly power in its sale of
cellophane. The Court, inter alia, observed that:
— determination of the competitive market of commodities depended upon how different from one another is the
offered commodity in character or use;
— what are the market alternatives that buyers may readily use for their purpose;
— how far the buyers will go for substitution of one commodity for another;
— products need not be fungible to be considered in the relevant market;
— party has monopoly power, if it has, over any part of trade or commerce, a power of controlling prices or
unreasonably restricting competition;
— in considering what is the relevant market for determining the control of price and competition, no more definite
rule can be laid down than that commodities reasonably are interchangeable by consumers for the same purpose.
— cellophanes interchangeability with other numerous materials was enough to make it a part of the market as a
whole for flexible packaging materials.
Defining relevant market is the first step towards assessing the dominance of a market player whose conduct has been
alleged to be abusive. The contours of relevant market guide the competition authority, both in terms of product/service
and geographic reach, as to what competitive constraints are faced by such market player. Relevant market has two
facets—relevant product market and relevant geographic market. The relevant product market delineation classifies all
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those products/services which act as competitive constraints to keep the conduct of market players under check. Similarly,
relevant geographic market defines the market within the territorial boundaries where the conditions of competition for
demand and supply are distinctly homogenous. The competitors present within the relevant market, by exerting pressure of
providing cheaper or better quality competitive products, prevent other players from acting independently of the
competitive forces. It is from this viewpoint that the definition of relevant market gains importance as it helps in reaching a
conclusion with respect to market power or dominant position of a particular market player in comparison to the other
players to understand its capability of operating independent of its competitors and consumers in the relevant market. Such
relevant market can be narrowed or broadened depending upon the facts and circumstances of each case. A relevant market
defined under one set of circumstances may change with changes in those circumstances. This necessarily implies that the
concept of relevant market is a fluid concept. Depending upon the facts and circumstances of each and every case, various
alternative market definitions can be employed in apparently similar, yet different, circumstances.252
Relevant market under section 4 is different from the market under section 3 of the Competition Act, 2002.253 Market is a
wider term where a large number of goods and services are transacted, whereas relevant market is the market that has to be
determined by the Commission with reference to the relevant product market or the relevant geographic market or with
reference to both the markets. For determining whether a market constitutes a “relevant market” for the purposes of the
Competition Act, 2002 the Commission is also required to have due regard to the “relevant geographic market” and
“relevant product market” by virtue of the provisions contained in section 19(5) of the Act. To determine the “relevant
geographic market”, the Commission, in terms of the factors contained in section 19(6) of the Act, is to have due regard to
all or any of the following factors viz., regulatory trade barriers, local specification requirements, national procurement
policies, adequate distribution facilities, transport costs, language, consumer preferences and need for secure or regular
supplies or rapid after-sales services. Further, to determine the “relevant product market”, the Commission, in terms of the
factors contained in section 19(7) of the Act, is to have due regard to all or any of the following factors viz., physical
characteristics or end-use of goods, price of goods or service, consumer preferences, exclusion of in-house production,
existence of specialised producers and classification of industrial products.254
In Combination Registration No. C-2015/02/246, the Commission observed that Competition authorities generally use the
Elzinga Hogarty Test (EH Test) and catchment area analysis to determine the relevant geographic market. It has also been
noted by the Commission in relation to the application of the EH Test that regardless of the choice of the threshold level
for the purpose of the EH Test and catchment area tests, there should be sufficient cause in terms of the competitive
constraints for inclusion of an additional state/area in the relevant geographic market. The said tests should be applied in a
manner that ensures that the market definition thus arrived at reflects the most relevant constraints on the behaviour of the
parties. Here the parties, on the basis of the EH Test, submitted that the relevant geographic market for the proposed
combination would constitute the States of Madhya Pradesh, Uttar Pradesh, Bihar, Rajasthan, Delhi, Haryana and Punjab.
However, the Commission noted that the definition given by the parties was too wide and did not reflect the relevant
competition constraints. The Commission, therefore, applied the EH Test to identify the areas forming part of the relevant
geographic market. As the competition assessment undertaken by the Commission revealed that the proposed combination
is not likely to cause any AAEC in any of the potential relevant markets that may be defined, the Commission decided that
the question pertaining to the exact delineation of the relevant geographic market may be left open with respect to the
proposed combination.
“Relevant geographic market”
The term has been defined to mean a market comprising the area in which conditions of competition for supply or demand
of goods or provision of services are distinctly homogenous distinguishable from the conditions prevailing in the
neighboring areas.
The expression “homogenous” has not been defined in the Competition Act, 2002. As per Law Lexicon, “homogenous”
means “of the same description”. Homogeneity of market conditions for supply of goods or services in specific area is the
requirement. Thus, the conditions of competition should be the same in the relevant geographic market.
Section 19(6) of the Competition Act, 2002 specifies one or more of the factors, which may be decisive in determining the
“relevant geographical market”:—
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(a) regulatory trade barriers;
(b) local specification requirements;
(c) national procurement policies;
(d) adequate distribution facilities;
(e) transport costs;
(f) language;
(g) consumer preferences;
(h) need for secure or regular supplies or rapid after sales services.
The opportunities for competition must be considered having regard to the particular features of the product in question
and with reference to a clearly defined geographic area in which it is marketed and where the conditions of competition are
sufficiently homogenous for the effect of the economic power of the undertaking concerned to be able to be evaluated.255
Geographic dimension involves identification of the geographical area within which competition takes place. Relevant
geographic markets could be local, national, international or occasionally even global, depending upon the facts in each
case. Some factors relevant to geographic dimension are consumption and shipment patterns, transportation costs,
perishability and existence of barriers to the shipment of products between adjoining geographic areas. For example, in
view of the high transportation costs in cement, the relevant geographical market may be the region close to the
manufacturing facility. The principle of geographic market is similar to that of product market. The geographic market is
defined by purchasers’ views of the substitutability or interchangeability of products made or sold at various locations. In
particular, if purchasers of a product sold in one location would, in response to a small but significant and non-transitory
increase in its price, switch to buying the product sold at another location, then those two locations are regarded to be in
the same geographic market with respect to that product. If not, the two locations are regarded to be in different geographic
markets.256
Geographic market definition involves the identification of those firms, selling the products within the relevant product
market, to which customers in the area will turn in the event of a significant price increase, and may also include firms that
would enter the geographic area in response to such an increase.257
Cases under the Competition Act, 2002—
Different factors used by Commission to determine relevant geographic market:
Homogeneity of conditions of competition
— In the Coal India cases,258 since condition for supply of coal in entire country was uniform and homogenous, the
Commission held the relevant geographic market as entire India. Similarly, in the case of Magnus Graphics,259
as the conditions for providing services to Nilpeter FB 3300 Servo Flexo machine were homogenous throughout
India, the relevant geographic market in the case was taken as the territory of India.260
— The Commission observed that since the conditions of competition with regard to manufacture and sale of
backhoe loaders and vibratory soil compactors were homogeneous across India and there was nothing on record
to suggest any heterogeneity in the conditions of competition in different regions within India.261
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— In a matter related to animation courses,262 the Commission noted that there were many colleges and institutions
which were providing degrees, certifications and diploma courses in the field of animation at pan India level.
Since the conditions of competition in animation related education services were homogenous throughout India,
relevant geographic market was held to be pan India.
— In Atos Worldline India Pvt Ltd v Verifone India Sales Pvt Ltd;263 Three D Integrated Solutions Ltd v Verifone
India Sales Pvt Ltd,264 because the conditions of competition throughout India were homogeneous and there was
no distinction in the conditions of supply and usage in the entire territory of India and parameters like regulatory
barriers, logistic facilities, consumer’s preferences, currency, etc., being identical in the entire country, the
Commission held the relevant geographic market as the entire territory of India.
— In the case of HT Media Ltd,265 it was noted that geographic market definition involves the identification of
those firms, selling the products within the relevant product market, to which customers in the area will turn in
the event of a significant price increase, and may also include firms that would enter the geographic area in
response to such an increase. Since any radio station operating in any city in India could purchase a license from
the opposite party or any of the opposite party’s competitors, the geographical area was the entire territory of
India. The Commission, therefore, concluded that the “relevant geographic market” was the “territory of India”.
— In the Shamsher Kataria case,266 the DG’s investigation revealed that the spare parts were available for a
particular brand of automobile from the authorised dealers of the Original Equipment Manufacturer (OEM) in
any part of India. Further, a perusal of the dealer agreements between the OEMs and the authorised dealers
suggested that such dealers were required to provide service requirements to an OEM’s customer irrespective of
the State in which the vehicle was registered. The DG based on such findings concluded that the relevant
geographical market would be India. Whether such repair shops were authorised dealer outlets or those run by
independent repairers, the conditions of competition for the sale of spare parts and after-sale repair and
maintenance services were homogeneous across the territory of India and, therefore, the relevant geographic
market was held to be the entire territory of India.
Transportation and logistics costs
— In a matter related to distribution of bottled water, the Commission noted the factors such as cost of
transportation, logistics, and taxation, etc., conditions of competition in Mumbai for distribution of bottled water
were distinguishable from other cities in India. Further, since the informant and the opposite party as distributors
of Bisleri products were operating in the localities of Mumbai, relevant geographic market in the instant matter
was taken as “Mumbai”.267
On-line and off-line services
— The Commission in the magicbricks.com case268 was of the view that on-line and off-line services of brokers
cannot be distinguished while defining the relevant product market as both are alternative channels of delivering
the same service. The Commission, therefore, held the relevant product market to be the market for “the services
of real estate brokers/agents”. With regard to the relevant geographic market the Commission observed that the
traditional brokers/agents provided services within their respective localities whereas Opposite Parties offered
their services anywhere in India. The services offered by Opposite Parties on the supply side enabled real estate
properties located anywhere in India to be listed for sale/purchase/renting, whereas on the demand side Opposite
Parties through their website enable consumers to purchase/rent any property in their localities or anywhere in
India. Further, it was noted that the Opposite Parties provided services regarding details of properties such as
value, area, locality, etc., to the real estate brokers as well as to the consumers throughout India. Therefore, the
relevant geographic market was considered as “India”.
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Characteristics of the region
— In the case of Sunil Bansal v Jaiprakash Associates Ltd,269 the Commission rejected the argument to consider
entire NCR as the relevant geographic market and held Noida and Greater Noida as the geographic market. The
Commission observed that conditions for supply of real estate development services in Noida and Greater Noida
were distinguishable from the conditions prevalent in other NCR regions such as Faridabad, Bhiwadi, Alwar,
Manesar, Kundli, etc., which were suggested as substitutable and also from other neighboring areas such as Delhi
on the basis of factors such as applicable rules and regulations, regulatory authorities, price difference in
properties, infrastructure, transport services, etc., which might prevent consumers from switching their purchases
to other regions.270
— In the DLF case,271 the Commission held “Gurgaon” to be a distinct geographic market. It was observed that the
geographic region of Gurgaon has gained relevance owing to its unique circumstances and proximity to Delhi,
airports, golf courses, world class malls. During the years it has evolved having a distinct brand image as a
destination for upwardly mobile families. In the DLF (Belaire) case,272 the Commission distinguished between
buyers looking for residential property out of their hard-earned money or even by taking housing loans and those
buyers who merely buy such residential apartments for investment purposes; stating clearly that the Commission
was not looking at the concerns of speculators, but of genuine buyers. It was, therefore, observed that a small 5%
increase in the price of an apartment in Gurgaon would not make a person shift his preference to Ghaziabad,
Bahadurgarh or Faridabad or the peripheries of Delhi or even Delhi in a vast majority of cases. The Hon’ble
COMPAT, through its order dated 19 May 2014, also upheld the Commission’s finding on the relevant
geographic market.
— In the matter related to allocation of flats under EWS (economically weaker sections) scheme by Ghaziabad
Development Authority (GDA), Commission delineated “Ghaziabad” as the relevant geographic market. This
was done on the basis of price of flat (in making choice for the flat by an EWS consumer, prime consideration is
the price as such consumers have meagre resources) and location (distance of the flat from their working place as
they have to pay transportation charges on daily basis to commute from their residence to the working place and
they cannot afford higher transportation charges) which differentiated it from similar flats in adjoining areas, if
available. Further, it was noted that the rules and regulations applicable for development of EWS flats in
Ghaziabad were different from the other locations of NCR and Urban Planning and Development Act, 1973 of
Uttar Pradesh empowered GDA to undertake development activities in the territory of Ghaziabad only.273
— In the case of Pankaj Aggarwal v DLF Gurgaon Home Developers Private Ltd,274 the Commission agreed with
the DG’s conclusion and held the relevant geographic market to be “geographic region of Gurgaon”. Reference
was made to the Belaire case, where it was concluded that a person working in “Noida” was unlikely to purchase
an apartment in Gurgaon, as he would never intend to settle there. The 2014 COMPAT order while disposing of
the appeals filed against the Commission’s order in the Belaire case, upheld the Commission’s finding on the
relevant geographic market to be a geographic region of Gurgaon.
— However, in the case of DGCOM Buyers and Owners Association, Chennai,275 the Commission was of the view
that the relevant geographic market cannot be confined to the OMR IT corridor, as it had not been shown that a
decision to purchase an apartment in the OMR IT corridor was not easily substitutable by a decision to purchase a
similar apartment in any other geographic area located within Chennai. Based upon the factors of demand and
supply substitutability, the relevant geographic area in this case was held to be the area comprising the entire
geographic area of Chennai city.
— In the case of Om Datt Sharma v Adidas AG, Reebok International Ltd and Reebok India Co,276 it was argued to
consider the territory of Noida as the relevant geographic market because it was operating at Noida, and for a
franchisee, a particular geographic area was not substitutable for another area. The Commission observed that the
territory of Noida appeared to be the relevant geographic market. Further, a consumer preferred to purchase
sports-goods from a location which was easily accessible to him. A consumer residing in Noida would not prefer
to go to National Capital Region (NCR) or other cities solely with a view to purchase the sports goods as it
involved additional transportation cost and time. Thus, the relevant market in the present case was taken to be
“the market of premium sports-goods in Noida”.277
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— The Commission on multiple occasions278 has held that the relevant geographic market will be decided on the
basis of the characteristics of the region in consideration along with other factors like consumer preference which
in itself is determined on the basis of factors such as distance, commuting facilities, differences in the price of
land, availability of essential services, etc. For instance, in the case of Prateek Realtors India Pvt Ltd,279 the
Commission held that though the geographic region of Noida and Greater Noida exhibited homogeneous and
distinct market conditions, the buyers of a residential unit in Noida and Greater Noida would not prefer other
areas of Uttar Pradesh and NCR because of factors such as differences in price of land, commutation facilities,
quality of essential services, etc. Therefore, the relevant geographic market in the present case was taken as “the
geographical areas of Noida and Greater Noida”. Similarly, in another matter280 Delhi as a geographic area was
distinguished from other neighbouring areas such as Gurgaon, Ghaziabad, Faridabad, Noida, etc. In another
matter,281 “Gurgaon”, was held to constitute different market distinguishable from other areas of NCR, such as,
Noida, Ghaziabad, Delhi, Faridabad, Sonepat, etc., on the basis of price, land availability, distance and
commuting facilities to the offices of Multi-National Companies, proximity and connectivity to airport, regional
or personal preferences, etc.
— The Commission in the case of ANI Technologies282 held the geographic market in the radio taxi services
industry to be defined on the basis of city/State in which they are operating. The Commission noted that since
transport is a State subject under the Constitution, the radio taxi services market is largely regulated by the State
Transport Authorities, making the conditions of competition homogenous only in a particular city/State.
Moreover, it is not economically viable for a consumer, willing to travel within a particular city or geographic
region, to book/hire a radio taxi operating in another city/State. The Commission further observed:
18. The Informants, however, have proposed the geographic market should be Delhi-NCR. The Informants
have relied on the agreement dated 14 October 2008, entered into amongst the governments of four states, i.e.
Delhi, Haryana, U.P and Rajasthan to issue permits for auto rickshaws and taxis to ensure unrestricted
movement within NCR. In this regard, the Commission notes that the taxis and auto-rickshaws commuting in
the NCR region, and thus eligible for a free movement under the agreement between the four governments
mentioned above, hold a separate permit. Such auto-rickshaws or taxis might be commuting from Delhi to
NCR and vice-versa, to a limited extent. However, these do not seem to pose an effective competitive
constraint on the existing fleet of auto/taxis in Delhi. The same kind of argument will hold good for other
regions in NCR. Further, although taxis and auto rickshaws may be permitted to travel from Delhi to NCR, it
may not be feasible from the riders’ point of view to book a taxi or auto rickshaw from these regions if the
requirement to commute is within Delhi. Further, due to other State specific peculiarities and regulatory
architecture, the conditions of competition are not homogenous across NCR.
19. For the foregoing reasons, the Commission is of the view that the relevant geographic market in the
instant case will be ‘Delhi’. Accordingly, in the present matter, there will be two relevant markets are
‘provision of Radio Taxi services in Delhi’ and ‘provision of auto rickshaw services in Delhi’. In both these
markets, the Opposite Party provides its services to the consumers (riders) through various radio taxis and
auto-rickshaws registered on its network.
— In the IOCL matter,283 the allegation related to the services relating to distribution/supply of LPG. The relevant
geographic market in this matter was taken as Badaun district of Uttar Pradesh as the consumers can choose the
services of any distributor in the said area and a distributor can supply LPG cylinder in that area. Further, the
conditions of competition for supply of LPG cylinders in Badaun district of Uttar Pradesh are homogenous and
distinct from the conditions prevailing in its neighbouring areas.
— In All Odisha Steel Federation v Odisha Mining Corp Ltd, it was held that since 99.5% of the total production of
friable chrome ore in the country was available in Odisha, the Commission was in agreement with DG/lower
Authority’s findings and held that “the State of Odisha was the relevant geographic market”.
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The relevant market in the present case was “the market of friable chrome ore in the State of Odisha”.284
— In Bharti Airtel Case,285 it was alleged that Reliance (Jio) was guilty of predatory pricing in contravention of the
provisions of section 4(2)(a)(ii) of the Competition Act, 2002 as it was offering free services since its inception.
Further, Reliance Industries Ltd (RIL) was alleged to be in contravention of section 4(2)(e) of the Act as it had
used its financial strength in other markets to enter into the telecom market through Reliance Jio Infocomm Ltd.
While delineating the relevant geographic market, the Commission observed as under:
7. As regards the relevant geographic market, it is noted that a consumer located in a particular place is not
likely to avail telecommunication services from any other territory. He is likely to choose amongst the
different options available in his locality. Further, a subscriber calling another subscriber located within the
same telecommunication circle, irrespective of the physical distance between the two, is treated as a local call
and any call terminating in other service areas is a long-distance call viz. Subscriber Trunk Dialling (STD).
On the supply side, spectrum is the primary input required for offering wireless mobile communication
services and the same is allocated to service providers through an auction process. India has been divided into
22 circles for such purpose and separate auction has been conducted for each circle. It further, appears that
telecommunication service providers determine circle wise tariff. In view of these factors, each of the said
circles appear to constitute distinct and separate geographic market. Thus, the relevant geographic market in
the instant case appears to be ‘each of the 22 telecommunication circles in India’.
— In the case of Kiratpur Sahib Truck Operators Co-op Transport Society Ltd,286 it was noted that the nature of
transport services was inherently local as consumer demand originated from a particular location. Accordingly,
the geographic market was taken as Kiratpur area, which is a town in Punjab and all the adjoining areas.
Special circumstances
— In the Hindustan Coca Cola Beverages case,287 the Commission noted that there were about 900 multi-screen
theatres out of which Hindustan Coca Cola Beverages Pvt. Ltd (HCCBPL) was having exclusive supply
agreement with multiplexes having 214 screens and PEPSICO with multiplexes having 600 screens. It was held
that the relevant geographical market could not be confined to the closed market inside the premises of
multiplexes owned by ILPL who was only operating 38 multiplexes in India. The Commission held that, if the
relevant geographical market was taken as defined by the DG, it would lead to illogical conclusion and in that
case every retail outlet, restaurant or store having exclusive supply agreement with a supplier will be deemed
dominant within the boundaries of its premises and at the same time, because of such agreements, supplier will
also be deemed dominant within the closed premises of that retailer.
— In the case of North Delhi Power Ltd,288 power companies in Delhi were alleged to have abused their
dominant position. In delineating the relevant market the Commission noted that the Government of Delhi
issued licenses for the distribution and supply of electricity to three private companies and to two deemed
licensees. The three licensees were BSES Rajdhani Power Ltd (BRPL), BSES Yamuna Power Ltd (BYPL)
and North Delhi Power Ltd (NDPL). These companies were engaged in the distribution and supply of
electricity to the end consumers in the territory of Delhi. In the areas of operations of the three DISCOMS,
conditions for supply of goods or provisions of service were distinctly homogeneous and could be
distinguished from the conditions prevailing in the adjoining areas. In the absence of parallel licenses, no
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other company could operate in the areas of operation of these DISCOMS. In other words, there were no
other suppliers in the areas of operations of these DISCOMS and there was no viable alternative product
which could serve as a substitute to electricity. Therefore, the appropriate relevant market in the instant case
was held to be relevant product market comprising of distribution and supply of electricity and relevant
geographic market comprising of the areas of operations of the three licensee companies – BRPL, BYPL and
NDPL as assigned in their respective licenses.
Multiple geographic markets – Telecom Services
— The Commission in the Vodafone case289 concerning international mobile data services noted that spectrum is
the primary input required for offering wireless mobile communication services and the same is allocated to
service providers through an auction process. Since India has been divided into 22 circles for such purpose and
separate auction have been conducted for each circle, each of the said circles will constitute distinct and separate
geographic market. In the instant case, since the Informant was a resident of Mumbai and the
customers/subscribers located in Mumbai cannot be said to have consider availing international mobile data
services from any other territory, the relevant geographic market was held to be the territory of Mumbai.
Unrestricted Geographical scope
In the WhatsApp Inc case,290 the Commission observed that the functionality provided by consumer communication apps
through smartphones was inherently cross-border. As consumers are free to install any app they want, the geographic
scope for either demand or supply of consumer communication apps is not limited to any particular area where the
consumers acquires connectivity to his/her device. Moreover, the developers distribute similar products to all of their
customers regardless of their geographic location. Further, functionality of consumer communication apps through
smartphones does not differ depending on the region or country concerned, either in terms of price, functionalities,
platforms or operating system. This is consistent with the fact that all consumers with access to internet are in principle
free to download and install any app they want, irrespective of their geographic location anywhere in the world. However,
competitive conditions, regulatory architecture and players may vary in different countries/regions. The Commission held
that since, in the present matter, the allegations of the Informant pertained to the alleged anti-competitive conduct of
“WhatsApp” within the geographic boundary of India and the conditions of competition in the market for instant
messaging services using consumer communication apps through smartphones was homogeneous throughout India, the
geographic area of “India” was defined as the relevant geographic market.
Relevant geographic market as global
— In the case of Bijay Poddar v Coal India Ltd,291 it was contended that the DG failed to consider the consistent
increase of imports of non-coking coal into India in the past few years, and the increased reliance of consumers
on such imported coal, which was clearly indicative of the relevant geographic market being global in nature and
the obvious substitutability of imported coal with that supplied by Coal India Ltd (CIL). The Commission
rejected the argument that the relevant market was global and it could not be confined to India. The Commission
observed:
From a plain reading of the Explanation to section 4 of the Act, ‘dominant position’ means a position of
strength, enjoyed by an enterprise, in the relevant market, in India, which enables it to operate independently
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of competitive forces prevailing in the relevant market or affect its competitors or consumers or the relevant
market in its favour. Thus, the plea advanced by the opposite parties contending the relevant market to be
global is ex facie contrary to the express provisions of the Act and has to be rejected. Further, investigation
revealed that condition for supply of coal in entire country was uniform and homogeneous as there were no
barriers within territory of India in terms of geographic location for consumers. Thus, Relevant Geographic
Market was taken as whole of India.292
The Tribunal agreed with the delineation of relevant geographic market as ‘India’ and refused to accept that
the market for the supply of coal was global. The Tribunal observed that the homogeneity requirement in
terms of section 2(r) with respect to regulatory restrictions, transportation costs, etc., were absent in regard to
the area beyond India.293
— Again, in the GHCL Ltd case,294 it was contended through import data that “significant” quantities of coal were
imported into India from other countries and therefore, the relevant geographic market for supply of non-coking
coal had to be global. The Commission, however, rejected the argument and held the “production and supply of
non-coking coal to thermal power producers, including captive power plants in India” as the relevant market by
giving a plain reading to the Explanation to section 4 of the Competition Act, 2002.
“Relevant product market”
The term has been defined to mean a market comprising all those products or services which are regarded as
interchangeable or substitutable by the consumer by reason of characteristics of the products or services, their prices and
intended use. Thus, for purposes of relevant product market, interchangeable products or the substitutes will also be taken
into account.
In section 19(7) of the Competition Act, 2002 the factors for determining “relevant product market” have been specified to
be one or more of the following:
(a) physical characteristics or end use of goods;
(b) price of goods or service;
(c) consumer preferences;
(d) exclusion of in-house production;
(e) existence of specialised producers;
(f) classification of industrial products.
Cases under the Competition Act, 2002
Physical characteristics or end-use of goods as factor to define relevant product market
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The Commission in a matter295 related to construction equipment industry delineated the relevant product market on the
basis of different types of construction equipment such as earthmoving equipment, cranes, concrete equipment, road
building equipment, etc., distinguishable from each other in terms of their attributes and utility. Reference was made to an
earlier order of the Commission296 where it divided the sector of machines for construction into two sub-sectors:
(a) heavy construction equipment, which includes the machines used for large construction and reclamation, as well
as major infrastructure projects; and
(b) light construction equipment, covering machines with similar characteristics to heavy construction equipment,
but with lesser power, weight and ability to work, and generally intended for maintenance work. Such machines
are generally used in urban areas or in restricted environments.
The Commission observed that as no two equipment/products can perform exactly the same function, they cannot be
substituted by the users/consumers for their end use. Thus, each equipment/product forms a distinct product market. The
Commission, thus considering the unique features of vibratory soil compactors, held that these machines cannot be
substituted with other types of compactors and therefore, constituted a distinct relevant product market.297 Similarly, in
the case of Indian Paint & Coating Association,298 the Commission observed that on account of its specific characteristics
such as biodegradability and less hazardous composition as compared to other chemicals used as ingredient for the same
purpose, Penta299 formed a separate relevant product market.
In the case of Picasso Animation,300 the Commission delineated the market on the basis of specific characteristics of the
animation course. The Commission observed that animation courses are not generally substitutable with other vocational
courses offered by institutions in view of their peculiarity. The Commission held that vocational course such as animation
is not generally substitutable with other vocational courses, viz., web designing, internet marketing, electrical and
electronics, hardware and software repair and maintenance, mobile repair, etc., and other streams or courses such as law,
arts, hotel management, finance, banking, insurance, engineering or other courses. Thus, the relevant product market was
held to be “Market for providing animation related education services”.
Online portal is not necessarily a separate relevant market
In the Magicbricks.com case,301 the Commission noted although there were multiple online portals engaged in the
activities of real estate listing, property finder solution, etc., the services provided through these portals were not very
distinct from the services provided by the traditional brokers. Accordingly, the Commission was of the view that on-line
and off-line services of brokers cannot be distinguished while defining the relevant product market as both are alternative
channels of delivering the same service. The Commission, therefore, held the relevant product market to be the market for
“the services of real estate brokers/agents”.
Reference can also be made to the Commission’s order in the case of Clues Network Pvt Ltd302 where it was observed that
although in the recent past buyers are shifting from offline to online retail market because of heavy discounts, better
choices and convenience, consumers are most likely to shift back towards the offline market if the prices in the online
market increase significantly. Therefore, the Commission was of the view that these two markets are only two different
channels of distribution and are not two different relevant markets.303
Residential unit versus commercial space
The Commission has in multiple cases304 observed that a residential unit constitutes a separate relevant product market
and it is not substitutable with the market for commercial space or the market for a plot of land. It is noted that real estate
property can be broadly classified into two main categories: residential and commercial. Residential properties can be
further categorised into residential apartments/flats and plots. The Commission has been of the view that residential
apartments form a separate relevant product market because the intention and factors considered by a buyer while buying a
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residential flat are different from those when buying a residential plot. Further, the requirements and prospects of a
consumer buying a residential apartment are different from a consumer buying a residential plot. Unlike residential
apartments where the real estate developer completes the construction of the apartment before handing over the possession
to the allottees, buyer of a plot has the freedom to decide about the floor plan, structure, design and other specifications,
subject to applicable regulations at their own discretion. From the perspective of the buyer, the decision to buy a flat in a
project can be distinguished from buying a plot/independent house, in terms of number of factors such as price, access to
common facilities, security, etc. Generally, when a consumer buys a flat in an apartment developed by a real estate
developer, he may get some amenities such as gym, swimming pool, car parking, party lawn, playground, clubhouse, etc.,
which may not be available in case of a plot. Thus, both the aforementioned choices are not found to be substitutable.
Taking into account factors, such as, the characteristics of service offered, price and intended use “provision of services for
development and sale of residential apartments/flats” is considered as the relevant product market in the present case.305
In the Ghaziabad Development Authority case,306 the Commission delineated the relevant product market as “market for
provision of services for development and sale of low cost residential flats under affordable housing schemes for the
economically weaker sections”. The Commission differentiated EWS flats from MIG and LIG flats on the basis of price
difference and eligible income group. The Commission also made a distinction with flats developed by private developers
on the basis of eligibility criteria and choice available to consumers.
Collaboration Agreements and delineation of relevant product market
From the buyer’s perspective, the Commission observed that a decision to engage the services of a developer/builder for
construction on an owned property differs from buying an apartment/flat from a real estate company/developer in terms of
characteristics such as nature of ownership, cost involved, development as per land owner’s choice, etc. When a buyer
buys an apartment/flat in a real estate project, he enjoys ownership only limited to the apartment/flat in which the property
resides whereas, possession and ownership of the plot and building under the Collaboration Agreement resides with the
owner while consideration is paid to the developer as per the terms of Collaboration Agreement. The scale and magnitude
of the real estate market under Collaboration Agreement may be smaller and informal in nature when compared to the real
estate market where, large renowned developers acquire land and develop flats and sell them to public at large. The
Commission, therefore, in a matter307 related to collaboration agreements defined the relevant product market as the
“market for provision of construction services on owned plots under Collaboration Agreement”.
Mobile data service as a distinct market
The Commission in the Vodafone case308 observed that data service on mobile is distinct from land-line connection and
for a cellular subscriber who seeks to access web world on mobile basis, a landline connection cannot be a viable
substitute. Landline connection and cellular connection can further be distinguished in terms of characteristics such as data
speed, price and devices required to avail the services. With respect to subscribers travelling abroad, it was observed that
they may remain connected with the web world either by activating the international roaming services or by opting for
international mobile data package from their telecom service provider or by availing the services of specialised player like
Matrix. All these options enable the subscriber to remain connected with the web world although the price charged for
each of the above-mentioned options may vary depending on the place visited and the underlying arrangement between the
domestic and foreign telecom service providers. Taking into consideration the needs of the subscribers travelling abroad
and the options available to them, the Commission was of the view that the relevant market in the instant case was the
market for provision of international mobile data services.
Different product market on the basis of different characteristics of the product in question
— In a matter related to distribution of bottled water, the Commission noted that bottled water is different from tap
water in terms of quality, mode of supply and delivery, sources, price, etc. Further, bottled water is more
expensive than municipality-supplied tap water. Sources and delivery systems of tap water are different from
bottled water, which is sold over the counter. Bottled water may have reduced amounts of copper, lead and other
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metal contaminants since it does not run through the plumbing pipes, whereas tap water is exposed to metal
corrosion. Considering the characteristics and price of different kinds of bottled water, the Commission was of
the view that “distribution of bottled water” was the relevant product market.309
— The Commission in the case310 related to allegation of abusive conduct in the market for CA/CS coaching
services noted that CA/CS coaching services is a distinct service compared to coaching service for other
professional areas and non-professional areas in terms of its characteristics, prices and end use and hence
constituted a separate relevant product market.
— Similarly, the Commission has in another matter311 held that coaching services related to GATE, ESE and State
Engineering Services Exam are distinct from coaching services for other professional exams in terms of
characteristics, prices and end use and defined the relevant product market as market for provision of coaching
services related to GATE, ESE and State Engineering Services Exam.
— In a matter312 where abusive conduct was alleged on the part of the opposite party for reducing the interest rate
charged in accordance with the reduction in repo rate and imposition of pre-payment charges, the commission
noted that different type of loans will constitute different product market. The Commission noted that various
types of loans, such as, personal loan, property loan, home loan, auto loan, appliances loan, education loan, etc.,
can be distinguished based on intended use, rate of interest, terms of repayment, etc. Thus, the Commission in the
instant case defined the relevant product market as market for provision for loan against property.
— In the Kotak Mahindra bank Ltd case,313 the Commission noted that the allegation related to various types of
banking services/facilities, viz., cash credit, bank guarantee and term loan facility availed by the Informants from
the opposite party do not relate to any specific banking facilities availed by the Informants from the opposite
party, but rather to a broader spectrum of banking services/facilities offered by the bank. The Commission
therefore, held that the relevant product market in this case cannot be narrowed down to a specific banking
service/facility such as term loan, bank guarantee, cash credit, etc., and it will be the broader market of banking
services. The Commission, however, distinguished the banking services provided by the bank to corporate
entities from the banking services available to the retail/general customer’s banks on the basis of various verticals
or indicators like demand requirements, credit worthiness, expected profitability of the proposed business
venture, etc. Therefore, the relevant product market in the instant case was defined as the market for the
“provision of banking services for corporate entities”.
— The Commission has on multiple occasions314 after noting the physical characteristics of non-coking coal and its
use in power plants, opined that there is no substitute available for non-coking coal used by the thermal power
plants in India.
— The dispute in another case315 related to purchase of an SUV, i.e., Toyota Fortuner 4x4 by the Informant from
the opposite party through its authorised dealer. The Commission in order to delineate relevant market noted the
distinction between SUV and general cars. It was observed that a SUV that is built on a light-truck chassis is
usually equipped with four-wheel drive for on or off-road ability with some pretension. Also, some SUVs
included the towing capacity of a pickup truck with the passenger carrying space of a minivan or large sedan. The
Commission noted that the features/characteristics of an SUV were different from other passenger cars/vehicles.
Further, in terms of price and consumer preferences, SUV was held to be not substitutable with other passenger
cars/vehicles. Thus, the relevant product market in this case was defined as “the market of sports utility vehicles”.
— In another matter,316 the Commission delineated the relevant product market to be “the market for chocolates”.
The Commission noted that the market for chocolate is a distinct market and it is distinguishable from the market
of other related products in terms of the nature of product, consumer preference, price, etc. It was noted that
because of its peculiar taste and craving-induced demand, chocolates are not substitutable with other
confectionary items or eatables.
— Taking into account the distinct characteristic of the smartphones such as storage capacity, processor speed,
availability of multi-home apps, point-of-sale terminal for paying goods or services, determining users exact
location utilising global positioning system, playing games, video chat sending and receiving email, which
distinguished it from other types of phone, viz., basic or feature phones, the Commission delineated the relevant
product market as “market for smartphones”.317
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— Based on the uniqueness of services and non-interchangeability provided by credit information companies like
CIBIL, the Commission delineated the relevant product market as “market for the provision of services by credit
information companies.”318
— In a majority decision, the Commission on the nature and distinctiveness of the product held that G-Scan
standing/tilting machine forms a market distinct from the conventional MRI machines. The Chairperson, in its
dissenting note, however noted that from the perspective of consumers, i.e., hospitals or clinics, there is sufficient
inter-changeability between different types of diagnostic equipment, particularly between different types of MRI
machines as there is no single factor that determines the solution for which a consumer opts. The Chairperson
thus, on the basis of factors like no distinct demand for weight bearing MRI machines in India, competitive
constraints faced by G-Scan tilting MRI machines from other types of MRI machines or other diagnostic
equipment, small size of the market, intended use held that there was no separate and distinct market for G-Scan
standing/tilting machine.319
In another matter320, the Commission noted that some of the cars were popularly known as luxury cars because of their
brand value, comfort, features, looks, etc. which made them a different class all together. These cars, on the basis of
differences in price, features and consumer preferences, were held to be distinguished from other categories of passenger
cars. Therefore, the relevant product market was defined as “market for manufacture and sale of luxury passenger cars”.
Organised v unorganised sector: The Tribunal in the case of Shubham Sanitary wares defined the relevant product market
as “the market for branded ceramic sanitarywares and bathroom fittings”. It was noted that ceramic sanitaryware products
and bathroom fittings manufactured in the unorganised sector cannot be considered as the substitute of branded ceramic
sanitaryware products and bathroom fittings because of difference in prices, quality, user group, etc. Moreover, ceramic
sanitaryware products and bathroom fittings manufactured in the unorganised sector generally caters to the low-income
buyers whereas, branded ceramic sanitarywares and bathroom fittings cater to the middle-and high-income buyers.321
Online market platform and online retail store: The Commission in the Flipkart matter322 differentiated an online market
platform from an online retail store. While in an online retail store, a particular seller, who may or may not own a brick and
mortar retail store, owns his portal to sell products thorough online website; in an online marketplace platform such as
Amazon or Flipkart, the owner of the online portal offers a platform for buyers and sellers to transact. Hence, the sellers
would be interested in selling on the platforms when increasingly high number of buyers visits an online platform, thus
characterising the online platforms with network effects. In the case of online retail stores, there are hardly any network
effects though there may be efficiencies of scale. Further, as per the guidelines for Foreign Direct Investment (FDI) on E-
commerce issued by Department of Industrial Policy & Promotion, Ministry of Commerce & Industry, Government of
India, FDI is not permitted in inventory based model of ecommerce.
Taxi Services: In the case of ANI Technologies Pvt Ltd323 it was contended by the informants who were stated to be auto
rickshaw and taxi drivers currently operating in Delhi and/or NCR that the opposite party was using its market power to
drive them out of the market by charging of low prices from riders and paying huge incentive to drivers. It was contended
that the relevant product market should be taken as “Para-transit Services” consisting of auto rickshaw, black-yellow taxis
and city taxis. However, the Commission observed that auto rickshaws and taxis, despite offering similar services, were
different from each other by virtue of their basic characteristics, consumer preference, prices, etc. The Commission further
observed:
14... Within a city, consumers can travel/commute by local or private buses, taxis, auto rickshaws, etc. However, owing to the
difference in comfort, time taken by various modes of transportation, buying power of the consumer (rider) etc., these different
alternatives do not qualify to be substitutes for each other. Thus, these are not substitutable in terms of the factors provided under
the Act and cannot be categorised as part of the same relevant market. Auto rickshaws and taxis may be serving the same intended
use but owing to different perception they hold in the eyes of the consumers in terms of convenience, prices and facilities etc., they
fall under different relevant product markets.
15. Even with regard to taxis, it is noted that the Opposite Party provides radio taxi services which can be distinguished from the
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other traditional taxis (yellow-black taxis, city taxis etc.). The Commission has already opined in past cases (Case No. 06/2015,
74/2015, 81/2015, 82/2015 and 96/2015) that the radio taxis form a distinct market in itself. In the said cases, the Commission,
while prima facie defining the relevant product market as ‘Radio Taxi services’, took into consideration factors like-convenience,
point-to-point pick and drop, pre-booking facility, ease of availability even at obscure places, round the clock availability,
predictability in terms of expected waiting/journey time etc. Hence, based on the holding of the Commission in those cases, the
relevant product market in the present case will be ‘market for provision of radio taxi services’.
The Commission in another matter differentiated radio taxies with other modes on transport on factors like convenience of
time saving, point-to-point pick and drop, pre-booking facility, ease of availability even at obscure places, round the clock
availability, predictability in terms of expected waiting/journey time, etc. The Commission also noted that there was a
dedicated category of commuters who use radio cabs, especially executives, professionals, tourist, etc., who will not switch
to auto-rickshaws or buses under normal circumstances even though they have to pay a little higher than the other modes
of transport.324
In Bharti Airtel Case325, it was alleged that Reliance (Jio) was guilty of predatory pricing in contravention of the
provisions of section 4(2)(a)(ii) of the Competition Act, 2002 as it was offering free services since its inception. Further,
Reliance Industries Ltd (RIL) was alleged to be in contravention of section 4(2)(e) of the Act as it had used its financial
strength in other markets to enter into the telecom market through Reliance Jio Infocomm Ltd. While delineating the
relevant product market, the Commission observed as under:
“15 ... While voice and mobile broadband services for smartphones are sold/bought together in a bundled form and are used in the
same mobile handset, mobile broadband over data-only devices is purchased and consumed independent of any voice services.
However, all the telecommunication service providers are similarly placed to offer a variety of services designed for data-only
device users and voice-enabled device users. Thus, distinction between the said services has not been found necessary in the facts
and circumstances of the case. Accordingly, the relevant product/service appears to be wireless telecommunication services.
16. The Commission is cognizant of the fact that 4G technology is superior to 3G technology in certain aspects and will be
operative only in 4G compatible mobile instruments. It will not be operative in a 3G compatible handset. However, a 3G network
will be operative in a 4G compatible handset. This implies that the ongoing technology evolution is backward compatible i.e.
between a new generation handset and an old generation network. Although, consumers may have to incur additional cost towards
buying new mobile instrument to avail 4G telecommunication services, considering the relatively lesser life span of mobile
handsets and ongoing technological innovation, constant migration of existing subscribers to upgraded ecosystem is natural and
inevitable over a period of time. From the supply side, any new entrant in the telecom market is likely to adopt the technology
available at that time and later upgrade its network from time to time to migrate or additionally offer services based on newer
technologies. In this ongoing process of evolution, it is not appropriate to differentiate wireless telecommunication services based
on technologies used for providing such services. More importantly, the cost of 3G and 4G compatible mobile handsets and the
tariff for 3G and 4G telecommunication services appear to be largely similar. It may also be relevant to point out that DoT grants
uniform and same licence to all telecommunication service providers i.e. Unified Access Licence and it does not differentiate
between service providers based on the technology deployed by them. The Commission notes that the decisions relied upon by the
Informant regarding relevant market are specific to the facts and circumstances of the concerned cases and the same are of no
relevance to the wireless telecommunication services impugned herein. In any case, relevant market is an economic reality to be
determined based on facts and circumstances of each case. In view of the foregoing discussion, the Commission is of the view that
the relevant product market in the facts and circumstances of the present case is the market for ‘provision of wireless
telecommunication services to end users’.
In the WhatsApp Inc case,326 the commission distinguished instant communication apps from the traditional electronic
communication services such as text messaging, voice calls, etc., as provided by various telecommunication operators as
unlike traditional modes of communication, instant messaging using communication apps are internet based and provide
additional functionalities to the users. There are also differences in the pricing conditions in both, “WhatsApp” being a
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free-to-download communication application which does not charge any fee from its users for providing the services and
just uses internet connection on the device to send instant messages, connect voice calls, etc. Also while text messaging
through traditional modes can be done between people who do not use the mobile service of the same service provider,
instant messaging services typically require contacts to be on the same communication application platform. Thus, the
Commission defined the relevant product market as “the market for instant messaging services using consumer
communication apps through smartphones”.
In the Google327 case, the Commission held that online general web search services cannot be substituted with direct
search option by typing URL of websites in the internet browsers. As the users may not be aware of URLs of all websites
that offer the information they are for, search engines become the first port of call for a user looking for information online.
Further, the Commission noted that online general web search services cannot be equated with specialised search services.
The Commission therefore, held “online general web search services” to be a distinct relevant product market. Similarly,
the Commission differentiated online and offline advertising services on the basis of internet as a medium and coverage
and noted that online advertising was not substitutable for newspapers, radio or television for advertisers who seek to
target areas or user groups with limited internet access. Further, advertising rates are significantly lower for online
advertising in comparison to traditional media. Online advertising allows advertisers to accurately monitor the
effectiveness of the advertisement on the basis of actual number of users that it reaches whereas for offline advertisements,
advertisers rely on estimated number of views and not the actual views. On the issue of search and non-search advertising,
the Commission noted that search advertising helps advertisers in targeting specific users. Typically, search advertisements
are used for demand fulfilment while non-search advertisements are for brand awareness or recognition. For that reason,
both the advertisements are priced using different pricing mechanisms. For example, search advertisements are generally
paid on a cost-per-click basis, while non-search advertisements are usually paid on a cost-per-thousand-impressions basis.
Thus, the characteristics, intended use and price of search and non-search advertising are different from one another. The
Commission therefore, held that online search advertising services was a distinct relevant product market.
Aftermarket
An aftermarket is a special kind of antitrust market consisting of unique replacement parts, post warranty service or other
consumables specific to some primary product. The term, therefore, refers to markets for complementary goods and
services such as maintenance, upgrades, and replacement parts that may be needed after the consumer has purchased a
durable good. Further, an independent secondary aftermarket would generally exist if consumers are not able to ascertain
the life time cost of the primary product/service at the time of its purchase, there is a high switching cost to shift to
substitutes and the manufacturer/service provider of the primary product/service has the ability to substantially hike the
price of the good/service offered in the secondary market (i.e., aftermarket) in spite of reputational concerns.
The Credit agency matter328 related to allegations of imposition of pre-payment penalty levied by the Opposite Party on
the Informant for premature closure of the mortgage loan. The Informant alluded that the pre-payment penalty clause in the
mortgage Loan Agreement locks-in a borrower with the lender and its imposition amounts to an aftermarket abuse. The
Commission noted that the arguments of the Informant regarding the purported aftermarket and the abuse therein were
untenable as the loan services of the nature did not involve any aftermarket as alleged by the Informant. The Commission
held that availing additional loan or migration of a loan from one lender to another were independent services and availing
additional loan or migration from one lender to another cannot be considered as an aftermarket. By contrast, the terms and
conditions of the loan including the rate of interest, term of repayment, rate of pre-payment penalty, etc., were made
certain to the Informant at the time of availing the loan itself, which enabled the Informant to ascertain the life time cost of
the loan facility including the cost of migration of the loan to other lenders. The Commission observed:
In the property loan market, the Informant being a borrower is on the demand side and OP is on the supply side. The Commission
observes that there exist various types of loans such as personal loan, property loan, home loan, auto loan, appliances loan,
education loan etc. in the market. Each of these categories of loan can be distinguished based on intended use, rate of interest and
terms of repayment etc. Thus, loan against property, which is the product/service under consideration in the instant case, is a
distinct product/service. The Commission does not find it relevant to distinguish between the loan services offered by the banks
and other financial institutions as all of them compete with each other and serve the same purpose. The fact that the Informant
could switch its loan from a bank to the Opposite further supports the substitutability/similarity in the loan services offered by
banks and other financial institutions. Thus, the Commission finds ‘provision of loan against property’ as the relevant product
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market. As regards the relevant geographic market, the Commission notes that many lenders are present and compete, across India.
Further, with the advent of technology and internet banking, the nature of loan services offered by these lenders appears to be
increasingly uniform across the nation. The aforementioned facts suggest that the relevant geographic market in the instant case is
the ‘whole of India’. Although, the relevant geographic market could be narrowed to the region where the Informant is located i.e.
NCR region, considering the presence of a number of lenders and uniformity in the nature of their services across India, a narrower
geographic market is not likely to affect the analysis or outcome in the instant matter. Accordingly, the relevant market in the
instant case is taken as ‘provision of loan against property in India’.329
Demand substitutability is taken as a relevant factor to determine Relevant Product Market
For determining the relevant product market, the demand side substitutability is the decisive factor because whether a
consumer would consider any other product as a substitute or inter-changeable with the products manufactured by the
Opposite Parties will determine what all goods can be included in the relevant product market definition.
— In the case of Om Datt Sharma,330 the Commission noted that sports goods like sports apparel, sports shoes,
sports equipment have a different intended end-usage and are generally not-substitutable for a consumer
intending to purchase the same. With the growing trend of premiumisation, the consumers seek to purchase better
quality and innovative products, thereby making the non-branded sports goods non-substitutable for premium
branded sports goods. Further, substantial price difference between the branded and non-branded sports goods
makes the market for branded sports goods a separate relevant product market because there are different
consumer groups for the above said two types of markets. Accordingly, the Commission was of the opinion that
the relevant product market in the case was “the market of premium sports goods”.331
— In the case of Atos Worldline India,332 the upstream Point of Sale (POS) Terminals (along with upgrading tools
such as Kernel, Operating System, Source Code, SDK, etc.) market was distinguished from the downstream
market of TPP (terminal management services), VAS (application development services) and after sales services
(repairs and maintenance). POS was regarded as a distinct product un-substitutable by new technologies such as
Easytap, MSwipe, etc., because of absence of demand side substitutability between the two among the end users.
Digital and mobile wallets, prepaid instruments, online payment, etc., was held to be no substitute of POS
Terminals because of difference in product characteristics, end use and consumer preferences. Also, POS
Terminals required services such as terminal management, application development, repairs and maintenance,
etc., in order to meet requirements of the customers such as a bank, etc., for which many specialised firms were
engaged. The nature of both the products was different as well as the players in both the markets were different.
— In the case of GHCL Ltd,333 the Commission held the relevant product market as “production and supply of non-
coking coal to the thermal power producers including captive power plants”. The product in question was non-
coking coal, used as raw material for generation of power by the thermal power producers whether captive or
otherwise. The product had no demand side substitutability as no such other substitute product could be utilised
as fuel for generation of electricity through thermal source for the thermal power plants. In light of the admission
by the Gujarat Heavy Chemicals Ltd (GHCL) about import of coal and lignite, it was argued that there was
absolutely no dependence of the customer on Coal India Ltd (CIL) and CIL was one of the options to procure
coal. The Commission, however, observed that quality of coal supplied by Western Coalfields Ltd (WCL) from
its mines was of inferior quality and therefore, GHCL was forced to use lignite in place of indigenous coal as the
quality of lignite was superior to the quality of coal. Also, lignite on account of its low gross calorific value and
high ash content could not be an effective substitute for coal. GHCL was forced to use lignite mixed with a
higher proportion of imported coal only because it did not get the supply of coal to achieve operational efficiency
of its power plant. This was not suggestive of the fact that GHCL was running its plant or it was otherwise viable
for it to run its plants on imported coal only. Moreover, it has been held in many cases that imported coal is not a
viable substitute or alternative for the Indian thermal power plants in view of the boilers used by them as well as
on account of fact that the imported coal is very costly and the raw material, i.e., coal alone amounts to 60%–70%
of the total cost incurred by a thermal power plant.334
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— In the case of Three D Integrated Solutions Ltd,335 the Commission noted that machines were required for the
purpose of implementing Automatic Fare Collection System (AFCS) project of Ministry of Urban Development
with a National Common Mobility Card (NCMC) for passengers in Jaipur city and to set up a pre-paid wallet
system based on a license from the RBI under the Payment and Settlement Systems Act, 2007. The product in
question related to card swiping-based electronic payment where payment was accepted through cards. The
machine in question was not only for limited use of providing an electronic record and electronic receipt of
transactions but also for electronic payments across merchants. It was noted that only a POS terminal which was
capable of processing electronic payment transaction could be useful for the said project, and not an ordinary
Electronic Ticketing Machine (ETM) machine. It was observed that although separate bids were called for ETMs
and POS terminals, specifications required for ETMs such as minimum EMV certification level 1, PCI/PED 2.0
certification, GPRS modem to suit Indian frequency band/Bluetooth, and long battery life were such that only a
POS terminal could fulfil those requirements. POS terminals could be converted to ETMs without the knowledge
of seller and there was no difference in the hardware of both the devices. The only difference between a POS
terminal and an ETM machine was that the ETMs have to be portable with GPRS with a good battery life. The
other features like billing, printing, etc. are part of every POS terminal. Based on the above analysis, the
Commission, in consonance with the DG report, determined the relevant product market in this case as the
“market for POS Terminals”.
— In the case of Jindal Steel Power Ltd336 the Commission defined the market as “rails compliant with RDSO
specification”. Studies on steel industry confirmed that in the long range products, namely structurals and rails,
there was very little switching. A shift to rails was determined purely by demand and any shift entailed additional
capital investment and there was a time lag.
— In the case of Kiratpur Sahib Truck Operators Co-op Transport Society Ltd,337 the Commission held the
“provision of services of goods transportation by trucks in and around Kiratpur area in Punjab”, as the relevant
market. It was observed that within the segment of freight transport by land, there was limited substitutability
between rail and road freight movement. While transportation through road was generally considered more
suitable for shorter distances, movement on railways network was generally more appropriate for longer
distances. Also, demand for freight transport by trucks was inelastic and there were no close economic substitutes
and therefore, freight transport by means of trucks form a separate relevant product market given its different
physical characteristics. It was also noted that for industrial consumers in Kiratpur region, the reach and
penetration of railways was not a viable alternative as it only enabled station to station delivery. Since railway
stations were located at a distance from consumers’ factories/warehouses, for transport of goods from
factories/warehouses to the railway stations, truck would have to be used anyhow, significantly adding to the
costs and time.
The Tribunal in the KFCC case338 rejected the argument that the Film and Television industry were two entirely different
product markets. It was observed that Films and Television are products of the entertainment industry as the films are not
only exhibited in theatres but are also telecast on TV channels and film rights get sold to TV channels. Similarly, television
shows can be adapted to a film format. Therefore, the films exhibited in the theatres and films telecast through the medium
of television were held to be substitutable as consumers seek entertainment and both films and television industry offer
products to entertain, and consumers can make their choices based on their prices, characteristics, etc. It was, thus, held in
the present case that any ban on dubbed content impacted both film and television market.
Demand and supply side substitutability
— To determine the relevant product market, the DG in the case of Maharashtra State Power Generation Co Ltd339
took into consideration the demand-side substitutability and supply-side substitutability. Considering the physical
characteristics of non-coking coal and its use in power plants, it was found by the DG that there is no substitute
available of the non-coking coal for the thermal power plants in India. Hence, the relevant product market in this
case was non-coking coal, which is used primarily as a raw material for generation of electricity by the thermal
power plants. The Commission noted that the demand-side substitutability occurs when consumers switch to
other products in response to change in the relative prices of the product. The product under consideration was
non-coking coal which was used inter alia as raw material for the generation of power by the thermal power
plants. This product had no demand-side substitutability as no such other substitute product could be utilised as
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fuel for generation of electricity through thermal power plants. It was found that imported coal was not a viable
substitute or alternative for the Indian thermal power plants in view of the boilers used by them as well as on
account of fact that the imported coal was very costly and the raw material, i.e., coal, alone amounts to 60%–70%
of the total cost incurred by a thermal power plant. The design of the said power plants was such that only
domestic coal, i.e., the one produced in India by CIL, could be fired into the boilers. The design of the boilers
was based upon certain ash, moisture and other intrinsic qualities of the said domestic coal. Any other coal,
including imported coal, had qualities which were markedly different to that of the domestic coal, and therefore,
the informants could not use imported beyond a small limit of 15%–30%. Resultantly, the power producers had
no other option but to purchase domestic coal for their power plants. So far as oil/gas as substitute for coal was
concerned, it was noted that existing plants were mostly designed for coal, besides the same were neither easily
available nor cost competitive with coal. The Commission concurred with the delineation of the relevant product
market by the DG as production and sale of non-coking coal to the thermal power generators.340
— Similarly, in the case of Bijay Poddar v Coal India Ltd,341 the Commission held that there did not exists any
substitute for non-coking coal which was made available to the bidders under the spot e-auction and therefore,
relevant product market was taken to be the “sale of non-coking coal to the bidders under Spot e-Auction”.
Commission noted that the opposite parties had not produced any data or material to indicate any substitutability
or interchangeability between the products bought under the different schemes.342,343 The COMPAT in appeal
refused to accept that imported coal can be regarded as interchangeable or substitutable by the consumer. The
Tribunal noted that the preference of the consumers, which is one of the factors to be considered under section
19(7), for obtaining coal through e-Auction, is a significant element in outlining the ‘relevant product market’ as
“the sale of non-coking coal to the bidders under Spot e-Auction”. Further, the Tribunal also refused to accept the
contention that the Spot e-Auction Scheme and the Forward e-Auction Scheme should be considered as the same
for the purposes of relevant market as it was fact that while actual users as well as traders could bid under the
Spot e-Auction Scheme, Forward e-Auction Scheme was confined to the buyers who obtained coal for their own
usage and was not available to the traders.344
[Note: The Commission in the batch of information filed by the power utilities (Maharashtra State Power Generation Co
Ltd and Gujarat State Electricity Corporation Ltd) vide its order dated 9 December 2013 found CIL and its subsidiaries to
operate independently of market forces and thus enjoying undisputed dominance in the relevant markets of supply of non-
coking coal to the thermal power producers. The Commission also held the Opposite Parties to be in contravention of the
provisions of section 4(2) (a)(i) of the Competition Act, 2002 for imposing unfair/discriminatory conditions and indulging
in unfair/discriminatory conduct in the matter of supply of non-coking coal, as detailed in the said order. The aforesaid
order of the Commission was put in appeal by various parties before the COMPAT. Accordingly, the Tribunal vide its
common order passed on 17 May 2016 in a batch of appeals arising out of the orders of the Commission passed on 9
December 2013, 15 April 2014 and 16 February 2015 in C. Nos. 03, 11 & 59 of 2012, C. Nos. 05, 07, 37 & 44 of 2013 and
C. No. 08 of 2014 respectively set aside the impugned order on grounds of violation of principles of natural justice and
remanded the matter back to the Commission. The Commission in a fresh order in March 2017 has cut the penalty imposed
on CIL to for abuse of dominant position to Rs 591 crores. However, the delineation of the relevant market in the March
2017 order is the same as the 2013 order. The Commission rejected the argument that imported coal can be considered a
substitute for domestic coal on account of several factors including the peculiar design and specifications of the boilers
used in majority of Indian thermal power plants and further considering that imported coal is subject to customs duty and
other levies, rendering it more expensive than domestic coal supplied by the Opposite Parties. The Commission held that
there is no substitute available for non-coking coal used by the thermal power plants in India. Thus, the relevant product
market in this case was taken by the DG as non-coking coal, which is used primarily as a raw material for generation of
electricity by the thermal power plants.]
No reason to precisely define relevant market
— In the case of DLF Gurgaon Home Developers Pvt Ltd,345 the Commission noted that the residential units being
considered in the case were not small or low priced dwelling units and were in the price range of Rs 40–60 lakhs
(high-end) and even if the prices of these units increased by around 10%, the prospective buyers would not settle
for other available options/substitutes, especially houses falling below the price bracket of Rs 40–60 lakhs.
Accordingly, the DG in its supplementary report narrowed down the relevant product market to “services
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provided by developers/builders in respect of residential building apartments ranging between Rs 40 to 60 lakhs
to the customers”. The DG defined the relevant product market in three different ways in the cases before the
Commission. In Case Nos. 13 and 21 of 2010, the DG delineated the relevant product market as the market for
“services provided by the developers/builders for construction of high end buildings” which was narrowed down
in the supplementary DG report for “services provided by developers/builders in respect of residential building
apartments ranging between Rs 40 to 60 lakhs to the customers”. In Case No. 55 of 2012, the DG found the
relevant product market to be the market for “provision of services for development of residential apartments”.
The DG, however, held DLF to be dominant in all three sub-segmented relevant product markets within the
geographic region of Gurgaon.346 The Commission noted:
The Commission notes that determination of relevant market is important for assessing dominance of the Opposite Party. But
defining relevant market is not an end in itself. If the primary reason for defining relevant market is assessment of dominance of a
particular enterprise/market player with regard to that relevant market, the Commission is of the opinion that such exercise can be
dispensed with when such assessment remains unchanged in different alternative relevant market definitions. Therefore, when
under possible alternative relevant market definitions, the conclusion on dominance remains the same; the Commission finds no
reason to get into the technicalities of precisely defining relevant market.347
One of the objections raised by the Opposite Party in respect of relevant product market is exclusion of similar apartments
in the secondary market. The Commission has already discarded this argument in the Belaire case as reproduced in the
following paragraph: Similarly, the argument that apartments are also sold by initial allottees and that there is a thriving
“secondary” market, also does not carry weight in the relevant market under consideration. Every asset, including real
estate, has a value which either erodes or appreciates with time. Depending upon the preference and the circumstances, the
owner may like to retain it or dispose of at an opportune time. While “secondary market” may have some bearing on the
demand and supply variables, it certainly cannot form a part of the relevant market for the simple reason that the primary
market is a market for ‘service’ while the secondary market is a market for immoveable property. Moreover, while
building an apartment, a builder performs numerous development activities like landscaping, providing common facilities,
apart from obtaining statutory licenses while a sale in secondary market merely transfers the ownership rights. An
individual who is selling an apartment he or she has purchased cannot be considered as a competitor of DLF Ltd or any
other builder/developer. Nor is he or she providing the service of building/developing. The dynamics of such sale or
purchase are completely different from those existing in the relevant market under consideration. The value added or the
value reduced due to usage or otherwise does not even leave the apartment as the same one as had been built or developed
by the builder/developer. Therefore, this argument also deserves to be rejected. (para 12.35)
The Commission, therefore, held that precise definition of relevant product market was not required in the case and the
relevant product market was delineated as the market for “the provision of services for development/sale of residential
apartments”.348
“Classification of consumer” as a factor to define relevant product market
— The Commission in the Saint Gobain Glass India Ltd case349 classified consumers of natural gas on the basis of
intended use and price. While industrial consumers used natural gas to meet the energy requirements in their
plants for heating, etc., the end use of natural gas for domestic consumers was for cooking and commercial
consumers used it for commercial purposes. The prices at which natural gas was supplied to these different
consumer groups were also different. Moreover, natural gas was distinct and distinguishable from other sources
of energy in terms of product’s characteristics. Natural gas is a flammable gaseous mixture composed mainly of
methane which is made available to consumers through a network of pipelines and does not require any storage
facilities at the end of these consumers. Further, being almost free from sulphur compounds, natural gas is a
cleaner, smoke-free and soot-free environmentally-clean fuel as compared to liquid hydrocarbons. Being
available on tap, natural gas ensures an uninterrupted supply of fuel unlike liquid fuels which need to be
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periodically transported and stored by consumers at their premises and natural gas is also considered as more
efficient as it burns more completely than other liquid fuels. Also, the Commission observed that, as per the
Government of India pricing order dated 1 July 2005, Administered Pricing Mechanism (APM) natural gas was
meant for a select group of consumers such as consumers of power sector, fertiliser sector, consumers covered
under court orders and those having allocation of less than 0.05 MMSCMD of natural gas, therefore, it should not
be clubbed with non-APM natural gas to form a single relevant product market. Considering all these factors, the
Commission in agreement with the DG report, was of the view that “the supply of non-APM natural gas to the
industrial customers” was the relevant product market in the instant case.
— In the IRCTC case,350 the DG noted that the service provided in this case was of transportation of passengers
from one station to another across the rail network of the country. This service had a unique character and was
distinguishable from other modes of transportation. Further, it was noted that pricing of passenger ticketing on
Railways is done annually through the exercise of rail budget which is passed by the Parliament. The basis of
pricing is supposed to be on cost-plus basis, however, there is a subsidy component in the ticket pricing as the IR
also discharges the social objective of offering cheap transportation to passengers across India. The passenger
ticket price is cross-subsidised by rail freight. As a result of policy, the pricing of passenger ticketing is
completely regulated keeping in view the geographic, demographic and socio-economic profile of the country’s
population which makes it distinguishable from other modes of travel. Lastly, it was observed that a consumer
proposing to carry out the travel through railways bases his/her decision on various factors such as travel budget,
distance of travel, time at disposal, safety of travel, etc., compared to other modes of travel, viz. road and air.
Once such a choice is made, there is very low likelihood of the consumer changing his preference. The IR has a
wide transportation network across India and offers a number of train options across its network providing
flexibility of structuring travel plan to the consumers. Further, in recent times, differentiated pricing schemes
such as Tatkal Scheme have been introduced providing the choice of train travel to last minute travel planner.
Thus, the consumer preference for train travel is not normally substitutable by other modes but for exceptional
situations. The Commission observed that due to various unique characteristics including travel comfort, safety,
pricing, particular consumer preference, reach and distance, etc., the service of rail passenger transportation in
India may be considered as a separate market. Accordingly, transportation of passengers through railways in
India was taken to be the relevant market. Such market would also include the ancillary segments like ticketing,
catering on board, platform facilities, etc. The Commission, therefore, agreed with the delineation of the relevant
market by the DG as “transportation of passengers through railways across India including the ancillary segments
like ticketing, catering on board, platform facilities etc. provided by Indian Railways”.
— The Commission in the case of Sunil Bansal v Jaiprakash Associates Ltd351 held that the residential projects
constituted a distinct product when compared to commercial/industrial/other types of properties. In coming to this
conclusion, the Commission considered that all the relevant stakeholders, including the Government/statutory
authorities, builders/developers, brokers/sales agents, etc. distinguished residential properties such as residential
apartments, villas and plots from other types of properties such as commercial spaces, commercial plots, farm
houses and agricultural lands primarily on the basis of their usages. Further, the development norms for
residential properties were entirely different from those relating to other types of properties. It was observed that
the residential houses constituted a separate product market and that a buyer before investing in a residential
property considers the company’s brand value, background, number of projects completed, delivery timelines,
value for money, amenities, design, materials, fixtures, location of the project, proximity to railways, metro
stations, hospitals, etc. Thus, the Commission considered the provision of services for development and sale of
residential apartments as a distinct product.
Relevant product market has to be defined keeping in mind overall consumer behaviour towards
substitutes
— In the case of Global Tax Free Traders,352 the Tribunal noted that there were various competing brands of scotch
and imported whiskies and they accounted for less than 2% market share in India. The Commission further
observed that single malt, blended malt, single grain, blended grain, etc., are different forms of whiskies and they
are perceived as substitutes by the common consumers intending to buy whisky. The Commission observed that
the market for alcoholic beverages comprises of different of spirits, across various price segments, and is
therefore, considerably differentiated and driven by the consumer’s preference for different products and brands
in each product category. The alcoholic beverages/products can be generally differentiated either on the basis of
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intrinsic quality or on the grounds of perceived quality. Therefore, in such a market which is characterised by
product differentiation, the propensity of the consumer to switch to a different product depends upon the
closeness of the available substitute products. In this scenario, products which are close substitutes compete more
vigorously with each other in comparison to others that are distant substitutes. It was observed that if two
competing enterprises produced differentiated products that are close substitutes, an increase in prices by one
enterprise could lead to a divergence of the demand to the products of the other. Therefore, the key variables
which an enterprise has to take into account in a differentiated product market while positioning and pricing its
brands, are the characteristics of the brand on the basis of which the enterprise wants to compete, and then launch
its brand in a price band close to the competitors’ price, so as to enable it to get its brand included in the
perceived consideration set of the consumers.
— In the Dwarkadhis Projects case,353 it was alleged that in the relevant market (“provision of services of real
estate in the Revenue Estate of Dharuhera in the State of Haryana”), Dwarkadhis Projects (P) Ltd was
abusing its dominant position through the buyer’s agreement related to obtaining pre-consent of the allottee
in favour of Opposite Party to subsequently change the lay-out/building plan at any time without consent
from the allottee, etc. As per the Commission, the product market of “the provision of services of real estate”
was too broad and would include all types of real estate properties, i.e., residential plots/flats, commercial
and industrial properties which cannot be regarded as interchangeable or substitutable for the simple reason
of different characteristics of the products, their price and intended use. The Commission, therefore, held that
“provision of services of development and sale of residential units in Dharuhera in the State of Haryana” as
the appropriate relevant market in this case.
— The Commission in the BCCI354 case held that a cricket match cannot be perceived to be substitutable with any
other sport-based on characteristics of the game. Further, it was held that professional domestic leagues like IPL
differ from other formats of cricket in several ways like team composition, team representation, format and
selection of players, bidding process, profit motive, etc. The Commission also rejected the argument of BCCI that
IPL, being an entertainment venture competed with other television content. The Commission held that cricket as
a product is completely different from general entertainment television programmes and other sports even if there
might be common viewership. It has different verticals and can be followed live in stadium, on television, radio,
internet or newspaper, and each of these mediums is likely to give different levels of satisfaction to the
viewers/followers. The Commission held that the test of substitutability cannot be applied mechanically and that
every shifting of consumers from one product or service to another need not necessarily indicate substitution.
Similarly, it would be erroneous to group two things into the same market merely because the same customers
buy both. Further, even if SSNIP (Small but Significant and Non-transitory Increase in Price) test was applied,
given the characteristics and consumer preference for cricket/IPL in India, the Commission noted that was
unlikely that such a large proportion of consumers would substitute IPL with any other form of entertainment,
viz. films, TV shows, etc., or any other sporting event thereby making a 5–10% increase in price unprofitable.
Integrated Townships – Whether separate product market?
— The DG in the supplementary investigation report355 held “the market for provision of services for the
development of integrated township” as the relevant product market. The Commission noted that the concept of
“integrated township” was new and has been employed by builders to market their products particularly in urban
areas to convince the prospective buyers about the easy availability of a cluster of various facilities and amenities
in and around the residential projects making the project a very attractive proposition for potential buyers who
may like to buy such product to avoid the attendant hassles of commutation and transportation, etc., in availing
such services that they may otherwise encounter while residing in standalone projects.
The Commission, however, held that the concept of “integrated township” was a nebulous and evolving concept and at this
stage of development of markets, it could not be said with certitude that all so called “integrated township” constituted a
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separate product market from standalone residential projects. The question of integrated township constituting an
altogether different relevant market would depend upon a host of factors which may make the same in a given case a
unique product in itself depending upon the factual matrix of a particular case, project involved and the amenities
associated therewith. Further, the demand-side substitutability of such an integrated township with standalone/independent
residential projects would also need to be considered while examining whether a particular so called integrated township is
altogether a separate product. The Commission also referred to its earlier decision in the case of Shri Sunil Chowdhary v
TDI Infrastructure Ltd,356 where it was noted by the Commission categorically that though the concept of integrated
township has become popular where all facilities are provided within one township but even in those cases, ordinarily the
market would be of residential units. Accordingly, in that case the market of services of development and sale of
residential apartments was taken as the relevant product market. A similar view was also taken by the Commission in Shri
Deepak Kumar Jain v TDI Infrastructure Ltd,357 wherein it was also observed that though integrated townships do offer
some different characteristics than other forms of plotted residential units, the same could not be considered as a separate
relevant product market.
The Commission observed that just because an integrated township offered services like hospitals, educational centers,
shopping malls, etc., which were available within a short distance unlike independent projects, it was not necessary that
residents of an integrated township will not avail other similar services outside the township or vice versa. [Delineation of
Relevant market by Commission was approved by Tribunal.]358 It was established that the services offered in the projects
under consideration could also be availed by residents of other independent apartments and were not restricted to
integrated township residents only.
— In the case of Jaiprakash Associates Ltd,359 the following points were considered to hold that integrated
township did not constitute a separate relevant product market:
1. The locational advantage of the projects being in close proximity with the developed urban area coupled with
connectivity to other areas offering similar amenities/facilities makes the so called integrated township less
unique.
2. Most of the real estate developers in order to attract consumers offer along with the apartments, various
recreational amenities, gym, parks, etc., and these services are not offered only in these integrated townships.
3. A consumer will take into consideration the company’s brand value, reputation, background, locations,
projects, materials used, launch period, its proximity to metro stations, hospitals, educational institutions,
expressway, etc., and several other factors before purchasing a residential property.
The Commission, therefore, held that integrated township in the present case did not constitute a distinct product market.
Therefore, the relevant product market in the present case was the market for “provision of services for the development
and sale of residential apartments”.
Different Relevant Product Market for different issues in question
In the case of Shamsher Kataria (Informant) v Honda Siel Cars India Ltd,360 the Commission observed that automobile
primary market and aftermarket for spare parts and repair services did not consist of a unified systems market since: (a)
consumers in primary market (manufacture and sale of cars) do not undertake whole life cost analysis when buying
automobile in primary market and (b) in spite of reputational factors each OEM had in practice substantially hiked up price
of spare parts (usually more than 100% and in certain cases approx 5000%); therefore, rebutting theory that reputational
concerns in primary market usually dissuaded manufacturer of primary market product from charging exploitative prices in
aftermarket. Hence, the Commission was of opinion that there existed three separate relevant markets; one for manufacture
and sale of cars, another for sale of spare parts and another for “sale of repair services”; although market for “sale of spare
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parts” and “sale of repair services” were inter-connected. Further, the Commission was of the opinion that a “clusters
market” existed for all spare parts for each brand of cars, manufactured by OEMs, in Indian automobile market. Moreover,
the Commission was in agreement with findings of the DG. An owner of any brand of automobile, manufactured by an
OEM, can get his car serviced or repaired from repair shops across territory of India. Whether such repair shops are
authorised dealer outlets or those run by independent repairers, the conditions of competition for sale of spare parts and
after-sale repair and maintenance services are homogeneous across the territory of India and therefore, relevant geographic
market for present case consists of entire territory of India. Therefore, the Commission was of the view that relevant
geographic market, as defined under section 2(s) of the Competition Act, 2002 consisted of entire territory of India.
Further, the Commission held that there existed two separate relevant markets; one for manufacture and sale of cars, and
the other for sale of spare parts and repair services in respect of automobile market in entire territory of India.
— In Sh Dhanraj Pillay v Hockey India,361 the Commission was dealing with two main issues: (a) Alleged practices
of FIH/HI to foreclose the market for rival leagues by bringing in regulations related to sanctioned and
unsanctioned events; (b) Restrictive conditions imposed by HI on players through the Code of Conduct
Agreement. In order to properly evaluate the competition concerns, the Commission considered the relevant
markets for the two allegations separately.
Relevant market for analysis of foreclosure of market for hockey events to rival leagues
Relevant market was considered from the viewpoint of the spectator, i.e., the ultimate viewer of sport in accordance with
the criteria laid down under the Act of “characteristics, intended use and price”. The Commission observed that the
approach of defining relevant market narrowed to sports events within a particular sport finds support from international
cases decided on similar issues. For instance, in the Dutch Football case,362 the Dutch FA (KNVB) was taken to court by
an affiliated club (Feyenoord). The KNVB decided in 1996 to sell the rights to transmission of all national league games,
and all games of the Dutch national team, to a sports channel for seven years. The plaintiff maintained that under Dutch
Law this amounted to an illegal price fixing agreement. This view was upheld by the court. The court held that the relevant
product market was “the market for (Dutch) football broadcasting rights”.
The CCI noted that for a live viewer of the sport, the entertainment from sport may not be regarded as substitutable with
other general entertainment forms. As regards the price factor or defining the relevant market, considering the basic test of
SSNIP and in considering consumer behaviour towards sport, it was unlikely that a consumer would substitute hockey
event with any other form of entertainment, viz. films, TV shows, etc., or any other sporting event. Therefore, the relevant
product market, as regards the allegation of foreclosure of rival leagues was held to be, “the market for organisation of
private professional hockey leagues in India”.
Relevant market for analysis of allegations related to restrictions on players’ movements
It was held that Hockey India which is the organiser of hockey events requires the services of hockey players for
conducting events and there is a degree of complementarity between the two. As per the Commission, HI was hiring the
services of Hockey players where the monetary consideration is in the form of match fees, etc., which implies that HI is the
consumer in this market. The arguments cited by DG and informants based on treatment of hockey players as consumers
on the aspects of demand and supply side substitutability with HI being the consumer were held to be valid in delineating
the relevant market “market for services of hockey players”.
Other cases
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— The Commission observed in the MCX Stock Exchange363 case that exchanges only provide the infrastructure
(platform) for products to be traded subject to regulations, rules, bye-laws, and operative procedures. Therefore,
the technological support and the facilities offered by exchanges like easy access, easy execution, lower cost of
transaction, efficient risk management and full-proof settlement mechanism are very vital. It was further noted
that the products which are traded in the exchanges need to be recognised for their characteristics across the
segments independent of exchanges, as the exchanges simply facilitate the trade execution subject to regulatory
requirements and just because several products are traded in different segments of the same stock exchange and
are categorised as exchange traded products, they do not lose their product differentiating features or their
identity as representing different asset classes with different target customers/consumers. Thus, both the
exchanges and the securities traded are the external trappings (forms) while, the real substance lies in the classes
of assets that are traded as underlying. The Commission in light of these observations held the relevant market as
currency derivatives (CD) segment of stock exchange services.
The COMPAT,364 however, observed that a fundamental error was committed in treating CD segment as a product by
itself and assessing relevant market focused on products being traded on stock exchange as opposed to services, which
were offered by stock exchanges. The Tribunal emphasised that a stock exchange did not manufacture, offer or sell any
product and simply offered a trading platform and associated services for brokers to use. Market for assessment, therefore,
had to be services offered by stock exchange independent of product being traded on that exchange because a stock
exchange did not sell a product. Also, that a stock exchange did not create products like WDM, F&O, securities and
currency derivatives and that it merely offered services. Competition assessment had to be therefore, only in respect of
services offered by stock exchanges irrespective and independent of products traded on stock exchange. What was
important was a service and not segments in which stock exchanges dealt. Therefore, it was concluded by the Tribunal that
relevant market was services offered by stock exchanges.
— In the case of Arshiya Rail Infrastructure Ltd (ARIL),365 Kribhco Rail Infrastructure Ltd (KRIL), a co-operative
undertaking, and Arshiya Rail Infrastructure Ltd (ARIL), a logistics infrastructure company, had moved the
commission alleging that the IR and ConCor worked as a group entity and indulged in exclusionary price
discrimination and unfair trade practices. This, they alleged, amounted to an abuse of their dominant position.
The Commission ruled that IR and the state-owned Container Corporation (ConCor) of India did not abuse their
dominant position in the freight services segment.366 The issue of defining relevant market gained quite
significance in deciding the case. The DG, relying on the Deutsche Bahn/PCC logistics367 judgement of the
European Commission and laying emphasis on the substitutability of wagons and containers for carrying freight
of all types over the rail network, defined the relevant product market as “transportation of goods/freight either
through containers or wagons over the railway network”, ruling out however, substitutability between road, rail,
air and water as alternative medium of transportation for carrying container freight. The Commission did not
agree with DG’s analysis and discussed the possibility of two options for defining the market. The Commission
noted that though it was possible to load goods either in a wagon or in a container, logistics management pointed
to a clear-cut distinction between the two. Further, it was noted that in the parlance of logistics, container-freight
refers specifically to high value non-bulk goods. Containers allow easy and flexible handling of non-bulk goods
from point of production to point of consumption and, are therefore, preferred by transporters (also referred to as
shippers) and consignors. Also, chances of damage and pilferage are considerably reduced when freight is
transported in containers. Furthermore, where transshipment of freight is required, container is the only option.
Wagons do not meet these conditions as they cannot be taken off rails. To classify wagon and container in the
same category was therefore, held to be inappropriate. The Commission further noted that within the inter-modal
transportation options for container freight, the choice of transport depends on a plethora of factors like distance
to be moved, physical characteristic and value of the commodity to be moved, total time required for the
consignment and total price of transportation. Transport logistics indicate that for short hauls, road transport is
preferred while for longer hauls rail transport and where available, water transports are the preferred options. The
Commission concluded that since the informants had not specified the nature of freight and the distance to be
covered, it was only appropriate that the relevant market covered both road and rail transportation; and to restrict
the relevant market to only the rail network would tantamount to a constrained analysis, arising solely from the
allegations of the informants, and overlooking the broader issue of availability of alternative choices to users in
the transport of container freight. The relevant market in the present case was therefore, held to be “the
transportation of containers within the boundaries of the country” and consequently the Commission concluded
that road and rail are substitutable for container freight operations.
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— In the case of Belaire Owners’ Association v DLF Ltd,368 the Commission held that the market was for
“services” in “high end residential accommodation”. The definition of services under section 2 was analysed to
conclude that service was being provided by DLF. “High end” was used to signify not only function, but also
size, reputation of the location, characteristics of neighbours, quality of constructions, etc.369 The Commission
compared residential accommodation for different income groups and after applying the SSNIP test concluded
that Relevant market consisted of “high end residential accommodation”. It compared DLF flats with flats built
by Delhi Development Authority and Ghaziabad Development Authority. Additionally, various factors like
quality of facilities which make life luxurious and comfortable would bring a lot of difference to the type of
accommodation that is selected by a person.
— In the case of Magnus Graphics,370 the Commission noted that label printing machine appeared comparable to
label printers manufactured by competitors of Opposite Party No. 1. Moreover, in view of presence of heavy
competitors, the Commission refused to confine market in terms of a particular model of product of Opposite
Party No. 1 only. Further, from material on record it was clear that relevant product market could not be limited
to servicing of Nilpeter FB 3300 Servo Flexo Printing Machines alone.
— In the case of HT Media Ltd v Super Cassettes Industries Ltd,371 a complaint was made with respect to certain
conduct of Opposite Party/OP in licensing its repertoire of songs to Informant. The Commission observed that a
Copyright consists of a bundle of different rights in same work, which can be exploited by owner of work
collectively or separately. Different types of rights may constitute different markets based on facts and
circumstances of case and markets involved. Therefore, the Commission considered narrowing down relevant
market based on medium of broadcasting. Further, Commission agreed with the DG on his conclusion that radio
was distinct from other media of broadcasting. Also, Commission was of the view that music content could not
be considered as substitutable/interchangeable with non-music content. Further, the technical distinctions
between AM and FM frequencies as well as fact that private FM stations could only broadcast on FM and not on
AM as per Government policy coupled with limitation on content imposed on private FM stations made it clear
that AIR and FM radio channels were distinct. Commission therefore, concluded that for purposes of
determination of relevant product market, AIR (AM as well as FM) was distinct from private FM stations.
Further, it was noted by Commission that Bollywood music can be distinguished from possible alternatives
comprising of non-Bollywood music by virtue of specific characteristics as a result of which Bollywood music
was not interchangeable with non-Bollywood music. Therefore, Commission concluded that relevant product
market in this case was “market for licensing of Bollywood music to private FM radio stations for broadcast”.
— In the case of Re Domestic Air Lines,372 the Commission agreed with the determination of relevant market by
DG as market of “service of passenger carriage provided by airline operators in India”. The Commission
observed that as per market share of each airline calculated by Directorate General of Civil Aviation (DGCA)
taking into account the number of passengers flown by them and also as per the submissions of various airlines
before DG, none of the players could be said to be enjoying a position of dominance in the relevant market. The
market share also kept on fluctuating every month depending upon the number of passengers flown by each
airline.
— In Suo-Motu Case by MRTPC v North Delhi Power Ltd, BSES Rajdhani Power Ltd, BSES Yamuna Power Ltd,373
the Commission after taking into consideration the provisions of the Competition Act, 2002 the provisions of the
Electricity Act, 2003 and on the basis of the various other regulatory provisions, held the relevant market as
distribution and supply of electricity in the licensed areas of respective Discoms in Delhi.
— In Quadrant EPP Surlon India Ltd v INA Bearings India Pvt Ltd,374 the Commission observed that cylindrical
roller bearings could be either procured from INA or its authorised distributor/stockist or it could be procured
from any other manufacturer, meeting INA brand specification. Thus, relevant market in instant case was taken
as “procurement of INA brand (or equivalent make) cylindrical roller bearings in India”.
— In Shri Yogesh Ganeshlaji Somani v Zee Turner Ltd and Star Den Media Services Pvt Ltd,375 on the basis of the
features and technology used in the supply chain of broadcasting of TV channels, the Commission was of the
view that in terms of factors mentioned under section 2(t) and 19(7) of the Competition Act, 2002 the services of
aggregating and distributing TV channels was a unique kind of service which could not be substituted by any
other kind of service. Hence, the Commission held the relevant product market as the market of the services of
aggregating and distribution of TV channels to MSOs, DTHOs and IPTVOs in India.
— In ESYS Information Technologies Pvt Ltd v Intel Corp (Intel Inc), Intel Semiconductor Ltd and Intel Technology
India Pvt Ltd,376 Commission found that there was substitutability between microprocessors based on
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architecture. It was noted that the given nature of high technology industry, substitutability across evolving
products could undergo a change and relevant product definition itself was dynamic. For instance, the
Commission noted that a few years back X86 could not be replaced by other architectures. However, changing
technological paradigm introduced possibility of substitution. Accordingly, Commission concluded that there
were four distinct relevant product markets, as identified by DG, to be considered. Further, to determine “relevant
geographic market”, Commission was to give due regard to “all or any of factors such as regulatory trade
barriers, local specification requirements, national procurement policies, adequate distribution facilities, transport
costs, language, consumer preferences and need for secure or regular supplies or rapid after-sales services.” In
present case, as per Agreement, territory of operation of Informant and other distributors and OEMs was India.
Accordingly, the distributors or OEMs in India cannot operate outside the territory of India. Accordingly,
Commission was also of view that there were four relevant markets involved in instant case as identified by DG,
viz., “the markets of microprocessors for desktops PCs in India”; “the market for microprocessors of
mobile/portable PCs such as laptops, notebooks, net-books, etc. in India”; “the market of microprocessors for
servers in India”; and “the market of microprocessors for tablets in India”.
— In Financial Software and Systems Pvt Ltd Informant v ACI Worldwide Solutions Pvt Ltd,377 the Commission
was of the view that DG had correctly found that other components of electronic payment systems/peripheral
software only complemented an EFT Switch and could not substitute same. Therefore, Commission was of the
opinion that market for EFT Switch/switch software was relevant upstream product market. However,
Commission found it imperative to point out that although DG had correctly found EFT Switch/switch software
to constitute a distinct relevant product, DG had limited market analysis for EFT Switch/switch software to
switch software used by banks for communicating with their core banking network alone. On this count,
Commission differed from DG’s understanding of relevant product market (upstream). Further, with respect to
relevant downstream market, DG had reported that EFT Switches needed to be customised/modified in order to
suit Indian buyers and to meet specific requirement of each bank for which many specialised firms are engaged.
Usually, license agreements entered into by and between EFT Switch/switch software developers and buyers
have provisions for licensee to outsource specified services to third parties. Such customisation/modification
services were required throughout entire life of switch software on an ongoing basis depending on value added
services sought to be provided as well as various regulatory requirements put in place from time to time.
Commission noted that Opposite Parties/OP’s/ACI a first mover in upstream market had allowed third party
provisioning of customisation and modification of EFT Switch/switch software. Competitors of OP’s were
providing a vertically integrated product, i.e., EFT Switch/switch software along with associated customisation
and modification due to efficiency considerations. However, as per facts gathered a significant number of players
existed in relevant downstream market. Therefore, Commission concluded that two separate markets existed,
with respect to EFT Switch/switch software and provision of services of customisation and modification of EFT
Switch/switch software. It was further observed that even though EFT Switch suppliers other than OP provided
customisation and modification of their software in-house, most had not restricted their buyers from procuring
these customisation and modification services from third parties. Hence, Commission was in consonance with
findings of DG, that relevant downstream product market would be “the provision of services with respect to
customisation and modification of EFT Switch/switch software”.
— In Faridabad Industries Association v Adani Gas Ltd,378 the Commission held that it was in agreement with
classification of consumers made by DG on the basis of intended use and price of natural gas. Also, the
Commission noted that while industrial consumers use gas to meet energy requirements in their plants for
heating, etc., end use of gas for domestic consumers was cooking for self-consumption which was different from
commercial consumers such as restaurants, malls, hospitals who used it for commercial purposes. Similarly,
consumption of gas by consumers for meeting their transportation requirements made these consumers a different
segment of consumers. Also price at which natural gas was supplied to these different consumer segments too
being different and technical considerations involved in supply and distribution of gas to different segments being
different, further necessitated a distinction to be made between consumers under above categories. The
Commission was also in agreement with DG on natural gas being distinct and distinguishable from other sources
of energy in as much as natural gas in terms of its characteristics was a flammable gaseous mixture composed
mainly of methane which was made available to consumers through a network of pipelines. It was noted by DG
that unlike other liquid hydrocarbons such as furnace oil, light diesel oil, etc., which could be considered as
substitutes, natural gas being a product in gaseous state did not require any storage facilities at end of these
consumers. Further, being almost free from sulphur compounds, natural gas was cleaner, smoke-free and soot-
free environmentally clean fuel as compared to liquid hydrocarbons. Being available on tap, natural gas ensured
an uninterrupted supply of fuel unlike liquid fuels which needed to be periodically transported and stored by
consumers at their premises. Also natural gas by burning more completely than other liquid fuels, also resulted in
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better efficiencies. Therefore, Commission was of opinion that relevant product market in present case was as
market of supply and distribution of natural gas to industrial consumers.
Relevant Market and the SSNIP (Small but Significant Non-transitory Increase in Price) Test
The definition of the relevant market is not an end in itself. However, it is a central tool and starting point to identify
situations where there might be competition concerns. It is an important qualitative first step in a structured effects based
investigation as it enables to scope the competitive landscape and identify the relevant (potential) competitors. By relying
on mostly readily available data already collected by firms, it helps to focus the more data intensive effects analysis on the
relevant issues. The necessity of defining market has been part of the competition policy of the EU from its inception and
pre-condition both to assess dominance under Article 102 Treaty of the Functioning of the European Union (TFEU) and
effect based infringements under Article 101(1) and (3) TFEU as well as an essential part of the EU Merger Control
Regime.379 The main purpose of market definition is to identify in a systematic way the competitive constraints that the
undertakings involved face.380 Firms are subject to three main sources of competitive constraints: demand side
substitutability, supply side substitutability and potential competition. From an economic point of view, for the definition
of the relevant market, demand side substitution constitutes the most immediate and effective disciplinary force on the
suppliers of a given product, in particular in relation to their pricing decisions.381 However, analysis of both demand and
supply side substitution is required in order to establish relevant market.382 The weakest competitive constraint, potential
competition, will usually be assessed at the later stage of the competitive assessment.383 The goal of the assessment of
demand side substitutability is to identify the group of products or services that are alternatives in satisfying the needs
normally served by the product in question in the eye of the relevant customers. The respective product characteristics,
product use and prices are usually important factors in such an assessment.384 The European Commission in the case of
Hoffmann–La Roche v Commission385 observed:
If a product could be used for different purposes and if these different uses are in accordance with economic needs, which are
themselves also different, there are good grounds for accepting that this product may, according to the circumstances, belong to
separate markets which may present specific features which differ from the standpoint both of the structure and of the conditions of
competition. However, this finding does not justify the conclusion that such a product together with all the other products which
can replace it as far as concerns the various uses to which it may be put and with which it may compete, forms one single market.
The concept of Relevant Market, in fact implies that there can be effective competition between the products which form part of it
and this presupposes that there is a sufficient degree of interchangeability between all the products forming part of the same market
in so far as a specific use of such product is concerned.386
The classic economic model to assess the demand substitution is the SSNIP test, i.e., by assessing, whether customers
would switch to other readily available substitute products or to suppliers located elsewhere in response to a hypothetical
small (5%–10%) but permanent increase in price of the product in question. According to the conceptual framework, a
hypothetical small but significant permanent price increase is applied to the respective product in question. In the situation
where the prices of the alternative products stay the same, if such an increase in price would lead customers to switch to
other alternative products and the resulting loss of customers would make such increase unprofitable, it means that the
product/set of products of the firm(s) in question does not constitute a separate market and that there are other products that
pose sufficient competitive constraints on it. Thus, further products are added to the relevant market, and the test is applied
until the increase in prices is profitable and the market is worth monopolising.387 The conceptual approach taken in the
context of geographic market definition is the same and is also based on the SSNIP test. It assesses the extent to which the
customers of a product in question would switch to suppliers located in other territories in response to a hypothetical small
but permanent increase in price of that given product.388
Cellophane Fallacy: It is necessary to enter a word of caution on the hypothetical monopolist test when applied to abuse of
dominance cases. A monopolist may already be charging a monopoly price and if it were to raise it any further, its
customers may cease to buy from it at all. In this situation, the monopolist’s own price elasticity or the extent to which
consumers switch from its products in response to a price rise is high. If SSNIP test is applied in these circumstances
between the monopolised product and the other one, this might suggest a high degree of substitutability, since consumers
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are already at a point where they will cease to buy from the monopolist; the test, therefore, would exaggerate the breadth of
the market by the inclusion of false substitutes. This error was committed by the US SC in US v El Du Pont de Nemour &
Co,389 in a case concerning packaging material including cellophane.
Supply side substitution: This seeks to identify the possibility of customers to switch to alternative suppliers. The question
is, whether, other suppliers would start producing the product in question if there is a permanent price increase by 5%–
10% in the market, i.e., whether, firms are able and willing to switch their production without incurring significant
additional costs or risks in a short time period. Important factors to consider for assessing the ability of potential suppliers
to switch production in a short time frame are the technical feasibility, regulatory and other barriers, etc. In addition, it has
to be analysed if the firms in question have the ability to switch production without incurring significant additional costs or
risks, e.g., considerable investment associated with such switching including the respective opportunity costs. When
evaluating the geographic dimension of the market, supply substitution relates to the possibility of other suppliers, located
outside a certain geographic area, to start supplying that area in the short term and without incurring significant additional
costs or risks.390
Application of SSNIP Test in India
In the case of MCX Stock Exchange,391 the DG examined the efficacy of using the SSNIP test for determining market
definition. The DG report observed:
In the present case, NSE has completely waived transaction charges, admission fee and data feed fee in the CD segment ... in fact,
there is no pricing in the CD segment. Therefore, the question of conducting any test based on pricing for determining demand
substitutability is not possible in the present case ... in these circumstances, SSNIP test is not being considered in the present case
for carrying out the test of demand substitution.
The Commission also did not get into technical tests such as SSNIP, particularly in the absence of historic data of prices.
The Commission observed:
SSNIP test is a tool of econometric analysis to evaluate competitive constraints between two products. It is used for assessing
competitive interaction between different or differentiated products. Ideally, time-series price data or trend should be examined to
see whether a small but significant non-transitional increase in price has led to switching of consumers from one product to
another. However, international jurisdictions have not reposed excessive faith in this test. The US Horizontal Merger Guidelines,
2010 considers SNIPP test as solely a methodological tool for performing hypothetical monopolist test for the analysis of mergers.
Similarly, in its notice published in the Official Journal C 372, 9 December 1997 p, 005 - 0013, the European Commission advises
action on the applicability of SSNIP test for determining market definition in terms of Article 82 of the European Union Treaty. In
the instant case, firstly, the CD segment did not exist prior to August, 2008 and secondly, right since inception, transaction fees and
data feed fees etc., which may be said to constitute price, have not been charged by any market player. In such a scenario, an
attempt to determine even hypothetical competitive prices would be nothing more than pure indulgence of intellect and
unwarranted misuse of an econometric tool, which in itself, is not error-proof. Such an attempt is bound to attract the criticism
drawn in the United States v El Du Pont de Nemour and Company Case No. 351 US 377 - 1956, notorious in the competition
lexicon as the “Cellophane Fallacy” case where the SSNIP test exaggerated the breadth of the market by the inclusion of the false
substitutes.
21.17 Moreover, the proportion of transaction value that a broker/trader pays as transaction fees and other fees is so small and
insignificant that it would have practically no bearing on substitutability effect. Therefore, SSNIP would be irrelevant in such a
case.
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The Commission in the case of Hiranandani Hospital392 held that the standard approach to defining the relevant market is
the Hypothetical Monopolist Test or SSNIP Test. However, it was held that the use of SSNIP test in case of differentiated
products, as in the present case, that has both price as well as non-price dimensions may be inappropriate to the extent that
SSNIP would capture only price-related aspects.
In the case of Jindal Steel and Power Ltd,393 the DG held that heavy structural cannot replace long rails of railway tracks.
Applying the principles of the SSNIP Test, the DG noted that a small but significant non-transitory increase in price of
long rails will not make the consumers switch to heavy structural. It was observed that IR was the major consumer of long
rails and its demand for the same could not be substituted by heavy structural.
In the case of Kansan News Pvt Ltd394 the Commission held that in view of product characteristics, cable TV system was
distinct from DTH or other platforms like IPTV, etc. The relevant product market, accordingly, was held to be cable TV
service. In this regard, the Commission noted that since the product characteristics of cable TV were entirely different from
other platforms, the need of carrying out SSNIP test would not materially affect the determination of relevant market in the
case. The change in price of Cable would not affect its market in comparison to DTH since the characteristics of the two
platforms were entirely different.
“Service”
The expression has been defined to mean “service” of any description made available to potential users. The definition is
very wide and it includes services in connection with business of any industrial or commercial matters and in particular the
services of banking, communication, education, financing, insurance, chit funds, real estate, transport, material treatment,
processing, supply of electrical or other energy, board and/or lodging, entertainment, amusement, construction, repair,
conveying of news or other information and advertising.
The definition uses the words “with business of any industrial or commercial matters.” These words seem to exclude
service relating to any philanthropic purpose. But then it seems to include, though not specifically stated, professional
services rendered by professionals like Advocates, Chartered Accountants, Architects and the like, as their services would
be in the nature of “commercial matters”.
“Service” under the MRTP Act, 1969
Section 2(r) of MRTP Act, 1969 defined the term “service” as under:
“service” means service which is made available to potential users and includes the provision of facilities in connection with
banking, financing, insurance, chit fund, real estate, transport, processing, supply of electrical or other energy, board or lodging or
both, entertainment, amusement or the purveying of news or other information, but does not include the rendering of any service
free of charge or under a contract of personal service;
Explanation.—For the removal of doubts, it is hereby declared that any dealings in real estate shall be included and shall
be deemed always to have been included within the definition of “service”.
The definition included the services in the areas specified therein. The services relating to chit funds and real estate and
Explanation were added by the MRTP (Amendment) Act, 1991. It may be noted that a service, which is free of charge or is
under a contract of personal service, was outside the scope of the definition. Though, not specifically stated, professional
services rendered by lawyers, doctors, chartered accountants, cost accountants, architects, etc., were also covered under
this clause. Contract of personal service was excluded from the purview of “service” and “trade practice”, and accordingly
there is no question in such a case of adoption or indulgence in RTP.395
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Initially, imparting of education by a school, on payment of tuition and other fees by the students was considered to be a
“service” as defined in section 2(r).396 However, later on, it was held that education and matters pertaining to education
fell outside the purview of MRTP Act, 1969, and thus not maintainable for enquiry for want of jurisdiction. This decision
followed the Karnataka High Court judgement in case of NITTE Education Trust v UOI.397
Re Sahara Saving & Investment Corp Ltd,398 the Commission held that the definition of the term “service” contained in
section 2(r) is couched in terms of widest amplitude. By inviting and accepting deposits from public, the respondent is
performing functions which bear close kinship to banking included in the definition of “service”. Banking has not been
used in the definition of “service” in its technical sense; in common parlance, acceptance of deposit for purposes of lending
or investment partakes of the various activities which can be clubbed under “banking”. It was argued that the respondent is
covered by the Residuary Non-Banking Companies (Reserve Bank) Directions, 1987 and its trade practices could be
considered to have been expressly authorised by law. The Commission observed that the said Directions do not even
impliedly authorise the respondent to make false and misleading claims about its services and thereby indulge in unfair
trade practices; it is naive to suggest that the unfair trade practices are expressly authorised by law.
The services of merchant banker, lead merger for public issue of shares or debentures and underwriter to the issue also
come within the definition of “service”.399
The Commission reiterated in the case DG (I&R) v National Council for Labour Management,400 that “education” is
service and overruled its earlier order in DG (I&R) v Holy Anges School case.
Trade practices relating to sale of immovable property were not originally covered under section 2(r) or under the
definition of “goods” under section 2(e). The restriction in respect of transferring of flats does not relate to any service, but
relates to immovable property.401
In the following cases, the Commission held that the activity of builders is covered under section 2(r):
— Re Manoj Builders,402 the respondent had been indulging in misrepresentation and misleading statements in
respect of booking of sites. The MRTP Commission held:
It is apparent that the trade as defined under section 2(s) of the MRTP Act, 1969 is not confined to a business
relating to goods only but also includes the provision of any services. The word ‘service’ has been defined in
section 2(r) of the MRTP Act. It means service of any description available to potential users but does not
include the rendering of service free of charge or under a contract of personal service. Therefore, any service
to potential users of even immovable property is a service within the meaning of section 2(r) provided it is
neither free nor under a contract of personal service and thus rendering of such service is a trade within the
meaning of section 2(s) of the MRTP Act.
In this respect the following observations in MG Investment and Industrial Co Ltd v New Shorrock Spinning and Mfg Co
Ltd,403 are very pertinent:—
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It would appear from the definition that amusement and recreational services, repair workshops, hotels, rooming houses, medical
and health services, legal services, motion pictures and non-profit members’ organisations, architectural, accounting, auditing and
book keeping services, research and development laboratories would be covered by the definition. I must, however, make it clear
that i am not called upon to decide whether these are services and do not propose to do so. I am giving these by way of illustration
that these would be services made available to potential users for remuneration. Obviously hotels and rooming houses are
immovable properties. There can be ‘services’ relating to the same which come within the definition of trade.
— Re RK Towers India Pvt Ltd,404 the respondent advertised that it was going to construct shops, offices and
shopping centre. The petitioners approached the respondent company for purchase of an office unit. As per
agreement, total amount payable worked out to Rs 3,13,500, but the respondent company went on raising
demands and actually collected an aggregate amount of Rs 3,80,325 in various instalments. It was also
complained that the covered area allotted is much less than for which the price has been paid. The MRTP
Commission held:
There is no doubt that simple sale of immoveable property as such does not involve any service, but the
contracts with builders are not of simple sale of immovable property. They are actually for provision of
services. The builders sell their services of constructing residential flats, shops, office accommodation along
provisions of facilities, under their management and maintenance, like lifts, car parking, common stairs,
supply of electric and water connections and electricity in places of common use etc. to potential users for a
price which is received in advance by instalments as construction work of building progresses. The builders
generally do not own any land and they either acquire the land and make construction by utilising that money
which they receive from time to time by instalments from intending purchasers or sometimes they possess
some land and they devote the same for the construction of the building at the expense of the persons who are
prospective purchasers and who in the terminology of the builders have done the ‘booking’ of the residential
flats or shops or office accommodation. In such cases, no single purchaser of land gets any portion of the land.
He merely gets user of the land on which the building exists as well as the facilities which are meant for
common use under the management of the builders. Therefore, in the case of such contracts there is providing
of services by the builders to the investors who are called ‘purchasers’ of the flats, etc. after completion of
building and provision of attendant services. In this respect it is very important to mention that as generally
happens, transfer of flats, office accommodation, etc. is not allowed without the permission of the builders or
their successors.
— In Bhawani Das Arora v Ghaziabad Development Authority,405 relying on the judgement of the Supreme Court
in Lucknow Development Authority v M K Gupta,406 it was held by the MRTP Commission that the principles
laid down in the said case, though in the context of Consumer Protection Act, 1986 very well applied to such
services as the respondent is providing falling within section 2(r) of the MRTP Act, 1969. In that case, the
Supreme Court observed:
When private undertakings are taken over by the Government or corporations are created to discharge what is
otherwise State’s function, one of the inherent objectives of such social welfare measures is to provide better,
efficient and cheaper services to the people ... Construction of a house or flat is for the benefit of the person
for whom it is constructed. He may do it himself or hire services of a builder or contractor. The latter being
for consideration is service as defined in the Act. Similarly, when a statutory authority develops land or allots
a site or constructs house for the benefit of common man, it is as much service as by a builder or contractor.
The one is contractual service and other statutory service. If the service is defective or it is not what was
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represented, then it would be unfair trade practice as defined in the Act. Any defect in construction activity
would be denial of comfort and service to a consumer. When possession of property is not delivered within
stipulated period, the delay so caused is denial of service.
“Service” under the Consumer Protection Act, 1986
The expression “Service” initially stood defined in the Consumer Protection Act, 1986407 exactly on the lines of section
2(r) of the MRTP Act, 1969 before its amendment in 1991.408 In this regard, it would be useful to take note of the views of
the Supreme Court in Lucknow Development Authority v MK Gupta.409 The salient aspects of the judgement (pointedly in
the context of the statutory authorities established to undertake housing development activity for the public, which was
held to be “Service”) are summarised below:
“Goods”, whether cover immovable property: The argument that the Consumer Protection Act, 1986 is not applicable to
immovable goods is not well founded. The respondents were aggrieved either by delay in delivery of possession of house
or use of substandard material, etc. and, therefore, they claimed deficiency in service rendered by the appellants. The
jurisdiction of the National Commission could not be ousted because even though it was service it related to immovable
property.
Service
The definition of the term “service” is in three parts. The main part is followed by inclusive clause and ends by
exclusionary clause. The main clause itself is very wide. It applies to any service made available to potential users. The
words “any” and “potential” are significant. But are of wide amplitude? The word “any” means “one or same or all”. It has
a diversity of meaning and may be employed to indicate “all” or “every” as well as “same” or “one” and its meaning in a
given statute depends upon the context and subject matter or the statue. The use of the word “any” in the context it has
been used in clause (o) of section 2(1) of the Consumer Protection Act, 1986 indicates that it has been used in wider sense
extending from one to all.
The other word “potential” is again very wide, i.e., to say naturally and probably expected to come into existence at some
future time, though not now existing. The word service is not only extended to actual users, but those who are capable, to
any or all actual or potential users. The meaning of this word has been extended to even such facilities as are available to a
consumer in connection with banking financing, etc. Each of these is wide ranging activities in day-to-day life. They are
discharged both by statutory and private bodies.
There is no reason to hold that authorities created by a statute are beyond the purview of the Act. When banks advance
loans or accept deposits or provide facility of locker they undoubtedly render service. The State Bank or a nationalised
bank renders as much service as a private bank. No distinction can be drawn in private and public transport or insurance
companies. Even the supply of electricity or gas which throughout the country is being made, mainly, by statutory
authorities is included in it. The legislative intention is thus clear to protect a consumer against services rendered even by
statutory bodies. The test, therefore, is not if a person against whom complaint is made is a statutory body but whether the
nature of the duty and function performed by it is service or even facility.
A Government or Semi-Government body or a local authority is as much amenable to the Act as any other private body
rendering similar service.
House construction activity
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What remains to be examined is if housing construction or building activity carried on by a private or statutory body was
service within the meaning of clause (o) of section 2 of the Consumer Protection Act, 1986 as it stood prior to inclusion of
the expression “housing construction” in the definition of “service” by Ordinance No. 24 of 1993. The entire purpose of
widening the definition is to include in it not only day-to-day buying and selling activity undertaken by a common man but
even to such activities which are otherwise not commercial in nature yet they partake of a character in which some benefit
is conferred on the consumer. Construction of a house or flat is for the benefit of the person for whom it is constructed. He
may do it himself or hire services of a builder or contractor. The latter being for consideration is service as defined in the
Act. Similarly, when a statutory authority develops land or allots a site or constructs a house for the benefit of common
man it is as much service as by a builder or contractor. The one is contractual service and other statutory services. If the
service is defective or it is not what was represented then it would be unfair trade practice as defined in the Act.
Any defect in construction activity would be denial of comfort and service to a consumer. When possession of property is
not delivered within the stipulated period the delay so caused is denial of service. Such disputes or claims are not in respect
of immovable property as argued but deficiency in rendering of service of particular standard, quality or grade. Such
deficiencies or omissions are defined in sub-clause (r) of clause (1) of section 2 of the Consumer Protection Act, 1986 as
unfair trade practice. If a builder of a house uses sub-standard material in construction of a building or makes a false or
misleading representation about the condition of the house, then it is denial of the facility or benefit of which a consumer is
entitled to claim value under the Act. When the contractor or builder undertakes to erect a house or flat then it is inherent
in it that he shall perform his obligation as agreed to. A flat with a leaking roof, or cracking wall or sub-standard floor is
denial of service. Similarly, when a statutory authority undertakes to develop land and frame housing scheme, it, while
performing statutory duty, renders service to the society in general and individual in particular.
A Development Authority, while developing the land or framing a scheme for housing, discharges statutory duty, the
purpose and objective of which is service to the citizens. The entire purpose of widening the definitions is to include in
them not only day-to-day buying of goods by a common man but even to such activities which are otherwise not
commercial but professional or service-oriented in nature. The provisions in the Acts, namely, Uttar Pradesh Urban
Planning & Development Act, 1973, Delhi Development Act, 1957 or Bangalore Development Act, 1976 clearly provide
the preparing plans, development of land, and framing of scheme, etc. Therefore, if such authority undertakes to construct
building or allot houses or building sites to citizens of the State either as amenity or as benefit then it amounts to rendering
of service and will be covered in the expression “service made available to potential users”. A person who applies for
allotment of a building site or for a flat constructed by the development authority or enters into an agreement with a builder
or a contractor is a potential user and nature or transaction is covered in the expression “service of any description”. It
further indicates that the definition is not exhaustive. The inclusive clause succeeded in widening its scope but not
exhausting the services which could be covered in earlier part. So any service except when it is free of charge or under a
contract of personal service is included in it. Since house activity is a service it was covered in the clause as it stood before
1993.
Power of forums to award compensation: Who should pay it?
No functionary in exercise of statutory power can claim immunity, except to the extent protected by the statute itself.
Public authorities, acting in violation of constitutional or statutory provisions oppressively are accountable for their
behaviour before authorities created under the statute like the National Commission or the Courts entrusted with
responsibility of maintaining the rule of law. Each hierarchy in the Act is empowered to entertain a complaint by the
consumer for value of the goods or services and compensation.
When the Commission has been vested with the jurisdiction to award value of goods or services and compensation, it has
to be construed widely enabling the Commission to determine compensation for any loss or damage suffered by a
consumer, which in law is otherwise included in wide meaning of compensation. The provision enables a consumer to
claim and empowers the Commission to redress any injustice done to him. The Commission or a forum in the Act is thus
entitled to award not only value of the goods or services, but also to compensate a consumer for injustice suffered by him,
which in law extends to physical, mental or even emotional suffering, insult or injury or loss.
Who should bear the brunt?
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When the Court directs payment of damages or compensation against the State the ultimate sufferer is the common man. It
is the tax-payer’s money which is paid for inaction of those who are entrusted under the Act to discharge their duties in
accordance with law. It is, therefore, necessary that the Commission, when it is satisfied that a complainant is entitled to
compensation for harassment or mental agony or oppression, then it should further direct the department concerned to pay
the amount to the complainant from the public fund immediately, but to recover the same from those who are found
responsible for such unpardonable behaviour by dividing it proportionately where there are more than one functionaries.
Directions
The Lucknow Development Authority shall fix responsibility of the officers who were responsible for causing harassment
and agony to the respondent. The amount of compensation of Rs 10,000 awarded by the Commission for mental
harassment shall be recovered from such officers proportionately from their salary.
Rendering of Service “Free of Charge” or “Under a Contract of Personal Service”
Under the Consumer Protection Act, 1986 as also under the MRTP Act, 1969, “service” excludes service rendered free of
charge or under contract of personal service. In this regard, the following case laws under the Consumer Protection Act,
1986 seem to be worthy of being noted:
— The concept of personal service stems from a master-servant relationship, which is entirely different from
professional relationships, e.g., lawyer-client relationship or doctor-patient relationship. Rendering of service
under a contract of personal service is excluded from the purview of the definition of “Service” under Consumer
Protection Act, 1986 for the reasons that the employee would be working under the supervision and control of the
employer and the employer could be turned out of employment at any time at the employer’s sweet will. The
stipulation as to payment of consideration is, however, a must before the “service” could fall under the purview
of this Act. Thus, non-performance of a duty vested under a statute for which no payment is made is not a service
under the Consumer Protection Act, 1986.410
— The grant of Government subsidy intended for the development of the backward areas, which is given as an
incentive and concession to industry cannot be labeled as hiring out of service by the Central or the State
Government.411 The Assessment and levy of Income-tax is not a service extended out—either by the Central
Government or its Tax Officers, within the meaning of section 2(1)(o).412 Treatment provided to the public,
wholly free of charge, by Government-run hospital or charitable institutions through the doctors and other
employees employed by it will not constitute service under this Act.413
“Potential” users of service
— As under the MRTP Act, 1969 the definition of “service” in section 2(1)(o) of the Consumer Protection Act, 1986
includes service made available to potential users. Also, the definition is having a wider connotation, as it is of
inclusive nature. Therefore, when some of the services though not expressly stated in the definition clause are
made available to potential users, like the marriage hall, it would fall within the definition of “service” for the
purposes of the Act.414 Likewise, the fact that non-mention of telephone facility falls in the inclusive portion of
the definition of “Service” is of no consequence in view of the wide language used in the main part of the
definition which takes in every form of service; since such service is not provided free of charge nor it is contract
of personal service, it does constitute hiring of service for consideration.415
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What constitutes “Service”—some illustration arising out of the judgements passed under the
Consumer Protection Act, 1986
— An organisation engaged in construction of, and providing, flats on receipt of consideration from the members of
the Armed forces, either present or past, falls within the meaning of “Service” as defined in section 2(1)(o); and
the fact that it is rendering such service for consideration, but is functioning on a no-profit no-loss basis is
irrelevant in this context.416
— The Municipal Corporation of Madras is rendering service to builders in the matter of granting permission and
the consideration therefor is fee collected from the builders; fee is collected not at the time of the application, but
immediately after the grant of permission. It, therefore, is a case where the payment of consideration is deferred
till the plan is sanctioned and complaint against such public body for delay in granting permission for building
constructions; therefore, is maintainable.417
— When capitation fees is paid on the promise that a seat in an educational institution would be reserved for the
complainant, it is “service” promised by the respondent for consideration.418
— Free maintenance of the printing machine during the Warranty period constitutes Service as defined in the
Consumer Protection Act, 1986 in as much as Warranty was a part of the composite contract for supply of
machine and its maintenance for a period of one year. The consideration for this service to be rendered under the
Warranty period is obviously included in the sale price of the machine; and it is wrong to maintain that the
Warranty obligation was gratis.419
When Banks advance loan or accept deposit or provide facility of locker they undoubtedly render service.
Likewise is Life Insurance or General Insurance Services, provided by LIC or General Insurance Companies,
which are covered by this Consumer Protection Act, 1986.420 The supply of electricity, gas or water, by
Municipal authorities for which charges are based on consumption thereof, is service under this Act.
The public transportation services made available by the Airlines, Roadways Buses or Railways, which all
are on payment or fare, constitute service within the meaning of the Consumer Protection Act, 1986.421
What does not constitute Service—some illustrations arising out of the judgements under the
Consumer Protection Act, 1986
— Maintenance of GPF account of Government employees by a Government organisation does not involve hiring of
service by the PF subscriber; there is compulsion to subscribe to the fund, and there can be no question of hiring
Services involved, because hiring means hiring voluntarily.422
— A University while valuing the answer papers or undertaking revaluation of answer papers or the re-checking of
marks awarded to a candidate at the instance of the candidate who had appeared at the examination is not
performing a service which had been hired or availed of for consideration.423
— Activities of the Air Force Naval Housing Board, who is not the owner of the houses and which has no interest in
the houses got constructed by it for the benefit of the service personnel of the Air Force and the Navy and which
is more on the nature of a welfare activity on no loss no profit basis, does not compare formally with the DDA’s
activity in executing their Self Financing House Scheme in as much as DDA charges certain percentage towards
the service, whereas the Board does not. The complaint against the Board is not maintainable.424
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— Bureau of Indian Standards (BIS) in licensing parties to use ISI marks on their products is performing as statutory
authority a regulatory function to ensure production of quality products in the interest of the consumers.
Licensing by BIS is not a service rendered for consideration, as licence fee cannot be treated as consideration for
supply of any goods or rendering any “service” to the licensee.425
— Placement of an order for the purchase of lottery tickets does not tantamount to rendering of service by the lottery
tickets vendor as defined in the Consumer Protection Act, 1986.426
— Service rendered by a Government-run Hospital where the patients are treated wholly free of charge does not
constitute service under the Act.427
— The exercise of sovereign functions which are of statutory nature, e.g., supplying water by the Tamil Nadu
Government for irrigation, however, cannot be termed as service, within the meaning of the Act.428 Likewise, the
State while issuing a passport is not providing any service for consideration and hence falls outside the purview
of the Act.429
Cases under the Competition Act, 2002
In the case of Sunil Bansal v Jaiprakash Associates Ltd,430 it was argued that for the present investigation to fall within the
jurisdiction of the Commission, the sale of residential units including apartments should either amount to sale of “goods”
or provision of “services”. It was further argued that the activity of sale of the residential units by JAL/JIL amounted to
sale of immovable property and not “goods” since the term “goods” as defined under section 2(i) of the Competition Act,
2002 made reference to the Sale of Goods Act, 1930 which expressly excluded immovable property from its ambit. As
such, it was sought to be canvassed that the sale of the residential units in the instant case would also not amount to sale of
goods. The Commission rejected the argument and relying on Supreme Court decision in Lucknow Development Authority
v MK Gupta431 held that housing activities undertaken by development authorities are “services” and are covered within
the definition of service. The Commission held that though the said ruling was given in the context of the Consumer
Protection Act, 1986, the same was fully applicable under the scheme of the Competition Act, 2002.
The Commission further noted that even without taking the support of the decisions of Supreme Court, a plain reading of
section 2(u) of the Competition Act, 2002 makes it abundantly clear that the activities of JAL/JIL in context of the present
matter squarely fall within the ambit of term “service”. The meaning of “service” as envisaged under the Act is of very
wide magnitude and is not exhaustive in application. It is not in dispute that JAL/JIL undertakes to construct apartments
intended for sale to the potential consumers after developing the land.432
— In Arshiya Rail Infrastructure Ltd case, “Transport” was held to be included in the definition of “service” given
in section 2(u) of the Competition Act, 2002 and public carriage of passengers or goods is transport. Therefore, IR
was held to be an “enterprise” within the definition of section 2(h) of the Competition Act, 2002.433
— The COMPAT in the NSE case434 observed that a fundamental error was committed in treating CD segment as a
product by itself and assessing relevant market focused on products being traded on stock exchange as opposed to
services, which were offered by stock exchanges. The Tribunal emphasised that a stock exchange did not
manufacture, offer or sale any product and simply offered a trading platform and associated services for brokers
to use. Market for assessment therefore, had to be services offered by stock exchange independent of product
being traded on that exchange because a stock exchange did not sell a product. Also, a stock exchange did not
create products like WDM, F&O, securities and currency derivatives and it merely offered services. Competition
assessment had to be therefore, only in respect of services offered by stock exchanges irrespective and
independent of products traded on stock exchange. What was important was a service and not segments in which
stock exchanges dealt. Therefore, it was concluded by the Tribunal that relevant market was services offered by
security exchanges. The Tribunal refused to accept the international precedents435 used in the argument as they
were merger cases irrelevant to the present case where the relevant product was a service offered by the security
exchange. The Tribunal held that the service offered by NSE in the matter of currency derivatives, would be no
different than the service offered in the other segments in which it was operating. The Tribunal further used the
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various similarities presented between F & O and CD segments to stress on its point. The Tribunal confirmed the
DG’s finding and held the relevant market as market for services offered by security exchanges.
In the case of Jupiter Gaming Solutions Pvt Ltd v Government of Goa,436 the issue was, whether lottery services were
covered within the meaning of the term service as defined in section 2(u) of the Competition Act, 2002 to give jurisdiction
to the Commission? The Commission opined that the expression “service of any description” has a wide meaning as by
insertion of the word “any” the scope of the section has been expanded to include all kinds of services. The Commission
made a reference to the Supreme Court decision in Managing Director, Maharashtra State Financial Corp v Sanjay
Shankarsa Mamarde,437 where the SC while interpreting the term services as given in section 2(o) of the Consumer
Protection Act, 1986 observed that the use of the words “any” and “potential” in the context indicated that the width of the
clause is very wide and extends to any or all actual or potential users. Reference was also made to SC decisions in
Lucknow Development Authority v MK Gupta,438 and Raj Kumar Shivhare v Assistant Director, Directorate of
Enforcement,439 to interpret the expression “any” and “service of any description” to have a diverse meaning dependent
depends upon the context and the subject matter of the statute. The Commission while holding that the definition of the
term service as given in section 2(u) of the Competition Act, 2002 was not restrictive but an inclusive one, found the lottery
services as covered within the meaning of the term service as defined in section 2(u) of the Competition Act, 2002 to give
the necessary jurisdiction to the Commission.
“Shares”
The term has been defined to mean shares in the share capital of a company carrying voting rights. It also mentions “any
security” which entitles the shareholder to receive shares with voting rights. The preference shares, having no right to vote,
are outside the scope of this definition. Merely by virtue of the right to vote in pursuance of the provisions of section 47(2)
of Companies Act, 2013 because of non-payment of dividend, the preference shares would not fall under the definition of
“Shares” under the clause (v) of section 2 of the Competition Act, 2002.
— In Combination Registration No. C-2012/03/47, notice was filed by Independent Media Trust relating to a series
of inter-connected and interdependent acquisitions that were ultimately intended to acquire control over
Network18 Group companies by Reliance Industries Ltd. The acquisition involved the subscription to Zero
Coupon Optionally Convertible Debentures (ZOCD). The Commission examined the matter and held as under:
In terms of the Investment Agreement, holder of each ZOCD has the option to convert the ZOCDs into equity
shares of the target companies with voting rights at any time during a period of ten years from the date of
subscription. Since the conversion option contained in each ZOCD entitles the holder to receive equity shares
of the target companies, the ZOCDs are shares within the meaning of sub-clause (i) of clause (v) of section 2
of the 2002 Act and the subscription to ZOCDs amounts to acquisition of shares of the target companies.
“Statutory authority”
The term has been defined to mean any authority, board, corporation, council, institute, university or any other body
corporate established for the purposes of regulating production or supply of goods or provision of any services or markets
therefor. The definition is important as a statutory authority may make a reference to the Commission for enquiry vide
sections 19(1)(b) and 21 of the Competition Act, 2002.
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“Trade”
The expression has been defined to mean all commercial activities relating to business, industry, profession or occupation.
It is significant to note that the expression includes profession and occupation for rendering any services. The term has not
been used in the Competition Act, 2002 independently and can be an aid for interpreting the other allied expressions like
trade association, trade practice, and anti-competitive agreements.
“Trade” means any trade, business, industry, profession or control of goods and includes provision of any services. Thus,
the definition of trade and, therefore, of trade practice is comprehensive, and is not limited merely to the sale of goods or
services. Re Mohan Meakins Ltd440 it was held by MRTP Commission that providing of know-how and trademark to the
manufacturers and bottlers of soft drinks, under the franchise agreement entered into by Mohan Meakins is covered within
the definition of trade.
Private educational institutions have to abide by the conditions imposed or to be imposed by the Government keeping is
view the basic objects of the constitution and the goal of education. No educational institution can be run without
recognition from Government and no institution can charge any fee beyond the ceiling of fee prescribed by the
Government under the Karnataka Education Act, 1983 and the Karnataka Educational Institution (Prohibition of Capitation
Fee) Act, 1984 would not make or render education or the establishment of educational institution a trade.441
Section 3(3) deals with agreements between persons, etc., “engaged in identical or similar trade”. The word “trade” has
been defined in section 2(x) as “any trade, business industry, profession or occupation relating to the production, supply,
distribution, storage or control of goods and includes provision of any services”. The word, “acquisition” mentioned in
definition of an “enterprise” in section 2(h) is not included here. As can be seen, purchasing activity of a consumer does
not qualify as “trade”. Therefore, section 3(3) is not applicable to a consumer.442
“Turnover”
This is an inclusive definition to include the value of sale of goods or services. According to the Law Lexicon by P
Ramanatha Aiyar:—
“Turnover” is the amount of money turned over in a business in a given time.
Excise duty though paid by the purchaser to meet the liability of the seller, is a part of the consideration for the sale and is
includible in the turnover.443
Where the dealer is not authorised to collect the tax, but he collects it and includes it in the bill, it is part of a price and will
constitute part of turnover. If the dealer, under the law, is empowered to pass on the sales-tax to purchasers, to collect it
and pay it to the Government, what he is permitted to collect as tax will not form part of his turnover.444
If any discount is given by a trader by way of trade discount, that could be excluded from the turnover.445
“Average” Turnover versus “Relevant” Turnover
Relevant turnover is the entity’s turnover pertaining to products and services that have been affected by such
contravention. In the case of Excel Crop Care Ltd v Competition Commission of India,446 it was argued before the
Tribunal that the Commission while imposing a penalty of 9% of turnover for cartel activity (in pricing of ALP tablets) in
violation of section 3(3)(d) should have taken into account the relevant turnover and not the average turnover meaning
thereby that the Commission should have only considered the turnover of the business of manufacturing ALP tablets in
cases of multi-product companies. Emphasis was laid on understanding of the term “turnover” in other jurisdictions:
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• The Competition Appeal Court of South Africa in the case of Southern Pipeline Contractors v The Competition
Commission447 has dealt with the question as to what should be the relevant turnover (paras 51 to 53) to
determine the appropriate amount of penalty to be imposed. It was held that the appropriate amount of penalty
had to be determined keeping into consideration the damage caused and the profits which accrue from the cartel
activity. The Tribunal had used the words “affected turnover” in these paragraphs. It was pointed out that
Southern Pipeline contractors was a multi-product company and the affected turnover was comparatively small.
• Point 5 of the EU guidelines prescribes the basis for setting the fine wherein it is provided that it is appropriate
for the Commission to refer to the value of the sales of goods or services to which the infringement relates. In
point 8 of the guidelines set out the principles which would guide the Commission where it orders fines in terms
of Article 23(a) of Regulation No. 1/2003. Thereafter the method of setting of fines is prescribed. In that under
section A it is provided at point 13 that in determining the basic amount of the fine, the Commission will take the
value of the undertakings sale of goods to which the infringement directly or indirectly relates. In this case it
would be the supplies to FCI under the tender of 2009.
• Relevant turnover is defined “as the turnover of the undertaking in the relevant product market and the relevant
geographic market affected by the infringement in the undertaking last business year”.The Tribunal while noting
that arguments based on EU and OFT guidelines as relevant also observed that they cannot be treated as be all
and end all in the matter and would have to be considered in the light of the facts of each case. The Tribunal,
however, accepted the argument on relevant turnover for multi-product companies. The Tribunal differentiated its
previous decision in the MDD Medical Systems India Pvt Ltd v Foundation for Common Cause,448 on the basis
that firstly, the companies in question in that case were not multi-product companies. The Tribunal also held that
a restricted turnover was different from relevant turnover. Secondly, in the MDD case the argument was that the
turnover generated in the supplies made only to the Government Hospitals should be considered and it was held
by the Tribunal that that the business of supply of the materials could not be any different from the supplies to the
other Hospitals. It was on that basis that the argument was rejected. The tribunal held that the concept of relevant
turnover can be accepted in the peculiar circumstances where companies clearly indicate that the other products
of those companies have no connection and do not depend upon the product involved in this matter. The
Tribunal, while finding the appellants guilty of cartel activity held that the penalty at 9% of three years average
turnover was not unreasonable. However, the said turnover would have to be a “relevant turnover”.449
In the case of MCX Stock Exchange Ltd,450 the Commission held that neither section 2(y) nor section 27(b)451 gave a
leeway for the Commission to interpret that turnover meant turnover in the context of only the relevant product or
geographic market and such an interpretation would not be in consonance with the underlying intent of the provisions of
the Competition Act, 2002 particularly in instances of contravention of section 4(e) where the market entered or protected
may have a very small turnover but the market from where the market power was transposed has a much larger turnover.
The imposition of monetary penalty under section 27(b) of the Act must serve the dual purpose of deterrence as well as
punishment. In the Indian context, if an enterprise or group is held in contravention of the Act, the law does not stipulate or
allow the Commission to restrict the monetary penalty by artificially truncating the turnover of the enterprise or group and
confining it to relevant market. As long as the entity that is guilty of contravention is a single entity, its entire turnover is
the relevant turnover for the purpose of section 27(b). The only fetter which has been placed by section 27(b) of the Act on
the power of the Commission to impose penalty in cases of infringement of section 4, is the cap of 10% of the average of
turnover for the last three preceding financial years.
The COMPAT,452 while upholding the penalty imposed by the Commission, differentiated the present case with that of
Excel Corp. The Tribunal held that the judgement in the case of Excel Crop v CCI453 was pressed into service to suggest
that the relevant turnover that should alone be considered for the sake of penalty was for multi-commodity companies. The
relevant market in the present case was the services of stock exchange in all the segments. It was pointed out that the NSE
was making tons of profits from the relevant market on account of its services in the other segments. Therefore, there can
be no justification for taking any lenient view, nor was it necessary to consider the concept of notional turnover figure,
when the turnover of the NSE is well available on the basis of Annual Reports. The contention of relevant turnover was
therefore, rejected.
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— In the case of Dr LH Hiranandani Hospital,454 the Tribunal noted that the appellant had been providing multiple
healthcare services, maternity service being one of them and stem cell banking which was provided by a third
party (Cryobanks), could at best be considered as a small part of the maternity services provided to those who
were desirous of availing such services. Therefore, even if the finding is that the agreement entered into between
the appellant and Cryobanks was violative of section 3(1) of the Competition Act, 2002, the turnover of the
appellant with reference to stem cell banking services only could be taken into consideration for the purpose of
imposing penalty and not the turnover with reference to other services or income derived from other sources.
The Supreme Court has finally in the case of Excel Crop Care Ltd v Competition Commission of India455 upheld the
Tribunal’s view of “relevant turnover”. Important points from the Supreme Court order have been listed out below:
1. There may be a situation that some of such enterprises may be multi-product companies and some may be single
product in respect of which the agreement is arrived at. If the concept of total turnover is introduced it may bring
out very inequitable results.
2. When the agreement leading to contravention of section 3 involves one product, there seems to be no justification
for including other products of an enterprise for the purpose of imposing penalty. This is also clear from the
opening words of section 27 read with section 3 which relate to one or more specified products. It also defies
common sense that though penalty would be imposed in respect of the infringing product, the “maximum
penalty” imposed in all cases be prescribed on the basis of “all the products” and the “total turnover” of the
enterprise. It would be more so when total turnover of an enterprise may involve activities besides production and
sale of products, like rendering of services, etc. It, therefore, leads to the conclusion that the turnover has to be of
the infringing products and when that is the proper yardstick, it brings home the concept of “relevant turnover”.
3. Doctrine of proportionality: Even the doctrine of “proportionality” would suggest that the Court should lean in
favour of “relevant turnover”. No doubt the objective contained in the Competition Act, 2002, viz., to discourage
and stop anti-competitive practices has to be achieved and those who are perpetrators of such practices need to be
indicted and suitably punished. It is for this reason that the Act contains penal provisions for penalising such
offenders. At the same time, the penalty cannot be disproportionate and it should not lead to shocking results.
That is the implication of the doctrine of proportionality which is based on equity and rationality. It is, in fact, a
constitutionally protected right which can be traced to Article 14 as well as Article 21 of the Constitution. The
doctrine of proportionality is aimed at bringing out “proportional result or proportionality stricto sensu”. It is a
result-oriented test as it examines the result of the law, in fact the proportionality achieves balancing between two
competing interests: harm caused to the society by the infringer which gives justification for penalising the
infringer on the one hand and the right of the infringer in not suffering the punishment which may be
disproportionate to the seriousness of the Act.
4. No doubt, the aim of the penal provision is also to ensure that it acts as deterrent for others. At the same time,
such a position cannot be countenanced which would deviate from “teaching a lesson” to the violators and lead to
the “death of the entity” itself. If we adopt the criteria of total turnover of a company by including within its
sweep the other products manufactured by the company, which were in no way connected with anti-competitive
activity, it would bring about shocking results not comprehended in a country governed by Rule of Law. Cases at
hand itself amply demonstrate that the CCI’s contention, if accepted, would bring about anomalous results.
5. The doctrine of “purposive interpretation” may again lean in favour of “relevant turnover” as the appropriate
yardstick for imposition of penalties. It is for this reason the judgement of Competition Appeal Court of South
Africa in the Southern Pipeline Contractors Conrite Walls, as quoted above, becomes relevant in Indian context
as well inasmuch as this Court has also repeatedly used same principle of interpretation. It needs to be repeated
that there is a legislative link between the damage caused and the profits which accrue from the cartel activity.
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There has to be a relationship between the nature of offence and the benefit derived therefrom and once this co-
relation is kept in mind, while imposing the penalty, it is the affected turnover, i.e., “relevant turnover” that
becomes the yardstick for imposing such a penalty. In this hue, doctrine of “purposive interpretation” as well as
that of “proportionality” overlaps.
6. In fact, some justifications have already appeared in this behalf while discussing the matter on the application of
doctrine of proportionality. What needs to be repeated is only that the purpose and objective behind the
Competition Act, 2002 is to discourage and stop anti-competitive practice. Penal provision contained in section
27 of the Act serves this purpose as it is aimed at achieving the objective of punishing the offender and acts as
deterrent to others. Such a purpose can adequately be served by taking into consideration the relevant turnover. It
is in the public interest as well as in the interest of national economy that industries thrive in this country leading
to maximum production. Therefore, it cannot be said that purpose of the Act is to ‘finish’ those industries
altogether by imposing those kinds of penalties which are beyond their means. It is also the purpose of the Act
not to punish the violator even in respect of which there are no anti-competitive practices and the provisions of
the Act are not attracted.
Restricted turnover versus relevant turnover
The Apex Court in Excel Crop Care case applied the concept of relevant turnover in case of a multi-product company
engaged in production/provision of more than one type of products/services. It is important, therefore, to note that the
argument of relevant turnover can be made in case of multi-product companies and that the other products/services of these
companies have no connection and do not depend upon the product/service involved in the infringement. Thus, it is
important to differentiate between relevant turnover and mere restricted turnover.456
Imposition of Penalty on Association
The Commission in most of the cases has imposed penalties on associations on the income/receipts of the associations. The
Commission in the case of Reliance Big Entertainment Ltd457 noted that as per provisions of section 27(b), penalties for
anti-competitive agreements are to be imposed either on turnover or profit. Since the associations were not having turnover
of their own out of exploitation of the activities of film distribution and exhibition and were having receipts from members
besides some other miscellaneous income and also considering that the associations represented the collective intent of the
members and the decisions of the associations are having anti-competitive effects on the market, the Commission found it
appropriate to impose penalty on receipts/income of these associations.458
Alternate views have sometimes been taken by members in imposing penalty on the basis of collective turnover of all the
enterprises. However, this view has not generally been followed. In the case of Motion Pictures,459 the issue was whether
a penalty can be imposed on an association or on a section 25 company, constituted by different enterprises for mutual
benefit. R Prasad in his dissenting opinion held that the appropriate mode of assessing the turnover of an association for
the purpose of imposing penalty is the collective turnover of all the enterprises who are members of such an association.
All the members of such association are business enterprises and are liable to be penalised for their collective anti-
competitive action, whether this collective anti-competitive action is taken in the name of the association or in the name of
a trust or cartel or in any other form. The Commission under such circumstances has power to impose an appropriate
penalty and the upper limit in such cases would be the total turnover of all the enterprises and not of the association or of
section 25 company registered as a non-profit association and in the name of turnover has no turnover or very nominal
turnover. Similarly, in the case of Peeveear Medical Agencies,460 SN DHINGRA, in his dissenting opinion held that in case
of associations, who behave like cartel and act for the benefit of their members so that the profit of the members is
maximised, the appropriate method of imposing penalty is to treat the association as a cartel of the members and impose
penalty on the association on the basis of aggregate turnover of the members.
“Words and Expressions” not defined
This clause provides that the words and expressions used but not defined in this Competition Act, 2002 and are defined in
the Companies Act, 1956 [now, Companies Act, 2013] shall have the same meaning assigned in the Companies Act, 1956.
Page 88 of 125
[s 2] Definitions
The same words used in different statutes on the same subject are interpreted to have the same meaning, if the statutes are
in pari materia with each other. The Competition Act, 2002 and Companies Act, 1956 are cognate legislations and the
legislature thought it fit to assign the meaning to the expressions used in the Competition Act, 2002 as defined in the
Companies Act, 1956.
9 Subs. for clause (ba), by Act 7 of 2017, section 171(a) (w.e.f. 26 May 2017). Before
substitution, it stood as under:
(ba) “Appellate Tribunal” means the Competition Appellate Tribunal established under sub-section (1) of section 53A;
10 Maulana Shamsuddin v Khushillal,
AIR 1978 SC 1740 , 1743 : 1978 UJ (SC) 723 : (1979) 1
SCC 121 : [1979 ] 1 SCR 582 .
11 Vanguard Fire and General Insurance Co Ltd, Madras v Fraser &
Ross, AIR 1960 SC 971 , pp 974, 975 :
[1960] 2 SCA 563 : 1963 1 SCJ 800
: 1960 3 SCR 857 :
1960 30 Com Cas (Ins) 13 ; Whirlpool Corp v Registrar of Trade Marks,
AIR 1999 SC 22 (1) : 1998 AIR SCW 3345 :
JT (1998) 7 SC 243 , p 252 : (1998) 8 SCC 1
: 1998 (5) Scale 655 .
12 NS Bindra, The Interpretation of Statutes, 5th Edn.
13 Chori Ouso v Sasoon Helegua,
AIR 1969 Ker 11 : 1968 Ker LJ 397
(FB).
14 Craies, Statute Law, 5th Edn, p 197.
15 MP State Road Transport Corp v Industrial Court,
AIR 1971 MP 54 : (1971) 1 LLJ 447
.
16 RD Goyal v Reliance Industries Ltd,
(2003) 113 Com Cas 1 .
17 Shah Bhojraj Kureji Oil Mills & Ginning Factory v Subhash
Chandra Yograj Saha, AIR 1961 SC 1596 , p 1690 :
(1962) 2 SCR 159 : 64 Bom LR 407 :
1962 1 SCJ 377 .
Page 89 of 125
[s 2] Definitions
18 S Sundaram v R Pattabhiraman,
AIR 1985 SC 582 : 1985 (1) SCC 591
: (1985) 2 SCR 643 :
1985 (98) LW 49 .
19 Bengal Immunity Co Ltd v State of Bihar,
AIR 1955 SC 661 , p 733 : (1955) 2 Mad LJ (SC) 168 : 1955 (6) STC 446.
20 Bihta Co-op Development and Cane Marketing Union Ltd v Bank of
Bihar, AIR 1967 SC 389 :
[1967] 1 SCR 848 ; State of Bihar v Ram Naresh Pandey, AIR 1957
SC 389 : (1957) 1 Mad LJ (Cri) 247 : 1957 SCC 282 : ILR 36 Pat 513 :
1957 Cr LJ 567 : 1957 MPC 420
: 1957 SCA 350 : 1957 All LJ 609 :
1957 SCR 279 :
1957 SCJ 336 : 1957 All WR (HC) 430 : 1957 BLJR 406
: [1957] 1 SCR 279 .
21 S Sundaram v R Pattabhiraman,
AIR 1985 SC 582 : 1985 (1) SCC 591
: (1985) 2 SCR 643 :
1985 (98) LW 49 .
22 GP Singh, Principles of Statutory Interpretation, 7th Edn, 1999, pp
172, 173.
23 Patel Roadways Ltd v Prasad Trading Co,
AIR 1992 SC 1514 , p 1518 : AIR 1992
SCC 1514 : [1992] 74 Com Cas 11
: (1991 4 SCC 270) :
[1991] 3 SCR 391 .
24 ITO, (First), Salem v Short Brothers Pvt Ltd,
AIR 1967 SC 81 , p 83 : (1966) 1 Comp LJ 279
.
25 Bihta Co-op Development and Cane Marketing Union Ltd v Bank of
Bihar, AIR 1967 SC 389 , p 393 :
[1967] 1 SCR 848 .
26 Aphali Pharmaceuticals Ltd v State of Maharashtra,
AIR 1989 SC 2227 , p 2238.
27 Y p Chawla v M p Tiwari, AIR 1992
SC 1360 , p 1362 : (1992) 2 Comp LJ SC 36
: (1992) 2 SCC 672 :
[1992] 2 SCR 440 , JT 1992 (2) SC 429
; Abdul Latif Khan v Abadi Begum, AIR 1934 PC 188
, p 191; Keshavji Raoji and Co v CIT, AIR 1991 SC 1806
, p 1818 : 1991 AIR SCW 1845 : (1990) 1 Comp LJ SC 374
: (1990) 2 SCC 231 .
28 Thomas Cook (India) Ltd v CCI, 2015 Comp LR 953 (CompAT).
Page 90 of 125
[s 2] Definitions
29 Ghanshyamdas Badrilal v State of MP,
AIR 1969 MP 186 : 1669 MPLJ 149
.
30 CIT v VVRNM Subbiah Chettiar,
(1947) 15 ITR 502 (Mad).
31 See Shirish Finance and Investment Pvt Ltd v M Sreenivasulu Reddy,
(2002) 109 Com Cas 913 (Bom) :
2002 (1) Bom CR 419 .
32 CIT v Jubilee Mills Ltd, (1963) 48
ITR 9 (SC).
33 Reghuvanshi Mills Ltd v CIT,
AIR 1961 SC 743 : (1961) 41 ITR 613
: [1961] 2 SCR 978 :
1961 2 SCJ 327 .
34 See Bank of India Ltd v Jamsetji A H Chinoy and Chirag & Co,
(1940) 67 IA 76 (PC).
35 See K N Narayanan v ITO,
(1984) 55 Com Cas 182 (Ker). Also see Rajagiri Rubber & Produce Co Ltd v CIT,
(1993) 203 ITR 663 (Ker); R Mathalone v Bombay Life Insurance Co
Ltd, AIR 1953 (SC) 385 :
[1954] 24 Com Cas 1 : [1953] 2 Mad LJ 259 :
1954 SCA 1039 : 1954 SCR 117
: 1953 SCJ 548 : 56 Bom LR 30.
36 Shirish Finance and Investment Pvt Ltd v M Shreenivasulu Reddy,
(2002) 109 Com Cas 913 (Bom) :
2002 (1) Bom CR 419 .
37 Director, Supplies and Disposals, Haryana v Shree Cement Ltd,
2017 Comp LR 97(CCI). Also see Re Aluminium Phosphide Tablet Manufacturers, Suo-motu Case No. 02/2011.
38 Re Tyre Manufacturers’ case,
[1996] 2 All ER 849 . See All India Motor Transport Congress v Indian Foundation of
Transport Research and Training (IFTRT), 2016 Comp LR 646 (CompAT)
39 Re Austin Motor Car Co Ltd,
(1957) LR 1 RP 6, per John J.
40 American Tobacco Co v United States, [1946] 328 US 781.
41 Re Mileage Conference Group of the Tyre Manufacturers
Conference Ltd, [1979] ECR 2435 .
Page 91 of 125
[s 2] Definitions
42 Re British Basic Slag Ltd, (1962) LR
3 RP 179.
43 Suo-motu case against LPG cylinder manufacturers, 2012 Comp LR
197 (CCI).
44 RRTA v W H Smith and Sons Ltd,
(1969) LR 7 RP 122.
45 Re Alleged cartelisation by Cement Manufacturers, RTPE No. 52 of
2006, decided on 31 August 2016 [CCI]; Nirmal Kumar Manshani v Ruchi Soya Industries Ltd, Case No. 76 of 2012, decided on 28
June 2016 (CCI).
46 Re British Basic Slag Ltd, (1962) LR
3 RP 179, per DIPLOCK LJ.
47 Director General (Supplies & Disposals) v Puja Enterprises Basti,
[2013] 116 CLA 126 (CCI) : 2013 Comp LR 714 (CCI).
48 CIT v East Coast Commercial Co Ltd,
AIR (1967) SC 768 .
49 Technip SA v SMS Holdings Pvt Ltd,
(2005) 5 SCC 465 .
50 Daiichi Sankyo Co Ltd v Jayaram Chigurupati,
[2007] 7 SCC 499 .
51 Also see All India Motor Transport Congress v Indian Foundation
of Transport Research and Training (IFTRT), 2016 Comp LR 646 (CompAT).
52 Re Delhi Automobiles Pvt Ltd,
(1976) 46 Com Cas 610 (MRTPC).
53 Re Coates of India Ltd, RTP Enquiry No. 7/1975, Order dated 12
September 1975.
54 Re Kasturi and Sons Ltd, (1976)
Tax LR 1715 (MRTPC).
55 Re Hindustan Times Ltd, (1979) 49
Com Cas 495 (MRTPC).
56 Re Rallis India Ltd, RTP Enquiry No. 15/1974, Order dated 2
February 1976; (1980) 50 Comp Cases 185.
Page 92 of 125
[s 2] Definitions
57 All India Tyre Dealers’ Federation Informant v Tyre Manufacturers,
2013 Comp LR 92 (CCI).
58 Also see Eros International Media Ltd v Central Circuit Cine
Association, Indore, Film Distributors Association, Kerala, Northern India Motion Pictures Association and Motion Pictures
Association and Sunshine Pictures Pvt Ltd v Motion Pictures Association, 2012 Comp LR 20 (CCI).
59 Reliance Big Entertainment Ltd v Karnataka Film Chamber of
Commerce, [2012] 108 CLA 116 (CCI) : 2012 Comp
LR 269 (CCI).
60 Technip S A v S M S Holding Pvt Ltd,
(2005) 5 SCC 465 at p 485 : [2005] 125 Com Cas
545 (SC), the court took note of the decision in the case of Guinness Plc v Distillers Co Plc
where the Takeover Panel was to determine whether Guinness had acted in concert with Piptec when Piptec purchased shares in
Distillers Co Plc. The Panel observed:
The nature of acting in concert requires the definition to be drawn in deliberately wide terms. It covers an understanding as
well as an agreement, and an informal as well as a formal arrangement which leads to the purchase of shares to acquire
control of a company. This is necessary as arrangements are often informal, and the understanding may arise from a hint. The
understanding may be tacit, and the definition covers situations where the parties act on the basis of a nod or a wink ... unless
persons formally declare this agreement or understanding, there is rarely direct evidence of action in concert and the panel
must draw upon its experience and common sense to determine whether those involved in any dealings have some form of
understanding and are acting in cooperation with each other. Also see Sh Neeraj Malhotra, Advocate v Deustche Post Bank
Home Finance Ltd (Deustche Bank), [2011] 102 CLA 181
(CCI) : [2011] 106 SCL 108 (CCI).
61 See Re Cartelisation in respect of tenders floated by Indian Railways
for supply of Brushless DC Fans and other electrical items, Suo Moto Case No. 03 of 2014 [CCI], decided on 18 January 2017.
62 Shri B p Khare, Principal Chief Engineer, South Eastern Railway v
Orissa Concrete and Allied Industries Ltd, [2013] 114 CLA 280
(CCI) : [2013] 119 SCL 1 (CCI); Indian Foundation of
Transport Research and Training v Bal Malkait Singh, 2015 Comp LR 377 (CCI); Alleged cartelization in the matter of supply of
spares to Diesel Loco Modernization Works v Stone India Ltd, Faiveley Transport Rail Technologies India Ltd and Escorts Ltd,
2014 Comp LR 170 (CCI); Shailesh Kumar v Tata Chemicals Ltd, 2013 Comp LR 509 (CCI) :
[2013] 120 SCL 95 (CCI).
63 Uniglobe Mod Travels Pvt Ltd v Travel Agents Federation of India,
2011 Comp LR 400 (CCI).
64 Automobiles Dealers Association, Hathras, UP v Global
Automobiles Ltd and Pooja Expo India Pvt Ltd, 2012 Comp LR 827 (CCI) : 2012 Comp LR 827 (CCI).
65 United States v General Motors, (1966) 384 US 127.
Page 93 of 125
[s 2] Definitions
66 Re Alleged Cartelization by Steel Producers, 2014 Comp LR 145
(CCI). The Commission held: from the analysis of the evidence available on record, HR coil producers recognised their
interdependence and simply mimicked their rivals’ conduct. There is no cogent material on record to contradict this inference. The
non-competitive nature of a market, by itself, does not imply an “agreement”. Interdependent behaviour of enterprises does not
necessarily indicate collusive conduct.
67 The Commission in the case of Re Aluminium Phosphide Tablets
Manufacturers, 2012 Comp LR 753 (CCI) noted:
identical pricing has been considered evidence leading to establish an illegal agreement. (United
States v CHAS. PFIZER Co, 217 F. Supp. 199 (1963). Identical bids have been condemned likewise in case of United States of
America v James P. Heffernan (No. 94-1080, US Courts of Appeals, Seventh Circuit). The facts and evidence which exist in this
case in form of identical rates in the price bids in spite of varying cost structure of the bidding parties, common entry in the visitors’
register of FCI lends credence to the allegations that they have acted under an agreement or an understanding.
68 Case No. 29 of 2010, decided on 20 June 2012.
69 Id.
70 The World Bank/OECD Glossary states that agreements may be
implicit, and their boundaries are nevertheless understood and observed by convention among the different members and most
agreements which give rise to anti-competitive prices tend to be covert arrangements that are not easily detected by competition
authorities.
71 Yashoda Hospital and Research Centre Ltd v India Bulls Financial
Services Ltd, (IFSL) 2011 Comp LR 324 (CCI).
72 Sh Neeraj Malhotra, Advocate v Deustche Post Bank Home Finance
Ltd (Deustche Bank), [2011] 102 CLA 181 (CCI) :
[2011] 106 SCL 108 (CCI).
73 Volkswagen AG v Commission of the European Communities, Case
C-338/00P, judgement delivered on 18 September 2003.
74 Commission v Bayer AG, (2004) 4
CMLR 13 ; Bundesverband der Arzneimittel-Importeure eV and Commission of the
European Communities v Bayer AG, (2004) 4 CMLR 13 .
75 In the Competition Act, 2002 — (a) in section 2, for clause (ba), the
following clause shall be substituted, namely:—
(ba) “Appellate Tribunal” means the National Company Law Appellate Tribunal referred to in sub-section (1) of section 53A.
76 In the Competition Act, 2002 cartels meant exclusively for exports
have been excluded from the provisions relating to Anti-competitive Agreements. Section 3, sub-section (5), clause (ii) of the
Competition Act, 2002 states:
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[s 2] Definitions
Nothing contained in this section shall restrict - (ii) the right of any person to export goods from India to the extent to which
the agreement relates exclusively to the production, supply, distribution or control of goods or provision of services for such
export.
77 Available at: www.oecd.org/dataoecd/57/32/1897960.doc (last
accessed in February 2019); Hard Core Cartels: “Third report on the implementation of the 1998 Council Recommendation” in
OECD Journal of Competition Law and Policy, vol 8, No 1, June 2006, OECD Publishing.
78 CIT v East Coast Commercial Co Ltd,
AIR 1967 SC 768 : [1967] 63 ITR 449
.
79 “Provisions related to Cartels”, Advocacy series-2, CCI. Available
at: http://www.cci.gov.in/sites/default/files/advocacy_booklet_document/cartel%20book.pdf (last accessed in February 2019).
80 In All India Tyre Dealers’ Federation Informant v
Tyre Manufacturers, 2013 Comp LR 92 (CCI), the Commission observed in paras 277–278:
In a market which is oligopolistic in nature, it is more likely that each market player is aware of the actions of the other and
influences each others’ decisions. No doubt, interdependence between firms is an important characteristic of such a market
which would mean that each firm in such a market takes into account the likely reactions of other firms while making
independent decisions particularly as regards prices and output. Though oligopolistic markets can lead to competitive
outcomes, the outcomes may not always be market driven but rather the result of concerted effort or collusion. The
interdependence between firms can lead to collusion-both implicit as well as explicit. Knowing that overt collusion is easily
detected, firms often collude in a manner which leads to non-competitive outcomes resulting in higher prices than warranted
by pure interplay of market forces. Thus, high concentration may provide a structural reasoning for collusive action resulting
in parallelism (price or output), yet it is very important to differentiate between “rational” conscious parallelism arising out of
the interdependence of the firms’ strategic choices and parallelism stemming from purely concerted action. Thus, inferring of
cartels would require further evidences. Economic theory has demonstrated convincingly that “conscious parallelism”, is not
uncommon in homogeneous oligopolistic markets. Competing firms are bound to be conscious of one another’s activities in
all phases, including marketing and pricing. Aware of such outcomes especially where there is little real difference in product
the Commission is of the opinion that it is quite probable that in many such instances, conscious parallelism may be dictated
solely by economic necessity. Avoidance of price wars is a common instance where this takes place.
81 The modelling of economic decisions by games whose outcome
depends on the decisions taken by two or more agents, each having to make decisions without information on what choices the
others are making. Game theory distinguishes between one-off games and repeated games, where reputation established through
earlier games affects the conduct of subsequent ones. Game theory is widely used in analysing both industrial organisation and
economic policy.
82 A game theory concept showing the disadvantages of not being able
to reach binding agreements. The name originates from a situation of two prisoners who must each decide whether to confess
Page 95 of 125
[s 2] Definitions
without knowing what the other will say, where a lighter penalty follows if you confess when the other does not. For details, see
JOHN BLACK, Oxford Dictionary of Economics, Oxford University Press, New Delhi, 2nd Edn, 2002, p 368.
83 It will also depend upon the likelihood that such deviations will ever
be detected and the rapidity and severity of the punishment that the other cartelists are willing and able to impose on the cheating
firm.
84 See the 1998 OECD report, Recommendation of the council
concerning effective action against hard core cartels (www.oecd.org), and the ICN SG1 report, defining hard core cartel conduct.
85 Section 3, the Competition Act, 2002.
86 See Study of Cartel Case Laws in Select Jurisdictions – Learnings for
the Competition Commission of India, Final Report, CUTS International, 2007. Available at:
http://www.cci.gov.in/sites/default/files/cartel_report1_20080812115152.pdf (last accessed in February 2019).
87 See Study of Cartel Case Laws in Select Jurisdictions – Learnings for
the Competition Commission of India, Final Report, CUTS International, 2007. Available at:
http://www.cci.gov.in/sites/default/files/cartel_report1_20080812115152.pdf (last accessed in February 2019). Also see Paolo
Buccirossi, “Does Parallel Behaviour Provide Some Evidence of Collusion” in Review of Law & Economics, vol 2, Issue 1, 2006,
pp 85–102.
88 Section 46, the Competition Act, 2002.
89 The Competition Commission of India (Lesser Penalty) Regulations,
2009 (No. 4 of 2009). Available at: http://www.cci.gov.in/sites/default/files/regulation_pdf/regu_lesser.pdf (last accessed in
February 2019).
90 Agreements and Concerted Practices, Office of Fair Trading,
Competition Law 2004. Available at: http://www.oft.gov.uk/shared_oft/business_leaflets/ca98_guidelines/oft401.pdf (last accessed
in February 2019).
91 Richard G Lipsey & Colin Harbury, Principles of
Economics, 2nd Edn, Oxford University Press, New Delhi, p 62.
92 Abir Roy & Nishchal Joshipura, “Cartels in
India” in Competition Law Insight, 2010. Available at:
http://www.nishithdesai.com/fileadmin/user_upload/pdfs/Cartels_in_India.pdf (last accessed in February 2019).
93 Id.
94 Id.
95 Verizon Communications, Inc v Law Offices of Curtis V Trinko, 124
S. Ct. (2004) at 879.
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[s 2] Definitions
96 Id.
97 Bharatpur Truck Operators Union, Order dated 24
August 1984 in RTP Enquiry No. 10/1982.
98 Goods Truck Operators Union, Faridabad, Order
dated 13 December 1989 in RTP Enquiry No. 13.13.1987; Rohtak Public Goods Motor Union, Order dated 25 August 1984 in RTP
Enquiry No. 250/10983.
99 Id.
100 Re Suo-moto case against LPG Cylinder
Manufacturers, Case No. 3/2011.
101 Id. The COMPAT in 2013 while agreeing with the
findings of the Commission on the fact of cartelisation remanded the matter back to the Commission as it did not agree with the
quantum of penalty that was imposed on all the 44 LPG cylinder manufacturers. The Commission, however, by its August 2014
order upheld its earlier decision and did not reduce the quantum of penalty. In appeal, the Tribunal, in its March 2016 order noted
that Commission did not take into account the principles laid down by the Supreme Court and High Courts with regard to
imposition of penalty and therefore, set aside the second order, dated 6 August 2014 passed by the CCI and remitted the case back
to it for deciding the issue relating to imposition of penalty under section 27(b) of the Competition Act, 2002. The Supreme Court
has finally set aside the order of the CCI on grounds of lack of sufficient evidence to prove cartelization. Rajasthan Cylinders and
Containers Limited v. Union of India (UOI) and Ors.[2018]150SCL1(SC).
102 Id.
103 Sh Neeraj Malhotra, Advocate v Deustche Post
Bank Home Finance Ltd (Deustche Bank), [2011] 102 CLA 181 (CCI) : [2011] 106
SCL 108 (CCI).
104 Also see In the Glass Manufacturers of India,
2012 Comp LR 365 (CCI).
105 All India Tyre Dealers’ Federation Informant v
Tyre Manufacturers, 2013 Comp LR 92 (CCI).
106 In 2007, AITDF had filed a complaint to the
Ministry of Corporate Affairs for probing cartels in tyre and transport. The Ministry had referred the matter to then MRTP
Commission in 2008 for investigation. Later, the complaint was transferred to CCI in 2010.
107 The Competition Act, 2002, para 301.
108 Atlantic Sugar Refineries Co Ltd v Attorney
General of Canada, [1980] 2 SCR 644 .
109 R Prasad, in his dissenting opinion noted
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[s 2] Definitions
118. The five OPs have been following anticompetitive practices even in respect of not passing on the excise duty cut benefits
to the consumers. The five OPs have been increasing prices of tyres when the raw material prices increased. But when the raw
material prices fell in 2009/10, especially of rubber, the five OPs instead of reducing the price of tyres increased the prices of
tyres. This can also be regarded as an anticompetitive practice. There was an economic slowdown world over in 2008. In
order to give a boost to the economy, government reduced the excise duty from 10% to 8%. But this benefit was not passed on
by the OPs to the consumers. Similarly, when the cost of raw materials fell, the prices of tyres were increased in 2009/10.
Thus, the pricing of tyres by the five OPs was unfair. Thus, by this unfair practices as well as the unjust practice not passing
on the excise duty cut to the consumers, the OPs have fixed the prices within the meaning of section 3(3)(a) of the Act.
110 Builders Association of India v Cement
Manufacturers’ Association, 2012 Comp LR 629 (CCI).
111 The Competition Act, 2002, para 6.5.8, Id.
112 On 11 December 2015, COMPAT revoked the
Commission’s order that imposed a combined penalty of Rs 6,316 crore on 11 cement companies for allegedly forming a price
cartel on the ground of violation of principles of natural justice. The COMPAT also directed the Commission to hear the cement
manufacturers and pass fresh orders. The parties were also entitled to refund of the 10% penalty deposited during the hearing of the
case.
The Commission then re-heard the matter and passed an order in 2016 taking more or less the same position as in the 2012
order. The Commission imposed a penalty of 0.5 times of the net profits of the Opposite Parties for the years 2009/10 and
2010/11 for violation of the cartel provisions of the Competition Act, 2002. The Commission also noted that the Opposite
Parties exchanged price-sensitive information relating to cost, prices, production and capacities using CMA as the platform.
The Tribunal, however, in November 2016 again stayed the order of the Commission against two entities found guilty of
cartelisation in favour of Jaiprakash Associates and the CMA. The Tribunal also stayed the Commission’s order against Shree
Cement and ACC Ltd. The NCLAT has finally dismissed the appeal filed on 25 July 2018.
113 Writ Petition No. 3393 of 2016, Writ Petition No. 3578 of 2016 and
Writ Petition No. 3787 of 216.
114 S K Translines Pvt Ltd v The Maharashtra State Warehousing Corp
Ltd, Writ Petition No. 3393 of 2016, Civil Application No. 4102 of 2016 in Writ Petition No. 3393 of 2016, Writ Petition Nos.
3578, 3787 and 4349 of 2016 and Civil Application No. 5648 of 2016 in Writ Petition No. 4349 of 2016 [Bom].
115 Indian Sugar Mills Association (ISMA) v Indian
Jute Mills Association (IJMA), 2014 Comp LR 225(CCI).
116
Id.
117 Indian Jute Mills Association v The Secretary,
Competition Commission of India (1 July 2016 - COMPAT).
Page 98 of 125
[s 2] Definitions
118 Para 93, Id.
119 Indian Foundation of Transport Research and
Training v Shri Bal Malkait Singh, President, All India Motor Transport Congress, Case No. 61 of 2012, decided on 16 February
2015.
120 APPEAL No. 60 of 2015 [COMPAT], decided
on 18 April 2016.
121 Advertising Agencies Guild v Indian
Broadcasting Foundation, [2013] 116 CLA 347
(CCI) : 2013 Comp LR 660 (CCI) : [2013] 121 SCL 1
(CCI).
122 Reason given by members related to Income
Tax Department’s mandate which requires members to deduct TDS on 15% discount (which amounts to commission to advertising
agencies) given to advertising agencies (which include members of the Informant association). Since members were not deducting
TDS on 15% discount/commission, they decided to start billing at net 85% instead of showing gross bill as 100% reduced to 85%
after showing discount on invoice. Therefore, Commission did not find any competition issue involved in change of this billing
system. Also see Kerala Cine Exhibitors Association v Kerala Film Exhibitors Federation, 2015 Comp LR 666 (CCI).
123 Re Cartelisation by public sector insurance
companies in rigging the bids submitted in response to the tenders floated by the Government of Kerala for selecting insurance
service provider for Rashtriya Swasthya Bima Yojna, Suo Moto Case No. 02 of 2014, decided in 2015.
124 National Insurance Co Ltd v Competition
Commission of India, Appeal No. 94/2015, decided on 3 December 2013.
New India Assurance Co Ltd v Competition Commission of India, Appeal No. 95/2015;
United India Insurance Co Ltd v Competition Commission of India, Appeal No. 96/2015; Oriental Insurance Co Ltd v Competition
Commission of India, Appeal No. 97/2015, decided on 9 December 2016.
125 Case No. 30 of 2013.
126 Appeal No. 07/2016.
127 Express Industry Council of India v Jet Airways (India) Ltd, Case
No. 30 of 2013 [CCI], decided on 7 March 2018.
128 Morgan Stanley Mutual Fund v Kartick Das,
[1994] 81 Com Cas 318 SC.
129 Ballarpur Industries Ltd v DG (I&R),
(1988) 64 Com Cas 1884 .
130 Sanven Pharmaceuticals (P) Ltd v Charak Pharmaceuticals (India)
Ltd, RTPE No. 241 of 1996, decided on 10 February 2000, also see Kamal Enterprises v Eveready Industries India Ltd, UTPC No.
30 (16915) of 1999, decided on 16 April 1999.
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[s 2] Definitions
131 Modern Radios v Bestavision Electronics Ltd, I
(2016) CPJ 42 (TA).
132 Adidas India Marketing Pvt Ltd v Nike India Pvt Ltd, 2015 Comp LR
622 (CompAT).
133 Jindal Steel and Power Ltd v Steel Authority of
India Ltd, [2012] 107 CLA 278 (CCI).
134 Belaire Owners’ Association v DLF Ltd Haryana
Urban Development Authority Department of Town and Country Planning, State of Haryana,
[2011] 104 CLA 398 (CCI) : 2011 Comp LR 239 (CCI) :
[2011] 109 SCL 655 (CCI).
135 Bhim Sen v Delhi Development Authority, I
(2003) CPJ 124 (MRTP).
136 Re Jaina Properties Pvt Ltd,
[1992] 73 Com Cas 184 .
137 Lucknow Development Authority v MK Gupta,
AIR 1994 SC 787 : 1994 AIR SCW 97 :
(1994) 1 SCC 243 : [1994] 1 Mad LJ 611 : [1994] 1 Mad LJ 55.
138 Approved in the COMPAT order, DLF Ltd v Competition
Commission of India, 2014 Comp LR 1 (CompAT).
139 Travel Agents Association of India v Balmer Lawrie & Co and
Competition Commission of India, [2013] 113 CLA 415
(CAT) : 2013 Comp LR 11 (CompAT) : [2013] 118 SCL 174
(CAT).
140 Appeal No. 25/2015 and I.A. No. 43/2015.
141 UOI v Competition Commission of India,
AIR 2012 Del 66 : [2012] 107 CLA 362
(Delhi) : 2012 Comp LR 187 (Delhi) : (2012) 3 Comp LJ 303
(Del) : 187 (2012) DLT 697 :
2012 (128) DRJ 301 .
142 Re Shri Masood Raza v Uttar Pradesh Avas Avam Vikas Parishad
(UPAVP), Case No. 9 of 2018 [CCI], decided on 11 May 2018 (CCI). See also Shri DK Srivastava v UP Housing & Development
Board, Case No. 26 of 2018, decided on 14 August 2018.
143 Wing Cdr (Retd) Dr Biswanath Prasad Singh, General Secretary,
Veterans Forum for Transparency in Public Life v Director General of Health Services (DGHS), Appeal No. 63/2014.
Page 100 of 125
[s 2] Definitions
144 Bangalore Water Supply and Sewage Board v A Rajappa,
AIR 1978 SC 548 : (1978) 2
SCC 213 : [1978] 1 LLJ 349 .
145 PWD Employees Union v State of Gujarat,
(1987) 2 GLR 1070 .
146 N Nagendra Rao & Co v State of AP, 1994 AIR SCW 3753 :
AIR 1994 SC 2663 :
(1994) 6 SCC 205 : 1995 (1) Guj LH 298 : 1994 (2) FAC 103 : 1994 FAJ 482 : 1995 (1) EFR 141 :
1994 (5) JT 572 : 1995 (1) Civ LJ 77 : 1994 SCC(Cri)
1609 : JT 1994 (5) SC 572 : 1994 (2) LS SC 23.
147 Also see Agricultural Produce Market Committee v Ashok Harikunt,
AIR 2000 SC 3116 ; State of UP v Deep Chandra,
2004 (1) All WC 858 : (2004) II LLJ 727 (All).
148 India Trade Promotion Organisation v Competition Commission of
India. (01.07.2016 - COMPAT). Also see Hemant Sharma v UOI, Writ Petition (Civil) No. 5770/2011, decided on 5 November
2011; UOI v CCI, Writ Petition (Civil) 993/2012 (Del.), decided on 23 February 2012.
149 Re Industries and Commerce Association v Coal India Ltd, Case No.
60 of 2017 [CCI], decided on 6 February 2018.
150 Uttarakhand Agricultural Produce Marketing Board v Competition
Commission of India, LPA 674 of/2017, decided on 17 October 2017 (Del.).
151 Id.
152 UOI v Competition Commission
of India, (2012) 187 DLT 697
153 Also see Anil Kumar Neotia v UOI,
AIR 1988 SC 1353 : (1988) 2 Comp LJ 91
(SC) : (1988) 2 SCC 587 :
JT 1988 (2) SC 227 : [1988] 3
SCR 738 .
154 Thyssen Stahlunion Gmbh v SAIL,
AIR 1999 SC 3923 : (2000) 99 Com Cas 383
(SC): (1999) 9 SCC 334 :
1999 (6) Scale 441 : JT 1999
(8) SC 66 .
155 Mansukhlal Dhanraj Jain v Eknath Vithal Ogale,
AIR 1995 SC 1102 : (1995) 2
SCC 665 .
156 See also Doypack Systems Pvt Ltd v UOI,
AIR 1988 SC 782 : (1988) 2 SCC 299
: JT 1988 (1) SC 304 :
Page 101 of 125
[s 2] Definitions
[1988] 2 SCR 962 : 1988 1 JT
304 : 1988 (36) ELT 201
.
157 Appeal No. 25/2015 and I.A. No. 43/2015.
158 Competition Commission of India v Co-ordination Committee of
Artists and Technicians of WB Film and Television, AIR 2017 SC 1449
.
159 Ramashre Chandrakar v Dena Bank,
(1996) 86 Com Cas 147 (MP) : 1994 MPLJ 610
.
160 See Sodan Singh v New Delhi Municipal Committee,
AIR 1989 SC 1988 : (1989) 4
SCC 155 : [1989] 3 SCR 1038
: JT 1989 (3) SC 553 .
161 Re Shri Uday Sakharam Yadav against Excise, Entertainment &
Luxury Tax Department, Govt of NCT of Delhi and Tata Consultancy Services, Case No. 67 of 2014.
162 Yarmount v France, (1887) 19
QBD 647 , per LINDLEY LJ.
163 Blake v Shaw, (1860) John 732, per PAGE WOOD, VC, p 734.
164 Re Nutlay & Finn, (1894)
WN 64 , per KEKEWICH, J, p 64.
165 Delhi Cloth & Gen Mills Co Ltd v Regional Provident Fund
Commissioner, AIR 1961 All 309 :
(1961) 2 Lab LJ 444 .
166 The Companies Act, 1956 under section 2(9) had a wider definition
of “branch office” to mean (a) any establishment described as a branch by the company; or (b) any establishment carrying on either
the same or substantially the same activity as that carried on by the head office of the company; or (c) any establishment engaged in
any production, processing or manufacture, but did not include any establishment specified in any order made by the Central
Government under section 8 of the Companies Act, 1956.
167 Carew & Co Ltd v UOI, AIR 1975
SC 2260 : (1976) 46 Comp Cases 121 (SC) : (1975) 2 SCC 791
: [1976] 1 SCR 379 .
168 UOI v Tata Engg & Locomotive Co Ltd,
AIR 1972 Bom 301 : (1972) 42 Comp Cases 72 (SC).
Page 102 of 125
[s 2] Definitions
169 Reliance Big Entertainment Ltd v Karnataka Film Chamber of
Commerce, [2012] 108 CLA 116 (CCI) : 2012 Comp
LR 269 (CCI).
170 Re Bengal Chemist and Druggist Association and Dr Chintamoni
Ghosh, [2014] 121 CLA 196 (CCI) : 2014 Comp LR 221
(CCI), it was observed:
43. Further, section 3(3) of the Act not only covers agreements entered into between enterprises or associations of enterprises
but also the practice carried on or decision taken by any association of enterprises engaged in identical or similar trade of
goods or provision of services. Thus, all actions and practices of BCDA including those relating to issues such as alleged
fixation of trade margins, issuing circulars directing its retailer members not to give discount on the MRP in the sale of
medicines to consumers, conducting raids in order to ensure strict compliance of its directives, carrying out vigilance
operations to identify the retailers defying the direction issued by it, forcing the defiant members to shut their shops as a
punishment measure, etc. would fall squarely as “practice carried on” or “decision taken by” an “association of
enterprises” under section 3 of the Act.
44. The Commission, therefore, holds that BCDA, being an association of its constituent enterprises, is taking decisions
relating to distribution and supply of pharma products on behalf of the members who are engaged in similar or identical
trade of goods and that such practices carried on, or decisions taken, by BCDA as an association of enterprises are
covered within the scope of section 3(3) of the Act.
Also see Manju Tharad, Proprietress and Manoranjan Films, Kolkata v Eastern India Motion Picture Association (EIMPA); Kolkata and
The Censor Board of Film Certification (CBFC), Kolkata, [2012] 110 CLA 136
(CCI) : 2012 Comp LR 1178 (CCI) : [2012] 114 SCL 20
(CCI).
171 Also see Eros International Media Ltd v Central Circuit Cine
Association, Indore; Film Distributors Association, Kerala, Northern India Motion Pictures Association and Motion Pictures
Association And Sunshine Pictures Pvt Ltd v Motion Pictures Association, 2012 Comp LR 20 (CCI).
172 Santuka Associates Pvt Ltd v All India Organization of Chemists
and Druggists, Organization of Pharmaceutical Producer of India, Indian Drug Manufacturers’ Association and USV Ltd, 2013
Comp LR 223 (CCI).
173 Also see Sandhya Drug Agency v Assam Drug Dealers Association,
2014 Comp LR 61 (CCI).
174 Shivam Enterprises v Kiratpur Sahib Truck Operators Co-op
Transport Society Ltd, 2015 Comp LR 232 (CCI).
175 India Glycols Ltd v Indian Sugar Mills Association, Case No. 94 of
2014 [CCI], decided on 11 May 2018.
176 Yashoda Hospital and Research Centre Ltd v
India Bulls Financial Services Ltd (IFSL), 2011 Comp LR 324 (CCI).
Page 103 of 125
[s 2] Definitions
177 Sh Dhanraj Pillay v Hockey India, 2013 Comp
LR 543 (CCI).
178 Hemant Sharma v UOI, 186
(2012) DLT 17 :
(2012) ILR 1 Delhi 620.
179 UOI v Competition Commission of India,
AIR 2012 Del 66 :
[2012] 107 CLA 362 (Delhi) : 2012 Comp LR 187 (Delhi) :
(2012) 3 Comp LJ 303 (Del) : 187
(2012) DLT 697 :
2012 (128) DRJ 301 .
180 UOI v Sri Ladulal Jain,
AIR 1963 SC 1681 : (1964) 1 Mad LJ 38; Chairman, Railway
Board v Chandrima Das, AIR 2000 SC 988 :
2000 AIR SCW 649 : (2000) 2 SCC 465 :
[2000] 2 Mad LJ 26 : 2000 (1) Scale 279
: JT 2000 (1) SC 426 :
[2000] 1 SCR 480 ; Bangalore Water
Supply & Sewerage Board v A Rajappa, AIR 1978 SC 548
: AIR 1978 SC 969 :
(1978) 2 SCC 213 : 1978 I LLJ 349; N
Nagendra Rao & Co v State of AP, AIR 1994 SC 663
: (1994) 6 SCC 205 .
181 Common Cause v UOI,
AIR 1999 SC 979 :
AIR 1999 SC 376 : (1999) 6 SCC 667
: 2004 (5) SCC 222
: [1999] 3 SCR 1279
: 1999 (4) Scale 354 :
JT 1999 (5) SC 237 .
182 Agricultural Produce Market Committee v Ashok
Harikuni, AIR 2000 SC 3116 :
(2000) 8 SCC 61 :
[2000] 2 LLJ 1382 :
2000 (6) Scale 461 .
183 Lucknow Development Authority v MK Gupta,
AIR 1994 SC 787 : 1994 AIR SCW 97 : 1994
SCC (1) 243 : [1994] 1 Mad LJ 611 : [1994] 1 Mad LJ 55.
184 Para 348, Arshiya Rail Infrastructure Ltd
(ARIL) v Ministry of Railways (MoR) through the Chairman, Railway Board (KB) and Container Corp of India Ltd (CONCOR),
[2013] 112 CLA 297 (CCI) : 2012 Comp
LR 937 (CCI) : [2012] 116 SCL 417
(CCI).
185 Indian Sugar Mills Association v Indian Jute
Mills Association, 2014 Comp LR 225 (CCI).
Page 104 of 125
[s 2] Definitions
186 Jindal Steel and Power Ltd v Steel Authority of
India Ltd, [2012] 107 CLA 278
(CCI).
187 Sh Surinder Singh Barmi v Board for Control of
Cricket in India (BCCI), [2013] 113 CLA 579
(CCI) : 2013 Comp LR 297 (CCI) : [2013] 118 SCL 226
(CCI).
188 See in particular, Case C-35/96 Commission v
Italy, [1998] ECR I-3851 , para 36,
and Joined Cases C-180/98 to C-184/98 Pavlov, (2000) ECR I-6451
, para 75.
189 Case 36/74 Walrave and Koch
(1974) ECR 1405 , para 4, and Case C-415/93
Bosman (1995) ECR I-4921 , para 73.
190 See to that effect, Case C-519/04 p Meca-
Medina and Majcen v Commission (2006) ECR I-6991
, paras 22 and 28.
191 Hemant Sharma v UOI, Delhi High Court, WP(C) 5770/2011, date
of decision, 4 November 2011, 2012 ComLR 1 (Del) : 186 (2012) DLT 17
.
192 Hemant Sharma v All India Chess Federation (AICF), Case No. 79
of 2011 [CCI], decided on 12 July 2018.
193 Royal Energy Ltd v Indian Oil Corp Ltd, Bharat
Petroleum Corp Ltd and Hindustan Petroleum Corp Ltd, 2012 Comp LR 563 (CCI).
194 Biswanath Prasad Singh v Director General of
Health Services (DGHS), Ministry of Health and Family Services, Appeal No. 63/2014, decided on 1 March 2016, 2016 Comp LR
427 : [2016] 134 SCL 599
(COMPAT).
195 Bangalore Water Supply and Sewage Board v A
Rajappa, AIR 1978 SC 969 :
AIR 1978 SC 548 :
(1978) 2 SCC 213 : 1978 I LLJ 349; PWD Employees Union v State of Gujarat,
(1987) 2 GLR 1070 ; N
Nagendra Rao & Co v State of AP, 1994 AIR SCW 3753 : AIR 1994 SC 2663
: (1994) 6 SCC 205
: 1995 (1) Guj LH 298 : 1994 (2) FAC 103 : 1994 FAJ 482 : 1995 (1) EFR 141 : 1994 (5) JT 572 :
1995 (1) Civ LJ 77 :
1994 SCC (Cri) 1609 :
JT 1994 (5) SC 572 : 1994 (2) LS SC 23; Common Cause v UOI,
(1999) 6 SCC 667 .
196 G p Konar v Department of Agriculture and
Farmers Welfare, Government of Haryana, Case No. 22 of 2018 [CCI], decided on 30 August 2018. See also Shri Rajat Verma and
Page 105 of 125
[s 2] Definitions
Haryana Public Works (B&R) Department, through its Engineer-in-Chief, Appeal No. 45 of 2015 [COMPAT], decided on 16
February 2016.
197 Manju Tharad, Proprietress and Manoranjan
Films, Kolkata v Eastern India Motion Picture Association (EIMPA), Kolkata and The Censor Board of Film Certification (CBFC),
Kolkata, [2012] 110 CLA 136 (CCI) :
2012 Comp LR 1178 (CCI) : [2012] 114 SCL 20
(CCI).
198 Taj Pharmaceuticals Ltd v The Department of
Sales Tax/Professional Tax, 2015 Comp LR 977 (CCI).
199 Red Giant Movies, Case No. 54 of 2014 (CCI).
200 Rajat Verma v Public Works (B&R) Department,
[2015] 130 SCL 1 (CCI).
201 Augustine Peter, Member, however gave a
dissenting opinion and stressed on the need to differentiate commercial activities from economic activities. He noted:
13.....Economic activity need not be relatable to profit objective, while commercial activities have as their objective
profitability. The Act in section 2(h) refers to activity in the sense of economic activity and not commercial activity.
He observed:
33. What is evident is that every economic activity by a government department non-relatable to sovereign function is covered
under competition law. As clearly indicated in judicial pronouncements cited above, the Public Works Department,
Government of Haryana while engaged in procuring construction services is not engaged in activity relatable to sovereign
function. On the other hand, when OP1 is engaged in decisions like how much budget has to be allocated towards public
works in general, or to a particular project, which public works to be undertaken, etc., for example, such decisions could be
said to belong to the sovereign domain of policy making by the Department. However, when it implements the project
through inviting tenders, the Department, in fact, is performing non-sovereign related function, and in the process also
interfaces with the market and affects the market for construction services. Competition issues are obvious, and PWD is an
‘enterprises’ under section 2(h) of the Competition Act, 2002.
202 Rajat Verma v Haryana Public Works (B&R)
Department, Appeal No. 45 of 2015 [COMPAT], dated 16 February 2016.
203 Shri Saurabh Bhargava v Secretary, Ministry of
Agriculture and Co-op, Agriculture Commissioner, Chairman of the Registration Committee, Krishi Bhawan, New Delhi and
Secretary, Central Insecticide Board & Registration Committee, [2013] 113 CLA
100 (CCI).
Page 106 of 125
[s 2] Definitions
204 Dilip Modwil v Insurance Regulatory
Development Authority of India (IRDA), Case No. 39 of 2014, decided on 12 September 2014.
205 Krishna Mohan Hospital & Allied Medical
Research Centre Pvt Ltd v The Secretary, Ministry of Agriculture & Co-op in Case No. 75 of 2011.
206 Prem Prakash v Director General, Bureau of
Indian Standards, Case No. 14 of 2017 [CCI], decided on 29 June 2017.
207 Re Applesoft and The Chief Secretary to the
Government of Karnataka, the Principal Secretary to the Government of Karnataka E-governance (DPAR-AR), the Secretary,
Kannada Ganaka Parishad, Case No. 08 of 2017 [CCI], decided on 5 May 2017.
208 Re Prem Prakash Industrial Area and The
Principal Secretary Madhya Pradesh Public Works Department Government of Madhya Pradesh, The Director General, Central
Public Works Department, Case No. 50 of 2014 [CCI], decided on 17 March 2017.
209 Prem Prakash v The Principal Secretary,
Madhya Pradesh Public Works Department, Appeal No. 51/2015.
210 Shri Satyendra Singh v Ghaziabad Development Authority (GDA),
Case No. 86 of 2016 [CCI], decided on 28 February 2018.
211 Section 8(1) of the UK Resale Prices Act, 1976 defines “Goods” to
include ships and aircrafts, minerals, substances and animals (including fish). Section 43(1) of the UK Restrictive Trade Practices
Act, 1976, defines “goods” to include ships and aircrafts, minerals, substances and animals (including fish) and production of goods
includes getting of minerals and taking of such minerals. Section 45 of the UK Consumer Protection Act, 1987 defines “goods” to
include substances, growing crops and things comprised in land by virtue of being attached to it and any ship, aircraft or vehicle.
The UK Fair Trading Act, 1973, however, defines “Goods” differently to include buildings and other structures, and also includes
ships, aircrafts and hovercraft, but not electricity; further, it defines, “supply” in relation to the supply of goods to include supply by
way of sale, purchase, lease, hire or hire-purchase, and, in relation to buildings or other structures includes the construction of them
by a person for another person.
212 UOI v Delhi Cloth and General Mills Co Ltd,
AIR 1963 SC 791 : 1963 SCD 524
.
213 See UOI v Delhi Cloth and General Mills Co Ltd,
AIR 1963 SC 791 and South Bihar Sugar Mills Ltd v UOI,
AIR 1968 SC 922 : [1968] 3 SCR 21
: 1978 (2) ELT 336 :
1968 (2) SCJ 433 .
214 UOI v JG Glass Industries Ltd,
AIR 1998 SC 839 : 1998 (2) SCC 32
: 1998 97 ELT 5 .
215 See Addl CIT v Kalsi Tyre Pvt Ltd,
(1981) 131 ITR 636 .
Page 107 of 125
[s 2] Definitions
216 CERC v TTK Pharma Ltd, RPT Enq No. 157 of 1986, decided on 15
May 1987, (1990) 68 Comp Cases 89 (MRTP).
217 JP Sharma v Reliance Petrochemicals Ltd, (1991) 70 Comp Cases
381 (MRTPC), also following the judgement of Supreme Court in Sri Gopal Jalan & Co v Calcutta Stock Exchange Association
Ltd, AIR 1964 SC 250 : (1963) 33 Comp Cases 862 (SC) :
[1964] 3 SCR 698 .
218 UTPE Enquiry No. 4 of 1989; Re Deepak Fertilizers &
Petrochemicals Corp Ltd, RPTE Enquiry No. 1585 of 1987; Re Reliance Industries Ltd, C.A. No. 2443/88; Re Reliance Industries
Ltd, UTP Enquiry No. 422/88; Re Ambalal Sarabhai Enterprises Ltd and UTP Enquiry No. 257/87; Re Gramophone Co of India
Ltd, decided on 11 August 1994.
219 Morgan Stanley Mutual Fund v Kartick Das,
(1994) 3 Comp LJ 27 : [1994] 81 Com Cas
318 (SC).
220 RD Goyal v Reliance Industries Ltd, (2003) 113 Comp Cases 2 :
2003 (1) SCC 81.
221 Sunil Bansal v Jaiprakash Associates Ltd (JAL), 2015 Comp LR
1009 (CCI).
222 Sunil Bansal v Jaiprakash Associates Ltd, Appeal No. 21 of 2016
[COMPAT], decided on 28 September 2016. COMPAT held that CCI did not record its disagreement with the findings and
conclusions recorded by the DG, till the passing of the final order which deprived the appellants an effective opportunity to
controvert what the CCI had perceived and this amounted to violation of the principles of natural justice, which the CCI was bound
to comply with in view of the mandate of section 36(1) of the Competition Act, 2002.
223 Neeraj Malhotra v North Delhi Power Ltd, BSES
Rajdhani Power Ltd and BSES Yamuna Power Ltd, Case No. 06/2009.
224 Telefonaktiebolaget LM Ericsson (PUBL) v Competition Commission
of India, W.P.(C) 464/2014 & CM Nos. 911/2014 & 915/2014; Telefonaktiebolaget LM Ericsson (PUBL) v Competition
Commission of India, W.P.(C) 1006/2014 & CM Nos. 2037/2014 & 2040/2014.
225 The Delhi High Court also noted that the question whether licences
for patents are goods is a contentious issue because when grant of licence does not extinguish the rights of a patent holder in the
subject matter, it may not amount to sale of goods. However, the Court did not examine the question in the proceedings.
226 Travel Agents Association of India v Balmer Lawrie & Co,
[2013] 113 CLA 415 (CAT) : 2013 Comp LR 11 (CompAT) :
[2013] 118 SCL 174 (CAT).
227 Shankar Lal v Joshan Pal Singh,
AIR 1934 All 553 .
228 Manju Tharad, Proprietress and Manoranjan Films, Kolkata v
Eastern India Motion Picture Association (EIMPA), Kolkata and The Censor Board of Film Certification, Kolkata,
[2012] 110 CLA 136 (CCI) : 2012 Comp LR 1178 (CCI) :
[2012] 114 SCL 20 (CCI), per R Prasad (Dissenting).
Page 108 of 125
[s 2] Definitions
229 Madras Central Urban Bank v Corp of Madras,
(1932) 2 Com Cas 328 (Mad).
230 Board of Trustees Ayurvedic and Unani Tibia College, Delhi v State
of Delhi, AIR 1962 SC 458 :
1962 Supp (1) SCR 156 .
231 Sh Dhanraj Pillay v Hockey India, 2013 Comp LR 543 (CCI).
232 The Commission also observed: 127..... to qualify as an enterprise
under the provisions of Section 2(h) of the Act, a person should be engaged in any activity relating to the provision of services. It is
not necessary for the person to carry any business. Even the regulation of sports or any other arena would qualify a person to be an
enterprise if its activities effect the provision of services. In this case, both FIH and HI regulate hockey in the international sphere
and India respectively. Therefore they qualify as an enterprise. But even if the arguments of the two OPs are accepted, as they carry
out commercial functions in the way that they grant sponsorship, radio and television rights, they have to be treated as enterprises
under the provisions of section 2(h) of the Act.
233 Star Tile Works Ltd v N Govindan,
AIR 1959 Ker 254 .
234 Re T G Vinayakumar (also known as Vinayan) Bharathim and
Association of Malayalam Movie Artists (AMMA), Film Employees Federation of Kerala (FEFKA), Case No. 98 of 2014, decided
on 24 March 2017.
235 See also Advertising Agencies Guild v Indian Broadcasting
Foundation (IBF) and its members, Case No. 35 of 2013.
236 See also Competition Commission of India v Co-ordination
Committee of Artists and Technicians of WB Film and Television, AIR 2017 SC 1449
; Shri T G Vinayakumar (also known as Vinayan) v Association of Malayalam Movie Artists, Case
No. 98 of 2014 [CCI], decided on 24 March 2017.
237 Jyoti Swaroop Arora v Tulip Infratech Ltd, 2015 Comp LR 109
(CCI).
238 Hindustan Lever Ltd v MRTP Commission,
(1977) 47 Com Cas 581 (SC).
239 Morgan Stanely Mutual Fund v Kartick Das,
1994 (2) CPJ 7 : (1994) 3 Comp LJ 27
(SC) : (1994) 2 CTJ 385 (CP), Supreme Court judgement dated 20 May 1994, in the context of
Consumer Protection Act, 1986.
240 Re Ambalal Sarabhai Enterprises Ltd, RTP Enquiry No. 365 of
1988, order dated 25August 1988. Decision of the Commission in this case seems to be at variance with that Re Mohan Meakins
(supra).
241 Re Auto Agents and Bajaj Auto Ltd, RTP Enquiry No. 129/1986,
order dated 10 December1990.
Page 109 of 125
[s 2] Definitions
242 Jyoti Swaroop Arora v Tulip Infratech Ltd, 2015
Comp LR 109 (CCI).
243 Re Domestic Air Lines,
[2012] 107 CLA 382 (CCI) : 2012 Comp LR 154 (CCI).
244 Shri V Ramachandran Reddy v HDFC Ltd, Case
Ref Nos. 7/28 and 8/28 of CCI.
245 Jyoti Sawroop Arora v The Competition Commission of India, III
(2016) CPJ 49 (Del.).
246 Standard Oil Co of California and Standard Station Inc v US, (1949)
337 US 293.
247 Competition Commission of India v Co-ordination Committee of
Artists and Technicians of WB Film and Television, AIR 2017 SC 1449
.
248 Competition Commission of India v Co-ordination Committee of
Artists and Technicians of WB Film and Television, AIR 2017 SC 1449
.
249 Surinder Singh Barmi v The Board of Control for Cricket in India,
Case No. 61 of 2010 [CCI], decided on 29 November 2017.
250 Surinder Singh Barmi v The Board of Control for Cricket in India,
Case No. 61 of 2010 [CCI], decided on 29 November 2017.
251 United States v EL Du Pont De Nemours & Co, (1956) 351 US 377.
252 Para 6.14, Pankaj Aggarwal v DLF Gurgaon Home Developers Pvt
Ltd, 2015 Comp LR 728 (CCI).
253 Under section 6, the term is used as “relevant market in India”.
254 Sunil Bansal v Jaiprakash Associates Ltd, Case Nos. 72 of 2011, 16,
34, 53 of 2012 and 45 of 2013; Atos Worldline India Pvt Ltd v Uerifone India Sales Pvt Ltd, 2015 Comp LR 327 (CCI); GHCL v
Coal India, 2015 Comp LR 357 (CCI) : [2015] 131 SCL 408
(CCI),.
255 United Brands v Commission,
(1978) ECR 207 : (1978) 1 CMLR 429
.
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[s 2] Definitions
256 Also see ESYS Information Technologies Pvt Ltd v Intel Corp (Intel
Inc), Intel Semiconductor Ltd and Intel Technology India Pvt Ltd, 2014 Comp LR 126 (CCI).
257 HT Media Ltd v Super Cassettes Industries Ltd, 2014 Comp LR 129
(CCI).
258 Maharashtra State Power Generation Co Ltd v
Mahanadi Coalfields Ltd and Gujarat State Electricity Corp Ltd v South Eastern Coalfields Ltd, 2013 Comp LR 910 (CCI). [Note:
The Tribunal on 17 May 2016 set aside the Commission’s 2013 order which imposed a Rs 1,773 crore fine on Coal India Ltd (CIL)
and three of its subsidiaries for misusing their monopoly to supply poor quality coal and fixing prices, on grounds of violation of
principles of natural justice. The Tribunal’s decision is on a preliminary finding that not all the members of the Commission who
signed off on the ruling were present during the hearings. Appeal No. 01/2014, Appeal Nos. 44–47/2014, Appeal No. 49/2014,
Appeal No. 70/2014 and Appeal No. 52/2015.] The Commission again found the opposite parties to be in violation of provisions of
Competition Act, 2002. The penalty was, however, reduced to Rs 591 crores.
259 Magnus Graphics v Nilpeter India Pvt Ltd, 2015
Comp LR 93 (CCI).
260 Sai Wardha Power Co Ltd v Western Coalfields
Ltd, 2014 Comp LR 265 (CCI).
261 Re Southwest India Machine Trading Pvt Ltd and
Case New Holland Construction Equipment (India) Pvt Ltd, Case No. 97 of 2015 [CCI], decided on 3 May 2016.
262 Re Picasso Animation Pvt Ltd (PAPL) and
Picasso Digital Media Pvt Ltd (PDMPL), Case No. 75 of 2016 [CCI], decided on 25 October 2016.
263 Atos Worldline India Pvt Ltd v Verifone India
Sales Pvt Ltd, 2015 Comp LR 327 (CCI).
264 Three D Integrated Solutions Ltd v Verifone
India Sales Pvt Ltd, 2015 Comp LR 464 (CCI).
265 HT Media Ltd v Super Cassettes Industries Ltd,
2014 Comp LR 129 (CCI).
266 Shamsher Kataria Informant v Honda Siel Cars
India Ltd, 2014 Comp LR 1 (CCI).
267 Re Aniket Sitaram Kokane and Shri Ganesh
Agency, Case No. 25 of 2016 [CCI], decided on 1 June 2016.
268 Re Confederation of Real Estate Brokers’
Association of India and Magicbricks.com, Case No. 23 of 2016 [CCI] decided on 3 May 2016.
269 Sunil Bansal v Jaiprakash Associates Ltd, Case
Nos. 72 of 2011, 16, 34, 53 of 2012 and 45 of 2013, 2015 Comp LR 1009 (CCI).
Page 111 of 125
[s 2] Definitions
270 See also Wing Commander Jai Kishan v Concept
Horizon Infra Pvt Ltd, Competition Appeal (AT) No. 04 of 2018 [NCLAT], decided on 23 January 2018.
271 Belaire Owners’ Association v DLF Ltd Haryana
Urban Development Authority Department of Town and Country Planning, State of Haryana,
[2011] 104 CLA 398 (CCI) : 2011 Comp LR 239 (CCI) :
[2011] 109 SCL 655 (CCI); Kaushal K Rana v DLF
Commercial Complexes Ltd, [2013] 117 SCL 512
(CCI). See also Shri Ashutosh Bhardwaj v DLF Ltd, Shri Lalit Babu v DLF Ltd, Case Nos. 1 of 2014 and 93 of 2015
[CCI], decided on 4 January 2017.
272
Id.
273 Satyendra Singh v Ghaziabad Development
Authority (GDA), Case No. 86 of 2016 [CCI], decided on 28 February 2018.
274 Pankaj Aggarwal v DLF Gurgaon Home
Developers Pvt Ltd, 2015 Comp LR 728 (CCI).
275 DGCOM Buyers and Owners Association,
Chennai v DLF Ltd, New Delhi and DLF Southern Homes Pvt Ltd, Chennai, 2012 Comp LR 1164 (CCI) :
[2013] 117 SCL 79 (CCI).
276 Om Datt Sharma v Adidas AG; Reebok
International Ltd and Reebok India Co, 2014 Comp LR 180 (CCI).
277 Note: As per COMPAT 2015, Commission
committed a jurisdictional error by entertaining the complaint for the purpose of finding out whether the appellant has succeeded in
making out a prima facie case in terms of section 26(1) of the Competition Act, 2002 (the term of the franchisee agreement entered
between Respondent No. 4 and Kalpataru Emporium ended in August/September, 2006. Section 4 which prohibits abuse of
dominant position by any enterprise or group, and also declares certain acts as an abuse of dominant position came into force on 20
May 2009. Thus, the information filed by the appellant on 17 February 2014, i.e., after more than seven years of the expiry of the
term of agreement was not maintainable). Also, the observations made by the Commission about the status of group and the
findings recorded on the issues of relevant market and dominant position shall not be binding on Respondent Nos. 2 to 4 in any
other proceedings before the Commission or any court of law.
278 See Re Actuate Business Consulting Pvt Ltd and
Ambika Trading & Construction Co Pvt Ltd, Case No. 22 of 2016 [CCI], decided on 3 May 2016; Re Vinay Kala and DLF Ltd,
Case No. 13 of 2016 [CCI], decided on 5 July 2016.
279 Re A S Sharma and Prateek Realtors India Pvt
Ltd, Case No. 28 of 2016 [CCI], decided on 1 June 2016; Re Usha Roy and ANS Developers Pvt Ltd, Case No. 48 of 2016 [CCI],
decided on 31 August 2016.
280 Re Sumit Kumar and KAMP Developers Pvt Ltd,
Case No. 26 of 2016 [CCI], decided on 8 June 2016.
281 Re Rex Propbuild Pvt Ltd and Parsvnath
Developers Ltd, Case No. 33 of 2016 [CCI], decided on 26 July 2016.
Page 112 of 125
[s 2] Definitions
282 Re Vilakshan Kumar Yadav and Ani
Technologies Pvt Ltd, Case No. 21 of 2016 [CCI], decided on 31 August 2016; See also Case No. 06/2015, 74/2015, 81/2015,
82/2015 and 96/2015.
283 Re Prem Pal and Amrish Mohalla Sohan Nagar
and Indian Oil Corp Ltd, Case No. 30 of 2016 [CCI], decided on 10 November 2016.
284 All Odisha Steel Federation v Odisha Mining
Corp Ltd, 2013 Comp LR 746 (CCI).
285 Re Bharti Airtel Ltd and Reliance Industries Ltd,
Reliance Jio Infocomm Ltd, Case No. 03 of 2017 [CCI], decided on 9 June 2016. See also Re C Shanmugam and Reliance Jio
Infocomm Ltd, Case No. 98 of 2016 [CCI], decided on 15 June 2016.
286 Shivam Enterprises v Kiratpur Sahib Truck
Operators Co-op Transport Society Ltd, 2015 Comp LR 232 (CCI).
287 Cine Prakashakula Viniyoga Darula Sangham v
Hindustan Coca Cola Beverages Pvt Ltd (HCCBPL) and Consumer Guidance Society v Hindustan Coca Cola Beverages Pvt Ltd
and INOX Leisure Pvt Ltd (ILPL), Case No. UTPE 99/2009 and RTPE-16/2009.
288 Neeraj Malhotra, Advocate v
North Delhi Power Ltd, BSES Rajdhani Power Ltd and BSES Yamuna Power Ltd, Case No. 06/2009, decided on 11 May 2011.
289 Re Vishwambhar M Doiphode and Vodafone
India Ltd, Case No. 04 of 2016 [CCI], decided on 5 May 2016.
290 Re Vinod Kumar Gupta and WhatsApp Inc, Case No. 99 of 2016
[CCI], decided on 1 June 2017.
291 Bijay Poddar v Coal India Ltd (CIL), 2014 Comp
LR 208 (CCI), supra 29.
292
Id.
293 Coal India Ltd v Competition Commission of
India & Bijay Poddar, Appeal No. 81/2014, decided on 20 March 2017.
294 GHCL Ltd v Coal India Ltd, 2015 Comp LR 357
(CCI) : [2015] 131 SCL 408 (CCI),
supra 29.
295 Re Southwest India Machine Trading Pvt Ltd and Case New
Holland Construction Equipment (India) Pvt Ltd, Case No. 97 of 2015 [CCI], decided on 3 May 2016.
296 Re Bull Machines Pvt Ltd and JCB India Ltd, Case No. 105/2013
[CCI].
Page 113 of 125
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297 Re Southwest India Machine Trading Pvt Ltd and Case New
Holland Construction Equipment (India) Pvt Ltd, Case No. 97 of 2015 [CCI], decided on 3 May 2016.
298 Re Indian Paint & Coating Association and Kanoria Chemicals &
Industries Ltd, Case No. 42 of 2016 [CCI], decided on 8 June 2016.
299 Penta is a basic organic chemical which is used in the manufacture
of alkyd resin, rosin esters, plasticisers, printing inks, synthetic rubber, stabilisers for plastics, modified drying oils, detonators,
explosives, pharmaceuticals, core oils and synthetic lubricants.
300 Re Picasso Animation Pvt Ltd (PAPL) and Picasso Digital Media
Pvt Ltd (PDMPL), Case No. 75 of 2016 [CCI], decided on 25 October 2016.
301 Re Confederation of Real Estate Brokers’ Association of India and
Magicbricks.com, Case No. 23 of 2016 [CCI] decided on 3 May 2016.
302 Re Deepak Verma and Clues Network Pvt Ltd, Case No. 34 of 2016
[CCI], decided on 26 July 2016.
303 See also Ashish Ahuja v Snapdeal.com, Case No. 34 of 2016 [CCI].
304 See Re Actuate Business Consulting Pvt Ltd and Ambika Trading &
Construction Co Pvt Ltd, Case No. 22 of 2016 [CCI], decided on 3 May 2016; Re A S Sharma and Prateek Realtors India Pvt Ltd,
Case No. 28 of 2016 [CCI], decided on 1 June 2016; Re Sumit Kumar and KAMP Developers Pvt Ltd, Case No. 26 of 2016 [CCI],
decided on 8 June 2016; Re Vinay Kala and DLF Ltd, Case No. 13 of 2016 [CCI], decided on 5 July 2016; Re Rex Propbuild Pvt
Ltd and Parsvnath Developers Ltd, Case No. 33 of 2016 [CCI], decided on 26 July 2016.
305 See also Re Gajinder Singh Kohli and Genius Propbuild Pvt Ltd,
Case No. 15 of 2016 [CCI], decided on 26 July 2016; Re Oberoi Cars Pvt Ltd and Imperial Housing Ventures Pvt Ltd, Case No. 60
of 2016 [CCI], decided on 31 August 2016; Re Sameer Agarwal and Bestech India Pvt Ltd, Case No. 59 of 2016 [CCI], decided on
6 September 2016; Re Anant and Pam Infrastructure, Case No. 63 of 2016 [CCI], decided on 25 October 2016; Re Dr AR
Subramanian and Mohit Arora, Managing Director, Supertech Ltd, Case No. 70 of 2016 [CCI], decided on 25 October 2016; Re
Major Siya Ram (Retd) and Wave Megacity Centre Pvt Ltd, Case No. 87 of 2016 [CCI], decided on 17 January 2017; Re Rajeev
Nohwar and Lodha Group, Case No. 109 of 2015 [CCI], decided on 8 March 2017; Re Sreedhar Reddy V and SJR Enterprises Pvt
Ltd, Case No. 16 of 2017 [CCI], decided on 8 August 2017; Re Sh Ujjwal Narayan and Goel Enclave, Case No. 04 of 2017 [CCI],
decided on 5 May 2017; Ranjit Singh Gujral v Vatika Ltd, Case No. 23 of 2018 [CCI] decided on 16 October 2018; Nikunj Sisondia
v Earth Infrastructure Ltd, Competition Appeal (AT) No. 02, 03 of 2018 [NCLAT], decided on 22 January 2018.
306 Satyendra Singh v. Ghaziabad Development Authority (GDA), Case
No. 86 of 2016 [CCI], decided on 28 February 2018.
307 Re Tirath Ram and Baba Associate, Case No. 102 of 2016 [CCI],
decided on 14 March 2017.
308 Re Vishwambhar M Doiphode and Vodafone India Ltd, Case No. 04
of 2016 [CCI], decided on 5 May 2016.
309 Re Aniket Sitaram Kokane and Ganesh Agency,
Case No. 25 of 2016 [CCI], decided on 1 June 2016.
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[s 2] Definitions
310 Re Indiacan Education Pvt Ltd and Aldine
Ventures Pvt Ltd, Case No. 71 of 2016 [CCI], decided on 10 November 2016.
311 Re Rachakonda Satya Sravan Kumar and ACE
Educational Services Pvt Ltd, Case No. 100 of 2016 [CCI], decided on 8 February 2017.
312 Re Ashish Dandona and Dhanlaxmi Bank Ltd,
Case No. 66 of 2016 [CCI], decided on 21 February 2017.
313 Re Aditya Automobile Spares Pvt Ltd and Kotak
Mahindra Bank Ltd, Case No. 103 of 2016 [CCI], decided on 15 July 2017.
314 Case Nos. 03, 11 & 59 of 2012 decided on 24
March 2017. See also Re Karnataka Power Corp Ltd and The Singareni Collieries Company Ltd, Case No. 10 of 2017 [CCI],
decided on 12 June 2017.
315 Re Dr Ravi Bhushan Sharma and Toyota
Kirloskar Motor Pvt Ltd, Case No. 92 of 2016 [CCI], decided on 6 December 2016.
316 Khemsons Agencies v Mondelez India Foods Pvt
Ltd, Case No. 17 of 2018 [CCI], decided on 27 August 2018.
317 Tamil Nadu Consumer Products Distributors
Association v Fangs Technology Pvt Ltd, Case No. 15 of 2008 [CCI] decided on 4 October 2018.
318 M Venugopal Reddy v Trans Union CIBIL Ltd,
Case No. 36 of 2018 [CCI] decided on 8 November 2018.
319
House of Diagnostics LLP v Esaote S p A, Case No. 09 of 2016 [CCIJ, decided on 27 September 2018.
320 Re Sh Ravi Beriwala Shyam Towers and Lexus Motors Ltd, Case
No. 79 of 2016 [CCI], decided on 17 January 2017.
321 Shubham Sanitarywares v Competition Commission of India &
HSIL Ltd, APPEAL No. 19 of 2016 [COMPAT], decided on 29 November 2016.
322 All India Online Vendors Association v Flipkart India Pvt Ltd, Case
No. 20 of 2018 [CCI], decided on 6 November 2018.
323 Re Vilakshan Kumar Yadav and ANI Technologies Pvt Ltd, Case
No. 21 of 2016 [CCI], decided on 31 August 2016.
324 Re Meru Travel Solutions Pvt Ltd, Case Nos. 25–28 of 2017 [CCI],
decided on 20 June 2018.
Page 115 of 125
[s 2] Definitions
325 Re Bharti Airtel Ltd Bharti and Reliance Industries Ltd, Reliance
Jio Infocomm Ltd, Case No. 03 of 2017 [CCI], decided on 9 June 2017. See also Re C Shanmugam and Reliance Jio Infocomm Ltd,
Case No. 98 of 2016 [CCI], decided on 15 June 2017.
326 Re Vinod Kumar Gupta and WhatsApp Inc., Case No. 99 of 2016
[CCI], decided on 1 June 2017.
327 Re Matrimony.com Ltd, Case Nos. 7 and 30 of 2012 [CCI], decided
on 8 February 2018.
328 Re Onicra Credit Rating Agency of India Ltd and Indiabulls
Housing Finance Ltd, Case No. 43 of 2016 [CCI], decided on 3 February 2017.
329 Id.
330 Om Datt Sharma v Competition Commission of
India, 2015 Comp LR 529 (CompAT).
331 Note: As per COMPAT 2015, Commission
committed a jurisdictional error by entertaining the complaint for the purpose of finding out whether the appellant has succeeded in
making out a prima facie case in terms of section 26(1) of the Competition Act, 2002 (the term of the franchisee agreement entered
between Respondent No. 4 and Kalpataru Emporium ended in August/September, 2006. Section 4 that prohibits abuse of dominant
position by any enterprise or group and also declares certain acts as an abuse of dominant position came into force on 20 May 2009.
Thus, the information filed by the appellant on 17 February 2014, i.e., after more than seven years of the expiry of the term of
agreement was not maintainable). Also, the observations made by the Commission about the status of group and the findings
recorded on the issues of relevant market and dominant position shall not be binding on Respondent Nos. 2 to 4 in any other
proceedings before the Commission or any court of law.
332 Atos Worldline India Pvt Ltd v Verifone India
Sales Pvt Ltd, 2015 Comp LR 327 (CCI).
333 GHCL Ltd v Coal India Ltd, 2015 Comp LR 357
(CCI) : [2015] 131 SCL 408 (CCI),
supra 29.
334 Para 57.
335 Three D Integrated Solutions Ltd v Verifone
India Sales Pvt Ltd, 2015 Comp LR 464 (CCI).
336 Jindal Steel and Power Ltd v Steel Authority of
India Ltd, [2012] 107 CLA 278
(CCI).
337 Shivam Enterprises v Kiratpur Sahib Truck
Operators Co-op Transport Society Ltd, 2015 Comp LR 232 (CCI).
Page 116 of 125
[s 2] Definitions
338 Karnataka Film Chamber of Commerce v Kannada Grahakara
Koota, Appeal No. 13/2016 with I.A. No. 08/2017 decided on 10 April 2017.
339 Maharashtra State Power Generation Co Ltd v
Mahanadi Coalfields Ltd and Coal India Ltd [Along with Case No. 11 of 2012] and Gujarat State Electricity Corp Ltd v South
Eastern Coalfields Ltd and Coal India Ltd, 2013 Comp LR 910 (CCI), supra 29.
340 Also see Sai Wardha Power Co Ltd v Western
Coalfields Ltd, 2014 Comp LR 265 (CCI).
341 Bijay Poddar v Coal India Ltd, 2014 Comp LR
208 (CCI), supra 29.
342 Para 38, Id.
343 Also see West Bengal Power Development Corp
Ltd v Coal India Ltd, Eastern Coalfields Ltd, Bharat Coking Coal Ltd and Mahanadi Coalfields Ltd and Sponge Iron Manufactures
Association v Coal India Ltd, 2014 Comp LR 68 (CCI).
344 Coal India Ltd v Competition Commission of
India & Bijay Poddar, Appeal No. 81/2014, decided on 20 March 2017.
345 Pankaj Aggarwal v DLF Gurgaon Home
Developers Pvt Ltd, 2015 Comp LR 728 (CCI).
346 Belaire case found DLF to be dominant in the
market for ‘services of developer/builder in respect of high-end residential accommodation in Gurgaon’. The COMPAT’s order
confirmed this finding of the Commission.
347 Case Nos. 13 and 21 of 2010 and Case No. 55 of
2012 (CCI). See also Shri Ashutosh Bhardwaj v DLF Ltd, Lalit Babu v DLF Limited, Case No. 1 of 2014 and 93 of 2015 [CCI],
decided on 4 January 2017.
348 In Case No. 6 of 2014, a minority order of the CCI under section
26(1) also noted that at the initiation stage, there is no mandate to precisely define the relevant market.
349 Saint Gobain Glass India Ltd v Gujarat Gas Co
Ltd, 2015 Comp LR 431 (CCI).
350 Sharad Kumar Jhunjunwala v UOI, 2015 Comp
LR 859 (CCI) : (2015) 4 Comp LJ 457 .
351 Sunil Bansal v Jaiprakash Associates Ltd, Case
Nos. 72 of 2011, 16, 34, 53 of 2012 and 45 of 2013 decided on 26 October 2015, 2015 Comp LR 1009 (CCI).
352 Global Tax Free Traders v William Grant &
Sons Ltd, 2015 Comp LR 503 (CompAT) : IV (2015) CPJ 55
.
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[s 2] Definitions
353 AKjain v The Dwarkadhis
Projects (P) Ltd, 2015 Comp LR 487 (CompAT) : III (2015) CPJ 15
.
354 Surinder Singh Barmi v The Board of Control for
Cricket in India, Case No. 61 of 2010 [CCI], decided on 29 November 2017.
355 AK Jain v The Dwarkadhis Projects (P) Ltd,
2015 Comp LR 487 (CompAT) : III (2015) CPJ 15
.
356 Shri Sunil Chowdhary v TDI Infrastructure Ltd, Case No. 27 of
2014 decided on 23 September 2014.
357 Shri Deepak Kumar Jain v TDI Infrastructure Ltd, Case No. 40 of
2014 decided on 24 September 2014.
358 Deepak Kumar Jain v Competition Commission of India, TDI
Infrastructure Ltd, Appeal No. 79 of 2014 I.A. Nos. 53/2016 and 161/2015 [COMPAT], decided on 8 November 2016.
359
Id.
360 Shamsher Kataria Informant v Honda Siel Cars India Ltd, 2014
Comp LR 1 (CCI).
361 Sh Dhanraj Pillay v Hockey India, 2013 Comp
LR 543 (CCI).
362 KNVB v Feyenoord, High Court of Amsterdam verdict of 8
November 1996.
363 MCX Stock Exchange Ltd v National Stock
Exchange of India Ltd, DotEx International Ltd and Omnesys Technologies Pvt Ltd, 2011 Comp LR 129 (CCI) :
[2011] 109 SCL 109 (CCI).
364 The National Stock Exchange of India Ltd v Competition
Commission of India, 2014 Comp LR 304 (CompAT).
365 Arshiya Rail Infrastructure Ltd (ARIL) v Ministry
of Railways (MoR) through the Chairman, Railway Board (KB) and Container Corp of India Ltd (CONCOR),
[2013] 112 CLA 297 (CCI) : 2012 Comp LR 937
(CCI) : [2012] 116 SCL 417 (CCI).
366 Shri ML TAYAL, (Member), while agreeing
with the majority ruling wrote a separate order with certain observations and clarifications. Shri R Prasad, Member wrote a separate
order wherein he differed with the majority order and went on to hold that there was contravention of various provisions under
section 4 of the Competition Act, 2002. He also inflicted penalty at 5% on average of three years turnover under section 27(2) of the
Page 118 of 125
[s 2] Definitions
Competition Act, 2002 against Indian Railways and inflicted a penalty of Rs 4,356 crores. He also issued a direction to Indian
Railways to withdraw the circular issued vide letter No. 2006/IT-III/73/12 dated 11 October 2006.
367 Deutsche Bahn/PCC logistics, Case No.
COMP/M.5480. Available at: http://ec.europa.eu/competition/mergers/cases/decisions/m5480_20090612_20310_en.pdf (last
accessed in February 2019).
368 Belaire Owners’ Association v DLF Ltd Haryana
Urban Development Authority Department of Town and Country Planning, State of Haryana,
[2011] 104 CLA 398 (CCI) : 2011 Comp LR 239 (CCI) :
[2011] 109 SCL 655 (CCI).
369 Page 66 of the order.
370 Magnus Graphics v Nilpeter India Pvt Ltd, 2015
Comp LR 93 (CCI).
371 HT Media Ltd v Super Cassettes Industries Ltd,
2014 Comp LR 129 (CCI).
372 Domestic Air Lines, RTPE 05/2009 of MRTPC
and Suo-Motu Case No. 02/2010.
373 Suo-Motu Case by MRTPC v North Delhi Power
Ltd, BSES Rajdhani Power Ltd, BSES Yamuna Power Ltd, Case No. DGIR/2008/IP/158 RTPE No. 19/2008 (MRTP), decided on 31
May 2011.
374 Quadrant EPP Surlon India Ltd v INA Bearings
India Pvt Ltd, 2013 Comp LR 664 (CCI) : [2013] 120 SCL 228
(CCI).
375 Shri Yogesh Ganeshlaji Somani v Zee Turner Ltd
and Star Den Media Services Pvt Ltd, [2013] 115 CLA 78
(CCI) : 2013 Comp LR 492 (CCI) : [2013] 119 SCL 371
(CCI).
376 ESYS Information Technologies Pvt Ltd v Intel
Corp (Intel Inc), Intel Semiconductor Ltd and Intel Technology India Pvt Ltd, 2014 Comp LR 126 (CCI).
377 Financial Software and Systems Pvt Ltd
Informant v ACI Worldwide Solutions Pvt Ltd, 2015 Comp LR 253 (CCI).
378 Faridabad Industries Association v Adani Gas
Ltd, 2014 Comp LR 185 (CCI).
379 “Proper definition of the relevant market is a necessary precondition
for the assessment of the effects on competition of the concentration”, Joined Cases C-68/94 and C-30/95 Kali & Salz,
[1998] ECR I-1375 , para 143; Case T-342/99 Airtours Plc v
Page 119 of 125
[s 2] Definitions
Commission, [2002] ECR II-2585 , para 19; Case T-
151/5 NVV v Commission, [2009] ECR II-1219 , para 51.
380 Commission Notice on the definition of relevant market for the
purposes of Community Competition law, OJ C 372, 9 December 1997.
381 Id.
382 Case 6/72 Europemballage Corp & Continental Can Co Inc v
Commission, [1973] ECR 215 .
383 Potential competition is usually not taken into account when defining
markets since the conditions under which potential competition will actually represent an effective competitive constraint depend
on the analysis of specific factors and circumstances related to the conditions of entry. If required, this analysis is only carried out at
a later stage, in general once the position of companies involved in the relevant market has already been ascertained, and when such
position gives rise to concerns from a competition point of view, see Notice on Market Definition, para 24.
384 Available at:
http://ec.europa.eu/competition/international/multilateral/2012_jun_market_definition_ en.pdf (last accessed in February 2019).
385 Hoffmann–La Roche v Commission,
[1979] ECR 461 .
386 Hoffmann–La Roche v Commission,
[1979] ECR 461 . Available at: http://eur-lex.europa.eu/legal-
content/EN/TXT/?uri=CELEX%3A61976CJ0085 (last accessed in February 2019).
387 Id. para 9.
388 Id. para 10.
389 US v El Du Pont de Nemour & Co, (1956) 351 US 377.
390 Id. para 12.
391 MCX Stock Exchange Ltd v National Stock Exchange of India Ltd,
DotEx International Ltd and Omnesys Technologies Pvt Ltd, 2011 Comp LR 129 (CCI) : [2011]
109 SCL 109 (CCI). Also see Continental Can case. Available at: http://eur-
lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A61972CJ0006 (last accessed in February 2019).
392 Ramakant Kini Informant v Dr LH Hiranandani Hospital, 2014
Comp LR 263 (CCI) 72.
393 Jindal Steel and Power Ltd v Steel Authority of India Ltd,
[2012] 107 CLA 278 (CCI).
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[s 2] Definitions
394 Kansan News Pvt Ltd v Fast Way Transmission Pvt Ltd Lajja
Tower, Sham Nagar, Ludhiana, Punjab, Case No. 36/2011.
395 DG (I&R) v Informatics Computer Systems, RTPE No. 217 of 1997,
decided on 23 April 1999.
396 Apeejay School, RPT Enquiry No. 1626/1987, Order dated 24 April
1991.
397 NITTE Education Trust v UOI, (1997) 5 CTJ 299 and Full Bench
ruling of MRTP Commission in the case of Holy Angels School, (1998) 6 CTJ 129.
398 Sahara Saving & Investment Corp Ltd, UTP Enquiry No. 497/87,
Order dated 3 June 1988.
399 MS Shoes East Ltd v SBI Capital Markts Br,
(2000) 37 CLA 223 (MRTPC).
400 DG (I&R) v National Council for Labour Management,
(2003) 57 CLA 152 (MRTPC).
401 Re Lusa Builders (P) Ltd, RTP Enquiry No. 441 of 1988, Order dated
24 November 1988.
402 Re Manoj Buiders, UTP Enquiry No. 43 of 1987,
Order dated 6 June 1987.
403 MG Investment and Industrial Co Ltd v New Shorrock Spinning and
Mfg Co Ltd, (1972) 42 Com Cas 145 (at pp 155–156).
404 Re RK Towers India Pvt Ltd, RTP Enquiry No.
342 of 1988, order dated 22 July 1988.
405 Bhawani Das Arora v Ghaziabad Development
Authority, Company Application No. 267 of 1994, heard on 21 September 1995,
(1996) 1 Comp LJ 182 (MRTPC).
406 Lucknow Development Authority v M K Gupta,
AIR 1994 SC 787 : 1994 AIR SCW 97 :
(1994) 1 Comp LJ 1 (SC) :
(1994)1 SCC 243 : [1994] 1 Mad LJ 611 : [1994] 1 Mad LJ 55.
407 The words “housing construction” have since been added by the
Consumer Protection (Amendment) Act, 1993 in section 2(1)(o).
408 The words “chit find, real estate” have since been inserted by the
MRTP (Amendment) Act, 1991.
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[s 2] Definitions
409 Lucknow Development Authority v MK Gupta,
AIR 1994 SC 787 : 1994 AIR SCW 97 : (1994) 1
Comp LJ 1 : (1994) 1 SCC 243
: [1994] 1 Mad LJ 611 : [1994] 1 Mad LJ 55.
410 Pravat Kumar Seth v Maruti Udyog Ltd, III
(1994) CPJ 249 (Ori-SC).
411 RK Industries v Director of Industries, III (1994)
CPR 516 : III (1994) CPJ 325 (PB-SC).
Also see Haryana Financial Corp of Chandigarh v Jamna Dass Cotton Mills of Hansi, (1994) 1 CPR 311 :
(1993) 1 CPJ 238 (Har-SC).
412 RP Kapur v Amarjit Singh Sandhu ITO,
II (1994) CPJ 303 (Har-SC); See also National
Forum for Consumer Protection v Keonjhargarh Municipality, II (1993) CPJ 1109
(Ori-SC).
413 Consumer Unity and Trust Society, Jaipur v State
of Rajasthan, First Appeal No. 2 of 1989, decided on 12 December 1989 (NC); Suhas Mohan Haldulkar v Secretary, Public Health
Department, Govt of Maharashtra, III (1994) CPJ 124
(NC).
414 HR Gill v Suryavanshi Kshatrya Dnyati Samaj, 1
(1992) CPR 647 : II (1991) CPJ 705 (Mah-SC).
415 UOI v Nilesh Agarwal, 1 (1991) CPR 23 : 1
(1991) CPJ 203 (NC).
416 BL Gupta v Army Welfare Housing
Organisation, III (1994) CPJ 40 (NC).
417 P Durga Prasad v Corp of Madras, (1994) 1
CPR 168 (TN-SC).
418 Director of Admissions v Radhe Narayanan (Dr),
1 (1995) CPJ 247 (Ker-SC).
419 Vishwajyoti Printers v Molins of India, 1
(1992) CPJ 167 (NC).
420 Umedilal Agarwal v United India Insurance Co
Ltd, II (1992) CPJ 451 : 1 (1991) CPR 217 :
1 (1991) CPJ 3 (NC).
421 Lucknow Development Authority v MK Gupta, 1
(1994) CPR 569 : III (1993) CPJ 7
(SC).
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[s 2] Definitions
422 Accountant General v District Consumer Forum,
II (1993) CPJ 905 (MP, SC).
423 Registrar, University of Bombay v Mumbai
Grahak Panchayat Bombay, II (1994) CPR 487 :
I (1994) CPJ 146 (NC); also see Joint
Secretary, Gujarat Secondary Education Board v Bharat Narottam Thakkar, 1 (1994)
CPJ 187 (NC).
424 PK Kuriakose v Air Force Naval Housing Board,
1 (1992) CPJ 318 (Del SC).
425 E Sadanandan v Bureau of Indian Standards, III
(1994) CPJ 34 (NC).
426 Vedprakash Sharma v Vimal Agencies, III
(1992) CPJ 544 :
II (1992) CRP 670 :
II (1992) CPJ 515 (NC).
427 Suhas Mohan Haldulkar v Public Health Dept,
Govt of Maharashtra, III (1994) CPJ 124
(NC); See also Consumer Unity Trust Society v State of Rajasthan, First Appeal No. 2/1989, decided on 12 December 1989 (NC).
428 P Muniaswamy Gounder v District Collector,
North Arcot Dist Fisheries Development Corp, II (1993) CPJ 923
(TM., SC).
429 I Ganapathy v Regional Passport Officer, 1
(1995) CPS 346 (Pond., SC).
430 Sunil Bansal v Jaiprakash Associates Ltd, Case Nos. 72 of 2011, 16,
34, 53 of 2012 and 45 of 2013.
431 Lucknow Development Authority v MK Gupta,
AIR 1994 SC 787 : 1994 AIR SCW 97 : (1994) 1
SCC 243 : [1994] 1 Mad LJ 611 : [1994] 1 Mad LJ 55.
432 Id., Also see Pankaj Aggarwal v DLF Gurgaon Home Developers
Pvt Ltd, 2015 Comp LR 728 (CCI).
433 Jindal Steel and Power Ltd v Steel Authority of
India Ltd, [2012] 107 CLA 278 (CCI).
434 The National Stock Exchange of India Ltd v
Competition Commission of India, 2014 Comp LR 304 (CompAT).
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[s 2] Definitions
435 (a) Merger of TSX Group Inc and Bourse de
Montreal (2009) where it was held that equities, derivatives and commodities had distinct risk profiles; as such, demand
substitutability was limited and these instruments were not competitive substitutes with one another; (b) Australian Stock Exchange
and SFE Corporation Ltd (2006), where it was suggested that the merger between an equities exchange and derivatives exchange
was approved on the basis that there was no product substitutability, implying a lack of demand substitutability. The Australian
Competition and Consumer Commission (ACCC) also found that supply side substitutability was unlikely in practice due to
network effects and that could arise as a result of liquidity requirements. (c) A quotation of the Competition Commission of UK
was quoted to the following effect “derivatives, equities and bonds are really substitutable from the purchasers’ point of view”. The
UK Competition Commission also found that there was no room for supply side substitutes based on the facts that a platform would
incur non-trivial cost over a year or more in order to start trading in another product. Furthermore, they noted the limitation on
economies of scope arising from power in adjacent markets. “Equities derivatives and bonds are typically traded on separate
platforms, suggesting that economies of scope are not strong enough to warrant inclusion in the same market”. (d) The European
Commission in the Eurex case observed the following, “despite the connections to the markets for listing and trading services for
securities, on which Parties operate, and the derivatives market, on which Eurex operates, there are substantial differences between
the two markets.”
436 Jupiter Gaming Solutions Pvt Ltd v Government of Goa, Case No.
15/2010, decided on 12 May 2011.
437 Managing Director, Maharashtra State Financial Corp v Sanjay
Shankarsa Mamarde, AIR 2010 SC 3534 : 2010 AIR
SCW 4420 : (2010) 7 SCC 489 : [2010] 8 Mad LJ 398 : 2010
(3) UC 1912 : 2010 (6) Scale 692 : 2010 (4) All MR
952 : 2010 (4) Civ LJ 242 :
2010 (3) CPJ 33 : 2010 (3) CPR 136 : 2010 (6) Andh LD 29 (SC) :
[2010] 8 SCR 358 .
438 Lucknow Development Authority v MK Gupta,
AIR 1994 SC 787 : 1994 AIR SCW 97 : (1994) 1
SCC 243 : [1994] 1 Mad LJ 611 : [1994] 1 Mad LJ 55.
439 Raj Kumar Shivhare v Assistant Director, Directorate of
Enforcement, AIR 2010 SC 2239 :
(2010) 4 SCC 772 : [2010] 4 Mad LJ 964 :
2010 253 ELT 3 : JT 2010 (4) SC 54
: [2010] SCR 608 .
440 Re Mohan Meakins Ltd, RTP Enquiry No. 65/1984, order dated 11
April 1986.
441 Nitte Education Trust v UOI,
(1997) 89 Com Cas 390 (Kant).
442 Pandrol Rahee Technologies Pvt Ltd v Delhi Metro Rail Corp Ltd,
2011 Comp LR 561 (CCI).
443 MC Dowell & Co Ltd v Commercial Tax Officer,
AIR 1986 SC 649 , 659 : (1985) 3 SCC 230
: 1985 SCC (Tax) 391 : 1985 59 STC 277
: 1985 3 SCR 791 : 1985 13 STL (SC) 243 :
1985 154 ITR 148 : 1985 UPTC 747 : 1985 5 ECC 259 : 1985 STI
(SC) 39 : 1986 UJ (SC) 595 (2) : 1985 (1) Scale 788.
444 Dy Commissioner Commercial Tax v M Krishnaswami Mudaliar &
Sons, AIR 1954 Mad 856 : (1954) 2 Mad LJ 151; See also
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[s 2] Definitions
State of AP v Shree Bajranga Jute Mills Ltd, AIR 1955 Andhra 241
, 242 : 1955 Andh WR 500.
445 Tungabhadra Industries Ltd v Com Tax Officer,
AIR 1955 AP 257 , 258 : 1955 Andh WR 328.
446 Excel Crop Care Ltd v Competition Commission of India, 2013
Comp LR 799 (CompAT).
447 Southern Pipeline Contractors v The Competition
Commission, Case No. 105/CAC/Dec 10, 106/CAC/Dec 10.
448 MDD Medical Systems India Pvt Ltd v Foundation
for Common Cause, Appeal No. 93 of 2012 decided on 25 February 2013, 2013 Comp LR 327 (CompAT).
449 The approach of relevant turnover for multi-
product companies has been approved by the Supreme Court [Excel Crop Care Ltd v Competition Commission of India,
AIR 2017 SC 2734 .]
450 MCX Stock Exchange Ltd v National Stock Exchange of India Ltd,
DotEx International Ltd and Omnesys Technologies Pvt Ltd, 2011 Comp LR 129 (CCI) : [2011]
109 SCL 109 (CCI).
451 Stipulates penalty based on an average of turnover for the last three
preceding financial years.
452 The National Stock Exchange of India Ltd v Competition
Commission of India, 2014 Comp LR 304 (CompAT).
453 Excel Crop v CCI, 2013 Comp LR 799 (CompAT).
454 Dr LH Hiranandani Hospital v Competition
Commission of India, Appeal No. 19 of 2014 decided on 18 December 2014, 2016 Comp LR 129 (CompAT).
455 Excel Crop Care Ltd v Competition Commission of India,
AIR 2017 SC 2734 .
456 Excel Crop Care Ltd v Competition Commission of India, (Appeal
no. 79 of 2012), COMPAT. See also Re Cartelisation by broadcasting service providers by rigging the bids submitted in response
to the tenders floated by Sports Broadcasters v Essel Shyam Communication Ltd, Suo-Motu Case No. 02/2013, decided on 11/7/18
(CCI).
457 Reliance Big Entertainment Ltd v Karnataka Film Chamber of
Commerce, [2012] 108 CLA 116 (CCI) : 2012 Comp
LR 269 (CCI).
458 Sandhya Drug Agency v Assam Drug Dealers Association, 2014
Comp LR 61 (CCI).
Page 125 of 125
[s 2] Definitions
459 UTV Software Communications Ltd, Mumbai v Motion Pictures
Association, Delhi, Case No. 09/2011, decided on 8 May 2012.
460 Peeveear Medical Agencies v All India Organization of Chemists and
Druggists, 2014 Comp LR 10 (CCI).
End of Document
[s 3] Anti-competitive agreements
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > CHAPTER
II PROHIBITION OF CERTAIN AGREEMENTS, ABUSE OF DOMINANT POSITION AND
REGULATION OF COMBINATIONS > Prohibition of agreements
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
CHAPTER II PROHIBITION OF CERTAIN AGREEMENTS, ABUSE OF
DOMINANT POSITION AND REGULATION OF COMBINATIONS
Prohibition of agreements
This Chapter deals with “three kinds of practices, which may be anti-competitive, viz., agreements which may turn out to be
anti-competitive; abusive use of dominant position by those enterprises or groups which enjoy such dominant position as
defined in the Act; and Regulations of combination of enterprises by means of mergers or amalgamations, so that they do not
become anti-competitive or abuse the dominant position which they can attain.”1
[s 3] Anti-competitive agreements2
(1) No enterprise or association of enterprises or person or association of persons shall enter into any agreement in
respect of production, supply, distribution, storage, acquisition or control of goods or provision of services, which
causes or is likely to cause an appreciable adverse effect on competition within India.
(2) Any agreement entered into in contravention of the provisions contained in sub-section (1) shall be void.
(3) Any agreement entered into between enterprises or associations of enterprises or persons or associations of
persons or between any person and enterprise or practice carried on, or decision taken by, any association of
enterprises or association of persons, including cartels, engaged in identical or similar trade of goods or provision
of services, which—
(a) directly or indirectly determines purchase or sale prices;
(b) limits or controls production, supply, markets, technical development, investment or provision of services;
(c) shares the 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) directly or indirectly results in bid rigging or collusive bidding, shall be presumed to have an appreciable
adverse effect on competition.
Provided that nothing contained in this sub-section shall apply to any agreement entered into by way of
joint ventures if such agreement increases efficiency in production, supply, distribution, storage,
acquisition or control of goods or provision of services.
Explanation.—For the purposes of this sub-section, “bid rigging” means any agreement, between
enterprises or persons referred to in sub-section (3) engaged in identical or similar production or trading
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[s 3] Anti-competitive agreements
of goods or provision of services, which has the effect of eliminating or reducing competition for bids or
adversely affecting or manipulating the process for bidding;
(4) Any agreement amongst enterprises or persons at different stages or levels of the production chain in different
markets, in respect of production, supply, distribution, storage, sale or price of, or trade in goods or provision of
services, including—
(a) tie-in arrangement;
(b) exclusive supply agreement;
(c) exclusive distribution agreement;
(d) refusal to deal;
(e) resale price maintenance,
shall be an agreement in contravention of sub-section (1) if such agreement causes or is likely to cause
an appreciable adverse effect on competition in India.
Explanation.—For the purposes of this sub-section,—
(a) “tie-in arrangements” includes any agreement requiring a purchaser of goods, as a condition of such
purchase, to purchase some other goods;
(b) “exclusive supply agreement” includes any agreement restricting in any manner the purchaser in the course
of his trade from acquiring or otherwise dealing in any goods other than those of the seller or any other
person;
(c) “exclusive distribution agreement” includes any agreement to limit, restrict or withhold the output or supply
of any goods or allocate any area or market for the disposal or sale of the goods;
(d) “refusal to deal” includes any agreement which restricts, or is likely to restrict, by any method the persons or
classes of persons to whom goods are sold or from whom goods are bought;
(e) “resale price maintenance” includes any agreement to sell goods on condition that the prices to be charged on
the resale by the purchaser shall be the prices stipulated by the seller unless it is clearly stated that prices
lower than those prices may be charged;
(5) Nothing contained in this section shall restrict—
(i) the right of any person to restrain any infringement of, or to impose reasonable conditions, as may be
necessary for protecting any of his rights which have been or may be conferred upon him under—
(a) the Copyright Act, 1957 (14 of 1957);
(b) the Patents Act, 1970 (39 of 1970);
(c) the Trade and Merchandise Marks Act, 1958 (43 of 1958) or the Trade Marks Act, 1999 (47 of 1999);
(d) the Geographical Indications of Goods (Registration and Protection) Act, 1999 (48 of 1999);
(e) the Designs Act, 2000 (16 of 2000);
(f) the Semi-conductor Integrated Circuits Layout-Design Act, 2000 (37 of 2000);
(ii) the right of any person to export goods from India to the extent to which the agreement relates exclusively to
the production, supply, distribution or control of goods or provision of services for such export.
LEGISLATIVE BACKGROUND
Anti-Competitive Agreements under the Competition Act, 2002 were in the nature of Restrictive Trade Practices under the
erstwhile Monopolies and Restrictive Trade Practices Act, 1969 (MRTP Act, 1969). Such Trade Practices originally
attracted the attention of Monopolies Inquiry Commission (1964) and later on, the Sachar Committee (August, 1978). The
present Competition Act, 2002 is based on the recommendations of the Raghavan Committee (May, 2002).
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Monopolies Inquiry Commission Report
In regard to Restrictive Trade Practices, Monopolies Inquiry Commission reported as follows:
Coming now to restrictive practices, the first of these that deserves mention is the habit of most traders of hoarding whenever any
scarcity is present or even apprehended... Another practice restrictive of competition is the insistence of many manufacturers that
their goods must not be sold below the price as dictated by them. This is usually described as re-sale price maintenance. It is
obvious that this kills competition between the actual distributors of the article and often keeps the prices which the ultimate
consumer has to pay higher than they would otherwise have been. Several producers have admitted before us that they do insist on
this. Some of them have tried to justify it on the ground that price stability attracts the consumer and if lesser price is charged for
their goods that might harm their reputation as regards quality. The replies given by the big companies (whose assets were
estimated to be not less than Rs. 1 crore) also indicate a wide prevalence of this practice. A large number of them admitted that re-
sale price maintenance was insisted upon in the agreements between them and their stockists or their agents in the first line of
distribution; copies of the agreements annexed to the replies fully establish this. In the second line of distribution also, viz.,
wholesalers, operating between these stockists and the retailers, resale price maintenance was practised. As regards distributors or
dealers selling goods to the ultimate consumer also, a large number of replies show that these last line distributors were also
prevented from selling at any price less than what was fixed by the producers..... Even more wide-spread than resale price
maintenance is the practice of exclusive dealing which many manufacturers enforce. This consists in a manufacturer telling a
dealer that he shall not deal in any competitor’s goods. If he does so he will not get the supply of goods from the particular
manufacturer. Sometimes such a term is embodied in a written agreement but more often, we are convinced manufacturer holding
a dominant position enforces exclusive dealings, by verbal instructions or threats...... Several instances were brought to our notice
of the practice of fixation of prices by agreement between competitors. It was admitted before us by the several manufacturers of
tyres and tubes that they had what they called “industry meetings” which decided the prices to be charged for their products and
these prices were adhered to by all the producers. The price of cables and winding wires were reported to be fixed similarly by the
different producers acting together. Similar fixation of prices by agreements between the producers of rolled glass has also been
admitted before us...... It has been brought to our notice by the Director-General of Supplies and Disposals who makes purchases of
various articles for the Government of India that tenders for cables received from the cable manufacturers quoted the same price.
Similarly, he said the tenders for lamps received from the members of the Electric Lamp Manufacturers of India were in identical
terms, while tenders received from the Indian Lamp Manufacturers Association quoted one price. This obviously was the necessary
and inevitable consequence of the price fixation agreements.... Several complaints in writing were received by us as regards tie-in
practices—”Tie-in” which is also described sometimes as “tie-up” consists in the supplier of some commodity refusing to supply it
to the dealer unless the latter agrees also to take from him certain other commodity stocked by the manufacturer. Sometimes this
insistence on purchasing another article before one article is supplied is practised by a distributor in respect of the next line of
distributors. This is a practice particularly difficult to prove as documentary evidence is not likely to exist and a manufacturer or
distributor indulging in such a practice would not ordinarily admit it.... The practice of full line forcing which is really an extreme
form of tie-in sales also appears to be fairly prevalent. An agreement which a leading dyestuff and textile auxiliarie’s manufacturer
has with his distributor contains a provision that concerns with which his distributor is connected shall take the entire requirement
of dyes and auxiliaries from him. A slightly different form of full line forcing is to bind the dealer to take the full quantum of
product which the manufacturer chooses to allocate to him. The agreements of some paper manufacturers with their dealers
contained such a provision. The field studies we have mentioned earlier indicate that this practice is also common in the case of
pharmaceuticals, cosmetics and even textile varieties... We came across two instances of boycott arrangements. A leading
manufacturer of pistons with his distributors stipulates that the manufacturer may maintain a list of persons called “stop list” and
the distributors shall not sell to any person in that stop list any of the products covered by the agreement. The agreement of one oil
company with its dealers prohibits supply to any one on the stop list of the company or of another petrol distributor company in
India. This last mentioned term indicates that concerted action is or may be taken by oil companies, in this matter.... Discrimination
in the rates of discount given to distributors and retailers was admitted before us by several industrialists. The copies of the
agreements produced also clearly show this. In certain cases the rates of discount vary according to the quantity of purchase made;
in some other cases it is dependent on the annual sales made during the year. Government generally receives especially favourable
terms. So also do users of tyres and other motor accessories as original equipment. The method of special discount on the basis of
aggregate purchases of all goods from a purchaser or a dealer over a fixed period appears to be regularly practised by certain
pharmaceutical concerns ... Allocation of areas between competing producers is more clearly indicated by the agreement which a
leading oil distributing company appears to have. This company has stated in its reply that multi-lateral product exchange
agreements with other oil companies in India exist to achieve economic distribution, avoid cross haulage and ensure continuity of
supplies and that they exchange on identical products or repay tonne per tonne on products drawn from exchange points of supply.
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Sachar Committee Report
The Sachar Committee recommended that the collective agreements relating to the trade practice of collective
discrimination, boycott, collective bidding, resale price maintenance and residuary collective agreements in this regard
should be prohibited. It was also suggested that bilateral agreements relating to the trade practice of minimum resale price
maintenance, price discrimination, tie-up sales, exclusive dealings, production sharing, conditional know-how and
residuary agreements in this regard should be prohibited. The Committee further recommended that compulsory
registration of agreements is not necessary, for the reasons that
Since the coming into force of the Act till the end of 1977, some twenty-one thousand and odd agreements were registered with the
RRTA in compliance with the provisions of section 33 of the Act. Of these agreements, the proceedings have been brought by the
RRTA before the MRTP Commission in regard to one hundred and six agreements only. In view of our recommendation for
prohibition of restrictive trade practices subject to certain exceptions, and keeping in view the past experiences, we feel that it
should not be necessary to have compulsory registration of agreements relating to restrictive trade practice. We feel that there are
enough sources open to the Director-General to become aware of any prohibited practices, and to take action accordingly. In any
case, whenever a complaint is received or an investigation is made, the proposed Director-General of Trade Practices will have the
power to call for a copy of the agreement and other relevant information or documents etc. for the purpose of his investigation,
particularly in view of the enhanced powers which are proposed to be vested in him. We, therefore, recommend that the
requirement of compulsory registration of agreements relating to restrictive trade practices should be deleted. Accordingly, section
33 will have to be deleted, while sections 34, 35 and 36 will require to be amended suitably. We may mention that no such
compulsory registration provision exists in latest legislation of Australia, Canada and New Zealand.
Monopolies and Restrictive Trade Practices Act, 1969 (MRTP Act, 1969)
The relevant provisions of MRTP Act, 1969 relating to restrictive trade practices were as follows:
[s 2(o)] “restrictive trade practice” means a trade practice which has, or may have, the effect of preventing, distorting or
restricting competition in any manner and in particular,—
(i) which tends to obstruct the flow of capital or resources into the stream of production, or
(ii) which tends to bring about manipulation of prices, or conditions of delivery or to affect the flow of supplies in the
market relating to goods or services in such manner as to impose on the consumers unjustified costs or
restrictions.
[s 33] Registrable agreements relating to restrictive trade practices.—(1) Every agreement falling within one or more of
the following categories shall be deemed, for the purposes of this Act, to be an agreement relating to restrictive trade
practices and shall be subject to registration in accordance with the provisions of this Chapter, namely:—
(a) any agreement which restricts, or is likely to restrict, by any method the persons or classes of persons to whom
goods are sold or from whom goods are bought;
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[s 3] Anti-competitive agreements
(b) any agreement requiring a purchaser of goods, as a condition of such purchase, to purchase some other goods;
(c) any agreement restricting in any manner the purchaser in the course of his trade from acquiring or otherwise
dealing in any goods other than those of the seller or any other person;
(d) any agreement to purchase or sell goods or to tender for the sale or purchase of goods only at prices or on terms
or conditions agreed upon between the sellers or purchasers;
(e) any agreement to grant or allow concessions or benefits, including allowances, discount, rebates or credit in
connection with, or by reason of, dealings;
(f) any agreement to sell goods on condition that the prices to be charged on re-sale by the purchaser shall be the
prices stipulated by the seller unless it is clearly stated that prices lower than those prices may be charged;
(g) any agreement to limit, restrict or withhold the output of supply of any goods or allocate any area or market for
the disposal of the goods;
(h) any agreement not to employ or restrict the employment of any method, machinery or process in the manufacture
of goods;
(i) any agreement for the exclusion from any trade association of any person carrying on or intending to carry on, in
good faith the trade in relation to which the trade association is formed;
(j) any agreement to sell goods at such prices as would have the effect of eliminating competition or a competitor;
(ja) any agreement restricting in any manner, the class or number of wholesalers, producers or suppliers from whom
any goods may be bought;
(jb) any agreement as to the bids which any of the parties thereto may offer at an auction for the sale of goods or any
agreement whereby any party thereto agrees to abstain from bidding at any auction for the sale of goods;
(k) any agreement not hereinbefore referred to in this section which the Central Government may, by notification
specify for the time being as being one relating to a restrictive trade practice within the meaning of this sub-
section pursuant to any recommendation made by the Commission in this behalf;
(l) any agreement to enforce the carrying out of any such agreement as is referred to in this sub-section.
(2) The provisions of this section shall apply, so far as may be, in relation to agreements making provision for services as
they apply in relation to agreements connected with the production, storage, supply, distribution or control of goods.
(3) No agreement falling within this section shall be subject to registration in accordance with the provisions of this
Chapter if it is expressly authorised by or under any law for the time being in force or has the approval of the Central
Government or if the Government is a party to such agreement.
[s 35] Registration of agreements.—(1) The Central Government shall, by notification, specify a day (hereinafter referred
to as the appointed day) on and from which every agreement falling within section 33 shall become registrable under this
Act:
Provided that different days may be appointed for different categories of agreements.
(2) Within sixty days from the appointed day, in the case of an agreement existing on that day, and in the case of an
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[s 3] Anti-competitive agreements
agreement made after the appointed day, within sixty days from the making thereof, there shall be furnished to the
Director-General in respect of every agreement falling within section 33, the following particulars, namely:—
(a) the names of the persons who are parties to the agreement; and
(b) the whole of the terms of the agreement.
(3) If at any time after the agreement has been registered under this section, the agreement is varied (whether in respect of
the parties or in respect of the terms thereof) or determined otherwise than by efflux of time, particulars of the variation or
determination shall be furnished to the Director General within one month after the date of the variation or determination.
(4) The particulars to be furnished under this section in respect of an agreement shall be furnished—
(a) in so far as the agreement or any variation or determination of the agreement is made by an instrument in writing,
by the production of the original or a true copy of that agreement; and
(b) in so far as the agreement or any variation or determination of the agreement is not so made, by the production of
a memorandum in writing signed by the person by whom the particulars are furnished.
(5) The particulars to be furnished under this section shall be furnished by or on behalf of any person who is a party to the
agreement or, as the case may be, was a party thereto immediately before its determination, and where the particulars are
duly furnished by or on behalf of any such person, the provisions of this section shall be deemed to be complied with on
the part of all such persons.
Explanation I.—Where any agreement subject to registration under this section relates to the production, storage, supply,
distribution or control of goods or the performance of any services in India and any party to the agreement carries on
business in India, the agreement shall be deemed to be an agreement within the meaning of this section, notwithstanding
that any other party to the agreement does not carry on business in India.
Explanation II.—Where an agreement is made by a trade association, the agreement for the purposes of this section shall
be deemed to be made by all persons who are members of the association or represented thereon as if each such person
were a party to the agreement.
Explanation III.—Where specific recommendations, whether express or implied, are made by or on behalf of a trade
association to its members, or to any class of its members, as to the action to be taken or not to be taken by them in relation
to any matter affecting the trade conditions of those members, this section shall apply in relation to the agreement for the
constitution of the association notwithstanding any provision to the contrary therein as if it contained a term by which each
such member and any person represented on the association by any such member agreed with the association to comply
with those recommendations and any subsequent recommendations affecting those recommendations.
S. 36. Keeping the register.—(1) For the purposes of this Act, the Director General shall keep a register in the prescribed
form and shall enter therein the prescribed particulars as regards agreements subject to registration.
(2) The Director-General shall provide for the maintenance of a special section of the register for the entry or filing in that
section of such particulars as the Commission may direct, being—
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(a) particulars containing information, the publication of which would, in the opinion of the Commission, be
contrary to the public interest;
(b) particulars containing information as to any matter being information the publication of which, in the opinion of
the Commission, would substantially damage the legitimate business interests of any person.
(3) Any party to an agreement required to be registered under section 35 may apply to the Director-General—
(i) for the agreement or any part of the agreement to be excluded from the provisions of this Chapter relating to the
registration on the ground that the agreement or part thereof has no substantial economic significance, or
(ii) for inclusion of any provision of the agreement in the special section, and the Director General shall dispose of
the matter in conformity with any general or special directions issued by the Commission in this behalf.
Section 33 of the MRTP Act, 1969 required that every agreement relating to any of the trade practices enumerated in
clauses (a) to (l) of sub-section (1) should be registered with the Director General pursuant to the provisions of section 35.
The various trade practices enumerated under sub-section (1) of section 33 were recognised to be per se restrictive. The
words “shall be deemed” in the opening part of sub-section (1) indicated that for the purposes of MRTP Act, 1969 it is to
be deemed or taken for granted that practices mentioned in clauses (a) to (l) thereof are restrictive trade practices.3 The
legislature brought out the amendment to this sub-section by adding the words “shall be deemed” purposely after the
decisions of the Hon’ble Supreme Court in Telco’s case4 and Mahindra & Mahindra Ltd v UOI,5 wherein it was held that
a trade practice does not become a RTP merely because it falls within one or the other clause of section 33(1), but that it
must also satisfy the definition of “restrictive trade practice” contained in section 2(o). Thus, these trade practices belonged
to the genus of restrictive trade practices defined in section 2(o), and were treated as statutory illustrations of restrictive
trade practices which MRTP legislation sought to regulate. The net cast by the trade practices stated under sub-section (1)
had been made so wide so as to cover all possible restrictive trade covenants. However, there might be trade practices,
other than those covered by sub-section (1) of section 33, which in terms of section 2(o) could be categorised as restrictive
trade practices; these, however, were not subject to registration under the MRTP Act, 1969.
In Voltas Ltd v UOI,6 the Supreme Court while referring to sub-section (1) of section 33 stated that a deeming clause has
been introduced by the Parliament saying that every agreement falling within one or more of the categories mentioned
therein shall be deemed, for the purposes of the Act, to be an agreement relating to restrictive trade practices. While
amending and substituting that part of sub-section (1), the Parliament determined and specified that agreements falling
within one or more of the categories mentioned in clauses (a) to (l) to sub-section (1) shall be deemed for the purposes of
the Act, to be agreement relating to restrictive trade practices. This was not the position in the original sub-section (1). The
effect of a statute containing a legal fiction is by now well settled. The Legislature by a statute may create a legal fiction
saying that something shall be deemed to have been done which in fact and truth has not been done, but even then court
has to give full effect to such statutory fiction after examining and ascertaining as to for what purpose and between what
parties such statutory fiction has been resorted to. In the well-known case of East End Dwellings Co Ltd v Finsbury
Borough Council,7 Lord Asquith has said:—
If you are bidden to treat an imaginary state of affairs as real, you must surely, unless prohibited from doing so, also imagine as
real the consequences and incidents which, if the putative, state of affairs had in fact existed, must inevitably have flowed from or
accompanied if ... The statute says that you must imagine a certain state of affairs; it does not say that having done so, you must
cause or permit your imagination to boggle when it comes to the inevitable corollaries of that state of affairs.
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The Supreme Court in the cases of State of Bombay v Pandurang Vinayak;8 Chief Inspector of Mines v Karam Chand
Thapar;9 JK Cotton Spinning and Weaving Mills Ltd v UOI;10 M Venugopal v The Divisional Manager, Life Insurance
Corp of India11 and Harish Tandon v The Addl District Magistrate,12 dealt in detail with the effect of a statutory fiction
and the limitation of the Court to ignore the mandate of the Legislature, unless it is violative of any of the provisions of the
Constitution. So far as sub-section (1) of section 33 is concerned, it mandated that agreements covered under different
clauses of sub-section (1) of section 33 would be deemed for the purposes of the MRTP Act, 1969 to be agreements
relating to restrictive trade practices. By the deeming clause, one is not required to treat any imaginary state of affairs as
real but to treat the agreements specified and enumerated in sub-section (1) of section 33 as agreements relating to
restrictive trade practices. It can be said that Parliament after having examined different trade practices, had identified such
trade practices which had to be held as restrictive trade practices for the purposes of the Act. To keep such trade practices
beyond controversy in any proceeding, a deeming clause had been introduced in sub-section (1) of section 33 saying that
they would be deemed to be restrictive trade practices. In this background, there was not much scope for argument that
although a particular agreement is covered by one or the other clause of sub-section (1) of section 33, still it would not
amount to an agreement containing conditions which can be held to be restrictive trade practices within the meaning of the
Act. Referring to the judgements in Telco’s case13 and Mahindra & Mahindra Ltd,14 the Supreme Court observed:
Now it is no more open to the Commission or to this court to test and examine any of the trade practices mentioned in clauses (a) to
(l) of sub-section (1) of section 33 in the light of section 2(o) of the Act, for the purpose of recording a finding as to whether those
types of trade practices shall be restrictive trade practices within the meaning of section 2(o) of the Act. This exercise has to be
done only in respect of such trade practices which have not been enumerated in any of the clauses from (a) to (l). Only such trade
practices have to be examined in the light of section 2(o) of the Act, as to whether they amounted to restrictive trade practices. It
need not be pointed that both judgments aforesaid of this Court interpreted the scope of sub-section (1) of section 33, as it stood
prior to the amendments by Act 30 of 1984. But after the amendment of sub-section (1) of section 33, if an agreement falls within
one of the clauses of the said sub-section, specifying a restrictive trade practice, then it is no more open to the Commission or to
the Court to say that it shall not amount to restrictive trade practice. Trade practices enumerated in clauses (a) to (l) of sub-section
(1) of section 33 shall be deemed to have now been statutorily determined and specified as restrictive trade practices. Neither the
Commission nor the Court can question the wisdom of the Parliament for having statutorily determined certain trade practices as
restrictive trade practices unless in this process there is contravention of any of the provisions of the Constitution.... It is true that
under section 37, the Commission has been vested with the power to inquire in respect of agreements which have been registered
under section 35 as well as those which have not been registered. But the fact remains that once the Commission is satisfied that a
particular agreement which has not been registered under section 35, falls within any of the clauses from (a) to (l) of sub-section
(1) of section 33, then no further inquiry is to be done, as to whether such agreement relates to restrictive trade practices or not.
The statutory fiction incorporated in sub-section (1) of section 33 shall also be applicable in respect of such agreements apart from
the penalty provided under section 48 of the Act. As such there is not much scope for discrimination between persons who have
got their agreements registered and those who have not got their agreements registered... According to us, in this respect, a decision
has to be taken by the person who is a party to the said agreement whether to get such agreement registered under section 35. But
once he gets the agreement registered, then he is debarred from questioning whether it contains any clause relating to a restrictive
trade practice. Sub-section (1) of section 33 specifies in different clauses various types of trade practices, which have now been
recognised as restrictive trade practices. Any person who is a party to any agreement has to examine the agreement in light of those
clauses. If according to such person, the agreement in question does not contain any clause relating to any of the restrictive trade
practices specified in clauses (a) to (l), such person need not get the agreement registered under section 35. He will be at liberty to
satisfy the Commission on that question. But once the agreement is registered, then such agreement cannot be enquired into by the
Commission, for the purpose as to whether it relates to any restrictive trade practice; of course inspite of registration of the
agreement, the person concerned can satisfy the Commission that such practice is not prejudicial to the public interest.
Raghavan Committee Report
Report of the High level Committee on Competition Policy and law, popularly known as the Raghavan Committee, made
the following recommendations relating to restrictive agreements, stated to be anti-competitive agreements:
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B. Agreements among enterprises
4.3.1 Agreements between firms have the potential of restricting competition. Most laws make a distinction between “horizontal”
and “vertical” agreements between firms. Horizontal agreements refer to agreements among competitors and vertical agreements
are agreements relating to an actual or potential relationship of buying or selling to each other. A distinction is also made between
cartels–a special type of horizontal agreements— and other horizontal agreements and between vertical agreements between firms
in a position of dominance and other vertical agreements. Generally, vertical agreements are treated more leniently than horizontal
agreements as, prima facie, a horizontal agreement is more likely to reduce competition than an agreement between firms in a
buyer-seller relationship.
4.3.2 It is not necessary that the agreement in question should be a formal or written agreement to be considered illegal. In
principle, any kind of agreement (including oral and informal agreements and arrangements) could be illegal, if it violates the law.
In the case of written or formal agreements, there can be no legal controversy. On the other hand, in the case of oral or informal
agreements, it is necessary to prove the existence of an agreement. Proof will generally be based on circumstantial evidence, and
parallelism of action between firms can indicate this. It follows that any prohibitions should also apply to what in the U.K. law are
known as “concerted practices”. Although the distinction between these and agreements are often imprecise, a concerted practice
exists when there is informal cooperation without a formal agreement.
4.3.3 However, a distinction needs to be made between what could be called an illegal practice of price cartelisation and must,
therefore, be curbed and punished and a perfectly legitimate economic and business behaviour in responding to a situation in which
a given competitor is placed in what could be described as a price leadership position. When a price leader alters price of his goods
or services due to factors such as increase in the cost of inputs, raw materials or other related costs, most other competitors will
have no choice, but to follow him though the extent could vary. This cannot be said to be illegal because its behaviour is not based
on any prior discussion or understanding, but on the sheer economic premises that any price increase taken by a small player ahead
of the price leader would imply significant penalties in terms of loss of custom. These price followers, therefore, have no choice
but to wait until the price leader takes a price increase. To assume in each such case, an informal co-operation (or informal
agreement), would be too harsh and would ignore a market place reality.
4.3.4 Horizontal Agreements.—Horizontal agreements are agreements between two or more enterprises that are at the same stage
of the production chain and, in the same market. The most obvious example would be that of agreements between enterprises
dealing in the same products. However, in general, it is important to define the relevant market(s). To attract the provision of the
law, the products must be substitutes. Being at the same stage of the production chain implies that the parties to the agreement are
both (all) producers, or retailers or wholesalers. As has been interpreted over the years in the U.S. (and enacted more recently in
other countries) a distinction is drawn in this regard between horizontal and vertical agreements. In certain circumstances it can be
established that firms that are collaborating on some socially valuable activity may need to agree to do away with competition so to
establish the cooperative relationship. In this, the European Community law goes beyond the objective of maximising welfare and
explicitly allows some restrictive contracts if they promote progressiveness and consumers ultimately stand to gain. The Japanese
law also allows for actions in contravention of the law provided they are in the “public interest”. It would be dangerous to allow the
kind of discretion in interpretation possible under the Japanese law. Any exceptions that are permissible should be clearly laid
down. However, we recommend that, restrictive contract which are designed to promote use of energy efficient manufacturing
processes and production of Eco-friendly products or conservation of natural resources should be explicitly permitted as
exceptions.
4.3.5 Agreements are considered illegal only if they result in unreasonable restrictions on competition. Based on the U.S. law, this
is tested on what is known as the “rule of reason” analysis. It is also required that the parties to the agreement are engaged in rival
or potentially rival activities. A potential rival is one who could be capable of engaging in the same type of activity. Such a
provision has generally been interpreted to mean that firms that are under common ownership or control are not considered as
“rival” or “potentially rival” firms. Under the U.K. law, an agreement infringes the law only if it has as its object or effect an
appreciable prevention, restriction or distortion of competition. This is obviously to be determined on a case-by-case basis.
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4.3.6 It is not possible to provide an exhaustive list of agreements that attract the attention of such provision, and the “rule of
reason” needs to be applied to individual cases. An illustrative list would include the following:
§ Agreements regarding fixing of purchase or selling prices
§ Agreements limiting quantities, markets, technical development or investment
§ Agreements regarding territories to be served and sources of supply
§ Agreements regarding dissimilar treatment of equivalent transactions with their trading parties that place them at a
disadvantage
4.3.7 Agreements involving a presumption of illegality.—In general the “rule of reason” test is required for establishing that an
agreement is illegal. However, for certain kinds of agreements the presumption is often that they cannot serve any useful or pro-
competitive purpose and therefore do not need to be subject to the “rule of reason” test. The following kinds of horizontal
agreements are often presumed to be anti-competitive.
§ Agreements regarding prices. This would include all agreements that directly or indirectly fix the purchase or sale price.
§ Agreements regarding quantities. This includes agreements aimed at limiting or controlling production and investment.
§ Agreements regarding bids (collusive tendering). This includes tenders submitted as a result of any joint activity or
agreement.
§ Agreements regarding market sharing. These include agreements for sharing of markets by territory, type or size of
customer or in any other way.
4.3.8 The presumption is that such horizontal agreements and membership of cartels lead to unreasonable restrictions of
competition and may, therefore, be presumed to have an appreciable adverse effect on competition. This provision of per se
illegality is rooted in the provisions of the U.S. law and has a parallel in most modern legislations on the subject. The Australian
law prohibits most price fixing arrangements, boycotts and some forms of exclusive dealing. Similarly, the new U.K. law presumes
that certain agreements have an “appreciable effect” on competition. In case such a provision is to be made in the law, there should
be very limited scope for discretion and interpretation on the part of the prosecuting and adjudicating authorities. Hence, such
agreements are presumed to be illegal and the governing principle is that they have an “appreciable” anti-competitive effect. It may
be pointed out that a significant number of the Members of the Committee were not in favour of identifying categories presumed to
be illegal. They feel that they should be subject to the “rule of reason” and that the CCI can issue relevant regulations in this
regard. But the majority however felt that such agreements are presumed to be illegal.
4.3.9 Vertical Agreements.—Vertical agreements, on the other hand, are agreements between enterprises that are at different stages
or levels of the production chain and, therefore, in different markets. An example of this would be an agreement between a
producer and a distributor. Vertical restraints on competition include:
§ Tie-in arrangements
§ Exclusive supply agreements
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§ Exclusive distribution agreements
§ Refusal to deal
§ Resale Price Maintenance (RPM)
4.4.0 In the past, the U.S. anti-trust laws had treated vertical restraints, like tie-in arrangements quite harshly. This thinking has
changed in recent times, and, under the rule of reason, vertical agreements are generally treated more leniently than horizontal
agreements. This is because vertical agreements can often perform pro-competitive functions. Such agreements are generally
considered anti-competitive if one or more of the firms that are party to the agreement have market power. In such a situation, the
agreement is, in any case, likely to attract the provisions of the law relating to abuse of dominance.
4.4.1 In a number of countries, RPM is presumed to be per se anti-competitive. The majority of the Members of the Committee
also felt that RPM should be treated as presumed to be illegal. However, after considerable discussions, in order to arrive at a
consensus, it was decided not to treat it as presumed to be illegal. It will be judged under the “rule of reason”.
4.4.2 The following conclusions arise in this section out of the discussion:—
§ Certain anti-competitive practices should be presumed to be illegal.
§ Agreements that contribute to the improvement of production and distribution and promote technical and economic
progress, while allowing consumers a fair share of the benefits, should be dealt with leniently.
to be made into a issue
§ The “relevant market” should be clearly identified in the context of horizontal agreements.
§ Blatant price, quantity, bid and territory sharing agreements and cartels should be presumed to be illegal.
The Competition Act, 2002
Section 3 has been enacted by the Competition Act, 2002. Notes on clauses of the Competition Bill, 200115 in context to
anti-competitive agreements, stated:
Clause 3—This clause, inter alia, provides for prohibition of entering into anti-competitive agreements. It shall not be lawful for
any enterprise or association of enterprises or person or association of persons to enter into an agreement in respect of production,
supply, storage, distribution, acquisition or control of goods or provision of service which causes or is likely to cause an
appreciable adverse effect on competition within India. All such agreements entered into in contravention of the aforesaid
prohibition shall be void. This clause also specifies certain activities which shall be presumed to have an appreciable adverse effect
on competition and also specifies certain agreements which shall be in contravention of sub-clause (1) of the said clause if such
agreement causes appreciable adverse effect on competition. The provision of this clause shall not apply to certain rights specified
in sub-clause (5) of this clause.
SCOPE OF THE SECTION
This section classifies anti-competitive agreements into two categories, namely,—
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(i) Horizontal agreements between two or more enterprises that are at the same stage of production chain and in the
same market. Such agreements are often between the same manufacturers or producers of goods or suppliers of
same services and are presumed to have appreciable adverse effect on competition. Under section 79 of the
Indian Evidence Act, 1872 a presumption of fact is a conclusion or inference as to the truth of some fact in
question, drawn from some other fact, judicially noticed or proved or admitted to be true. Under Law Lexicon, a
presumption of law is a presumption artificially made by annexing a rule at law or legal incident to a particular
fact proved. The following horizontal agreements have been identified in sub-section (3), which are per se void:
(a) Agreements fixing purchase or selling prices;
(b) Agreements limiting or controlling production, supply, markets, technical development, investment or
provision of services;
(c) Agreements for sharing of market or source of production or services by way of allocation of geographical
market or type of goods or services in the market; and
(d) Agreements relating to bid rigging or collective pricing.
Since these agreements are presumed to be anti-competitive, the onus lies on the person or enterprise to
establish that the agreement does not fall under the prohibited category and the enquiry before the
Commission shall relate to only that aspect. Once the agreement falls under sub-section (3), it is not
necessary to prove that the agreement has an appreciable adverse effect in competition.
(ii) Vertical agreements between enterprises which are at different stages or levels of production chain. Most
prominent amongst the vertical agreements are between the manufacturer of goods and its dealers approached to
market the product. Such agreements are not per se void and are not presumed to be anti-competitive. These have
been identified in sub-section (4) as follows:
(a) tie-in arrangement;
(b) exclusive supply agreement;
(c) exclusive distribution agreement;
(d) refused to deal; and
(e) resale price maintenance.
Such agreements shall be regarded as anti-competitive and in contravention of section 3(1) only when it is established that
the agreement falls under sub-section (4) and its adverse effect on competition is appreciable and the onus lies on the
complainant to substantiate this allegation. Thus, the enquiry before the Commission shall be in relation to both the
aspects.
“Enterprise”
The Apex Court in CCI v Co-ordination Committee of Artists and Technicians of WB Film and Television16 observed that
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regardless of its form, any entity engaging in an economic activity (that involved economic trade) constitutes an
“enterprise” within the meaning of section 3.17
Agreement’ under section 3(1)
In Jyoti Swaroop Arora,18 the Delhi High court observed that section 2(b) of the Competition Act, 2002 while defining
“agreement” takes within its ambit “any arrangement” or “understanding” or “action in concert”, even if it was arrived at
informally and even if not intended to be enforceable. If the act of parties were found to be in pursuance to some common
intention, though not in pursuance to an “agreement” within the definition of Indian Contract Act, 1872, but in pursuance
to an “understanding” or “arrangement”, it would be an agreement within section 3(1). Conversely, merely because two or
more persons were doing similar or identical acts, it would not amount to an agreement under section 3(1) unless some
meeting of their minds or common intention is established.19 An agreement, in law, might be oral or in writing but
required a meeting of minds of the parties entering into agreement on all essentials of the subject qua which they were
entering into agreement so as to bind each other thereto and compel performance or to measure damages in lieu of the
performance. Such meeting of minds, in the absence of a writing, had to be proved as a fact and without it being so proved,
there could not be said to be contravention of section 3(1). Without any evidence of meeting of minds between any two or
more parties, there cannot be any violation of section 3.
CAUSES OR IS LIKELY TO CAUSE APPRECIABLE ADVERSE EFFECT ON
COMPETITION: SUB-SECTION (1)
The expression used in the sub-section viz “which causes or is likely to cause an appreciable adverse effect on competition
within India” can be broken into three components, viz., (1) it should affect competition within India; (2) affect should be
appreciable, i.e., not minimal; and (3) it should either actually effect or is expected to affect competition. The effect on the
Competition should be the result of the agreement, as defined. The consequential effect may even be unintentional. What is
material is potential damages to competition by virtue of the agreement (which will include any understanding or
arrangement formal, i.e., enforceable in law or informal). It is not necessary to find a specific intent.20 It is sufficient that
the likely effect is the consequence of the persons’ conduct or business arrangements. Because the essence of violation is
the illegal agreement, the proper analysis focuses on the potential harm that would ensue if the conspiracy is successful,
and not upon the actual consequence.21 The conduct or contract between two parties not resulting in the said consequences
is not prohibited.22 It is all that is necessary to see is that it must be possible to foresee with a sufficient degree of
probability on the basis of a set of objective factors of law or of fact that the agreement in question may have influence,
direct or indirect, actual or potential, on competition.23
In FICCI – Multiplex Association of India v United Producers/Distributors Forum,24 the Commission observed that as
regards existence of Appreciable Adverse Effect on Competition (AAEC), the scheme of the Competition Act, 2002
envisages two situations:
(a) where the agreement is of the most pernicious nature (such as price fixing or market-sharing), including cartels,
as mentioned under section 3(3), AAEC is presumed and
(b) in less pernicious agreements, such as those mentioned under section 3(4), AAEC has to see with reference to
factors given under section 19(3) of the Act.
Whether or not the damage to competition has occurred is irrelevant. In the case of Summit Health Ltd v Pinhas,25 the US
Court observed:
When the Competitive Significance of respondent’s exclusion from the market is measured, not by a particularised evaluation of
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his practice, but by a general evaluation of the restraints impact on other participants and potential participants in that market, the
restraint is covered by the Sherman Act.
In US v Griffith,26 it was held by the US Court that:
(1) Even if there was absence of specific intent to restrain or monopolise trade, it may be violative of Sherman Act;
(2) It is sufficient that a restraint of trade results as a consequence of the defendants’ conduct or business
arrangements. It is not necessary to find a specific intent to restrain trade to say that sections 1 and 2 of Sherman
Act have been violated;
(3) Specific intent, in the sense in which the common law used the term, is necessary only where the act falls short of
the results prohibited by the Sherman Act;
(4) The use of the Monopoly Power, however legally acquired, foreclose competition, to gain competitive advantage,
or to destroy a Competition, is unlawful.
Section 3 of Competition Act, 2002 covers agreements, as defined under the Act, which cause or are likely to cause
appreciable adverse effect on competition in India. The probability and not merely possibility of its consequence as
appreciably affecting competition is the requirement. If the agreement can have the potential to distort competition, it will
be covered under this provision. It is pertinent to note that the agreement need not have taken effect or have been
operationalising for the provisions of section 3 of the Act to apply.27 What is important is whether the agreement is
capable of constituting a threat, direct or indirect, actual or potential, to the competition in the market.28
“APPRECIABLE ADVERSE EFFECT ON COMPETITION”—SUB-SECTION (1)/(3)/(4)
Agreements having an “appreciable adverse effect on competition” specified in sub-sections (3) and (4) are considered to
be in contravention of section 3 and shall be void. The said term has not been defined in the Competition Act, 2002. The
word “appreciable” has been defined in Law Lexicon as follows:
capable of being estimated, weighed, judged of, or recognised by the mind, capable of being perceived or recognised by the senses,
perceptible but not a synonym of substantial (Black’s Law Dictionary.)
In terms of section 19(3), the Commission shall have due regard to the various factors specified therein in clauses (a) to (f)
while determining whether an agreement has an appreciable adverse effect on competition under section 3. It is purely in
the realm of estimation and is subjective. Whether the adverse effect of competition is appreciable or not will vary in the
facts and circumstances of each case leaving the business enterprise and parties to the agreement guessing and not being
able to chalk out its business and market policies.
Public interest does not necessarily mean interest only of industry. The restraint of trade would be tolerable if it is limited
to what is reasonably necessary; otherwise it becomes appreciably adverse. The measurement in terms of rupee volume in
itself is not of significance, but other facts as specified are required to be considered.
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In Standard Oil Co v US,29 the court held that “the requirement of article 3 of the Clayton Act of showing the effect of the
contract to substantially lessen competition is satisfied by the proof that competition has been foreclosed in a substantial
share of the line of commerce affected”.
This is relevant for purposes of enquiry before the Commission relating to vertical agreements falling under sub-section
(4).
“Test of Appreciability”
For any agreement to be considered to be anti-competitive it should have an “appreciable” adverse effect on competition
(AAEC). Section 19(3) of the Act lays down the factors to be considered while determining AAEC. However, there is no
parameter provided for appreciable factor under section 3. In other jurisdictions, insignificant market share of an
undertaking has been held to be a factor to determine appreciability. The Competition Commission in India is likely to take
the same approach. Any agreement in question has to affect competition to an appreciable extent to fall within the
prohibition of section 3(1). Some of the factors that are likely to be taken in to account by the Commission to check
appreciable effect on competition are: (a) percentage of business controlled, (b) the strength of the remaining competition;
(c) whether the action springs from business requirements or purpose to monopolise; (d) the probable development of the
industry, consumer demands and other characteristics of the market.
“ De Minimis ” Doctrine
The doctrine of de minimis deals with the concept wherein agreements of enterprises with insignificant market shares have
insignificant effect on the market i.e., it is unlikely to cause appreciable adverse effect on competition in the market. It is
possible mostly in cases where the positions of the said enterprises are weak in the market. In the case of Ghanshyam Dass
Vij v Bajaj Corp Ltd,30 the Commission observed that that the doctrine of de minimis can be used as a factor to militate
against appreciable adverse effect on competition. Accordingly, in light of the market structure of FMCG products and
particularly the hair oil segment in India, it was observed that Bajaj Corp did not have a position of strength in the sector in
comparison with other brands. Accordingly, the arrangement with its distributors regarding territorial demarcations, in the
presence of several competitors and considering the dynamic nature of the sector was unlikely to affect the inter-brand
competition in the market. As such, the impact of restrictions imposed by Bajaj Corp would be negligible. The
Commission therefore, disagreed with the Director General’s conclusion that the vertical restraints imposed by Bajaj on its
distributors caused appreciable adverse effect on competition in the market which contravenes section 3(4) of the
Competition Act, 2002.31
“ De Minimis ” Doctrine in EU
The De Minimis doctrine was first formulated by the Court of Justice in Volk v Vervaecke,32 where it observed that an
agreement falls outside the prohibition of Article 101(1) where it has only an insignificant effect on market, taking in to
account the weak position which the persons concerned have on the market of the product in question. In the notice on
agreements of minor importance (de minimis),33 the Commission quantifies, with the help of market share thresholds,
what is not an appreciable restriction of competition under Article 101 of the Treaty on the functioning of the EU (ex
Article 81 TEC) [Commission notice]. The Commission holds the view that an agreement between undertakings, even if it
affects trade between Member States, does not appreciably restrict competition within the meaning of Article 101 section 1
of the TFEU if: (a) the aggregate market share held by the parties to the agreement does not exceed 10% on any of the
relevant markets affected by the agreement, where the agreement is made between undertakings which are actual or
potential competitors on any of these markets; or (b) the market share held by each of the parties to the agreement does not
exceed 15% on any of the relevant markets affected by the agreement, where the agreement is made between undertakings
which are not actual or potential competitors on any of these markets. In these cases the Commission will not institute
proceedings either upon application or on its own initiative.
Also, agreements entered into by small and medium enterprises (SMEs) whose annual turnover and balance-sheet total do
not exceed EUR 40 million and 27 million, respectively, and which have a maximum of 250 employees are rarely capable
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of appreciably affecting trade between Member States and are not, in principle, investigated by the Commission. However,
there exists a “blacklist of hardcore restrictions” – such as price-fixing, market-sharing or territorial protection – which,
because of their nature is regarded as typically incompatible with Article 101, section 1 of the TFEU and hence liable to be
caught by the ban on agreements, even if the parties’ market shares are below the above-mentioned thresholds.
In some sectors, cumulative effect of many vertical agreements may lead to foreclosure of the market. The Notice provides
guidance on appreciability in this situation (a) by indicating when a cumulative foreclosure effect is likely and (b) by
providing a market share threshold indicating whether particular agreements contribute to that effect. Paragraph 8 provides
that a cumulative foreclosure effect is unlikely to exist if less than 30% of the relevant market is covered by parallel
agreements having similar effects; where there is a foreclosure effect, individual suppliers or distributors will not be
considered to contribute to that effect where their market share does not exceed 5%.34
To prevent the hard core restrictions from falling outside Article 101, the Commission in para 11 of the Notice has made it
clear that the safe harbor provided by para 7 does not apply to certain restrictions: horizontal agreement to fix prices, limit
output or sales and to allocate market or customers; vertical agreements to fix prices, impose export bans and to restrict
sales within a selective distribution system.35
On 25 June 2014 the EU Commission issued revised rules providing a safe harbour for certain minor agreements from the
prohibition on anti-competitive agreements (within the so-called “De Minimis Notice”). The new Notice does not change
the market share thresholds under which the parties can presume their agreement does not appreciably restrict competition
in breach of the prohibition. The EU Commission has, however, codified its recent practice that agreements restrictive of
competition by “object” will always be regarded as appreciably restricting competition, regardless of the size of the parties
or the (lack of) impact of the agreement on competition in practice.36
“COMPETITION WITHIN INDIA”
To be covered under section 3 of the Competition Act, 2002, anti-competitive agreement should have an appreciable effect
on competition within India irrespective of where the agreement or the understanding has been arrived at.
Extra-territorial application of MRTP Act, 1969 – Effects Doctrine
The Supreme Court in the case of Haridas Exports v All India Float Glass Mfrs Association,37 examined the application of
“Effects Doctrine” in India. Where, in other words, actions take place and agreements are entered into outside India but the
resultant adverse effect is experienced in India then can the MRTP Commission (MRTPC) have any jurisdiction? The
Court observed:
43. Under section 33(1)(j) of the Act, any agreement to sell goods at such prices as would have the effect of eliminating
competition or a competitor is regarded as an agreement relating to restrictive trade practice and shall be subject to registration.
The Act nowhere states that this agreement should be only in India or between Indian parties. In effect, this Section recognises the
“effects doctrine”, namely, where an agreement results in sale of goods at such prices which would have the effect of eliminating
competition or a competitor. In the very nature of things, the sale of goods keeping in mind the definition of the word “goods” in
section 2(e) must be of goods imported into India, in the case like the present. But if we replace the word “goods” in section
33(1)(j) with the definition of “goods” in section 2(e)(iii), then the section 33(1)(j) would read as follows:
Any agreement to sell goods imported into India at such prices as would have the effect of eliminating competition or a competitor.
Thus, the agreement requiring registration must be in respect of goods after their import into India.
45. It is possible that persons outside India indulge in such trade practices not necessarily restricted to the effectuation of prices
within India, which have the effect of preventing, distorting or restricting competition in India or gives rise to a restrictive trade
practice within India then in respect of that restive trade practice, MRTP Commission will have jurisdiction. The counsel for the
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respondents is right in submitting that if the effect of restrictive trade practices came to be felt in India because of a part of the
trade practice being implemented here the MRTP Commission would have jurisdiction. This “effects doctrine” will clothe the
MRTP Commission with jurisdiction to pass an appropriate order even though a transaction, for example, which results in
exporting goods to India at predatory price, which was in effect a restrictive trade practice, had been carried out outside the
territory of India if the effect of that had resulted in a restrictive trade practice in India. If power is not given to the MRTP
Commission to have jurisdiction with regard to that part of trade practice in India which is restrictive in nature then it will mean
that persons outside India can continue to indulge in such practices whose adverse effect is felt in India with impunity. A
competition law like the MRTP Act is a mechanism to counter cross border cross border economic terrorism. Therefore, even
though such an agreement may enter into outside the territorial jurisdiction of the Commission but if it results in a restrictive trade
practice in India then the Commission will have jurisdiction under Section 37 to pass appropriate orders in respect of such
restrictive trade practice.38
Re Jugaldas Damodar Mody Co,39 it was urged that the whole gamut of transactions involved in the enquiry had taken
place in Oman and the main party was Sultan of Oman who represented the Sovereign State and the law applicable was
that of State of Oman.
The MRTPC held that this contention overlooked section 14 of the MRTP Act, 1969. The mere fact that the contract was executed
in Muscat and Sultan of Oman was a party to that agreement did not preclude the Commission from exercising its jurisdiction with
respect to that part of the practice which is carried on in India. The definition of ‘restrictive trade practice’ clearly goes to show that
it is an effect oriented or result based definition ... If any of these effects is visible in India, the trade practice must be taken to be
carried on in India.
The answer to the question whether, the Commission has extra territorial jurisdiction or not is neither an absolute no nor an
absolute yes. It is both yes and no, depending upon the facts and the circumstances of each case. Resident status of the
respondent is immaterial. This section empowers the Commission to pass an order in respect of that part of trade practice
which is carried on in India even if the party charged with an unfair trade practice is a foreign company carrying on
business from outside India, which was evident from the facts of the case.40 The mere fact that the American Natural Soda
Ash Corporation (ANSAC) agreement had been outside the country could not be construed in a vacuum, as its visible
effects in India would have to be seen in order to ascertain whether any part of the trade practice had been on the Indian
soil. The correspondence between some of the Indian consumers and the ANSAC clearly established a nexus between the
two and therefore, Commission was held to have jurisdiction to entertain the complaint.41In Ballarpur Industries Ltd v
Sinarmas42 the Commission held:
36. This particular matter came up for consideration in Universal Petro Chemicals Ltd v Idomitsu Kosan Co Ltd (I.A. No. 108 of
1994-16 November 1995), it was ruled, that even if a contract had been executed outside the country, it would not preclude the
Commission from exercising its jurisdiction with respect to that part of the practice which is carried on in India. Leaning on an
earlier decision of this Commission in Jugaldas Damodar Mody Co43, it was underscored that the definition of ‘restrictive trade
practice’ as given in the Act would go to show that it is an effect-oriented or result-based definition. If the effects of a restrictive
trade practice are visible in India, the trade practice must be taken to be carried on in India.
Raghavan’s Committee Report44 on extra-territorial reach of Competition Law
5.3.8 Some anti-competitive practices may have extra-territorial origin or extra-territorial impact. For instance, some mergers and
acquisitions may have significant effects beyond the borders of the country in which the merging parties are based or have
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production facilities. In such matters, the concept of “relevant market” for Competition Law purposes will come into play (See the
section on mergers in the previous Chapter, supra).
5.3.9 The applicability of domestic Competition Law to arrangements entered into outside a country’s borders, so long as such
conduct has significant effects in the country, is important to the control of anti-competitive practices. However, it needs to be
noted that extra-territorial application of national laws entails some potential for conflicts between jurisdictions. International co-
operation and, in particular, agreements incorporating principles of “positive comity” can be useful in minimising the actual extent
of such conflicts between countries participating in such arrangements. A caveat which has justification is that, if a country wants
to have extra-territorial reach of its Competition Law, it should allow other countries to have extra-territorial reach of their
Competition Laws in its soil.
5.4.0 The Indian Monopolies and Restrictive Trade Practices Act, 1969 (MRTP Act), has a provision that where any practice
substantially falls within monopolistic, restrictive or unfair trade practices relating to production, storage, supply, distribution or
control of goods of any description or the provision of any services and any party to such practice does not carry on business in
India, the Monopolies and Restrictive Trade Practices Commission can make an order under the Act with respect to that part of the
practice which is carried on in India. This extra-territorial reach provision may be appropriately retained in the Competition Law
under consideration and design.
5.4.1 Summary Competition Policy/Law needs to have necessary provisions and teeth to examine and adjudicate upon anti-
competition practices that may accompany or follow developments arising out of the implementation of WTO Agreements. In
particular, agreements relating to foreign investment, intellectual property rights, subsidies, countervailing duties, anti-dumping
measures, sanitary and phytosanitary measures, technical barriers to trade and Government procurement need to be reckoned in the
Competition Policy/Law with a view to dealing with anti-competition practices. The Competition Law should have extra-territorial
reach.
The Competition Act, 2002
An agreement,45 practice, or concentration which has the effect of restricting competition (AAEC) within India would be
deemed anti-competitive under section 3(1). In the case Re Jyoti Swaroop Arora46 the Commission observed that though
section 3(1) employs the term “agreement”, the provisions of section 3(3) use different phraseology viz., “agreement”
entered into/“practice” carried on/“decision” taken. Hence, it is evident that the Legislature provided a very wide definition
of the term “agreement” in the Competition Act, 2002 in contradistinction to the agreements as understood under civil law
and the same is also reflected by the usage of the aforesaid phraseology, viz. practice/decision, etc., in section 3(3) of the
Act. Also, section 32 of the Competition Act, 2002 empowers the Commission to inquire into an agreement or abuse of
dominant position or combination if such agreements or dominant position or combination has or is likely to have an
appreciable adverse effect on competition in India even if such agreement or abuse of dominant position or combination as
specified in sub-clauses (a) to (g) of the said clause take place outside India.47
For further discussion on extra-territorial application of Competition Act, 2002 see section 32.
VOID AGREEMENT—SUB-SECTION (2)
Section 3(1) of the Act prohibits and section 3(2) makes void all agreements by enterprises or persons in respect of
production, supply, distribution, storage, acquisition or control of goods or provisions of services which cause or are likely
to cause appreciable adverse effect on completion within India. The word “void” denotes nullity. It means that which has
no force or effect, is without legal efficacy, is incapable of being enforced, or has no legal or binding force. Rule of
severability, however, applies and nullity affects only the prohibited clauses in the agreement. If such clauses cannot be
severed from other terms of the agreement, the whole agreement is void. For example in the case of Eastern India Motion
Picture Association (EIMPA),48 it was held that formation of an Association and approval of by laws by its members
amounts to entering into an agreement by the Members inter-se and if the bye-laws contain such clauses which are likely
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to cause appreciable adverse effect on the competition, such clauses shall be void in terms of section 3(2) of the
Competition Act, 2002 and shall not be binding on the members. If the association enforces such clauses against the
members or the members inter se enforce such clauses, they shall be liable for action under the Competition Act, 2002.
Similarly, in the case of Hockey India49 it was held that the Code of Conduct (COC) agreement clauses entered into by HI
and the players where the players had to sign or they would have been barred from playing hockey caused appreciable
adverse effect on competition in India. As the COC agreements caused AAEC, they were held to be void under the
provisions of section 3(2) of the Act.
Under the Indian Contract Act, 1872, an agreement not enforceable by law is said to be void [section 2(g)] and an
agreement enforceable by law is a contract [section 2(h)]. A thing which is void is “non-est” and it is not necessary that it
be said to be void, although it may sometimes be convenient to do so.50
Before declaring an agreement to be void the provisions mentioned in section 19(3) of the Act have to be looked into. An
appreciable adverse effect on competition under section 3 cannot be determined without regard to all or any of the factors
enumerated in section 19(3) of the Competition Act, 2002 which are:
1. Creation of barriers to new entrant in the market.
2. Driving existing competitors out of the market.
3. Foreclosure of competition by hindering entry into the market.
4. Accrual of benefits to consumers.
5. Improvements in production or distribution of goods or provision of services.
6. Promotion of technical, scientific and economic development by means of production or distribution of goods or
provision of service.
The European Court of Justice (ECJ) has essentially limited itself to establishing a set of basic general principles
concerning the characteristics of the nullity envisaged in Article 101(2), but has entrusted the practical application of these
principles to national courts.
In Béguelin51 the ECJ clarified the erga omnes nature of the nullity envisaged by Article 101(2). According to the Court,
“since the nullity referred to in Article 101(2) is absolute, an agreement which is null and void by virtue of this provision
has no effect as between the contracting parties and cannot be set up against third parties”.
In Courage v Crehan,52 it went further and clarified that the remedy of nullity has an ex tunc effect, that is, that any given
agreement would be declared void since the very moment of its inception. In the Court’s words, “this principle of nullity
(...) is capable of having a bearing on all the effects, either past or future, of the agreement or decision concerned”.
In Kerpen & Kerpen (Cement),53 the Court went on to establish the principle of severability both regarding (i) the
severability of a given anticompetitive clause from the wider agreement in which it may be contained; and (ii) the
severability of a given anticompetitive clause or wider agreement from other related agreements or transactions. As the
Court put it:
the automatic nullity decreed by Article 101(2) applies only to those contractual provisions which are incompatible with Article
101(1). The consequences of such nullity for other parts of the agreement are not a matter for Community law. The same applies to
any orders and deliveries made on the basis of such an agreement and to the resulting financial obligations.
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In Europe, some Courts are of the opinion that the anti-competitive clauses form the core of the agreement and therefore
cannot be severed from the main agreement.54 However, there are Courts who have also limited nullity to specific clause
within the main agreement.55
Void and voidable
A contract is void which is destitute of all legal effect, while voidable contract is one which may be affirmed or rejected at
the will of one of the parties.
Void means that an instrument or transaction is so nugatory and ineffectual that nothing can cure it. It is voidable, when an
imperfection or defect can be cured by the act or confirmation of one, who could take advantage of it. Thus, while
acceptance of rent will make good a voidable lease, it will not affirm a void lease. (Wharton).
Illegal and void agreements
The Indian Contract Act, 1872 draws distinction between an agreement which is only void and the one in which the
consideration or object is also unlawful. “Section 23 points out in what cases the consideration of an agreement is
unlawful, and in such cases the agreement is also void, that is, not enforceable at law.”56 Sections 25 to 30 refer to cases in
which the agreement is only void, although the consideration is not necessarily unlawful. An illegal agreement is one
which is actually forbidden by the law; but a void agreement may not be forbidden, “the law may merely say that if it is
made, the courts will not enforce it”.57 Thus, every illegal agreement is also void, but a void contract is not necessarily
illegal. However, the distinction is not always very clear. Another similarity between an illegal and a void agreement is
that in either case, the main or the primary agreement is unenforceable. Nothing can be recovered under either kind of
agreement and if something has been delivered or some payment made, it cannot be recovered back.
The word “illegal” is applicable to everything which is an offence or which is prohibited by law, or which furnishes
ground for a civil action; and a person is said to be “legally bound to do” whatever it is illegal in him to omit (
Indian Penal Code, section 43 ).
The word “illegal” has an extensive meaning, including anything and everything which is prohibited by law which
constitutes an offence and which furnishes the basis for a civil suit ending in damages.58
It may be noted that despite the fact that the two categories of agreements are significantly different, the horizontal
agreements under sub-section (3) being per se violative and vertical agreement under sub-section (4) are subjected to rule
of reason, both have been treated alike and declared as void under sub-section (2). It is a moot point whether these
agreements are void ab initio or became void after an order is passed by the Commission after enquiry under section 27.
Lack of clarity in this regard is likely to cause needless litigation between the parties to the impugned agreement in as
much as an agreement which is void is not enforceable in a Court of Law. Any of the party to the agreement may seek to
disown or avoid his obligation on the ground that the agreement is void ab initio and not prospectively after an order is
passed by the Commission after an enquiry.
There is also another aspect of the matter. In case, the anti-competitive agreements are considered as “per se illegal”, then
neither the question of an enquiry envisaged under Chapter IV of the Act nor a cease and desist order by the Commission
would arise. The Commission would than straight way treat the case for imposition of penalty on the lines of Sherman Act,
1890 in USA.
Doctrine of Single Economic Entity
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Two or more legal entities might be considered as a Single Economic Entity for the purpose of applying competition
law.59 For instance, Competition law does not in most cases perceive a parent company and its wholly owned subsidiary
as competitors, even if they are active in the same market. The subsidiary is presumed not to act autonomously in the
market but to follow its parent’s directives. Agreements between the parent and wholly-owned subsidiary thus, escape
section 3 of the Competition Act, 2002.60 The exemption of single economic entity stems from the inseparability of the
economic interest of the parties to the agreement. Generally, entities belonging to the same group, e.g., holding-
subsidiaries are presumed to be part of a “single economic entity” incapable of entering into an agreement, the presumption
was not irrebuttable. It is a question which should be decided however on the facts and circumstances of each case.61
The evolution of the concept of “single economic entity” in European Union can be traced back the European Commission
(EC), case of Mausegatt v Haute autorite,62 where it was observed that “affiliation to the group deprives the subsidiary
company of the ability to act according to an economic scheme of its own. The “given conditions” of such a subsidiary’s
operations are prescribed not by the market but by the instructions of the principal company”. In this case the relationship
between the parent and the subsidiary was used to demonstrate that a cartel could not be formed between the parent and
subsidiary, as they must be considered to be governed by the same leading group. The 2011 EC Guidelines on the
applicability of Article 101 of the Treaty on the Functioning of the European Union to horizontal co-operation agreements
inducted the concept of “single economic entity” as following:
11. Companies that form part of the same ‘undertaking’ within the meaning of Article 101(1) are not considered to be competitors
for the purpose of these guidelines. Article 101 only apples to agreements between independent undertakings. When a company
exercises decisive influence over another company they form a single economic entity and, hence, are part of the same
undertaking. The same is true for sister companies, that is to say, companies over which decisive influence is exercised by the same
parent company. They are consequently not considered to be competitors even if they are both active on the same relevant product
and geographic markets.
The practice of considering two or more legal entities as a single economic entity within European Competition law was
also laid out in the 1973 case of Continental Can v Commission, where the Court observed:
... the circumstances that this subsidiary company has its own legal personality does not suffice to exclude the possibility that its
conduct might be attributed to the parent company. This is true in cases particularly where the subsidiary company does not
determine its market behavior autonomously but in essential follows directions of the parent company.63
If two legal entities are part of the same economic unit then they cannot be said to collude with each other. In considering
whether two companies belong to same economic entity, the following factors may be considered: a. Ownership (where a
company owns all or large part of another company); b. Economic Independence (a company which is entirely financially
dependent on another would most likely have to follow instructions from the other company); c. Degree of instructions
given and the obedience to those instructions.
In EU, the Court had clarified that for wholly owned or near wholly owned subsidiaries there was a presumption that
decisive influence was exercised and therefore, single economic entity could be used.64,65 For partially owned entities, the
mere ability to exercise decisive influence is, however, not enough; instead, evidence must be adduced to demonstrate that
actual use had been made of that power. In India, however, the position is not very clear on the circumstances for the use
of the doctrine.66
The US Supreme Court in the 1984 case of Copperweld Corp v Independence Tube Corp67 similarly concluded that an
internal agreement to implement a single, unitary firm’s policies does not raise the antitrust dangers that section 1 of the
Sherman Act, 1890 was designed to police. It was further observed that a parent corporation and its wholly owned
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subsidiary are incapable of conspiring with each other. Similarly, in the American Needle Inc v National Football league et
al, the US Supreme Court observed that a parent corporation and its wholly owned subsidiary are incapable of conspiring
with each other for purposes of section 1 of Sherman Act, 1890. Although the parent corporation and its wholly owned
subsidiary are separate for the purposes of incorporation or formal title, they are controlled by a single center of decision
making and they control a single aggregation of economic power. Joint conduct by two such entities does not deprive the
market place of independent centers of decision making and as a result an agreement between them does not constitute a
contract, combination or conspiracy.68
Indian Cases applying Single Economic entity doctrine
In the case of Exclusive Motors Pvt Ltd v Automobili Lamborghini SPA,69 the Competition Commission of India observed
that for the application of section 3, there has to be a proved agreement between two or more enterprises. It held that the
agreement between M/s Lamborghini, the opposite party and its Group Company Volkswagen India could not be
considered to be an agreement between the two enterprises as envisaged under section 2(h) of the Competition Act, 2002.
According to the Commission, the agreements between entities constituting one enterprise could not be assessed under the
Act. The Commission relied on the internationally accepted doctrine of “single economic entity”. The Commission
referred to the European case of Viho v Commission70, where the Court went on to observe, firstly, the facts in the
complaint by Viho, which complained that Parker was prohibiting the export of its product by its distributors, dividing the
common market into national markets of the Member States, and maintaining artificially high prices for Parker products on
those national markets. The Commission found that the complaint was not entertainable on the ground that Parker’s
subsidiary companies were wholly dependent upon Parker Pen UK and enjoyed no real autonomy. It was found by the
Commission that an integrated distribution system was set up by Parker to sell its products in Germany, France, Belgium,
Spain and the Netherlands through subsidiary companies and that these subsidiary companies and the parent company
formed one economic unit within which the subsidiaries did not enjoy the real autonomy in determining their course of
action in the market.
The Commission also referred to the judgement of the Court of the First Instance and also relied upon the observation of
para 35 in Ahmed Saeed Flugereisen wherein it was held that Article 85 does not apply where the concerted practice in
question is between undertakings belonging to a single group as parent company and subsidiary, if those undertakings form
an economic unit within which the subsidiary had no real freedom to determine its course of action on the market.71
The Competition Commission of India in the case of Shamsher Kataria72 observed that an internal agreement/arrangement
between an enterprise and its group/parent company is not within the purview of the mischief of section 3(4) of the
Competition Act, 2002. The Commission noted that the exemption of single economic entity stems from the inseparability
of the economic interest of the parties to the agreement. It held thus: “Generally, entities belonging to the same group, e.g.,
holding-subsidiaries are presumed to be part of a “single economic entity” incapable of entering into an [anti-competitive]
agreement, the presumption is not irrebuttable.” The Commission noted that the Original Equipment Manufacturers
(OEMs) were sourcing spare parts for the aftermarket from their parent companies abroad or affiliates of their parent
companies in different countries. Since they belonged to the same group where the decision making on behalf of the
affiliates was largely influenced by the policy of the parent, they could all be termed to be part of a single economic entity.
In such situation, it was held that they could not be termed to be separate enterprises for examination under section 3(4).73
In the case of National Insurance Co Ltd,74 one of the issues decided by the Commission was whether the public sector
insurance companies constituted “a single economic entity”. It was argued that until 2002, all National insurance
companies were owned by General Insurance Company and pursuant to the enactment of the General Insurance Business
(Nationalisation) Amendment Act, 2002, Government of India held 100% shares of each of the insurance companies and
controlled the management and affairs of the companies through Department of Financial Services (DFS) (Insurance
Division), Ministry of Finance. It was noted by the Commission that pursuant to the recommendations of the Malhotra
Committee, two major regulatory changes were introduced in 1993, including, ending the monopoly of General Insurance
Company in the general insurance business and ending the control exercised by General Insurance Company over its four
wholly owned subsidiaries, i.e., the four public sector insurance companies. These regulatory changes were ushered in to
allow the public sector insurance companies to act independently and to compete with the private players to offer better
services to consumers. Further, even though the public sector insurance companies are presently under the overall
supervision of the Central Government, all decisions relating to submission of bids, determination of bid amounts, business
sharing arrangements, etc. are taken internally at company level without any ex ante approval/directions from Ministry of
Finance. The Commission held that the conduct of the insurance companies in relation to the RSBY/CHIS tenders issued
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by the Government of Kerala during the period between 2010/11 and 2012/13 were based on their own volition and the
Ministry of Finance had no role to play. On this basis, the Commission held that the Ministry of Finance did not exercise
any de facto or de jure control over their business decisions. As such, they cannot be said to constitute a single economic
unit. The Tribunal affirmed the position of the Commission. The proposition that the Appellants were a “single economic
entity” because they were driven by a common objective of carrying out obligations of State and were “State” in
implementing the health insurance schemes and other social obligations under Directive Principles of the Constitution, was
rejected.75
Similarly, in the case of Arshiya Rail Infrastructure Ltd v Ministry of Railways and Container Corp of India Ltd,76
economic oneness was interpreted to be used only in specific context:
... only that part of the activity of the enterprise is to be taken into consideration which is related to the relevant market ... Arshiya
is a multinational company active in various markets and constituted a subsidiary in India for the purpose of container trains...It is
natural that economic strength of other group companies active in diverse markets, but having no share in the relevant market
cannot be considered as part of economic strength of subsidiary company for the purpose of determining dominance in a particular
relevant market. If subsidiary of a company is active in a particular relevant market, the strength of holding company active in
different markets cannot be clubbed with the subsidiary company to determine dominance in the relevant market.77
In another matter, bid rigging was alleged in the tender floated by Delhi Jal Board (DJB) for supply of PAC (poly
aluminum chloride) and Liquid Chlorine (LC).78 It was alleged that Aditya Birla Chemicals (India) Ltd (ABCIL), Grasim
Industries Ltd (GIL) and Punjab Alkalies and Chemicals Ltd (PACL) colluded to quote similar prices. It was argued that
there cannot be collusion between GIL and ABCIL since they constituted a single economic entity within the meaning of
Explanation (b) to section 5 of the Competition Act, 2002. It was contended that the fact that both the parties are part of the
same group was already known to DJB as well as the Commission. It was pointed out that both the entities have common
management/employees, promoters, directors, customers, logo, etc. Personnel common to both ABCIL and GIL took
decisions on participation and prices to be quoted in tenders including in the tenders issued by DJB. The central marketing
team was responsible for evaluation of tenders, determination of proposed approach and final submission of bids to the
respective tender issuing bodies, including DJB. It was also stated that the parties’ key business decisions were taken by
the same set of personnel, which indicate that they essentially belong to one single entity. The Commission however made
a factual assessment of bidding parties and noted that that at every stage of the bidding process, suppliers including ABCIL
and GIL were treated as opponents/competitors and these bids were assessed individually and not collectively. Both the
companies bid separately and not as one unit. By bidding as separate entities, GIL and ABCIL were behaving like two
separate competing companies in the market and before the procurer. DJB cannot be expected to know the intrinsic details
of day to day management of the business of GIL and ABCIL. It appeared that GIL and ABCIL were giving DJB the
impression that they were separate decision making centres. The Commission therefore held that ABCIL and GIL have to
be seen as competitors irrespective of the fact that they are related to each other by virtue of common shareholders,
employees, etc., if any. The Commission further held that the contention of the parties that they form part of a same
“group” as defined in Explanation (b) to section 5 of the Competition Act, 2002 and hence is outside the scope of section 3
of the Act, is completely misplaced because the concept of “group” is applicable only in the context of regulation of
combinations under sections 5 and 6 of the Act and has no application to the proceedings under section 3 of the Act. The
concept of “group” has been extended to section 4 and not section 3. The Commission observed:
Where two or more entities of the same group decide to separately submit bids in the same tender, they have consciously decided
to represent themselves to the procurer that they are independent decision making centres and independent options for
procurement. They will, under such circumstances, have to comply with the provisions of the Act in letter and spirit. Any argument
by such entities to the effect that they decided to submit separate bids but the prices were decided by the same person, which fact is
not known to the procurer, cannot be used to escape the provisions of law. Such behaviour, apart from manipulating the price
discovery process of public procurement, is contrary to the objective of the Act and should be condemned. Accordingly, ABCIL
and GIL cannot avoid the responsibility cast under Section 3(3)(d) read with Section 3(1) of the Act under the garb of belonging to
the same group.79
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HORIZONTAL AGREEMENTS AND THE PER SE RULE – SECTION 3(3)
(3) Any agreement entered into between enterprises or associations of enterprises or persons or associations of persons or
between any person and enterprise or practice carried on, or decision taken by, any association of enterprises or association
of persons, including cartels, engaged in identical or similar trade of goods or provision of services, which—
(a) directly or indirectly determines purchase or sale prices;
(b) limits or controls production, supply, markets, technical development, investment or provision of services;
(c) shares the 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) directly or indirectly results in bid rigging or collusive bidding, shall be presumed to have an appreciable adverse
effect on competition.
Raghavan Committee Report on Horizontal Agreements
4.3.1 Agreements between firms have the potential of restricting competition. Most laws make a distinction between “horizontal”
and “vertical” agreements between firms. Horizontal agreements refer to agreements among competitors and vertical agreements
are agreements relating to an actual or potential relationship of buying or selling to each other. A distinction is also made between
cartels – a special type of horizontal agreements–and other horizontal agreements and between vertical agreements between firms
in a position of dominance and other vertical agreements. Generally, vertical agreements are treated more leniently than horizontal
agreements as, prima facie, a horizontal agreement is more likely to reduce competition than an agreement between firms in a
buyer-seller relationship.
4.3.4 Horizontal Agreements Horizontal agreements are agreements between two or more enterprises that are at the same stage of
the production chain and, in the same market. The most obvious example would be that of agreements between enterprises dealing
in the same products. However, in general, it is important to define the relevant market. To attract the provision of the law, the
products must be substitutes. Being at the same stage of the production chain implies that the parties to the agreement are both (all)
producers, or retailers or wholesalers. As has been interpreted over the years in the US (and enacted more recently in other
countries) a distinction is drawn in this regard between horizontal and vertical agreements. In certain circumstances it can be
established that firms that are collaborating on some socially valuable activity may need to agree to do away with competition so as
to establish the cooperative relationship. In this, the European Community law goes beyond the objective of maximising welfare
and explicitly allows some restrictive contracts if they promote progressiveness and consumers ultimately stand to gain. The
Japanese law also allows for actions in contravention of the law provided they are in the “public interest”. It would be dangerous to
allow the kind of discretion in interpretation possible under the Japanese law. Any exceptions that are permissible should be clearly
laid down. However, we recommend that restrictive contracts which are designed to promote use of energy efficient manufacturing
processes and production of Eco-friendly products or conservation of natural resources should be explicitly permitted as
exceptions.
4.3.5 Agreements are considered illegal only if they result in unreasonable restrictions on competition. Based on the US law, this is
tested on what is known as the “rule of reason” analysis. It is also required that the parties to the agreement are engaged in rival or
potentially rival activities. A potential rival is one who could be capable of engaging in the same type of activity. Such a provision
has generally been interpreted to mean that firms that are under common ownership or control are not considered as “rival” or
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“potentially rival” firms. Under the UK law, an agreement infringes the law only if it has as its object or effects an appreciable
prevention, restriction or distortion of competition. This is obviously to be determined on a case-by-case basis.
4.3.6 It is not possible to provide an exhaustive list of agreements that attract the attention of such provision, and the “rule of
reason” needs to be applied to individual cases. An illustrative list would include the following:
• Agreements regarding fixing of purchase or selling prices
• Agreements limiting quantities, markets, technical development or investment
• Agreements regarding territories to be served and sources of supply
• Agreements regarding dissimilar treatment of equivalent transactions with other trading parties that place them at a
disadvantage.
4.3.7 Agreements involving a presumption of illegality: In general the “rule of reason” test is required for establishing that an
agreement is illegal. However, for certain kinds of agreements the presumption is often that they cannot serve any useful or pro-
competitive purpose and therefore do not need to be subject to the “rule of reason” test. The following kinds of horizontal
agreements are often presumed to be anticompetitive.
• Agreements regarding prices: This would include all agreements that directly or indirectly fix the purchase or sale price.
• Agreements regarding quantities: This includes agreements aimed at limiting or controlling production and investment.
• Agreements regarding bids (collusive tendering): This includes tenders submitted as a result of any joint activity or
agreement.
• Agreements regarding market sharing: These include agreements for sharing of markets by territory, type or size of
customer or in any other way.
4.3.8 The presumption is that such horizontal agreements and membership of cartels lead to unreasonable restrictions of
competition and may, therefore, be presumed to have an appreciable adverse effect on competition. This provision of per se
illegality is rooted in the provisions of the US law and has a parallel in most modern legislations on the subject. The Australian law
prohibits most price fixing arrangements, boycotts and some forms of exclusive dealing. Similarly, the new UK law presumes that
certain agreements have an “appreciable effect” on competition. In case such a provision is to be made in the law, there should be
very limited scope for discretion and interpretation on the part of the prosecuting and adjudicating authorities. Hence, such
agreements are presumed to be illegal and the governing principle is that they have an “appreciable” anti-competitive effect. It may
be pointed out that a significant number of the Members of the Committee were not in favour of identifying categories presumed to
be illegal. They feel that they should be subject to the “rule of reason” and that the CCI can issue relevant regulations in this
regard. But the majority however felt that such agreements are presumed to be illegal.
Horizontal Agreements
Between competitors operating at the same level in the economic process i.e., enterprises engaged in broadly the same
activity. These are the agreements between producers or between wholesalers or between retailers, dealing in similar kinds
of products. These are basically agreements between competitors.80 It happens not infrequently that such firms decide to
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co-operate with one another in some respect. The degree of co-operation may vary from sharing of laboratory space to
carrying out R & D, to establishing a new company (Joint Venture). There is no doubt that some degree of co-operation
between firms may be highly beneficial to the competitive structure of the market and to consumers. However, somewhere
on the spectrum of horizontal agreements these co-operations will have no pro-competitive object or effect, but is, rather,
purely intended to maximise profits of the parties to the agreement at the expense of the consumers. Such horizontal
collusion is considered harmful to the economy and consumers, and it has been met by a very harsh attitude on the part of
the competition authorities.81
Section 3(1) prohibits any agreement which causes or is likely to cause appreciable adverse effect on competition. Yet
certain types of agreements are set out in section 3(3) which are so harmful that competition law does not require any proof
or justification and is unlawful per se.82 The anti-competitive potential in all such agreements justifies their facial
invalidation even if pro-competitive justifications are offered for some.83 Horizontal Agreements of the agreements
including cartels described in section 3(3) are presumed to have an appreciable adverse effect on competition84 and
therefore void.85 There may be horizontal agreements for activities other than those mentioned in section 3(3), for
example, for research and development, setting standards, specialisation, or for exchange of information. Such agreements
may have efficiency enhancing effects. Horizontal agreements that do not fall within any of the categories listed in section
3(3) would be covered by section 3(1), and would therefore subject to the rule of reason as against the “shall presume
rule”.86
Section 3(3) is a presumptive section. If the intent of an agreement is to restrict competition in any manner, it will naturally
attract provisions of section 3 of the Competition Act, 2002. Section 3(3) of the Act applies not only to an agreement
entered into between enterprises or associations of enterprises or persons or association of persons or between any person
and enterprises but also with equal force to the practice carried on or decision taken by any association of enterprises or
association of persons including cartels, engaged in identical or similar trade of goods and provision of services which has
the purpose of directly or indirectly fixing prices, limiting output or sales for sharing markets or customers. Once existence
of prohibited agreement, practice or decision enumerated under section 3(3) is established, it may not be necessary to show
an effect on competition, thereby shifting the burden of proof upon the opposite parties to show that impugned conduct
does not causes appreciable adverse effect on competition. Under the Competition Act, 2002 once the essential elements of
section 3(3) are established, a presumption arises that such conduct has an appreciable adverse effect on competition. Of
course this presumption can be rebutted if the opposite parties are able to prove that their conduct has pro-competitive
effects or that there is no AAEC as enumerated under section 19(3) of the Act. The burden of proof shifts on the opposite
parties to show that impugned conduct does not cause an appreciable adverse effect on competition.87
In FICCI – Multiplex Association of India,88 the Commission held that the presumption contained in section 3(3) of the
Competition Act, 2002 is rebuttable and the opposite parties may produce evidence to controvert the presumption
contained therein. Also, in Indian Sugar Mills Association,89 the Commission held that the argument that after an
“agreement” is found amongst market participants in the same business, an investigation has to follow to establish factors
that cause an appreciable adverse effect on competition in India under section 3 read with section 19(3) of the Act, is
fallacious and the Commission emphasised that under section 3(3) of the Act, the presumption of appreciable adverse
effect on competition has to follow once an agreement falling under clauses (a) to (d) of section 3(3) of the Act is found to
exist and the onus to rebut this presumption on the opposite party.
“Practice carried on”
The Court in Jyoti Swaroop Arora’s case90 observed that the words “practice carried on” under section 3(3) had to be
understood as a practice of trade in pursuance to meeting of minds and that by itself section 3(3) is neither prohibitory nor
voiding provision as sections 3(1) and 3(2) respectively were.
“shall presume”
The concept and meaning of shall presume, used in section 3(3) of the Act, has been explained by the courts in India in
numerous cases such as in Sodhi Transport Co v State of UP,91 and RS Nayak v AR Antulay.92 In Sodhi Transport Co, the
court observed that the words “shall presume” have been used in the Indian judicial lore for over a century to convey that
they lay down a rebuttable presumption in respect of matters with reference to which they are used...and not laying down a
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rule of conclusive proof. The court also observed that a presumption is not in itself evidence but only makes a prima facie
case for the party in whose favour it exists. It indicates the person on whom the burden of proof lies. But when the
presumption is conclusive, it obviates the production of any other evidence. But when it is rebuttable, it only points out the
party on which lies the duty of going forward on the evidence on the fact presumed, and, when that party has produced
evidence fairly and reasonably tending to show that the real fact is not as presumed, the purpose of presumption is over.
This suggests that in the case of horizontal agreements listed in section 3(3) of the Act, once it is established that such an
agreement exists then it will be presumed that such an agreement is anti-competitive and has an appreciable adverse effect
on competition in the market. Thus, the presumption laid down under section 3(3) of the Act is rebuttable. However, the
grounds taken for rebutting the presumption are to be tested on the touch stone of guiding factors laid down under section
19(3) of the Competition Act, 2002.
A combined reading of section 3(3) and section 19(3) of the Act suggests that although the term appreciable adverse effect
on competition, used in section 3(1) has not been defined, however, section 19(3) of the Act states that while determining
whether an agreement has an appreciable adverse effect on competition under section 3 of the Act, the Commission shall
have due regard to all or any of the above-mentioned factors. The first three factors laid down in section 19(3) of the Act,
viz., (a), (b) and (c) relate to negative effects on competition while the remaining three relate to beneficial effects. Thus, in
assessing whether an agreement has an appreciable adverse effect on competition, both the harmful and beneficial effects,
as reflected in the above factors, are to be considered.
Delineation of relevant market for section 3(3) – whether necessary?
The Supreme Court in the case of CCI v Coordination Committee of Artists and Technicians of WB Film and Television,93
held that the term “market” in section 3 of the Act had reference to the term “relevant market” and then accordingly
analysed the market from the threshold requirements of relevant product market and relevant geographic market. It was
humbly submitted that the Supreme Court had unnecessarily made the application of section 3 subject to delineation of
relevant market. Relevant market was used more in the context of section 4 where relevant market was defined keeping in
mind the factors under sections 19(6) and 19(7) of the Competition Act, 2002. Section 3(3) of the Act carries with it a
presumption of AAEC, thus, there was no requirement to define a relevant market in such cases.
Clarification was sought by the Commission on the aspect of relevant market delineation for section 3 assessment. The
Apex Court in its 2017 judgement94 had mentioned in para 30 that determination of relevant market is essential for section
3 assessment. The Supreme Court has now clarified that determination of “relevant market” is not a mandatory pre-
condition for making assessment of the alleged violation under section 3 of the Act.95
VERTICAL AGREEMENTS AND THE RULE OF REASON – SECTION 3(4)
(4) Any agreement amongst enterprises or persons at different stages or levels of the production chain in different markets,
in respect of production, supply, distribution, storage, sale or price of, or trade in goods or provision of services,
including—
(a) tie-in arrangement;
(b) exclusive supply agreement;
(c) exclusive distribution agreement;
(d) refusal to deal;
(e) resale price maintenance,
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shall be an agreement in contravention of sub-section (1) if such agreement causes or is likely to cause an appreciable
adverse effect on competition in India.
In considering whether an agreement has the effect of distorting competition, two separate approaches are envisaged under
the Competition Act, 2002: (a) Per se illegality where the agreement is presumed to be unreasonable and illegal and where
no argument is need to prove the harmful effect the agreement in question will cause on the market (Horizontal
Agreements, section 3(3)). (b) Rule of Reason where the agreement is not presumed per se illegal but is assessed in its
legal and economic perspective to determine whether the agreement in question poses any real threat to competitive forces.
Vertical agreements can have pro-competitive effects also (Vertical Agreements, section 3(4)).
Vertical agreements are agreements between non-competing enterprises or persons at different level of manufacturing and
distribution chain and therefore in different markets. Vertical agreements are more of condition fixing agreements and
price fixing.
Raghavan Committee Report on Vertical Agreements
4.3.1 Agreements between firms have the potential of restricting competition. Most laws make a distinction between
“horizontal” and “vertical” agreements between firms. Horizontal agreements refer to agreements among competitors and
vertical agreements are agreements relating to an actual or potential relationship of buying or selling to each other. A
distinction is also made between cartels – a special type of horizontal agreements – and other horizontal agreements and
between vertical agreements between firms in a position of dominance and other vertical agreements. Generally, vertical
agreements are treated more leniently than horizontal agreements as, prima facie, a horizontal agreement is more likely to
reduce competition than an agreement between firms in a buyer-seller relationship.
4.3.9 Vertical agreements, on the other hand, are agreements between enterprises that are at different stages or levels of the
production chain and, therefore, in different markets. An example of this would be an agreement between a producer and a
distributor. Vertical restraints on competition include:
• Tie-in arrangements
• Exclusive supply agreements
• Exclusive distribution agreements
• Refusal to deal
• Resale Price Maintenance (RPM)
4.4.0 In the past, the US anti-trust laws had treated vertical restraints, like tie-in arrangements quite harshly. This thinking
has changed in recent times, and, under the rule of reason, vertical agreements are generally treated more leniently than
horizontal agreements. This is because vertical agreements can often perform pro-competitive functions. Such agreements
are generally considered anti-competitive if one or more of the firms that are party to the agreement have market power. In
such a situation, the agreement is, in any case, likely to attract the provisions of the law relating to abuse of dominance.
4.4.1 In a number of countries, RPM is presumed to be per se anti-competitive. The majority of the Members of the
Committee also felt that RPM should be treated as presumed to be illegal. However, after considerable discussions, in
order to arrive at a consensus, it was decided not to treat it as presumed to be illegal. It will be judged under the “rule of
reason”.
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4.4.2 The following conclusions arise in this section out of the discussion:
• Certain anti-competitive practices should be presumed to be illegal.
• Agreements that contribute to the improvement of production and distribution and promote technical and
economic progress, while allowing consumers a fair share of the benefits, should be dealt with leniently.
• The “relevant market” should be clearly identified in the context of horizontal agreements.
• Blatant price, quantity, bid and territory sharing agreements and cartels should be presumed to be illegal.
4.5.8 ... Such arrangements are common business practices and infringe the law only, if they reduce competition. These
have been discussed in the previous section. In this section only those vertical restraints that have the potential for
foreclosing competition by hindering entry into the market are discussed. These could result from the following types of
arrangements:
• Exclusive Dealing and Purchasing.—Under such arrangements a retailer agrees to purchase or deal in the goods
of only one manufacturer making entry difficult for new manufacturers.
• Exclusive/Selective Distribution.—Under such arrangements the manufacturer supplies one or a selected number
of retailers making entry difficult for other retailers.
• Tie-in Sales, Full-line Forcing, Quantity Forcing and Fidelity Discounts.—Tie-in sales make the purchase of one
product conditional on the sale of another (tied) product. Full line forcing is an extreme form of the former where
the retailer must stock the full range of the manufacturer’s products. Under quantity forcing the retailer is
required to purchase a minimum quantity of a certain product. Under fidelity discounts, the retailer receives
discounts based on the proportion of its sales coming from the manufacturer. Such arrangements could make
entry difficult for both manufacturers and retailers.
• Slotting Fees.—This requires the manufacturer to pay a fee to get its product stocked. Such arrangements could
make entry difficult for manufacturers.
• Non-linear Pricing and Franchise Fees.—These involve payment of non-cost-related discounts to existing
retailers or franchise fees, thus raising the sunk cost of entry and making entry difficult for other retailers.
4.5.9 To attract the provision of the law, in all these cases it needs to be established whether the restraints create a barrier
to new entry or force existing competitors out of the market. The key issue is the extent to which these arrangements
foreclose the market to manufacturers (inter brand rivalry) or retailers (intra-brand rivalry) and the extent to which these
raise rivals’ costs and/or dampen existing competition. The costs of such arrangements need to be weighed against the
benefits. For example, some of these restraints help to overcome the free-rider problem and allow for the exploitation of
scale economies in retailing.
The Distribution chain
A producer of goods or a supplier of services will either require them for its own consumption or will want to supply them
to the market. A firm wishing to sell its product must decide how to do so. There are various possibilities. It may carry out
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both production and sales and distribution by itself [Vertical Integration] or it may use the services of a commercial agent
to find customers or it may find an independent distributor.
Raw Material Supplier - Manufacturer/Producer - Wholesaler - Retailer - Consumer
The key aspect of a vertical relationship is that the agents in such a relation should be at different stages of the production
chain in different markets in respect of production, supply, distribution, storage, sale or price of, or trade in goods or
provisions of services. Therefore, it is required to first identify “different stages or levels of production chain” and
“different markets” before undertaking further examination whether any vertical agreement between the two entities
operating in such markets has caused Appreciable Adverse Effect on Competition in India.96 Competition concerns in a
vertical relationship arise if one of the agent on account of its market power is able to impose unreasonable restraints on
the other, that are likely to cause an appreciable adverse effect on competition. For concluding that a vertical agreement
has caused an appreciable adverse effect on competition, the person imposing the vertical restriction should have sufficient
market strength and the intent behind the restriction should be foreclosure, without any obvious efficiency justifications.97
In the case of Eros International98 the Commission relied on the Rule of reason enunciated by the Hon’ble Supreme Court
of India in Mahindra & Mahindra Ltd v UOI,99 which laid out:
It will thus be seen that the “rule of reason” normally requires an ascertainment of the facts or
features peculiar to the particular business; its condition before and after the restraint was imposed; the nature of the restraint and
its effect, actual or probable; the history of the restraint and the evil believed to exist, the reason for adopting the particular
restraint and the purpose or end sought to be attained “and it is only on a consideration of these factors that it can be decided
whether a particular act, contract or agreement, imposing the restraint is unduly restrictive of competition so as to constitute
“restraint of trade.
Furthermore, the Supreme Court in TELCO v Registrar of Restrictive Trade Agreements100 had also held that the question
of competition cannot be considered in vacuum or in a doctrinaire spirit. The concept of competition is to be understood in
a commercial sense. It needs to be established, whether such an agreement has an appreciable adverse effect on
competition, with regard to all or any of the factors stated in section 19(3) of the Competition Act, 2002.
Vertical Agreements: Possible detriments and benefits to Competition
In horizontal agreements, firms combine their market power to their own advantage. Vertical agreements, however, do not
involve a combination of market power. Vertical restraints are likely to raise competition concerns only when there is
degree of market power at the level of supplier or at the level of buyer or at both levels.101 The negative effects of vertical
restraints might be foreclosure of other suppliers or other buyers by raising barriers to entry; reduction of intra-brand
competition between companies operating on market, including facilitation of collusion amongst suppliers or buyers;
reduction of intra-brand competition between distributors of the same brand. Some theorists argue that vertical restraints
are not suitable targets for competition authorities at all. A more realistic view is that they should be investigated only
where at least one of the parties has market power. Para 106 of the “EC Vertical Guidelines” recognises the positive
effects of vertical restraints. Para 107 sets out nine situations in which vertical restraints may help to realise efficiencies
and the new markets:102
(107) While trying to give a fair overview of the various justifications for vertical restraints, these Guidelines do not claim to be
complete or exhaustive. The following reasons may justify the application of certain vertical restraints:
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(1) To solve a “free-rider” problem: One distributor may free-ride on the promotion efforts of another distributor. This type
of problem is most common at the wholesale and retail level. Exclusive distribution or similar restrictions may be
helpful in avoiding such free-riding. Free-riding can also occur between suppliers, for instance where one invests in
promotion at the buyer’s premises, in general at the retail level, that may also attract customers for its competitors. Non-
compete type restraints can help to overcome this situation of free-riding.103
For there to be a problem, there needs to be a real free-rider issue. Free-riding between buyers can only occur on
pre-sales services and other promotional activities, but not on after-sales services for which the distributor can
charge its customers individually. The product will usually need to be relatively new or technically complex or the
reputation of the product must be a major determinant of its demand, as the customer may otherwise very well
know what he or she wants, based on past purchases. And the product must be of a reasonably high value as it is
otherwise not attractive for a customer to go to one shop for information and to another to buy. Lastly, it must not
be practical for the supplier to impose on all buyers, by contract, effective promotion or service requirements.
Free-riding between suppliers is also restricted to specific situations, namely to cases where the promotion takes
place at the buyer’s premises and is generic, not brand specific.
(2) To “open up or enter new markets”. Where a manufacturer wants to enter a new geographic market, for instance by
exporting to another country for the first time, this may involve special “first time investments” by the distributor to
establish the brand in the market. In order to persuade a local distributor to make these investments it may be necessary
to provide territorial protection to the distributor so that he can recoup these investments by temporarily charging a
higher price. Distributors based in other markets should then be restrained for a limited period from selling in the new
market. This is a special case of the free-rider problem described under point (1).
(3) The “certification free-rider issue”. In some sectors, certain retailers have a reputation for stocking only “quality”
products. In such a case, selling through these retailers may be vital for the introduction of a new product. If the
manufacturer cannot initially limit his sales to the premium stores, he runs the risk of being delisted and the product
introduction may fail. This means that there may be a reason for allowing for a limited duration a restriction such as
exclusive distribution or selective distribution. It must be enough to guarantee introduction of the new product but not so
long as to hinder large-scale dissemination. Such benefits are more likely with “experience” goods or complex goods
that represent a relatively large purchase for the final consumer.
(4) The so-called “hold-up problem”. Sometimes there are client-specific investments to be made by either the supplier or
the buyer, such as in special equipment or training.
For instance, a component manufacturer that has to build new machines and tools in order to satisfy a particular
requirement of one of his customers. The investor may not commit the necessary investments before particular
supply arrangements are fixed. However, as in the other free-riding examples, there are a number of conditions that
have to be met before the risk of under-investment is real or significant. Firstly, the investment must be
relationship-specific. An investment made by the supplier is considered to be relationship-specific when, after
termination of the contract, it cannot be used by the supplier to supply other customers and can only be sold at a
significant loss. An investment made by the buyer is considered to be relationship specific when, after termination
of the contract, it cannot be used by the buyer to purchase and/or use products supplied by other suppliers and can
only be sold at a significant loss. An investment is thus relationship-specific because for instance it can only be
used to produce a brand-specific component or to store a particular brand and thus cannot be used profitably to
produce or resell alternatives. Secondly, it must be a long-term investment that is not recouped in the short run. And
thirdly, the investment must be asymmetric i.e. one party to the contract invests more than the other party. When
these conditions are met, there is usually a good reason to have a vertical restraint for the duration it takes to
depreciate the investment. The appropriate vertical restraint will be of the non-compete type or quantity-forcing
type when the investment is made by the supplier and of the exclusive distribution, exclusive customer allocation or
exclusive supply type when the investment is made by the buyer.
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(5) The “specific hold-up problem that may arise in the case of transfer of substantial know-how”. The know-how, once
provided, cannot be taken back and the provider of the know-how may not want it to be used for or by his competitors.
In as far as the know-how was not readily available to the buyer, is substantial and indispensable for the operation of the
agreement, such a transfer may justify a non-compete type of restriction. This would normally fall outside Article
101(1).
(6) The “vertical externality issue”. A retailer may not gain all the benefits of its action taken to improve sales; some may go
to the manufacturer. For every extra unit a retailer sells by lowering its resale price or by increasing its sales effort, the
manufacturer benefits if its wholesale price exceeds its marginal production costs. Thus, there may be a positive
externality bestowed on the manufacturer by such retailer’s actions and from the manufacturer’s perspective the retailer
may be pricing too high and/or making too little sales efforts. The negative externality of too high pricing by the retailer
is sometimes called the “double marginalisation problem” and it can be avoided by imposing a maximum resale price on
the retailer. To increase the retailer’s sales efforts selective distribution, exclusive distribution or similar restrictions may
be helpful.
(7) “Economies of scale in distribution”. In order to have scale economies exploited and thereby see a lower retail price for
his product, the manufacturer may want to concentrate the resale of his products on a limited number of distributors. For
this he could use exclusive distribution, quantity forcing in the form of a minimum purchasing requirement, selective
distribution containing such a requirement or exclusive sourcing.
(8) “Capital market imperfections”. The usual providers of capital (banks, equity markets) may provide capital sub-
optimally when they have imperfect information on the quality of the borrower or there is an inadequate basis to secure
the loan. The buyer or supplier may have better information and be able, through an exclusive relationship, to obtain
extra security for his investment. Where the supplier provides the loan to the buyer this may lead to non-compete or
quantity forcing on the buyer. Where the buyer provides the loan to the supplier this may be the reason for having
exclusive supply or quantity forcing on the supplier.
(9) “Uniformity and quality standardisation”. A vertical restraint may help to create a brand image by imposing a certain
measure of uniformity and quality standardisation on the distributors, thereby increasing the attractiveness of the product
to the final consumer and increasing its sales. This can for instance be found in selective distribution and franchising.
(108) The nine situations mentioned in para 107 make clear that under certain conditions vertical agreements are likely to help
realise efficiencies and the development of new markets and that this may offset possible negative effects. The case is in general
strongest for vertical restraints of a limited duration which help the introduction of new complex products or protect relationship-
specific investments. A vertical restraint is sometimes necessary for as long as the supplier sells his product to the buyer (see in
particular the situations described in para 107, points (1), (5), (6), (7) and (9).
Thus, Vertical Agreements have both positive and negative effects. If the negative effects outweigh the positive, the
agreement is declared void.
Vertical Agreements in US
For many years, vertical restraints falling under section 1 of the Sherman Act, 1890104 were considered to be per se
illegal.105 The Supreme Court’s GTE Sylvania106 decision, however, brought about a change with respect to the treatment
given to non-price vertical restraints. In overruling Schwinn107, the Court in Sylvania recognised that vertical restraints
have the dual characteristics of simultaneously reducing intra brand competition and stimulating inter brand competition.
The Court observed:
‘Since the Schwinn court failed to evaluate the challenged restrictions on the basis of their individual potential for intra brand harm
or inter brand benefit,’ but rather assumed the form of the transaction dictated the competitive impact of the restriction, the
Schwinn analysis was considered superficial and defective.’ Without legitimate criteria determining the degree of either intra brand
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harm or inter brand benefit, the imposition of a per se standard based on the form of the transaction is itself unreasonable and
unfair to the business community. By discounting Schwinn’s distinction between sale and non-sale transactions” and characterising
it as “essentially unrelated to any relevant economic impact,” Sylvania overrules Schwinn on the ground that vertical restrictions
promote inter brand competition.108
The Courts, however, remained hesitant in applying the rule of reason to vertical price restraints. Finally, after two decades
in 1997, maximum resale price maintenance was declared to be subject to the rule of reason analysis in Khan,109 and more
recently the per se illegality rule was removed from minimum price maintenance in the Leegin case.110 Moreover, the
Supreme Court has reaffirmed the conclusion in Standard Oil that analysis under the rule of reason should focus on the
economic but not the social consequences of a restraint.111 Further, the Court retained the per se rule against tying
contracts but raised the threshold showing of market power that plaintiffs must make to satisfy the rule’s requirement of
“economic power”.112
Vertical Agreements in EU
Article 101 TFEU113 applies to vertical agreements that may affect trade between Member States and that prevent, restrict
or distort competition (“vertical restraints”).114 Article 101 provides a legal framework for the assessment of vertical
restraints, which takes into consideration the distinction between anti-competitive and pro-competitive effects. Article
101(1) prohibits those agreements which appreciably restrict or distort competition, while Article 101(3) exempts those
agreements which confer sufficient benefits to outweigh the anti-competitive effects.115 For most vertical restraints,
competition concerns can only arise if there is insufficient competition at one or more levels of trade, i.e., if there is some
degree of market power at the level of the supplier or the buyer or at both levels. Vertical restraints are generally less
harmful than horizontal restraints and may provide substantial scope for efficiencies.
It is to be noted that agreements of minor importance and SMEs, agency agreements and sub-contracting agreements fall
outside the scope of Article 101. Also, as per regulation 330/2010–Block Exemption Regulation, whether a vertical
agreement actually restricts competition and whether in that case the benefits outweigh the anti-competitive effects will
often depend on the market structure requiring individual assessment. Regulation 330/2010 provides a safe haven for many
vertical agreements. However, certain conditions must be fulfilled before a particular vertical agreement is exempted from
the prohibition of Article 101(1) TFEU which are:
— Agreement must not contain any hard core restrictions.116
— If both the supplier and the buyer of goods/services do not have a market share exceeding 30%.
Therefore, there is no need to consider the application of Article 101(1) to agreements that are within the safe haven of
block exemptions.
Relevant factors for the assessment under Article 101(1):
— Nature of Agreement
— Market position of the parties
— Market position of Competitors
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— Entry barriers
— Maturity of Market
— Level of trade affected by agreement
— Nature of product
ASSOCIATION OF ENTERPRISES
Competition law is not an impediment to appropriate trade association activities and members of such associations should be fully
aware of the types of conduct the law proscribes when carrying out an association’s programs and activities. Under the Act, trade
associations face anti-trust risks under section 3 of the Act for entering into any agreement in respect of production, supply,
distribution, storage, acquisition or control of goods or provision of services, which causes or is likely to cause an appreciable
adverse effect on competition within India.117
Trade associations are for building consensus among the members on policy/other issues affecting the industry and to
promote these policy interests with the government and with other public/private players. The trade associations provide a
forum for entities working in the same industry to meet and to discuss common issues. They carry out many valuable and
lawful functions which provide a public benefit, e.g., setting common technical standards for products or interfaces; setting
the standards for admission to membership of a profession; arranging education and training for those wishing to join the
industry; paying for and encouraging research into new techniques or developing a common response to changing
government policy. However, when these trade associations transgress their legal contours and facilitate collusive or
collective decision making, with the intention of limiting or controlling the production, distribution, sale or price of or
trade in goods or provision of services by its members, it amounts to violation of the provisions of the Competition Act,
2002.118
Decisions taken or practices carried on by associations can be examined under section 3(1) read with section 3(3) of the
Act. By virtue of their association the members enter in to an agreement amongst themselves to pursue the common
objective. In case of association of enterprises comprising of entities which themselves are enterprises, liability for anti-
competitive conduct may arise two fold.119 While the association of enterprises may be liable for breach of section 3 of
the Act embodied in a decision taken by the association, the constituent enterprises of the association may also be held
liable for contravention of section 3 of the Act arising from an agreement or concerted practice among them. Moreover, the
anti-competitive decision or practice of the association can be attributed to the members who were responsible for running
the affairs of the association and actively participated in giving effect to the anti-competitive decision or practice of the
association. The Commission has taken a similar view in many cases concerning trade associations such as in the matters
of Varca Druggist & Chemist v Chemists & Druggists Association, Goa),120 Santuka Associates and AIOCD,121 etc.122
Citing the Supreme Court order in the case of CCI v Co-ordination Committee of Artists and Technicians of WB Film and
Television,123 the COMPAT in the KFCC case of was of the view that action by an “enterprise” was a joint action of its
members with the association, as also joint action inter-se members, constituting an agreement entered into, practice
carried on or decision taken by which could be subjected to appraisal to ascertain as whether there was any contravention
of section 3 of the Competition Act, 2002.124
INDEPENDENT APPLICATION OF SECTION 3(1)
Will an agreement not falling under section 3(3) or 3(4) of the Act, be amenable to the jurisdiction of the Commission
under section 3(1) if the same has an appreciable adverse effect on competition (AAEC)?
In the case of Ramakant Kini v Dr LH Hiranandani Hospital,125 one Mrs Jain was registered with LH Hiranandani
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Hospital (Hospital) for maternity related services and delivery of her child. She entered into an agreement with one M/s
Life Cell India Pvt Ltd (Life Cell) to avail stem cell banking services. As the due date grew closer, Mrs Jain requested the
Hospital to allow Life Cell to collect stem cell blood which needs to be collected within 10 minutes of the birth of the
child. The Hospital refused Mrs Jain’s request due to the reason that the Hospital has an exclusive agreement with one
Cryobanks International India (Cryobank) which provides the stem cell banking services to the patients of the Hospital and
if she wishes she can avail of the services from Cryobank. Mrs Jain was not informed of this arrangement and that they
will not allow any other stem cell bank to collect stem cells. Eventually, Mrs Jain had to shift to another hospital and get
her delivery done. On the basis of the above facts, one Mr Ramakant Kini filed a complaint with the Commission on behalf
of Mrs Jain alleging violation of sections 3(4), 4(2)(a)(i) and 4(2)(c) of the Act. The Commission found that there was
sufficient material to form a prima facie opinion about the violation of section 3 as well as section 4 of the Act and
directed investigation by the Director General (DG) into the matter vide its order dated 19 September 2012.
The Director General found the Hospital to be a dominant player in the relevant market of provision of maternity services
by super specialty hospital and the Hospital, due to its dominance, was in a position to influence the consumers by
imposing unfair conditions on expecting mothers coming to it for maternity services. Also, the agreement entered into
between the Hospital and CryoBank was reported to be in violation of section 3(4) and it had appreciable adverse effect on
competition. The Commission in its majority opinion noted that section 3(1) of the Act prohibits entering into agreements
which cause or is likely to cause adverse effect on competition within India. Section 3(3) and section 3(4) provide for two
categories of agreements – horizontal agreements and vertical agreements, respectively. While section 3(3) gives an
exhaustive list of agreements which are presumed to have appreciable adverse effect on competition, section 3(4) is
illustrative in nature. The Commission held that section 3(3) and 3(4) are expansion of section 3(1) and not exhaustive of
the scope of section 3(1). Hence, there can be other types of agreements which can fall within the ambit of section 3(1)
including agreements which are against the interest of the consumers, affect freedom of trade and cause or likely to cause
appreciable adverse effect on competition in India. The scope of section 3(1) is vast and must be considered in light of the
aims and objectives of the Act. Accordingly, the Commission held that the section 3(1) is independent of section 3(3) and
3(4), and these two sections do not limit the scope of section 3(1).
The Commission further stated that the anti-competitive effect of the exclusive agreement has to be analysed on the basis
of the factors laid down in section 19(3) of the Competition Act, 2002. While analysing in light of the factors mentioned
under section 19(3), it observed that exclusive agreements of this nature will distort the market and will lead to inefficiency
which will adversely impact the consumers’ interest. Given the peculiar nature of the services like long tie-in relation of
the consumer and the nascent stage of the market such agreements foreclose competition and create entry barriers
depriving consumers of choices and moulding consumer preferences in the long run.
The Commission ordered that the impugned agreements for the year 2011/12 and 2013 as null and void. The Hospital was
ordered to not enter into a similar agreement with any stem cell bank in future and imposed a penalty of Rs 3,81,58,303
calculated at the rate of 4% of the average turnover of the Hospital.
Dr Geeta Gouri, member, in her dissenting opinion observed that the Director General chose a method of sample analysis
which was inappropriate while deciding the relevant market and that the Hospital was not in a dominant position. The
Hospital was in a vertical relationship with umbilical stem cell bank for collection of umbilical cord stem cells. She held
that it was evident that patients at the Hospital were not compelled to avail stem cell banking services from its premises
and therefore, it could not be concluded that agreement between the Hospital and Cryobank was a tie-in agreement since
more than 93% of patient had choice of availing only maternity services. Conditions of exclusive supply agreement did not
appear to hold true for reason that the Hospital did not stop Cryobank from enrolling patients from other hospitals.
ML Tayal, Member, observed that the relevant market could not be categorised as the market for mutli-specialty hospitals
and all hospitals providing maternity services should have been taken into account. Also, the geographical market that
should have been considered was geographical area of Mumbai and not just particular municipal wards of Mumbai.
Accordingly, he held that the Hospital was not in a dominant position in the relevant market. With regards to violation of
section 3(4), it was opined that the parties to the impugned agreement were not in a vertical arrangement and hence, the
Hospital could not be in violation of section 3(4) of the Act.
The Hospital appealed against the majority order passed by the Commission before the Tribunal.126 The Tribunal noted
that the Commission failed to independently examine the various factors mentioned in sections 19(3), (5), (6) and (7) for
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deciding what constitute “relevant market”. It held that the Director General and the majority of the Commission erred in
deciding the relevant market and considered the “market of maternity services” as the relevant market ignoring that the
entire issue that was concerned with the market of stem cell banking services. Further, it was held that the Commission
also completely overlooked that the impugned agreement did not restrict the choice of service provider in the relevant
market i.e., market for stem cell banking. By virtue of the impugned agreement, the Hospital could provide stem cell
banking services to the patients who wanted to avail such services only through Cryobank but the latter was free to enroll
any patient for such services to be availed in any other hospitals or maternity homes. The Director General and the
Commission confused the basic issue by presuming that the stem cell banking service was an integral part of the maternity
services provided by the Hospital and this confusion has resulted in miscarriage of justice in as much as the Hospital has
been found to be guilty of violating section 3(1) of the Act without any evidence that the refusal of the Hospital to allow
Life Cell to provide stem cell banking services to Mrs Jain had appreciable adverse effect on competition. The Tribunal
held that it is in complete agreement with the view expressed in the minority order and held that the finding recorded by
the majority of the Commission is wholly erroneous and unsustainable. Additionally, the fact that two new entities entered
the market of stem cell banking after the execution of the impugned agreement evidences the fact that the agreement did
not have the effect of foreclosing competition. The Tribunal, as a result of the abovementioned view refused to uphold the
penalty imposed. Hence, the appeal was allowed and majority order of the Commission was set aside.
It has to be noted here that the principle of independent application of section 3(1) given by the Commission in the
Hiranandani case has been used in cases like PK Krishnan v Paul Madavana127 and Rohit Medical Store v Macleods
Pharmaceutical Ltd.128 Though, after the Tribunal order in the Hiranandani case, it has to be seen whether the
Commission or Tribunal uses the principle in future.
SUB-SECTION (3)—CLAUSE (A)—DIRECTLY OR INDIRECTLY DETERMINES
PURCHASE OR SALE PRICE: HORIZONTAL PRICE FIXING
Price fixing agreements are agreements129 (written/verbal/inferred from conduct) among competitors that set the price (raise/fix or
otherwise maintain) at which they will sell their product or service and that are not accompanied by any significant integration of
the firms productive activities.130
While according to certain scholars131 horizontal price fixing was not always prohibited and many organisations
considered such agreements to provide stability and protection from recession, international competition and help in
orderly growth of the market,132 it is not the position as advocated by the Competition Act, 2002. It was soon realised that
such agreements would cause more harm than good and therefore most of the jurisdictions today have strict regulations on
price fixing agreements. Most of the scholars, particularly of the Chicago School of thought have advocated the prohibition
of horizontal price fixing.133
Every consumer has the right to expect the best quality of goods and services at the lowest rate possible. However, this
right is said to be infringed when competitors collude to fix prices which get inflated much to the dissatisfaction of the
consumer. A combination or conspiracy among a number of persons engaged in a particular business, to stifle or prevent
competition and thereby to enhance or diminish prices to a point above or below what they would have been if left to the
influence of unrestricted competition ... is contrary to public policy.134
The aim and result of every price-fixing agreement, if effective, is the elimination of one form of competition. The power to fix
prices, whether, reasonably exercised or not, involves power to control the market and to fix arbitrary and unreasonable prices. The
reasonable price fixed today may through economic and business changes become the unreasonable price of tomorrow. Once
established, it may remain unchanged because of the absence of competition secured by the agreement.135
The fixing of a price, even one which merely constitutes a target, affects competition because it enables all the participants to
predict with a reasonable degree of certainty what the pricing policy pursued by their competitors will be.136
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Horizontal price fixing is considered as one of the most pernicious violations of competition law. As per section 3 of the
Competition Act, 2002 horizontal price fixing is per se illegal as there are no socially redeeming features and therefore no
explanation will justify its existence. Law requires no elaborate enquiry as to the precise harm they have caused. The
Supreme Court in the case of Sodhi Transport Co v State of UP,137 interpreted “shall be presumed” as a presumption and
not evidence itself, but merely indicative on whom burden of proof lies. Vertical agreements relating to activities referred
to under section 3(4) of the Competition Act, 2002 on the other hand have to be analysed in accordance with the rule of
reason analysis under the Competition Act, 2002. In essence, these arrangements are ant-competitive only if they cause or
are likely to cause an AAEC in India.
Section 3(3) is fairly comprehensive to cover all types of collective agreements or combinations regulating trade terms and
conditions between the sellers or between the buyers. The agreements falling under this clause are commonly referred to as
collusive price fixation, collusive (or level) tendering, cartel, etc. Price-fixing may occur at any level in the production and
distribution process. Similarity or identity of prices charged does not alone establish the existence of conspiracy, unless it
is done in furtherance of an agreement, or arrangement or understanding. The UN Model Law on Competition also treats
price fixing agreements to be per se illegal. It states thus:
34. Price-fixing is amount the most common forms of restrictive business practices and, irrespective of whether it involves goods
or services, is considered as per se violation in many countries. Price-fixing can occur at any level in the production and
distribution process. It may involve agreements as to prices of primary goods, intermediary inputs or finished products. It may also
involve agreements relating to specific forms of price computation, including the granting of discounts and rebates, drawing up to
price lists and variations therefrom and exchange of price information.”138
35. Price fixing may be engaged in by enterprises as an isolated practice or it may be part of larger collusive agreement among
enterprises regulating most of the trading activities of members, involving for example collusive tendering, market and customer
allocation agreements, sales and production quotas, etc. also, agreements fixing prices of other terms of sale prohibited under this
paragraph may include those relating to the demand side, such as is the case of cartels aimed at or having the effect of enforcing
buying power.139
“Directly or Indirectly”
Prices can be fixed in multiple ways and a meaningful legal provision should be able to “comprehend not only the most
blatant forms of practice but a whole range of more subtle collusive behavior where the object is to limit price
competition.”
The collusive arrangement, generally speaking, is with respect to:
(i) Price of the product (increase/decrease/hold);
(ii) Grant of commission, discount or rebates;
(iii) grant/restriction of credit;
(iv) Terms of warranty;
(v) Allocation of territories or market share.140
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(vi) Adopting identical cost accounting methods
(vii) Maintain certain price differentials between different types, sizes or quantities of products.141
Most of the agreements would fall under section 3(3), whenever the agreement is collectively entered into between two (or
more) manufacturers/suppliers or two (or more) dealers/buyers. Such cartels, in particular, amongst
producers/manufacturers give them enormous power to dictate prices and other terms of sale to the wholesalers and
retailers in the marketing channel. Whenever, a group of suppliers come together to fix the price of the product or service
in concert, they voluntarily, as a group, give up price competition and bring about mutually administered prices, ignoring
consumer interest. Such concerted action may also be resorted for preventing the entry of new entrepreneurs in the market.
In every such agreement, two (or more) persons act according to a scheme or plan to achieve a common object or goal. It is
not necessary that all their actions must be demonstrated by an express or written agreement; it may be inferred from the
circumstances surrounding the transactions. The transactions may point out to a course of dealing or facts indicating that
the parties had an opportunity to meet, exchange views and conspire. An intention to combine or conspire in restraint of
trade is necessary in such an action. If it is proved that some form of contact existed between the persons who combine or
conspire, there will be no hesitation in inferring a combined or concerted action. This does not mean that the absence of
such contact will necessarily preclude a finding of combination of sellers or purchasers. On the other hand, simultaneous
price increase or submission of identical quotations by certain manufacturers cannot ipso facto be construed as concert.
Generally speaking, on coming to a conclusion about the existence of a collusive arrangement, one or more of the
following factors (Plus Factors),142 individually or in combination, need to be considered:
(1) Number of firms in the industry—whether it is small;
(2) Level of concentration in the industry—whether it is high;
(3) Barriers, if any, restricting entry in the industry, arising, inter alia, from Government policies on industrial
licensing, import control, foreign collaboration, etc.;
(4) Pace of technological advancement in the industry—whether it is low;
(5) Whether the product is homogeneous and the demand for it is relatively inelastic;
(6) Whether the competing firms are able to exchange information easily about the prices and other terms of sale;
(7) Whether there is an effective trade association in the industry, which closely monitors the activities of its
constituents. (When standard price lists are published by a trade association, it gives the parties to the agreement,
the power to control the market and it is inconsequential whether that power is exercised or not and the
arrangement actually results in a price increase or not.)
“By its very nature, an agreement fixing a minimum price for a product which is submitted to the public authorities for the
purpose of obtaining approval for that minimum price, so that it becomes binding on all traders on the market in question,
is intended to distort competition on that market.”143
It is also unnecessary, for the establishment of concerted practice, for the parties to have agreed a precise or detailed plan
in advance. The criteria of co-ordination and cooperation laid down in the case law of the Court must be understood in the
light of the concept inherent in the competition law that each economic operator must determine independently the policy
which he intends to adopt.144 “Even though the members of the price fixing group were in no position to control the
market, yet to the extent that they raised, lowered, fixed, pegged, or stabilised prices, they would be directly interfering
with the free play of the market forces.”145
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Anti-competitive behavior cannot be justified on the ground that most of the members the association, would be ruined if
competitive forces are allowed to operate in the market. Concerted action to fix uniform trade margin by an agreement
amongst the members of the trade association is illegal.146
Importance of Circumstantial Evidence
The definition of “agreement” as given in section 2(b) of the Competition Act, 2002 requires inter alia any arrangement or
understanding or action in concert whether or not formal or in writing or intended to be enforceable by legal proceedings.
The definition, being inclusive and not exhaustive, is a wide one. The understanding may be tacit, and the definition covers
situations where the parties act even on the basis of a nod or a wink (metaphorically).147 There is rarely a direct evidence
of action in concert and the Commission has to determine whether those involved in such dealings had some form of
understanding and were acting in co-operation with each other. In the light of the definition of the term “agreement”, the
Commission has to find sufficiency of evidence on the basis of benchmark of “preponderance of probabilities”.148
Even if the Commission discovers evidence explicitly showing unlawful conduct between traders, such as the minutes of a
meeting, it will normally be only fragmentary and sparse, so that it is often necessary to reconstitute certain details by deduction. In
most cases, the existence of an anti-competitive practice or agreement must be inferred from a number of coincidences and indicia
which, taken together, may, in the absence of another plausible explanation, constitute evidence of the existence of an
agreement.149, 150
Price fixing agreements are secretive and large amounts of circumstantial evidence have to be relied upon to prove that a
cartel is running. For example when a pattern of unexplained identical contract terms or price behavior together with other
facts like lack of legitimate business explanation is seen among competitors, collusive price fixing may be the reason.151
However, one has to be careful to distinguish collusive behavior from a simple price parallelism. For example prices of
certain products are volatile and intertwined with market factors. Therefore, fluctuations in prices (upwards or downwards)
in commodities like oil, wheat etc. can happen due to certain circumstances like drought, etc. “The prevalent market
conditions like small number of suppliers, little or no entry, stable demand conditions, identical products or services and
few or no substitutes, etc., indicate that the market is conducive to cartelisation.”152
In US, Competition Authorities have held parties guilty of price fixing based on circumstantial evidence. It is emphasised
that:
In some cases the competition authority might not find evidence of the fact that prices have actually been fixed,153 but that the
parties to the agreement/concerted practice could rely on the other participants to pursue a collaborative strategy of higher pricing
in an atmosphere of mutual certainty.154 Regular and consistent practice of drawing up and circulating recommended tariffs to
members of a trade association has been held to be bad by the Commission in the Fenex case.155 In Bananas156 the Commission
imposed heavy fines on three producers of banana for holding bilateral phone calls to discuss or disclose their pricing intentions. It
was held that these discussions reduced uncertainty as to the quotation prices set by the producers and concerned fixing of
prices.157
The fact that an undertaking is not active on the cartelised market does not preclude a finding that it participated in the cartel.158 It
is no defence that a participant in a cartel sometimes does not respect the agreed price increases.159 Likewise undertakings cannot
justify price fixing by claiming that it did not have a direct effect on prices paid by consumers.160
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EXCHANGE OF PRICE INFORMATION
The exchange of commercially sensitive information between competitors can be seen as an attempt to fix prices and an
indicator of collusion. However, it’s still a matter of debate as to nature of information exchange that should be prohibited
because unlike other forms of collusion exchange of information can have pro-competitive effects. Exchange of
information is not uncommon in competitive markets and certainly has some economic benefits.
It solves problems of information asymmetries, thereby making markets more efficient. Moreover, companies often increase their
internal efficiency through benchmarking against each other’s best practices. Sharing of information can also help firms to save
costs by reducing their inventories, enabling quicker delivery of perishable products to consumers, or dealing with unstable
demand etc.161
Information exchange can also lead to collusion and other restrictive effects on competition. Therefore, most of
Competition Authorities across jurisdictions have dealt this subject on a case to case basis. Examples can be seen across
jurisdictions where
Competition authorities have held certain information exchange to be anti-competitive.162 Whether, a given information exchange
between competitors is contrary to competition will depend both on the pre-existing market situation as well as on the manner in
which the exchange alters this situation. This, in turn, depends on the nature of the information and on how specifically it is
exchanged.163
Some of the factors considered in EU to determine whether the practice is anti-competitive:164
• Characteristics of the market (concentration, transparency, stability, complexity, symmetry)165
• Nature of Information (subject matter, its age, frequency, aggregation etc.)
• Market coverage
• The level of detail in the information
• The age and reference period of the exchanged information
• The frequency of the exchange
• The information is publicly available
• The information is verifiable
In Europe, regular and consistent practice of drawing up and circulating recommended tariffs to members of a trade
association has been held to be bad by the Commission in the Fenex case.166 In Bananas167 the Commission imposed
heavy fines on three producers of banana for holding bilateral phone calls to discuss or disclose their pricing intentions. It
was held that these discussions reduced uncertainty as to the quotation prices set by the producers and concerned fixing of
prices.168 US Supreme Court in the famous case of American Hardwood Manufacturers Association held that the “open
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competition plan” of the association that facilitated information exchange among members on production cost, volume of
production, and volume of orders was unreasonable restraint of trade and therefore, violative of Sherman Act, 1890.169
Section 3 of the Competition Act, 2002 does not explicitly include information exchange within any form of prohibition.
However, the definition of “agreement” under section 2 is wide enough to include informal arrangements like in the form
of price information exchanges. Information exchange will be seen as anti-competitive if the nature of exchange
strengthens collusion and it has no pro-competitive effects as such. Price information is one such example. In the case of
Orissa Concrete and Allied Industries Ltd,170 the Director General found direct evidence of sharing of information by
competitors and considered it as sufficient evidence to establish concerted action by the parties. It was concluded that the
parties had contravened the provisions of section 3(1) read with sections 3(3)(a) and 3(3)(d) of the Act by determining
prices and bid rigging respectively.171 Again, in the case of Indian Sugar Mills Association (ISMA) v Indian Jute Mills
Association172 the movement of GTA DPB price was found “not to be governed by the market price, but controlled
manually by the GTA and its members in a concerted manner, by meeting and applying their minds, publishing and
disseminating to the interested parties.”173 The Tribunal, however, in appeal held that there was no evidence on record to
prove that there was an agreement between GTA and IJMA about fixation of price of A-Twill jute bags or that the price of
such bags was fixed by GTA after discussion with IJMA. The COMPAT held that the finding of violation of section
3(3)(a) and 3(3)(b) were unsustainable and deserved to be set aside. The COMPAT noted:
93. In the light of the above noted principles, it was to be seen whether IJMA had formed a cartel with GTA or entered into an
agreement for fixing the price of A-Twill jut bags and thereby violated section 3(3)(b) of the Act. A careful scrutiny of the record
showed that neither the informants produced nor the DG could collect any substantive evidence to prove that there was an
agreement between GTA and IJMA about fixation of price of A-Twill jute bags or that the price of such jute bags was fixed by
GTA after discussing the matter with the members of IJMA or non-members jute mills or that there was a meeting between the
representatives of the two entities. Rather, the facts brought on record to show that none of the 30 members of IJMA, who are also
the members of GTA, was on the sub-committee constituted by GTA for DPB. The material produced by the informants or
collected by the DG unmistakably show that neither there was any meeting between the representatives of the two entities, namely,
IJMA and GTA and no deliberation had taken place between their members on the issue of fixation of price of A-Twill jute bags.
Cases under The Competition Act, 2002
Price fixing in the Pharmaceutical sector
The Pharmaceutical sector is one of the fastest growing sectors in India and attracts huge foreign capital. However, it is
also true that this sector has witnessed multiple forms of anti-competitive behavior in recent times. The Commission has
on number of occasions passed cease and desist orders and has also imposed fines on market players indulging in anti-
competitive practices. Anti-competitive practices in the pharmaceutical sector and health delivery system in India,
includes, amongst others, price fixing, abuse of dominance, collusive agreements and tied selling.174
Concerted activities of associations in enforcing the sale of drugs on MRP have not only adversely affected the interests of retailers
but have also adversely affected the consumers. Those retailers who have been selling drugs by offering discounts and also offering
other innovative and better services like privilege card membership, 24x7 service, free home delivery etc., have been denied the
opportunity to expand their sales/business. When the trade associations indulge in taking commercially sensitive business decisions
on behalf of the entire industry as to whether or not to offer discounts, 24x7 service, free home delivery etc., then competitive
forces are not allowed to operate in the market for furtherance of one’s business. Innovative business practices, superior services,
consumer choice, lower prices, etc., take a back seat and do not become the guiding force for doing business. Consequently, not
only the businesses suffer but irreparable harm is caused to the consumers. The consumers buy drugs as a matter of necessity to
save themselves from suffering (pain/death). They are deprived of their legitimate right to get medicines prescribed by the doctors
at competitive/cheapest rates by the impugned conduct of the trade association.175
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In the case of Varca Druggist & Chemist v Chemist & Druggists Association, Goa (CDAG),176 the Commission imposed a
penalty of Rs 2 lakhs on CDAG holding that the guidelines issued by it that lay down the margins for wholesalers and
retailers, as anti-competitive and against the interests of the consumers. As part of these guidelines, the CDAG had
prescribed a cap on the amount of the discount a wholesaler can give to the retailer and prohibited the retailer from giving
any discounts to the consumers. Apart from fixing margin on drugs, the Association also determined the amount of
discounts to be extended by the wholesalers and retailers that had the impact of ultimate determination of price of
drugs.177 The Commission observed:
When efforts are being made to ensure supply of drugs to the common man at a cheaper rate, the restrictive guidelines of Chemists
and Druggist Association work as stumbling block. Such guidelines of CDAG do not appear to be in line with the government
plans to provide medicines to common man at an affordable rate.
The Commission was of the view that CDAG not only limited and controlled supply of drugs in the market through a
system of seeking mandatory PIS approvals and limited and controlled the number of players by insisting on obtaining its
NOC for appointment of stockist but also through its guidelines fixed trade margins for the wholesalers and retailers
which, in turn, resulted into determination of sale price of drugs in the market. Therefore, the Commission has held that
CDAG had violated the provisions of sections 3(3)(a) and 3(3)(b) of the Competition Act, 2002. The anti-competitive
decision or practice of the association was also attributed to the members who were responsible for running the affairs of
the association and actively participated in giving effect to the anti-competitive decision for practice of the association. In
another case, a cease and desist order was passed against AIOCD from indulging in anti-competitive practices in the case
of All India Organisation of Chemists and Druggists (AIOCD),178 it was alleged that that AIOCD imposed unfair and
discriminatory conditions against any stockist, distributors and C&FAs who did not give in to its mandates and dictates,
thereby abusing its dominant position. It was also alleged that threats of boycott were issued and also new entrants were
hindered entry by closing competition doors in the market by imposing stringent requirements of No Objection Certificate
(NOC), Product Information Service (PIS) approvals etc. AIOCD was held to influence the purchase and sale price of
drugs and pharmaceutical products, controlled the trade margins and profit margins and collected PIS of Rs 2000 per
product from a new stockist of pharmaceutical companies. It was found that the requirement of NOC limited market
supply, boycott of products by delaying or withholding PIS approval which was a sine qua non of the agreements, MOU
between AIOCD, Organisation of Pharmaceutical Producers of India (OPPI) and Indian Drug Manufacturers’ Association
(IDMA) resulted in determination of price of drugs/trade margins in the market on a noncompetitive basis, in violation of
section 3 of the Act.179
The AIOCD was again held responsible for anti-competitive behavior in the case of Sandhya Drug Agency v Assam Drug
Dealers Association180 where it was alleged that Barpeta Drug Dealers Association (BDDA), Assam Drug Dealers
Association (ADDA), All India Organisation of Chemists & Druggists (AIOCD), and Alkem Laboratories Ltd were in
violation of competition law provisions. The Commission held:
Para 9 (a), The practices carried on by their members on the issue of grant of NOC for appointment of stockists including the
second stockist, fixation of trade margins and collection of PIS charges and/or boycott of products of pharmaceutical companies
has the effect of directly or indirectly determining the price of drugs and limiting and controlling the supply of drugs in
contravention of the provisions of section 3(3)(a) and 3(3)(b) read with section 3(1) of the Act.
(d) As the conduct of ADDA and BDDA, an affiliate of AIOCD, are predicated on the various MOUs signed between the AIOCD,
OPPI and IDMA, the decisions of OPPI and IDMA to enter into tripartite agreements with the AIOCD and to implement the
decisions contained in the MOUs pertaining to NOC/LOC, PIS, fixed trade margins also amount to an anti-competitive agreement
within the meaning of section 3(3)(a) and 3(3) (b) read with section 3(1) of the Act.
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Again, in the matter of Peeveear Medical Agencies,181 the Commission observed that AIOCD created a restraint on trade
through NOC and MOUs restricting market supply. The mandatory PIS approval, resulting in delay in reaching drugs to
consumers and giving fixed trade margins had the effect of determining the purchase or sale prices of drugs and the
boycott by AIOCD and affiliates had the effect of limiting or controlling the supply and market of the pharmaceutical
products. These practices were found to violate sections 3(3)(a) and 3(3)(b) of the Competition Act, 2002.
Appeals182 were directed against the order of the Commission dated 19 February 2013 in Case No.20/2011 [Santuka
Associates Pvt Ltd case] and two orders dated 9 December 2013 passed in Case Nos. 41/2011 [Sandhya Drug Agency,
Barpeta, Assam] and 30/2011 [Peeveear Medical Agencies], whereby, the Commission held that the conduct of AIOCD
and its affiliates in the matter of grant of “No Objection Certificate” (NOC) attracted the provisions of section 3(3)(b) read
with section 3(1) of the Competition Act, 2002 as AIOCD and its affiliates created restraint on freedom of trade on account
of NOC, through MoU, which had the effect of limiting or controlling the market or supply and further held that the
approval of Product Information Service (PIS), fixation of trade margins and boycott of the pharmaceutical companies
appointing stockists without insisting on the requirement of NOC as contrary to section 3(3)(b) read with section 3(1) of
the Act and imposed penalty at 10% of the average receipts of AIOCD for three preceding financial years from 2008/09 to
2010/11 in Case No. 20/2011, issued certain directions under section 27 of the Act, imposed penalty of Rs 5,61,097 on
Assam Drug Dealers Association (ADDA) in Case No. 41/2011 representing 10% of the average receipts for the financial
years 2008/09 and 2010/11 and issued separate directions under section 27 of the Act in Case No. 30/2011.
The COMPAT, however, overruled the decision of the Commission. As per the Tribunal, while the Director General’s
report mentioned that the evidence to conclude that trade associations through their NOC requirement tried to restrict/limit
the number of players and thereby, also restrict/limit the supply of medicines in the market and thereby also restrict/limit
the supply of medicines in the market, were not enough. While the Director General’s report and the Commission held that
the requirement of NOC restricted/limited the entry of new chemists/stockiest, the Tribunal held that there were no
evidences to prove that either the membership of AIOCD or its affiliate trade associations at the State and District level
was restricted to any particular class of people engaged in the business or trying to enter the market of drug distribution in
India or that NOC was ever denied by any chemist association to a bona fide chemist and noted that as per the Director
General investigation, the pharmaceutical companies had stated that the NOC was really not a big issue. Thus, the Tribunal
concluded that in light of lack of sufficient evidence, it could not be said that the NOC was a mandatory requirement.
Further, NOC requirement was held to be only a means to verify the credentials of the new stockists. Further, the Tribunal
also held that the PIS approval was to facilitate implementation of the provisions of the Drugs (Prices Control) Order, 1995
and that PIS approval was nothing but a mechanism evolved for informing the industry participants about the price of a
new drug to be introduced in the market by a pharmaceutical company. Thus, the Tribunal held that the PIS approval could
not lead to restriction in supply of medicines in the market.
On the issue of trade margins, the Tribunal held that since the trade margin was fixed by the manufacturer and not by the
Chemists and Druggists Association, it could not lead to the determination of purchase or sale price of drugs in violation of
section 3(3)(a) of the Act.
The Tribunal, thus, termed the Commission’s order as erroneous and allowed the appeals setting aside the Commission’s
orders against three trade associations.
Re Bengal Chemist and Druggist Association (BCDA),183 it was alleged that BCDA, an association of wholesalers and
retail sellers of drugs and affiliated to All India Organisation of Chemist and Druggist was engaged in anti-competitive
practice of directly or indirectly determining the sale price of drugs and controlling the supply of drugs in a concerted
manner in violation of sections 3(3)(a) and 3(3)(b) of the Competition Act, 2002. BCDA’s executive committee directed its
retailer member not to give discount on the MRP in the sale of medicines to consumers. In order to ensure strict
compliance of its directives, BCDA had been carrying out vigilance operations to identify the retailers defying the
directions issued by it, and had even forced the defiant members to shut their shops as a punishment measure. It was held
that the aforementioned act restricted freedom of trade for the retailers and discount was not passed on to the end
consumers which resulted into directly or indirectly determining, the sale prices of drugs by prohibiting its retailer
members from giving discounts on MRP and controlled and limited the production/supply of medicines and the market of
provision of services by forcing them to close their business and adversely affected the interest of retailers and consumers.
The Commission observed:
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62. The Maximum Retail Price only sets the upper most price boundary beyond which a product cannot be sold. It does not
preclude sale of drugs below the MRP ... there are large number of retailers who are willing to offer discounts on MRP to the
customers. However, the concerted and collusive activities of BCDA members have prevented price competition between one
retailer and the other. The same has resulted in fixation of the selling prices as the drug prices are not allowed to be determined by
the independent market forces. Such conduct of the BCDA contravenes the provisions of Section 3(3)(a) read with Section 3(1) of
the Act. When sale of drugs is determined to take place only at MRP, on account of agreement entered into amongst the members
of the BCDA, then such a trade practice causes or is likely to cause an appreciable adverse effect on competition, especially when
almost all the retailers and wholesalers are members of the BCDA.184
In another information filed by Maruti & Co185, a chemist based in Bengaluru, it was alleged that the Karnataka Chemist
and Druggist Association (KCDA) by restraining companies from appointing new stockists in Karnataka unless they
obtained a no objection certificate (NOC) from it was violative of section 3 of the Competition Act, 2002. It was further
alleged that M/s Lupin Ltd, a drug manufacturing company had refused to supply drugs to Maruti for not obtaining a NOC.
The Director General concluded that Lupin, on the insistence of KCDA had denied supplies to Maruti & Co for failure to
get a NOC. The Director General, thus, reported that KCDA and Lupin had violated section 3(3) of the Act. Going by the
Director General’s report, the Commission held that the practice of a mandatory NOC was anti-competitive. The
Commission noted that the pharmaceutical companies like Lupin cooperated with the NOC requirement instead of
approaching the Commission, and were thus, equally complicit in the anti-competitive conduct. Further, the Commission
found three of KCDA’s office bearers and two of Lupin officials responsible under section 48 of the Act in light of their
involvement in KCDA’s anti-competitive conduct and their positions of responsibility during the period of contravention.
A penalty of Rs 8,60,321, calculated at the rate of 10% of the average income of KCDA, was thus imposed on KCDA.
Lupin was penalised at the rate of 1% of its average turnover, amounting to Rs 72.96 crores, as the company had resumed
the supply of drugs after a brief period, which was taken as a mitigating factor by the Commission. Monetary penalties
were imposed on KCDA’s office bearers and Lupin’s officials at a rate of 10% and 1% of their incomes, respectively.
The COMPAT however, in its December, 2016 order had in light of lack of evidence, either direct or circumstantial
quashed the penalty imposed by the Commission on Lupin and its officials. The Tribunal noted:
63. The conclusion recorded by the Jt. DG, which had been approved by the Commission, that Appellant No. 1 had acted in
violation of section 3(1) read with section 3(3)(b) is ex facie erroneous. That section could not have been invoked by the Jt.
DG/Commission because there was not a shred of evidence direct or circumstantial to show that the appellants and Respondent No.
3 were engaged in identical or similar trade of goods or provisions of services. Undisputedly, Appellant No. 1 was a manufacturer
of pharmaceutical products and Appellant Nos. 2 and 3 were its officers engaged in the supply and distribution of those medicines.
As against that, Respondent No. 3 was an association of chemists and druggist engaged in the business of selling medicines in the
State of Karnataka. There was absolutely no identity or similarity in the activities of the appellants on the one hand and Respondent
No. 3 on the other. Therefore, the Jt. DG and the Commission committed a jurisdictional error by returning a finding that Appellant
No. 1 had acted in violation of section 3(1) read with section 3(3)(b) of the Act.
The Tribunal, further, held that the finding recorded by the Commission that there was an arrangement/understanding
between KCDA and Lupin and they were guilty of anti-competitive conduct in violation of section 3(1) was erroneous.
The Tribunal relied on the case of Alkem Laboratories Ltd v CCI186 to hold that once the Commission found that the
Association had been issuing diktats to the pharmaceutical companies or coercing them to insist on production of NOC for
appointment of a person as a stockist or supply of medicines, the element of agreement/concurrence automatically
disappears and thus, Lupin could not have been held guilty of acting in violation of section 3(1) of the Competition Act,
2002. The Tribunal also held that there was no evidence to suggest that one instance of non-supply of medicines by Lupin
to Maruti had appreciable adverse effect on competition that resulted in shortage of the particular medicines in the market
adversely affecting the interest of the consumers. COMPAT also noted that the Commission had imposed the penalty by
taking into consideration the average of the total turnover of Lupin for the preceding three financial years ignoring the fact
that Lupin was a multi-product company.
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In yet another ruling187 against Chemist and Druggist Association, the Commission has held that fixing trade margins for
wholesalers and retailers by KCDA has resulted in determination of the sale and purchase price of wholesalers and
purchase price of retailers, which ultimately impacts and determines the sale price of the pharmaceutical products.
Other Cases under The Competition Act, 2002
Joint stand on fixing the revenue ratio is an example of joint price-fixing.188 For establishing cartel like conduct, action in
concert or joint decisions taken, the investigation does not have to define any relevant market. In the FICCI-Multiplex
Association of India,189 the respondents namely United Producers/Distributors Forum (UPDF), The Association of Motion
Pictures and TV Programme Producers (AMPTPP) and the Film and Television Producers Gild of India Ltd (FTPGI) were
held to be behaving like a cartel. Members of the UPDF who were competitors and controlling almost 100% of the market
for production and distribution of Hindi pictures in multiplexes in India were acting in concert to fix prices in infringement
of section 3(3)(a) of the Competition Act, 2002 and also limiting/controlling supply by refusing to release Hindi films for
exhibition in multiplexes to members of the informant hence violating section 3(3)(b). It was further alleged that UPDF
and its members had collectively boycotted the multiplex cinema operators in violation of section 3(3)(c) of the Act. After
a dispute on the revenue sharing ration, UPDF through letters had instructed all producers and distributors including those
who were not the members of UPDF, not to release any new film to the members of the informant for the purposes of
exhibition at the multiplexes operated by the members of the informant.
The Commission agreed with the Director General’s report and held the respondents to be in violation of section 3. The
Commission noted that the boycott of multiplexes by the opposite party was a blatant act of limiting or controlling of
production, distribution, etc., of films. Further, it was noted that the members of the UPDF, AMPTPP and FTPGI who
controlled almost 100% of the market for the production and distribution of Hindi Motion Pictures which are exhibited in
Multiplexes in India were acting in concert to fix sales prices by fixing the revenue share ratio in violation of section
3(3)(a) of the Act.
COMPAT found no fault in the finding of the Commission and dismissed the appeal.190
Once an agreement is covered within the presumptive rule contained in section 3(3) of the Act, a presumption as to AAEC
has to be raised by the Commission and the factors mentioned in section 19(3) of the Act need not be gone into by the
Commission while drawing the aforesaid presumption with respect to the agreements mentioned in section 3(3) of the Act.
This was highlighted in the case of Indian Sugar Mills Association,191 where members of IJMA were alleged to fix sale
prices of jute packaging material by issuing of daily price bulletin (DPB) for the members to follow. It was argued that the
opposite parties were using their monopoly position (created due to The Jute Packaging Materials (Compulsory Use in
Packaging Commodities Act, 1987) (JPM Act), and were charging excessive prices for jute bags from the sugar
manufacturers and were also changing prices frequently. The Commission agreed with the observations of Director
General that due to JPM Act, 1987 the sugar manufacturers had to necessarily pack their products in A-Twill jute bags.
The bags could not be imported because the JPM Act, 1987 and further statutory orders stipulated that the bags should be
manufactured in India and that too from the raw jute produced in India. Hence, the movement of GTA DPB price was
found not to be governed by the market price, but controlled manually by the GTA and its members in a concerted manner,
by meeting and applying their minds, publishing and disseminating to the interested parties. The Commission concluded
that the Act was nothing but to control the price, other than the market force, through a tacit agreement192 in contravention
of the provision of section 3(3)(a) read with section 3(1) of the Act. The Tribunal however, by order dated 1 July 2016 set
aside the order of the Commission. It was held that there was no evidence on record to prove that there was an agreement
between GTA and IJMA about fixation of price of A-Twill jute bags or that the price of such bags was fixed by GTA after
discussion with IJMA. The COMPAT held that the finding of violation of sections 3(3)(a) and 3(3)(b) were unsustainable
and deserved to be set aside. COMPAT observed that the case for proving a cartel offence essentially boils down to
production of viable evidences (direct or circumstantial) which should be substantial and impactful so that an act of
collusion could be established in terms of section 3(3) of the Competition Act, 2002. Robust and modern techniques for
investigations (such as e-discovery examination, etc.) should be developed by the Director General for establishing the
cartel offences.
In the Domestic Air Lines case,193 reference was made to the Commission from MCA to check possible anti-competitive
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behavior of domestic airline services. It was stated that due to the strike called by the pilots of Air India with effect from
the midnight of 26 April 2011, different airlines had started charging exorbitant fares for the tickets. It was also mentioned
in the said reference that in normal course also one could not buy tickets online, even though seats were available and
tickets had to be bought at higher prices near to the date of departure. The Commission, however, noted that the impugned
practice had not been found to be emanating out of any association of enterprises or association of persons. It was also not
a case where there was any evidence to suggest that the impugned acts of shifting seats from lower buckets to higher
buckets had emanated out of a practice carried on or insisted upon by Federation of Indian Airlines, which is the forum
where the individual Indian domestic airlines normally interact. The practice of shifting the fares from lower to higher fare
bucket was noted to be a business model of pricing which was followed not only in India but internationally. The
Commission noted that in a case where Full Service Carriers and Low Cost Airlines were following different business
models and were having varying cost structures, it would be difficult to reach a common understanding among all of them
regarding a practice of this nature, with a view to increasing fares and reducing supplies, particularly when the airlines are
competing with each other for getting additional share of passengers. The Commission also noted that the airlines were
following a system of yield management and dynamic pricing in which the main principle followed was to optimise
seating capacity on their flights.194 The Commission observed:
... due to the dynamic pricing system, an airline may change its fares daily or even within a day if a need is felt for fare adjustments
in accordance with prevalent conditions in the market, realising that the right fare to charge for a bucket class is what a customer
would be willing to pay. The airlines know that in case they fail to determine correct fares and their tickets are underpriced, they
may lose out to its competitors. However, by overpricing the fares, the airline may not get enough passengers on its flights, losing
out price sensitive passengers to the competitors. Thus, under a system of dynamic pricing, airlines are striving constantly to adjust
rates in response to changing conditions of supply and demand in market, inherent in the system of dynamic pricing is a system of
demand-based pricing wherein during periods of low demands, lower rates are offered and with increase in demand, fares in lower
rate categories are closed and higher rates become visible.
The Commission, therefore, concluded no violation of section 3 of the Competition Act, 2002.
In another matter related to airline sector, collusion was alleged in the fixing of fuel surcharge (FSC) rates for cargo
transportation by domestic carriers during the period 2008–13. The Commission in 2015 held that three carries viz., Jet
Airways, IndiGo and SpiceJet) had acted in parallel and colluded in fixing of FSC rates in contravention of section 3(3)(a).
Penalties of Rs 151.69 crore, Rs 63.74 crore and Rs 42.48 crore were imposed upon Jet Airways (India) Ltd, InterGlobe
Aviation Limited and Spice Jet Limited respectively for their impugned conduct. The Appelate Tribunal in 2016 set aside
the order of the Commission and remanded the matter back to the Commission on grounds of violation of principles of
natural justice. The Commission in its order of March 2018 held again that the opposite parties acted in parallel and the
only plausible reason for increment of FSC rates by the airlines was collusion amongst them. Such a conduct resulted into
indirectly determining the rates of air cargo transport in terms of the provisions contained in section 3(3)(a) of the
Competition Act, 2002. However, taking in to account the losses incurred by Airlines at the relevant time and the fact that
FSC constituted about 20% to 30% of domestic cargo revenue of the Airlines, the Commission decided to impose a penalty
of at the rate of 3% of their average turnover earned from levy of FSC on the volume of cargo handled during the last three
financial years based on the financial statements filed by them. Consequently, penalties of Rs 39.81 crore, Rs 9.45 crore,
Rs 5.10 crore was imposed upon Jet Airways (India) Ltd, InterGlobe Aviation Limited and Spice Jet Limited,
respectively.195
In the Tyre Cartel case,196 it was alleged by the All India Tyre Dealers’ Federation (AITDF) that tyre manufacturers were
indulging in various pricing and trade malpractices, which had direct bearing on the revenue of the state exchequer.197
Director General concluded that the major domestic tyre companies acted in concert and ATMA provided the platform to
the members for exchange and sharing of information relating to price, export, import, OEMs, etc. Thus, the Director
General concluded that ATMA and its five major domestic Tyre manufacturing companies (Apollo, MRF, JK Tyre, Birla
and CEAT) had acted in concert in contravention of the provisions of sections 3(3)(a) and 3(3)(b) of the Competition Act,
2002. The Commission observed that that tyre industry in India, being highly oligopolistic and concentrated in nature,
having entry barriers and a homogenous product, was conducive for cartelisation but there were also other factors that
diluted the above structure and created conditions which did not sustain the maintenance of a cartel.
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The Commission further distinguished the Indian tyre market from the global tyre market on the basis of kind of tyres
manufactured in India and noted that the entry barriers were primarily due to the high capital requirements. It also
observed that the domestic tyre market was facing competition from cheaper imports, which required them to act together,
which could indicate cartelisation. On the issue of price parallelism specifically, the Commission was of the opinion that
price parallelism per se may not fall foul of the provisions of the Act and in certain instances it may be dictated solely by
economic reasons and not having anti-competitive effect. However, if the same is a result of concerted and coordinated
actions between parties to the cartels, then such actions are covered within the purview of the Act. The Commission
analysed the actions of the Manufacturers to ascertain, if there were any price parallelism plus, other relevant factors to
establish cartelisation.
1. Underutilisation of the capacity: The Commission observed that trends were mixed, showing that capacity
utilisation for some companies increase and others decrease. Thus, the Commission observed that the fall in
capacity utilisation of the Respondent Manufacturers in the 2008/09 was in line with the recession. Further, there
was no trend of low capacity utilisation uniformly amongst the Respondent Manufacturers for a same year.
2. Margin on the Sale: Commission noted that the trade margins for each Respondent Manufacturer showed a
healthy increasing trend. However, at the same time due to huge variation in the individual margins of each of the
Respondent Manufacturer, Commission opined that it would be difficult to presume meeting of minds on the part
of Respondent Manufacturers.
3. Share in the market: Commission noted that there was variation in the market share of the respondents which was
unlike the case in a cartel. It was also against the rational business behavior, to lose market share to a rival in a
cartel set up.
Thus, the Commission weighed various parameters and held that the presence of other factors such as the bargaining
power of the Original equipment manufacturers (OEMs), who constituted a majority of the customer base, and the options
to replacement consumer to retread, diluted the factors suggesting collusive actions. It also held that the levy of anti-
dumping duty on the imported tyres suggested that cheaper options were available. The Commission found that there was
no sufficient evidence to hold a violation by the tyre companies and ATMA of the provisions of section 3(3)(a) and 3(3)(b)
read with section 3(1) of the Act.
Agreement among members of the association to fix prices for supply of services of freight transport by trucks was held to
infringe section 3(3)(a) of the Competition Act, 2002 in the Truck operators case.198
All India Motor Transport Congress199 was held to be acting in a “cartel like” manner by asking its members to effect
15% increase in freight charges across the country the actual effect of the diesel price hike. As such, the act of AIMTC was
considered to be in contravention of the provisions of section 3(3)(a) of the Competition Act, 2002. “The Commission held
that even de hors the written circular or directions if the material on record indicates a concerted action, it may be enough
to hold contravention of the provisions of the Act.” It was observed that the act of quoting identical price not only
adversely affected the tender process but also prima facie showed that the tender process was manipulated.200
In the Cement cartel case,201 information was filed on 26 July 2010 by Builders’ Association of India (BAI) against the
Cement Manufacturers’ Association (CMA) and 11 other cement manufacturing companies202 for alleged violation of the
provisions of sections 3 and 4 of the Act. It was alleged that these cement manufacturers under the umbrella of CMA
indulged directly and indirectly into monopolistic and restrictive trade practices, in an effort to control the price of cement
by limiting and restricting the production and supply of cement as against the available capacity of production. Further, it
was alleged that they indulged in “collusive price fixing” and have divided the territory of India into five zones so as to
enable themselves to control the supply and determine or fix exorbitantly high price of cement by forming a cartel in
contravention of provisions of section 3 of the Act. The Commission noted that the oligopolistic nature of the Cement
market coupled with factors like few market players (12 cement companies having about 75% of the total capacity in India
with about 21 companies controlling about 90% market share in terms of capacity); dependence of consumers; high
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concentration facilitated collusion. Further, the Commission, relying on international practice, noted that given the
clandestine nature of cartels, circumstantial evidence was of no less value than direct evidence to prove cartelisation.
Following factors were considered to prove cartelisation:
1. CMA collected retail and wholesale prices data from different parts of the country and transmitted them to the
Ministry of Commerce, as per the latter’s request. The Commission held that the competitors were interacting
using the platform of the CMA and this gave them an opportunity to determine and fix prices.
2. Publishing of statistics on production and dispatch of each company (factory wise) and circulation of it amongst
competitors made co-ordination easier amongst the cement companies.
3. Cement prices increased immediately after the High Power Committee Meetings of the CMA which were
attended by the cement companies in January and February 2011. It further noted that ACC and ACL, despite
having ceased to be members of the CMA, attended these meetings.
4. Price Parallelism: The Director General had conducted an economic analysis of price data which indicated that
there was a very strong positive correlation in the prices of all companies. This, according to the Director
General, confirmed price parallelism. The respondents argued that the correlation benchmark of 0.5 taken by the
Director General was arbitrary. Moreover, the prices used by the Director General were incomparable since the
prices submitted by the companies differed from each other (some had submitted gross prices, while others had
submitted depot prices, average retail prices etc.). The CCI did not accept these arguments and stated that given
the nature of data exchanged between the parties, price parallelism could not be a reflection of non-collusive
oligopolistic market conditions.
5. The Report submitted by the Director General suggested that whilst capacity utilisation increased during the last
four years, the production had not increased commensurately during this period.
6. Forces of demand and supply dictated that the dispatch figures should have been more than or equal to
consumption of cement in the corresponding period of the previous year. However, in two months of November
and December 2010, the dispatch was lower than the actual consumption for the corresponding months of 2009.
7. Production Parallelism: The production figures across cement companies (in a particular geographical region)
showed strong positive correlation. In November– December 2010 the cement companies reduced production
collectively, although during the same period in 2009, the production of the cement companies differed. This was
a clear indication of co-ordinated behaviour.
8. Dispatches made by the cement companies had been almost identical for the period from January 2009 to
December 2010.
9. The deliberate act of shortage in production and supplies by the cement companies and almost inelastic nature of
demand of cement in the market resulted into higher prices for cement. There was no apparent constraint in
demand which could justify the lower capacity utilisation. Further, there was no constraint in demand during
November and December 2010, and, in fact, the construction industry saw a positive growth in the third quarter
of 2010/11.
10. The Commission noted that the given the small number of major cement manufacturers, the price leaders gave
price signals through advanced media reporting which made it easier for other manufactures to co-ordinate their
strategies.
The Commission, imposed a penalty of approximately Rs 6000 crores (approx. USD 1.1 billion) on cement manufacturers
in India after holding them guilty of cartelisation in the cement industry. The penalty has been imposed at the rate of 0.5
times the net profit of such manufactures for the past two years. Additionally, the Cement Manufacturer’s Association (the
CMA) has been fined 10% of its total receipts for the past two years for its role as the platform from which the cartel
activity took place.203
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The Tribunal, however, in 2015 set aside the 2012 order of the Commission on grounds of violation of principles of natural
justice and remanded the matter back to the Commission for fresh adjudication. The Commission then re-heard the matter
and passed an order in 2016 taking more or less the same position as in the 2012 order. The Commission imposed a
penalty of 0.5 times of the net profits of the Opposite Parties for the years 2009/10 and 2010/11 for violation of the cartel
provisions of the Competition Act, 2002.204 The Commission also noted that the Opposite Parties exchanged price
sensitive information relating to cost, prices, production and capacities using CMA as the platform. The Commission
noted:
• The opposite parties were engaged in cartelisation by limiting and restricting production and supply of cement
and collusive price fixing through price parallelism.1
• The opposite parties created artificial scarcity and restricted supply leading to increase in cement prices and
abnormal profits.
• The opposite parties divided the market among themselves based on their operations and increased price without
any direct nexus with the varied input costs and production value incurred at different regions.
• CMA, through its meetings, and reports provided a platform for sharing of price, production, supply related
information for sharing between the cement manufacturing companies.
The Tribunal however in November, 2016 again stayed the order of the Commission against two entities found guilty of
cartelisation in favour of Jaiprakash Associates and the Cement Manufacturers’ Association (CMA). The Tribunal has
asked the two entities to deposit 10% of the penalties in fixed deposits of six months duration with its registry. The
Tribunal has also stayed the Commission’s order against Shree Cement and ACC Ltd. The NCLAT in its July 2018 order
upheld the penalty imposed by CCI on 11 cement manufacturers. The Appellate Tribunal noted that the companies were
using the platform of Cement Manufactures Association (CMA) to discuss price and sensitive information relating to
production, capacity, dispatch etc. The tribunal held that there was a meeting of minds between the cement companies with
regard to fixation of sale price of cement and for regulating the supply and production of cement.
Cartel in commodities market
In the case of (Ruchi Soya Industries),205 it was alleged that the opposite parties who were involved in futures trading of
agricultural commodities in India, were involved in a cartel with respect to trading of Guar Seeds and Guar Gum in various
commodity exchanges. Further, it was alleged that the opposite parties inflated the prices of the two by artificially
increasing the demand through self-trading, circular trading, causing huge loss to traders, hedgers and farmers. The
Commission noted that the prices of the two commodities were quite stable and fluctuated as per demand and supply gap
in the spot market and futures market from 2004/2011. But from October 2011 to March 2012 the prices increased
abnormally from Rs 42/kg to Rs 299/kg [Guar seed] and from Rs 130/kg to Rs 950/kg [for Guar Gum]. Therefore, the
Commission prima facie noted that the opposite parties played a role in manipulation of prices and ordered the Director
General to investigate the matter under section 26(1) of the Competition Act, 2002. The Director General observed that the
conduct of the opposite parties resulted into directly or indirectly determining the prices. The opposite parties, however,
argued the above conclusion to be fallacious on two counts, both of which the Commission found to have substance. First,
the physical stock held by opposite parties was insignificant to empower them to determine the prices; and secondly, the
factum of prices continued to rise till next quarter when the opposite parties were said to have exited the market,
contradicts the conclusion completely. On the allegation of hoarding of stocks of the two commodities to create scarcity in
the market and thereby, jacking the prices, the Commission noted that the trading volumes of opposite party-1 and opposite
party-2 had been miniscule and they had not indulged in self-trading or circular trading. The Commission held that the
opposite parties had rebutted the statutory presumption of their being an AAEC in case of agreements under section 3(3)
on the following counts:
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• There was no “creation of barriers to new entrants” - the future commodity market was regulated by the FMX
and NCDEX, MCX and NMCE. The new members were admitted in, controlled and monitored by the exchanges
themselves. No member was in a position to control the entry of others.
• There was no evidence of “driving existing competitors out of market”- the volume of trade in the two
commodities carried out in the NCDEX by the related entities from April 2011–February 2012 was negligible to
cause any impact in the market so as to drive out the existing competitors.
• There was no “foreclosure of competition by hindering entry into the market”- the opposite party had no role to
play in the entry and exit of new players in the market, since the future commodity market was regulated by
commodity exchanges.
Price fixing in coastal operations
A reference was made to the Commission by the Cochin Port Trust,206 against Container Trailer Owners Coordination
Committee (CTOCC) and some of its office bearers/executives and it was alleged that that the opposite parties contravened
the section 3 of the Competition Act, 2002 by imposing a “Turn System” on coastal operations which allegedly had led to
unilateral fixation of prices. It was alleged that, during the Turn System, the users and container trailers were obliged to
book services only through this centrally controlled system and that CTOCC was restraining outside transporters from
lifting the containers which was impeding the ability of the users to hire trailers of their choice. The Informant Port,
further, alleged that the transporters, who were registered with the “Turn System”, were not allowed to operate for EXIM
containers and if they did so, they were not allowed to get back into the “Turn System” again. Due to this, the supply of
trailers for EXIM containers was also being affected, thereby raising rates for EXIM trade. The Director General found
that CTOCC, along with its four participating association [Cochin Container Carrier Owners Welfare Association
(CCCOWA), Vallarpadam Trailer Owners Association (VTOA), Kerala Container Carrier Owners Association (KCCOA)
and Island Container Carrier Owners Association (ICCOA)] introduced and implemented a “Turn System” under which
they not only unilaterally fixed the prices for coastal container services, but also led to limiting and controlling of such
services at the Informant Port. Thus, the OPs were found to be contravening the provisions of section 3(3)(a). The opposite
parties tried to justify the system by citing the prevailing circumstances at the time when such Turn System came into
existence and also by citing various reasons why the adoption or implementation of such system should not be considered
as an anti-competitive arrangement under the Act. The Commission however rejected the arguments and noted the
following:
• The argument that the Turn System was not coercive or mandatory in nature was insufficient to rebut the
presumption of AAEC that had arisen in this case.
• The incumbents could not justify price fixing by stating that some of the competitors were quoting a lower price,
thus prices were fixed.
• The justification that some of the users/consumers were delaying payments to the container trailer transporters
and thus, to ensure timely payments, Turn System was adopted is insufficient to justify the solution devised by
the opposite parties. Fixing prices under the newly introduced Turn System to ensure timely payment of
transportation charges was an excessively restrictive remedy to meet the objective stated by the opposite parties.
The opposite parties could have considered alternatives which might have been less restrictive while providing an
effective achievement of the objective sought to be pursued.
Online taxi services: In the Ola matter207, it was alleged that algorithms used by Cab Aggregators entrusts them with the
centralised power to fix the ride prices for rides booked through their respective Apps for every ride and do not allow the
drivers to compete on prices in violation of section 3(3)(a). It was argued that price determination acts as a hub and spoke
arrangement. The Commission however rejected the argument and noted that the algorithmically determined pricing for
each rider and each trip tends to be different owing to the interplay of large data sets like time of the day, traffic situation,
special conditions/events, festival, weekday/weekend which all determine the demand-supply situation etc. and such
pricing is not similar to the “hub and spoke” arrangement. Further, it was observed that even though the drivers acceded to
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the algorithmically determined prices by the platform (Ola/Uber), it does not amount to collusion between the drivers. In
the case of ride-sourcing and ride-sharing services, a hub-and-spoke cartel would have required an agreement between all
drivers to set prices through the platform, or an agreement for the platform to coordinate prices between them.
In the case involving Cochin Port Trust,208 it was alleged that Container Trailer Owners Coordination Committee and its
office bearers by imposing a “Turn System” on coastal operations unilaterally fixed higher rates for hiring trailer services
from its Port, apparent from the alleged 25% increase in freight rates. It was argued that that the prevailing conditions
during the period such as under-quotation by certain container trailer owners or delay in payment by users of the container
trailer transport services justified the imposition of the Turn System. The Commission rejected the justifications and also
noted that the opposite parties failed to prove efficiency gains of such a system. The Committee was therefore, held to be
in violation of section 3(3)(a).
Cartelisation in the market for zinc carbon dry cell batteries market in India was discovered after a leniency application
was filed by Panasonic Energy India Co Ltd.209 It was found that the employees of opposite parties (manufacturers) used
to meet and agree on the price increase, which was to be led by one manufacturer of zinc-carbon dry cell batteries and
followed by others under the pretext of following the market leader. Further, it was also found that the Manufacturers
agreed not to push sales through their channel/distribution partners aggressively to avoid price war amongst themselves. It
was seen that coordination not only pertained to the MRP of their products but also exchange of information about the
components of pricing structure of their products including trade discount, wholesale price, dealers/stockist landing cost,
open market rates, retailers margin, sales promotion schemes, etc., to monitor effective implementation of price increase
and determine price for distributors/whole sellers/retailers and end consumers, for allocation of market amongst
themselves on the basis of types/sizes of batteries and/or geographical areas, and to control output to establish higher
prices and control supply. Further, the Commission found that the practice by Association of Indian Dry Cell
Manufacturers (AIDCM) of compiling and disseminating commercially sensitive data was greatly helpful to the
Manufacturers to monitor the outcome of overall “agreement/understanding” reached at amongst them with regard to
pricing, output, sale/supply, allocation of market, etc. Penalty at the rate of 10% of the average of its gross receipts for the
last preceding three financial years was levied on the Association.
The Commission observed:
9.2 From the information and evidence furnished by OPs and the investigation by the DG, it is observed that the Manufacturers
indulged in anticompetitive conduct of price coordination, limiting production/supply as well as market allocation. The price
coordination amongst the Manufacturers encompassed not only increase in the MRP of the zinc carbon dry call batteries but also
exclusion of “price competition” at all levels in the distribution chain of zinc carbon dry cell batteries to ensure implementation of
the agreement to increase price. In addition, the Manufacturers also agreed to control supply in the market to establish higher prices
and indulged in market allocation by requesting each other to withdraw their products from the market. For these purposes, the
Manufacturers exchanged amongst themselves confidential and commercially sensitive information about pricing as well as other
information such as production and sales data.
9.3 In order to increase price of the zinc carbon dry call batteries, the Manufacturers mutually agreed on the implementation
modalities of MRP. They not only decided the schedule of start of production of units with new MRP but also the start of billing as
well as availability of products, with revised rates in the market.
The Commission in the Dry Cell Battery cartel210 case noted that the information provided by Panasonic India was crucial
in assessing the domestic market structure of the zinc-carbon dry cell batteries, nature and extent of information exchanges
amongst opposite parties with regard to the cartel and identifying the names, locations and email accounts of key persons
of OPs actively involved in the cartel activities. Also, since Panasonic was the first to make the application 100% reduction
in penalty was granted. With respect to other applicants, the Commission noted that the information/evidence on cartel
submitted did not result in “significant value addition” as the incriminating documents (both hard and soft copies)
recovered and seized from the premises of the Manufacturers during the search and seizure operations were independently
sufficient to establish the contravention of Section 3. However, in light of genuine, full, continuous and expeditious
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cooperation during the course of investigation, the Commission decided to grant 30% and 20% reduction in penalty to
Eveready Industries India Ltd and Indo National Ltd, respectively.
In another leniency application filed by Panasonic211, it was disclosed that there existed a bilateral ancillary cartel between
Geep Industries (India) Private Limited and itself in the institutional sales of dry cell batteries. Panasonic had a primary
cartel with Eveready Industries India Ltd and Indo National Limited whereby they co-ordinated the market prices of zinc-
carbon dry-cell batteries. Hence, Panasonic had the fore-knowledge about the time of price increase to be affected by this
primary cartel. This foreknowledge was used by Panasonic as leverage to negotiate and increase the basic price of the
batteries being sold by it to Geep. Panasonic would lead Geep to believe that the Market Operating Price (MOP) and MRP
of all the major manufacturers would increase in the near future, and Geep would be in a position to pass on the increase in
the basic price to the consumers by such increased MOP/MRP. Panasonic and Geep used to agree on the market price of
the batteries being sold by them, so as to maintain price parity in the market. They also monitored the MOP of each other
and of other manufacturers, and inform each other in cases of any discrepancy noticed. Such price parity was in
consonance with the prices determined by the primary cartel. The Commission held the parties to be in violation of section
3(3)(a) and very importantly observed:
20. Viewed from another angle, the Commission notes that even if it is taken that OP-3 (Geep) was merely a recipient of
information on pricing of a “larger cartel” from OP-2 (Panasonic) which was not sought by it and such disclosure of commercially
sensitive information by OP-2 was of unilateral nature, it cannot escape liability. Para 62 of Guidelines of European Union on
applicability of Article 101 of TFEU to Horizontal Co-operation Agreements, 2010 states as under:
“[a] situation where only one undertaking discloses strategic information to its competitor (s) who accept (s), it can also
constitute a concerted practice. Such disclosure could occur, for example, through contacts via mail, emails, phone calls,
meetings etc. It is then irrelevant whether only one undertaking unilaterally informs its competitor of its’ intended market
behaviour or, whether all participating undertakings inform each other of the respective deliberation and intentions. When
one undertaking alone reveals to its competitors strategic information concerning its future commercial policy that reduces
strategic uncertainty as to the future operation of the market for all the competitors involved and increase the risk of limiting
competition and collusive behaviour.”
21. Hence, OP-3 could have refused to enter into any such agreement with such anticompetitive clause, but it rather went ahead
with the agreement so as to further its larger business interests. Also, as observed by the DG, OP-3 was also fully aware of the
existence of cartel between OP-2, Eveready and Nippo. It chose to maintain price co-ordination in line with the prices of the other
two players Eveready and Nippo from 2010-11 to 2016-17, and therefore, it was an active participant of the cartel.
In light of the vital disclosures made by Panasonic and the evidences adduced which were found to be crucial in
establishing contravention of the provisions of section 3 of the Competition Act, 2002, 100% reduction in penalty was
granted to Panasonic.
SECTION 3(3)(A) [HORIZONTAL PRICE FIXING] USED ALONG WITH SECTION
3(3)(D) [BID RIGGING]
It has been observed by the Commission that bid rigging is more likely to occur when a small number of companies supply
the goods or services and such suppliers are repetitive bidders. The fewer the number of sellers, and the repetitive the
bidding, the conditions become more conducive for bidders to reach an agreement to rig bids. When the products or
services sold or rendered are identical or very similar and there are few or no substitutes, it is easier for bidders to reach an
agreement on a common price structure.212
It was held by the Commission in the Railways Case213 that quotations of identical prices against the tenders from time to
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time in spite of variations in cost factors arising out of differences in product range, installed capacities, size of operations,
tax rates, sources of procurement of raw materials, basis adopted for giving quotations, etc. as well as on account of the
parties being geographically located in different regions indicate prior meeting of minds. To add to it, there was direct
evidence of sharing of information among competitors. It was concluded that the parties had contravened the provisions of
section 3(1) read with sections 3(3)(a) and 3(3)(d) of the Competition Act, 2002 by determining prices and bid rigging,
respectively.
In the absence of explicit agreement, circumstantial evidence is necessary to prove horizontal price fixing. Similar or
identical bids will not in itself prove a violation of section 3.214 In the case of Coal India Ltd (CIL),215 it was alleged that
the cartelised behavior of the explosive suppliers had caused harm to the informant in purchase of explosives and resulted
in appreciable adverse effect on competition in Indian. “Setting of a price unilaterally and independently in its capacity as a
purchaser cannot be an example of an “agreement” of fixing price. The concept of fixing the price is entirely different from
setting the price.” Further, the Commission held that the allegation that CIL and its subsidiaries were entering into an
agreement for fixing the price was merely a myth. A company cannot be stated to enter into an anti-competitive agreement
with its subsidiary as the subsidiary is the same entity as CIL. There will be no competition in between CIL on one part
and the subsidiary on the other. Setting up of ceiling price is, therefore, to be viewed as a unilateral decision on the part of
CIL. Thus, on this logic, the argument that section 3 had been contravened was incorrect.216 (Single economic entity)217
In the case of Director General (Supplies & Disposals)218 a reference was made to the Commission alleging bid rigging
and market allocation in the tender of contract for polyester blended duck ankle boots rubber sole.219 The prices were
quotes within a narrow band of Rs 393 to Rs 410 for 45 types of different sizes and colors of the product. The Commission
noted that the prices quoted had not factored the differential cost of transportations to be incurred by bidders located at
different places. The argument of the opposite parties that since raw material and other costs for all the manufacturers were
more or less the same, as such, their quoted prices were also almost same was rejected by the Commission:
35. On a careful consideration of entire circumstances i.e. quotation of near identical prices despite these units having been located
in different geographical locations with varying tax structure and different margins; possession by one bidder of the Performance
Statements of other bidders; meetings under the platform of Trade Federation; and failure on the part of the opposite parties to
provide any plausible explanation for the same, it is safe to deduce that the opposite parties entered into an agreement to determine
prices besides rigging the bid.
.................
45. Reliance was made by the opposite parties on the decision of Hon’ble Supreme Court of India in the case of Union of India v
Hindustan Development Corporation,220 to contend that even pure conscious price parallelism is not unlawful. The ruling is of no
assistance as in the facts of the present case, apart from conscious price parallelism, there is overwhelming circumstantial evidence,
as discussed in earlier paras, to infer the anti-competitive nature of the impugned actions.
The Tribunal,221 however, setting aside the order of the Commission observed that neither the Director General nor the
Commission gave due weightage to the some very important factors222 and heavily banked on the factors like identical or
near identical price quoted by the appellants in response to Tender Enquiry dated 14 June 2011 and the so-called plus-
factor for recording a finding that the appellants had contravened section 3(1) read with sections 3(3)(a) and 3(3)(d) of the
Competition Act, 2002. Setting aside the ruling, the tribunal also held that the commission committed grave error by
imposing penalty on the appellants at 5% of their total turnover in respect of all the products manufactured by them. The
tribunal observed that some of these companies were producers of multiple products and the turnover of only the product
in question should have been taken into consideration for imposing penalty. COMPAT directed the concerned authority to
refund the penalty amount within a period of three months, failing which, the appellants (the firms) would be entitled to
interest at the rate of 12% per annum.
Re M/sSheth & Co:223 In a matter taken up by the Commission on the complaint of the Comptroller and Auditor General
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(CAG) on Defence Sector, there was allegation of cartelisation among 13 manufacturers/suppliers of CN container224 to
the ordnance factories. The price bids submitted by the Opposite Parties to the tenders issued by the ordinance factories
were either identical or similar with minor variations in a very narrow price band. The Director General relied on OECD
guidelines to note that a market which has small number of suppliers, little or no entry, stable demand conditions, identical
products or services and few or no substitutes, small number of manufacturers, geographical proximity, absence of new
entrants, predictable and stable demand, standardised product, non-availability of substitutes, etc., indicates that the market
is conducive to cartelisation.
34. ... Considering the remote possibility of availability of any direct evidence in cartel cases, the existence of an anti-competitive
practice or agreement can be inferred from the conduct of the colluding parties. Such conduct may include a number of
coincidences and indicia which, taken together and in absence of any plausible explanation, points towards the existence of a
collusive agreement. In the light of the definition of the “agreement”, as noted supra, the Commission has to find sufficiency of
circumstantial evidence on the benchmark of “preponderance of probabilities”.
38. The law is well settled that price parallelism per se is not enough to establish an agreement in contravention of section 3 of the
Act. However, in the present case, price parallelism coupled with peculiar market conditions like few enterprises with same
owners, stringently standardised product, predictable demand, etc., unequivocally establishes that the conduct of the Opposite
Parties of quoting identical/similar price bids was only due to collusive tactics adopted by them in violation of section 3(1) read
with sections 3(3)(a) and section 3(3)(d) of the Act.225
The Commission in light of facts held the opposite parties to be guilty of violation of sections 3(3)(a) and 3(3)(d) read with
section 3(1) of the Competition Act, 2002. Their agreements had not only resulted in creation of barriers to new entrants,
but also foreclosed competition by hindering entry into the market. Only a handful of entities control the already limited
market and make every possible attempt to share the bids amongst themselves. The Tribunal, however, by order in May
2016226 had set aside the order of the Commission on grounds of violation of principles of natural justice. Additionally,
with respect to quoting of similar prices, the Tribunal noted that though the quoting of similar/identical prices could lead to
the suspicion of cartelisation, but other additional factors also needed to be present to make a conclusive finding about the
same. The Tribunal, further, noted that the Director General had only taken the quoting of identical or near similar price by
the companies as evidence of cartelisation and no other evidence was given to show actual collusion between them. The
Tribunal also noted that the Commission did not take into account the legitimate justifications being given for the
similarity in prices. The Tribunal noted that the reasons put forward by the appellants for substantial similarity in the prices
quoted by them and other suppliers in response to various tender enquiries were plausible. As the product was required to
be manufactured strictly in conformity with the specifications prescribed by the concerned authority, the suppliers had
quoted the price keeping in view the last purchase price which was available on the website of the ordnance factories and
in view of the fact that the supplies were to be made only to three ordnance factories, the suppliers had the temptation to
quote the price keeping in view the last purchase price. Therefore, in the facts and circumstances of the case, identity of
price was held not to be abnormal phenomena. The order of the Commission was, therefore, set aside.
A similar question was considered by the Tribunal in Appeals Nos. 13, 15 and 20 of 2014 of Escorts Ltd v CCI.227 In that
case, the Director General and the Commission concurrently held that the appellants had formed cartel and indulged in bid-
rigging in the matter of supply of C2N feed valves to Diesel Loco Modernisation Works, Patiala. The Commission
approved the findings and conclusions recorded by the Director General primarily on the basis of identical price quoted by
the appellants by observing that this could not have been possible because their production units were situated in three
different states. The Commission also relied upon the factum of award of contracts to the appellants by different Zonal
Railways despite the fact that the price offered by them was identical in several cases and held that they are guilty of
cartelisation.
The Tribunal however, held that the observation made by the Commission that the appellants had adopted a strategy which
involved supplementary/complementary bidding by EL and FTRTIL was based on pure conjectures and was liable to be
rejected because before making the observation, the Commission did not give any opportunity to the two appellants to
have their say. Similarly, the observation made by the Commission that the Tender Committee committed an illegality in
overlooking the bids of EL and FTRTIL was ex facie erroneous. It was observed that once the competent authority had laid
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down particular conditions required to be fulfilled by the tenderer and the two of the three tenderers failed to comply with
the same, the Tender Committee and Respondent could not be said to have committed any illegality by not acting upon
their tenders. The Tender Committee could have recommended for fresh tendering and Respondent could have accepted
that recommendation but their failure to do so cannot lead to an inference that they acted with ulterior motive or that the
Tender Committee ought to have waived the defects/deficiencies and allowed the two appellants, i.e., EL and FTRTIL to
participate in the bid or called them for negotiations.
Evidentiary standards
The Tribunal in MDD Medical Systems India Pvt Ltd228 observed that although there is a penalty for cartel activity, it does
not operate in the realm of criminal jurisprudence where a proof beyond the reasonable doubt is required and the test of
probability would be a good test. It was noted that the factors proved like the huge disparity in the rates between the MDD
on one hand and PES and MPS on another, the identical price bids in respect of the O & M percentages between PES and
MPS, as also the common typographical errors and other common errors did prove that there was guilty meeting of minds
in between the three competitors. The Tribunal while noting that a conspiracy did not normally have a support of direct
evidence and is more or less inferential, held that there was meeting of minds of a nature as would be in contravention of
section 3(3)(d).
In another case, the Commission took up an anonymous complaint229 against four public sector insurance companies230
alleging rigging of bid in the tender floated by the Government of Kerala for selecting insurance service provider for
implementation of the “Rashtriya Swasthya Bima Yojna” (“RSBY”) for the year 2010/11. It was also alleged that they
formed a cartel and quoted higher premium rates in response to the aforementioned tender. It was found out by the
Commission that the companies held a meeting prior to submission of bid. The meeting was held “to discuss about sharing
of business and submission of quotation for the above business”. The Commission relied on the minutes of the meeting,
financial bids submitted by them prior to finalisation of the tender; and the business sharing arrangement concluded
subsequently after finalisation of the tender to conclude that they entered into an anti-competitive agreement to manipulate
the tendering process. The Tribunal231 while noting that the arrangement arrived at by the companies leading to bid
rigging was in the nature of cover bidding whereby NICL, NIACL and OICL submitted bids higher than that of UIICL,
creating a false impression of genuine competition, approved the order of the Commission. The Tribunal noted that the
minutes of the meeting which caused the initiation of inquiry by the Commission are a contemporaneous record of the
intent of the meeting and decisions taken. Further, it was held that the Appellants, through their separate bids created an
impression of genuine competition and this misleading facade resulted in UIICL not ending up as a lone qualifying bidder.
In the LPG232 cartel case, Indian Oil Corporation Ltd had invited bids for supply of 105 lakh, 14.2 kg capacity cylinders
with SC valves to various bottling plants in 2010/11. Out of 63 bidders 50 were qualified for opening of price bids. The
bids of large number of parties were exactly identical or near to identical which indicated of some sort of agreement and
understanding between the bidders. Out of 50 bidders 37 belonged to different groups so it was usual to get such identical
bids in different States. On investigation it was found that the LPG cylinder manufactures met in a Hotel in Mumbai before
the date of submission of price bids and discussed tenders. The manufacturers were held responsible for cartels and
infringement of section 3(3) of the Competition Act, 2002. It was observed that market conditions (predictability of
demand), small number of suppliers, few new entrants, active trade association, repetitive bidding, homogenous products,
few or no substitutes and lack of significant technological changes are facilitating factors of cartelisation and all these
factors were present in this case. The CCI imposed a penalty at the rate of 7% of the average turnover of the each
company.233
Through COMPAT’s234 judgement dated 20 December 2013, the order of Commission was upheld on merits. However,
COMPAT directed re-consideration by the Commission on the question of penalties imposed on the LPG cylinder
manufacturers. Upon re-consideration, the Commission upheld the original penalty imposed at the rate of 7% of the
turnover on all the parties except in case of M/s Confidence Petroleum Ltd, the penalty on was reduced on account of error
of calculation in the original order. This order of CCI dated 6 August 2014 was appealed by the LPG manufacturers.
COMPAT, through its judgement dated 1 March 2016 set aside the order of Commission dated 6 August 2014. The
COMPAT set aside the order on essentially two considerations. Firstly, the COMPAT held that the Commission had not
considered the relevant turnover of the LPG manufacturers while imposing penalties, and instead had imposed the penalty
on average of total turnover of LPG manufacturers. Secondly, the COMPAT opined that the Commission had not given
due weightage to the mitigating factors pleaded by many of the LPG manufacturers for reduction of penalties, such as
nature of anti-competitive agreement, appreciable adverse effect on competition, financial health of the enterprise and
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market condition. The Supreme Court has recently set aside the penalty imposed on LPG gas cylinder manufacturers. The
apex court noted that the bidders had to quote the lowest even if their manufacturing cost was higher. The main purpose
behind this was to remain in the fray and not to lose out business coupled with transparency in the market regarding prices
of a standardized product. As per the Court, while the meeting before the tender raised suspicion, despite 19 parties not
attending the meeting, they quoted identical/similar price. It shows that the meeting was not for pricing. The Court held
that the market conditions prevalent were that of an oligopsony and parallel behavior was not the result of any concerted
practice. It was observed that in an oligopsony, parallel pricing simplicitor would not lead to the conclusion that there was
a concerted practice and there has to be other credible and corroborative evidence.235
— The Tribunal in Excel Crop Care Ltd236 case affirmed the decision of the Commission that that the companies
had contravened section 3(3)(d) of the Competition Act, 2002. It was noted that from 2007 up to 2009, Appellants
quoted identical prices in tenders and identical prices of odd figures were offered consistently right upto 2011.
Therefore, considering that the number of manufacturers of ALP tablets in India was only three or four, such
identical pricing and such boycott viewed on backdrop of consistent practice of offering identical price bids was
held to have been done with common design which amounted to agreement. Further considering different
distances and locations for supplies to be made, there was absolutely no explanation on identical pricing. The
Tribunal observed that identical pricing on one or two occasions though raises strong suspicion may not be
enough to draw inference of concerted agreement but when repeated constantly with odd figures and without any
reasonable explanation for same would only draw inference of pre-concerted agreement. Further, it was held that
boycotting tender in 2011 to force FCI to give orders for supply to all concerned manufacturers at negotiated
amounted to bid rigging prohibited under section 3(3)(d) of Act. The Supreme Court upheld the decision of
COMPAT. The Supreme Court237 held that since collusion was proved by the conduct of the Appellants in
abstaining from the bidding in respect of May 2011 tender, requirement of section 3(3)(d) of the Act read with
“explanation” thereto was satisfied, viz., concerted action based on an agreement/arrangement between the
Appellants, resulted in restricting or manipulating competition or process of bidding, since the said Act was
collusive in nature.
Case Law under the MRTP Act, 1969
The simultaneous price increase of certain brands of toilet soap by the two dominant soap manufacturers could not be said
to be on account of any concert between them merely because both happened to be members of the executive committee of
soap manufacturers’ association. In an oligopolistic industry like that of toilet soap, where a few units dominate the
industry and each unit is having its eye on the other to see what its behaviour will be, there will be inter-dependence
without any overt acting together.238 Likewise, merely because two manufacturers of AC Pressure pipes quoted identical
prices for different types of the said product, would not by itself make it a case of concerted action by the process of
collusive tendering, when there was no evidence of collusion between the parties in regard thereto.239 Similarly, the
identical prices quoted by three storage battery manufacturers against tenders invited by Director General, Supply and
Disposals, could not be brought within the ambit of parallel pricing as it could not be proved that the prices quoted by them
eliminated competition. The first respondent being the bulk supplier of batteries having a large share of the market, the
other two manufacturers could not be blamed for treating it as price-leader and quoting prices identical with or similar to
the price quoted by it. Parallel price moves by the small companies in a standardised market, which closely followed and
imitated the prior moves of the industry leader, was insufficient to imply the existence of a price fixing conspiracy.240
The timing and proximate dates of the revision of prices of a product are relevant, but they have to be viewed in the light
of the prices of essential raw materials. If prices of some materials are determined by Government agencies and the rise in
the prices of the product in question synchronises with the rise in the price of its raw materials, it could not be alleged that
the rise in prices of the product was as a result of concert among the manufacturers for exploiting consumers. In the case of
Alkali and Chemical Corp of India Ltd and Bayer (India) Ltd,241 the Commission, after examining the Indian and the US
laws came to the conclusion that there was no concert between the two companies for raising the prices of their products.
The excerpts from the order of the Commission are given below for understanding the concept of “price parallelism and
acting in concert”:—
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The issue is whether the respondents are indulging in the trade practice of price parallelism and acting in concert in fixing,
maintaining and increasing prices of rubber chemicals ... The two respondents have not seriously contested the correctness of
information regarding increase in prices; their objections are marginal and verbal. Their contentions, that they have to compete
with each other as well as two other units in the organised sector also does not detract from the substance of extensive price
parallelism between the two respondents. But their case rests on the assertion that there is no direct proof of concert behind the
price increases. Director of Investigation, however, leans heavily on the well established doctrine of preponderance of probabilities
which it is asserted is squarely applicable to the circumstances of the case. In this connection, he had laid great emphasis on the
arbitrariness of price increases, unjustified by any commercial consideration. The Counsel for the respondent, however, asserts that
Director of Investigation has failed to produce any evidence to link price parallelism with a tacit agreement or understanding
amongst parties to the concert and therefore the charge of concert must fail ... We find that the only established fact is the identity
or near identity or frequent price increases made by the two respondents who dominate the market. There is also some substance in
the Director of Investigation’s assertion that the respondents have not made any serious effort to produce any evidence to support
their general plea that price increases are due to factors such as increase in excise duty and/or increase in cost of raw material. But
we cannot ignore the well accepted proposition as propounded by economists that price parallelism is typical of oligopolistic
situation where a couple of members dominate the market and products are generally standardised and undifferentiated. In such a
situation the price parallelism may represent a common reaction or response to market stimuli or may be a case of price leadership
... We must admit that the price parallelism practised extensively coupled with only a feeble attempt on the part of respondent at
justification of parallel price increase, does appear highly suspicious and we find it hard to believe that the frequent and equal
increases in prices could have been carried out without some prior understanding. Suspicion however strong is no substitute for
proof ... We find that the subject of parallel business behaviour vis-a-vis conspiracy in constraint of trade came up before the
Supreme Court of United States in the case of Theatre Enterprises. The Supreme Court held: “The crucial question is whether
respondents’ conduct towards petitioner stemmed from independent decision or from an agreement, tacit or express. To be sure,
business behaviour is admissible circumstantial evidence from which the fact finder may infer agreement. But this Court has never
held that proof of parallel business behaviour conclusively established agreement or, phrased differently that such behaviour itself
constitutes a Sherman Act offence. Circumstantial evidence of conspiracy or parallel behaviour may have made heavy in-roads into
the traditional judicial attitude towards conspiracy, but “conscious parallelism” has not yet read conspiracy out of the Sherman Act
entirely”. It will be seen that the Supreme Court, did recognise that parallel behaviour may constitute admissible circumstantial
evidence. But what is the probative value of conscious price parallelism? For an answer we would like to turn to the following
extract from ‘Twenty-five Years of Anti-trust’ by Milton Handler, vol I (566): ‘Nevertheless, since Theatre Enterprises, there has
been uncertainty as to the probative significance of conscious parallelism. The cases that have actually fastened liability on
defendants have involved, in addition to uniform conduct, some circumstance pointing in the direction of concerted activity—as,
for example, where the defendants met, discussed prices, or acted contrary to their apparent self-interest’. The observations are also
supported by Philips Marcus in ‘West’s Handbook Series Anti-trust Law and Practice’ in the following words: ‘The Theatre
Enterprises case merely held that conscious parallelism was not enough to prevent a defendant from getting to a jury. The courts
have not dealt with this doctrine on a uniform basis, some taking a more liberal view of its use, while others have taken a more
restricted attitude. Some plus factors, including the circumstances, of its use, are likely to persuade that conspiracy exists. And it
would seem that a slight plus factor will often suffice for that purpose’. We also find that in a number of judgments concerning
concert and price parallelism, this Commission also has taken the view that mere price parallelism is not sufficient to sustain a
charge of concert ... Great reliance has been placed by the Counsel of the Director of Investigation on the Judgment of the Supreme
Court in Collector of Customs v Bhurmal which is an authority for the proposition that the initial onus of proof can be sufficiently
discharged by circumstantial evidence, but the circumstantial evidence produced on behalf of the Director of Investigation does not
go beyond proving the resort by respondents to price parallelism on a large scale and as already discussed and pointed out by us,
some plus factor besides conscious parallelism must be shown to establish concert and it is this plus factor which is lacking in the
circumstantial evidence available in the instant case ... The evidence adduced on behalf of Director of Investigation does not
measure up to the yardstick laid down by the Supreme Court in Hanuman v State of Madhya Pradesh.242 It cannot be said that the
circumstances are of ‘a conclusive nature and tendency’ and they are such as ‘to exclude every hypothesis but the one proposed to
be proved’ or ‘to show that within all human probability’ the respondents must have acted in concert ... To sum up, in the absence
of any direct evidence of cartel and the circumstantial evidence not going beyond price parallelism, without there being even a
shred of evidence in proof of any plus factor to bolster the circumstances of price parallelism, we find it unsafe to conclude that the
respondents indulged in any cartel for raising the prices. The charge of cartel therefore fails.
Of the various cases, which have come up before the Commission, the following are particularly noteworthy. In all these
cases (listed below), the Commission after examining the necessary evidence, concluded that the practice of collectively
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fixing of prices and other terms or conditions of sale or purchase was established against the parties who were charged to
be indulging in them and which was prejudicial to public interest:
— Re Alkali Manufacturer’s Association of India,243 in respect of circulars issued by the Association indicating
ceiling prices for various grades of caustic soda, the association had recommended ceiling prices for various
grades of caustic soda and had issued a circular to its members stating that “as in the past the prices indicated are
only the recommended ceiling and members are in no way bound to follow the recommendations” and that
“members had full liberty to sell their products at prices lower than those recommended”. The practice adopted
by the association was found to be restrictive in the context of the glut in the market of caustic soda and low
margin of profit prevalent. It was held that the circular gave an impression to the members of the association that
they can increase the price to the recommended level without fear of getting eliminated in the competition with
other manufacturers. The practice was held restrictive on the basis of the tenor and appeal of the circulars of the
association having patently the restrictive effect on competition. In this context, the following observations of the
Commission are worth noting:
15. We may refer to a stable and relevant factor in the situation with which we are concerned, namely the
fact that the respondent association has almost all the leading producers of caustic soda of the country as its
members which, together account for the bulk of production. In this context, therefore, if all or most of the
members of the respondent association follow the recommended ceiling in prices, its impact on competition
amongst its members would be formidable. We would go a step further and hold that the trade practice of an
association fixing or recommending increase in ceiling prices, is a per se restrictive trade practice
particularly when such an association consists of members who monopolise the production. In this departure
from the rule of reason, we have relied on following observations made by the Supreme Court in the famous
Mahindra and Mahindra Ltd, v Union of India,244 “Of course there may be trade practices which are such
that by their inherent nature and inevitable effect, they necessarily impair competition and in case of such
trade practices, it would not be necessary to consider any other facts or circumstances for they would be per
se restrictive trade practices. Such would be the position in case of those trade practices which of necessity
produce prohibited effect in such an overwhelming proportion of cases that minute enquiry in every instance
would be wasteful of judicial and administrative resources.
16. The view that we have propounded in the preceding paras may appear to be vulnerable in the context of
the clarification contained in the circulars issued by the respondent association, that “as in the past, the prices
indicated are only the recommended ceilings and members are in no way bound to follow these
recommendations” and that “members had full liberty to sell their products at prices lower than those
recommended”. It has been argued that such a clear stipulation knocks the bottom out of the charge that the
association has been fixing/revising ceiling selling prices. We, however, are of the opinion that this
clarification is a thinly veiled attempt to hoodwink the law. The association seems to have taken the cue from
section 33(1)(f) according to which an agreement to sell goods on the condition that the prices to be charged
on resale by the purchaser shall be the prices stipulated by the seller is an agreement relating to a restrictive
trade practice unless it is clearly stated that the prices lower than those prices may be charged. We have
already discussed this point earlier in this order and we do not think that this escape route is available to the
manufacturers when they act through an association in revising or fixing ceiling prices.
17. What can be the effect of such a circular on the minds and actions of member manufacturers? A member
sees in the circular a signal for recommended price rise. The fear that he will not be able to compete with the
other manufacturers if the price is increased to the recommended level would no longer deter him from
increasing the price. The effect of the stipulation in the circular that members are at full liberty to sell their
products at prices lower than those recommended, is bound to be minimal. It is in these reactions that we find
the inherently restrictive nature of the trade practice of fixing prices followed by trade associations. That the
revision of prices is merely recommendatory and not mandatory, becomes only a fiction and a subterfuge ...
19. Our thinking finds support from a statement on the nature and functions of trade associations issued by
the Temporary National Economic Committee of the U.S. Government [(Monograph No. 21 (1941)]. The
following observations from this statement are relevant to the discussion on issues before us:
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‘Conspicuous among association activities is the promotion of cost accounting, or in association parlance:
cost education ... it endeavours to persuade all sellers that they should adopt the common estimates of cost
and, therefore, charge a common price ...... Among the many legitimate kinds of trade association activities
which may easily and imperceptibly pass over from the stage of useful service to that of abuse and even
illegality, there are probably few more prone to this sort of transition than cost accounting work ... Through
their prices reporting system, association members make available to one another information concerning
prices at which products have been, are being, or are to be sold ... If the publication of average costs suggest
a figure to be filed, if uniform charges are voted at trade meetings, then the reporting system becomes a
method of policing the observance of a common price.’
20. We feel that the tenor, thrust and appeal of the circulars of the association has a patently restrictive effect
on competition amongst its member manufacturers. There is firstly a reference to the fact of the Committee
of the Association having met and having “considered at length the mounting pressure on cost of production,
particularly cost of electricity which forms the major raw material for the industry”. This Committee has also
taken note of the pressure of increased standing charges such as wages, repairs and maintenances, etc. It is
out of these considerations and with a view to “partially off-setting the cumulative burden on cost of
production due to all these factors” that the Committee has “recommended an upward revision in the
previous recommended ceiling selling prices”. Secondly, the circular also covers a particular aspect of the
price structure of caustic soda and states specifically that “price differential for both solid and flakes
technical grades, over the lye prices, is maintained unchanged at Rs. 750/- per tonne only and that there will
be no change in other factors such as purity allowance new capacity/rehabilitation allowance and the power
cut surcharge formula”. Thirdly, the circular also mentions the date from which the recommendations
regarding prices are made effective. In fact the contents of the circular are capsuled into a telegramme which
is issued to the members ...
22. We have discussed the issues which arise out of the enquiry in the preceding paragraphs and we have no
hesitation in coming to the conclusion that the practice of issuing circulars to its members recommending
prices/upward revision of prices from time to time, carried on by the respondent association, is a restrictive
trade practice prejudicial to public interest. We would, therefore, direct the respondent to ‘cease and desist’
from this practice.
— Re Bengal Tools Ltd,245 respondents were found to have quoted identical rates for various items in response to
tenders floated by Salem Steel Plant, even though their costs of production varied. Steel Plant was rather wonder-
struck how these parties located at different places in the country were able to quote same rates. The Commission
observed that in spite of no positive evidence of the parties having met and decided upon the rates was
forthcoming, yet the onus of establishing existence of concert stood discharged by circumstantial evidence. This
raised presumption in favour of a cartel and the onus of disproving cartel stood shifted to the respondents.
— Re Ghai Enterprises Pvt Ltd and Kwality Ice Creams,246 fixation of selling prices of their respective brands of
ice-cream by these two leading manufacturers, dominating almost 80% of the market, which were very nearly
identical. The Commission, inter alia, observed that the identity of the prices of a large number of varieties of the
ice-cream was not fortuitous nor just a price parallelism but a mutually well-planned scheme or policy a priori to
maintaining a particular consumer price level for the mutual benefit. The various schemes allegedly innovated
were by way of augmenting or promoting their business interests. It was also noted that the two respondents were
having inter-connection and were interested in each other, price increases were effected almost simultaneously,
and even in introducing incentives, discount schemes, new flavours, etc., one was following the other. The
Commission concluded that the preponderance of probabilities in the case leads to an inference of concert
between the respondents in the matter of fixing identical prices for a large number of varieties of ice-cream. The
Commission passed a “Cease & desist Order”. (This judgement is in contrast to the general proposition that there
should be concrete evidence linking price parallelism with a tacit agreement or understanding amongst the parties
to the concert and mere proof of identity of frequent price increases made by companies who dominate the
market is not sufficient.)
— Re Goods Truck Operators’ Union, Faridabad,247—Eliminating competition in the market by fixing the freight
rates without liberty to the union members to negotiate individually and not allowing the non-members of the
union to carry the goods.
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In RRTA v Incheck Tyres—In respect of general code of conduct for the “Members of the Automotive Tyre Industry in
India”, which sought to regulate the production, distribution and sale of tyres and tubes with a view to completely
eliminate competition in the industry.248
Re Indian Woollen Mills Federation—In respect of concert in fixing tariffs for combing of wool and synthetic fibres and
for rendering other connected services.249
Re Jugaldas Damodar Mody Co and 18 other importers of dates—In respect of the agreement forming a cartel called “The
Oman Dates Committee” for the import of dates from the Sultanate of Oman.250
Collusive tendering is justified rarely. Re Swastic Laminating Industries,251 several companies in the small scale sector
quoted identical rates in response to tender floated by a Government Department for supply of blankets. The tender was for
a huge quantity, which a single small unit was not in a position to supply. The prices quoted by these units were the lowest
compared to the prices quoted by other parties. It was contended by the small scale units that this benefited not only the
Government, but also the small scale units which depended for their survival in such large tenders and if any one of them
quoted lower rates, the other units’ offer would be rejected leading to closure of the units resulting in large scale
unemployment in that area. Viewing in the context of the fact that no single unit could meet the huge demand of the
Government Department, the Commission decided that the impugned practice in this particular case was not prejudicial to
the public interest, emphasising that the concept of competition should be understood in a commercial sense.
An interesting case, which came up before the Commission, related to the bandh organised by the Federation of
Association of Maharashtra.252 The Federation by an advertisement in a newspaper announced a convention of the entire
trade, industry and transporters of the State to organise an indefinite bandh of trade, industry and transporters to achieve
total abolition of octroi duty in the State. The Bombay Labour Union, in a letter to the Commission, alleged that the
purported action of the Federation would amount to collective refusal and boycott of manufacturing, marketing and
distribution of essential commodities and services, that this would have the effect of preventing, distorting or restricting
competition, and would, therefore, amount to a restrictive trade practice. The Director General stated that a resort to
boycott of sale of any goods amounted to restrictive trade practice within the meaning of section 33(1)(d) read with section
2(o) of the MRTP Act, 1969. The Commission observed that
the conduct of a bandh cannot be regarded as a trade practice because it is not a practice relating to the carrying on of any trade as
defined under the MRTP Act. A bandh is a stoppage of work. It can by no means be reckoned as a trade, business, industry,
profession, or occupation and, therefore, does not come within the definition of a trade. Trade has to be in the nature of positive
action in furtherance of business, industry, profession or occupation with the objective of making profits, individually or
collectively, through such activity. Bandh, on the other hand, is in-action and the purpose is not to control supply of goods,
increase prices or enhance profits. It is in the nature of a protest against the Government rather than directed against the consumer
or the general public. It is a different matter that as a result of the bandh general public may be put to hardship, but this in itself
does not warrant action under the Act. In our considered view, section 2(o) of the MRTP Act will not, therefore, apply to the bandh
organised or announced by the Federation.
The Commission held that section 33(1)(d) envisages an agreement to purchase or sell goods or to tender for the sale or
purchase of goods only at prices or on terms of conditions agreed upon between sellers or purchasers. There is no
concerted action in fixing prices or quantities for sale in this case, and that being so, no action can be taken under section
33(1)(d).
Though the term “cartel” has not been defined in the MRTP Act, 1969 section 33(1)(d) thereof includes in its scope the
elements of cartel or cartelisation as generally understood in legal or economic terms. It has been recognised in various
case laws that cartel would be conceived in secrecy. Even there may not be formal meeting taking place. Cartelisation may
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be resorted to by even non-participants in the scheme by adhering to the arrangement. Thus, if there was any arrangement
worked out by the respondents to increase the prices of their products within a narrow band at periodic intervals, it would
at best, be an arrangement without any direct proof. In foreign countries, cartelisation can be proved by indirect evidence
by adopting “preponderance of probability” and “liaison of intentions” as the standard of proof. In the present case, the
MRTPC found direct as well as indirect evidence of concert. If the dealings between manufacturers and their stockists
were on “principal to principal basis” there is no question of manufacturers or their local management fixing the retail
prices. The agreement in relation to section 33(1)(d) need not be express or in writing. Even their common understanding
would suffice.253
In the case of UOI v Hindustan Development Corp,254 the Supreme Court has laid down that merely quoting identical
process in tender will not be sufficient to conclude that such parties have formed a cartel. In addition to price parallelism,
there should be proof of agreement among such parties to act in concert. Of course, such agreement may be tacit or indirect
which can be inferred from the facts established on record.
In Delhi Development Authority v Shree Cement Ltd,255 the Competition Appellate Tribunal held that in the absence of
any direct evidence of cartel and the circumstancial evidence without a shred of evidence in proof of any plus factor to
bolster the circumstances of price parallelism it is unsafe to conclude that there is a contract. A mere offer of a lower price
by itself does not manifest the requisite intent to gain monopoly and in the absence of a specific agreement by way of an
action suggesting conspiracy, a cartel among the producers cannot readily be inferred. In the instant case, except the fact
that identical prices were quoted, there is no other material to establish cartelisation or predatory pricing. Quoting of
identical prices by different persons at the most is a suspicious circumstance. But it does not per se establish cartelisation.
Case Law in USA
Identity, or substantial identity, of prices among competitors, often, has been utilised to show or establish agreement or
conspiracy to eliminate competition, and thereby offending the US Anti-trust law. In this regard, no inference of lack of
agreement can be drawn from the fact that price increases of various competing firms were spread over a period of time,
e.g., over a month or two months’ period. In other words, a charge of price fixing conspiracy will not fail merely because
all the competing firms did not put up the prices as agreed upon at the same time. The approach, generally speaking, has
been that the facts and circumstances in each case are determinative of the probative value of pricing practices as evidence
of such conspiracy or agreement. In this context, the various cases which have come up for consideration are given below:
Ability to sell production
With the exception of one of the producers, in 1956 all of them were, at all times, able to sell all the vaccine they could
produce. Under such circumstances, they could not be expected to lower their prices. The contention that non-reduction in
the prices was the result of an agreement was held to be unfounded.256
Disparity in costs
A “proffer of proof” that the companies offered vaccine to those not alleged to have been objects of the conspiracy (public
authorities) at “ disparate prices”, was both relevant and material. Their uniform prices quoted to the public authorities
were, therefore, the result of unlawful agreement, rather than because of uniform costs.257
Identical bids
Uniformity in bidding prices in the sale of rock salt to Government agencies was established by evidence of high
percentage of identical bids, formula pricing (using the same freight rates and the same f.o.b. mine prices, which bore no
relation to costs) and maintenance of an intelligence system.258 On the other hand, submission of nearly identical bids for
stone sales did not necessitate a finding of conspiracy in view of evidence that stone was a fungible product conducive to
comparable, if not identical prices.259
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Price leadership
Follow-the-leader pricing practices constituted sufficient evidence of conspiracy to fix uniform prices, where a
manufacturer of asphalt roofing products published a new price schedule involving an intricate system of zoning, and all
other major manufacturers abandoning their pricing methods, adopted the price list substantially identical to the former
manufacturer, even down to an apparently erroneous zone classification.260 On the other hand, the fact that price leader in
the industry, although it published its prices, did not conspire with other manufacturers in the establishment of its prices,
the manufacturers followed the prices of the industry leader because they could not make the same identical product any
cheaper.261
Profit margins
Reaping large profits by raising prices, during a period of declining costs and granting price reduction, only when
competition from other asserts itself constitute probative evidence of price fixing conspiracy.262
Suggested retail price
Parallel behaviour among bakeries, including maintenance of a two-tiered wholesale price structure, was insufficient to
establish any conspiratorial action against a bread distributor that bought from bakeries for resale to retail outlets.263
Uniformity of prices
Uniformity of prices at an artificial level, not related to the supply and demand of the commodity, may be evidence from
which an agreement or undertaking, or some concert of action among sellers may be inferred.264
Duration
Evidence of uniformity of prices over a period from 1919 to 1931 could support a finding of an agreement.265
Standardised product—intense competition
When the defendant’s product is a thoroughly standardised product, in their competition, price, rather than brand, is
generally the vital consideration. The question of unreasonable restraint of competition, thus, relates, in main, to
competition in prices, terms and conditions of sale. The fact that, because sugar is a standardised commodity, there is a
strong tendency to uniformity of price makes it the more important that such opportunities may exist for fair competition
should not be impaired.266
On the other hand, mere uniformity of prices in the sale of standardised product is not, in itself, evidence of a violation of
the Sherman Act, 1890. In a case based on such circumstantial evidence as price uniformity, the evidence must not only
point to the guise of the accused, but must exclude every “reasonable hypothesis of innocence”. Thus, evidence that two
dairies sold fluid milk at substantially uniform prices, and evidence of the proximity in time of their price changes was
insufficient to establish the existence of a conspiracy to fix prices, because the product was standardised and the costs of
both dairies were substantially the same. The price of milk delivered to them for processing was fixed by Government
regulations; the quality of milk was determined by local municipal ordinance; and the labour costs in processing the milk
were determined by contracts with labour unions. Thus, the almost simultaneous price changes were prompted by
economic factors. Where there were standardised major cost factors, uniformity in prices was to be expected.267
PARALLEL BUSINESS BEHAVIOUR
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Price parallelism in itself is not anti-competitive and may be the result of market factors. However, it may be used as a
starting point to prove collusion or meeting of minds between the competitors.
US and European courts have adopted a ‘parallelism plus’ approach which requires showing the existence of ‘plus factors’ beyond
merely the firms’ parallel behavior, in order to prove that an antitrust violation has occurred. This has been adopted in some cases
in Brazil as well. In all these jurisdictions, yet, there is an inclination to consider parallel behavior as a first clue pointing to the
presence of collusion. Even though parallelism does not suffice to prove unlawful conduct, it may contribute to forming a
suspicion of illegality.
In Excel Crop Care Ltd (supra) the Hon’ble Supreme Court has endorsed the test laid down by the European Court of
Justice in Imperial Chemical Industries Ltd v Commission of the European Communities.268 Although parallel behaviour
may not itself be identified with a concerted practice, it may however amount to strong evidence of such a practice if it
leads to conditions of competition which do not respond to the normal conditions of the market, having regard to the nature
of the products, the size and number of the undertakings, and the volume of the said market. Such is the case especially
where the parallel behaviour is such as to permit the parties to seek price equilibrium at a different level from that which
would have resulted from competition, and to crystallise the status quo to the detriment of effective freedom of movement
of the products in the [internal] market and free choice by consumers of their suppliers.
The Commission Re M/sSheth & Co,269 observed that price parallelism per se is not enough to establish an agreement in
contravention of section 3 of the Competition Act, 2002. The Commission noted that in the present matter price parallelism
coupled with peculiar market conditions like few enterprises with same owners, stringently standardised product,
predictable demand, etc., unequivocally established that the conduct of the Opposite Parties of quoting identical/similar
price bids was only due to collusive tactics adopted by them in violation of section 3(1) read with section 3(3)(a) and
section 3(3) (d) of the Act.270
While parallel business behaviour among competitors is not illegal per se (Theatre Enterprises Inc v Paramount Film
Distributing Corp271), the protective mantle of “conscious parallelism” cannot clothe with immunity a system employed
by substantially all members of an industry whereby all offer their products for sale at any given time and at any given
point at identical prices, without regard to differences in shipping costs.272
The following leading cases give a further glimpse of the price fixing arrangements in the United States:
— Buckelew v Martens:273
Price-fixing agreements, whether in fact detriment to the public or not when entered into by competing firms
for the purpose of maintaining higher prices, are illegal ... The public are entitled to have competition, in
order that they may buy at the lowest price, and it makes no difference whether the prices-fixing agreements
are reasonable or unreasonable or tend to monopoly or not.
— US v Trenton Potteries Co:274
It does not follow that agreements to fix or maintain prices are reasonable restraints and therefore permitted
by the statute, merely because the prices themselves are reasonable. Reasonableness is not a concept of
definite and unchanging content. Its meaning necessarily varies in the different fields of the law, because it is
used as a convenient summary of the dominant considerations which control in the application of legal
doctrines. Our view of what is reasonable restraint of commerce is controlled by the recognised purpose of
the Sherman Law itself. Whether this type of restraint is reasonable or not must be judged in part at least in
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the light of its effect on competition, for whatever difference of opinion there may be among economists as
to the social and economic desirability of an unrestrained competitive system, it cannot be doubted that the
Sherman Law and the judicial decisions interpreting it are based upon the assumption that the public interest
is best protected from the evils of monopoly and price control by the maintenance of competition. ... The aim
and result of every price fixing agreement, if effective, is the elimination of one form of competition. The
power to fix prices whether reasonably exercised or not, involves power to control the market and to fix
arbitrary and unreasonable price. The reasonable price fixed today may through economic and business
changes become the unreasonable prices of tomorrow. Once established, it may be maintained unchanged
because of the absence of competition secured by the agreement for a price reasonable when fixed.
Agreements which create such potential power may well be held to be in themselves unreasonable or
unlawful restraints, without the necessity of minute inquiry whether a particular price is reasonable or
unreasonable as fixed.
— Re American Column and Lumber Co,275 it was held:
An open competition plan of action is plainly a misleading misnomer. Genuine competitors do not make
daily, weekly and monthly reports of the minutest details of their business to their rivals. ... They do not
contract ... to submit their books to the discretionary audit, and their stocks to the discretionary inspection of
their rivals, for the purpose of successfully competing with them ... To pronounce such abnormal conduct on
the part of 365 natural competitors, controlling one-third of the trade of the country in an article of prime
necessity ‘new form of competition’, and not an old form of combination in restraint of trade as it so plainly
is, would be for this court to confess itself blinded by words and forms to realities which men in general very
plainly see, and understand and condemn, as an old evil in a new dress and with a new name. It is futile to
argue that the purpose of the plan was simply to furnish the equivalent of such information as it is contained
in the newspaper and Government publication with respect to the market for commodities ... One
distinguishing and sufficient difference is that the published reports go to both seller and buyer, but these
reports go to the seller only; and another is that there is no skilled interpreter of the published reports such as
we have in this case, to insistently recommend harmony of action likely to prove profitable in proportion as it
is unitedly pursued.
— US v Container Corp of America:276
Result of this reciprocal exchange of prices was to stabilise prices though at a downward level. Knowledge
of a competitor’s price usually meant matching that price. The continuation of some price competition is not
fatal to the Government’s case. The limitation or reduction of price competition brings the case within the
ban. Interference with the setting of price by free market forces is unlawful per se. Stabilising prices as well
as raising them is within the bane of section 1 of the Sherman Act.
— Maple Flooring Manufacturers Association v US:277
Trade associations or combinations of persons or corporations which openly and fairly gather and
disseminate information as to the costs of their product, the volume of production, the actual price which the
product has brought in past transactions, stocks of merchandise on hand, approximate cost of transportation
from the principal point of shipment to the points of consumption as did these defendants and who, as they
did, meet and discuss such information and statistics without however reaching or attempting to reach any
agreement or any concerted action with respect to prices or production or restraining competition, do not
thereby engage in unlawful restraint of commerce.
Case Laws in the EU
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Article 101 penalises price fixation by enterprises in the market. Exchange of information and price parallelism is
scrutinised by the antitrust authorities for detecting any price fixation. Several cases have been adjudged by the European
Commission, as follows:
T-Mobile Netherlands BV, KPN Mobile NV, Orange Nederland NV and Vodafone Libertel NV
v Raad van bestuur van de Nederlandse Mededingingsautoriteit 278
It was held that:
In order to assess the anti-competitive nature of an agreement or a decision by an association of undertakings, regard must be
had inter alia to the content of its provisions, its objectives and the economic and legal context of which it forms a part. In
that regard, it is sufficient that the agreement or the decision of an association of undertakings has the potential to have a
negative impact on competition. In other words, the agreement or decision must simply be capable in the particular case,
having regard to the specific legal and economic context, of preventing, restricting or distorting competition within the
common market. It is not necessary for there to be actual prevention, restriction or distortion of competition or a direct link
between [that agreement or decision] and consumer prices. In addition, although the parties’ intention is not a necessary
factor in determining whether an agreement is restrictive, there is nothing prohibiting the Commission or the Community
judicature from taking it into account.
Right to claim compensation
Article 101(1) TFEU produces direct effects in relations between individuals and creates rights for individuals with the result that it
must be open to any individual to claim damages for loss caused to him by a contract or by conduct liable to restrict or distort
competition. National courts whose task it is to apply that provision in areas within their jurisdiction must therefore ensure that
those rules take full effect and must protect the rights which they confer on individuals (judgment of 6 June 2013 in Donau
Chemie, C-536/11, ECR, EU: C:2013:366, paras 21 and 22). It follows that any person can claim compensation for the harm
suffered where there is a causal relationship between that harm and an agreement or practice prohibited under Article 101(1) TFEU
... the full effectiveness of Article 101 TFEU would be undermined if a person’s right to claim compensation from another person
for harm suffered depended, unconditionally, on the existence of a contractual link between those two persons.279
Object versus Effect dichotomy
To be caught by the prohibition laid down in Article 101(1) TFEU, an agreement must have “as [its] object or effect the
prevention, restriction or distortion of competition within the internal market’.”280
Accordingly, where the anti-competitive object of the agreement is established it is not necessary to examine its effects on
competition. Where, however, the analysis of the content of the agreement does not reveal a sufficient degree of harm to
competition, the effects of the agreement should then be considered and, for it to be caught by the prohibition, it is necessary to
find that factors are present which show that competition has in fact been prevented, restricted or distorted to an appreciable
extent.281
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The alternative nature of that requirement, indicated by the conjunction “or”, leads, first of all, to the need to consider the
precise object of the agreement in the economic context in which it is to be applied.282 The distinction between
“infringements by object” and “infringements by effect” arises from the fact that certain forms of collusion between
undertakings can be regarded, by their very nature, as being injurious to the proper functioning of normal competition:283
In order to determine whether an agreement involves a restriction of competition ‘by object’, regard must be had to the content of
its provisions, its objectives and the economic and legal context of which it forms a part. When determining that context, it is also
appropriate to take into consideration the nature of the goods or services affected, as well as the real conditions of the functioning
and structure of the market or markets in question. In addition, although the parties’ intention is not a necessary factor in
determining whether an agreement is restrictive, there is nothing prohibiting the competition authorities, the national courts or the
Courts of the European Union from taking that factor into account.284
Allianz Hungkria Biztosító 285
It was held that Article 101(1) TFEU must be interpreted as meaning that agreements whereby car insurance companies
come to bilateral arrangements, either with car dealers acting as car repair shops or with an association representing those
dealers, concerning the hourly charge to be paid by the insurance company for repairs to vehicles insured by it, stipulating
that that charge depends, inter alia, on the number and percentage of insurance contracts that the dealer has sold as
intermediary for that company, can be considered to be a restriction of competition “by object” within the meaning of that
provision, where, following a concrete and individual examination of the wording and aim of those agreements and of the
economic and legal context of which they form a part, it is apparent that they are, by their very nature, injurious to the
proper functioning of normal competition on one of the two markets concerned. It was further held that “certain collusive
behaviour, such as that leading to horizontal price-fixing by cartels, may be considered by their nature as likely to have
negative effects, in particular on the price, quantity or quality of the goods and services, so that it may be considered
redundant, for the purposes of applying Article 101(1) TFEU, to prove that they have actual effects on the market.”286
E-book price fixation
It was held:
While this requirement of independence does not deprive traders of the right to adapt themselves intelligently to the existing or
anticipated conduct of their competitors, it does, however, preclude any direct or indirect contact between traders, the object or
effect of which is to create conditions of competition which do not correspond to the normal conditions of the market in question,
regard being had to the nature of the products or services offered, the size and number of the undertakings and the volume of the
said market. This precludes any direct or indirect contact between competitors, the object or effect of which is to influence the
conduct on the market of an actual or potential competitor or to disclose to such a competitor the course of conduct which they
themselves have decided to adopt or contemplate adopting on the market in question. The assessment of the existence of a
concerted practice is not affected by the fact that an undertaking may be active on a level of trade different from that of other
participants in a concerted practice. Rather, it is sufficient that there is a ‘joint intention [of the undertakings] to conducting
themselves on the market in a specific way.’ Thus, the relevant market on which a member of a concerted practice is active does
not need to be the same as the market on which that concerted practice is deemed to materialise.287
SUB-SECTION 3—CLAUSE (B)—AGREEMENT LIMITING OR CONTROLLING
PRODUCTION, SUPPLY, ETC.
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This clause is in two parts, the first relating to production or supply of goods, and the second relating to restriction on
investment and technical development.
A restriction of output automatically creates an imbalance between supply and demand and causes an increase in the
market prices. Indeed, volume control is an indispensable condition and inevitable consequence of any price initiative
adopted.288 Section 3(3)(b) of the Competition Act, 2002 clearly provides that agreements which limit or control
production, etc., restricts competition within the meaning of that provision. These restrictions are often applied in sectors
where there is surplus capacity and the parties to the collusion want to raise prices. In order to enforce this scheme, a
pooling arrangement is often created whereby firms selling in excess of their quota are required to make payments to the
pool to compensate those selling below their quotas. The effect of output-restricting agreements is similar to price fixing, if
output is reduced, prices will rise. Therefore, more efficient or innovative firms cannot expand; firms may not be able to
fully exploit economies of scale. Competition is lessened and consumers pay higher prices.289
For instance, the Commission in Paper Merchants Association,290 held that the threat to or boycott of the customer by all
other sellers belonging to any association very clearly would be a joint decision taken by that association of enterprises and
would amount to limiting supply to the disputing buyer. Such threat or boycott would limit supply in the market in
contravention of clause (b) of sub-section (3) of section 3 of the Competition Act, 2002. The Commission further noted that
the Opposite Parties had also not given any justifications under sub-sections (e) or (f) of section 19 of the Act that would
mitigate the adverse effect of their regulations. Therefore, the infringement of provisions of section 3(3)(b) of the Act was
held to be established.
Restricting or withholding output or supply
The underlying object of such agreements is to regulate the flow of supplies of goods or services of a particular kind in the
market, so that the producers engaged in that line of activity may benefit equally in times of prosperity or may face the
setback uniformly in adverse market conditions. Various measures may be adopted for the purpose, e.g., size of capital
investment, installed capacity, quantity or value of existing production or sale. Lord Wilberforce has explained this in the
following words:
Various methods are employed. One is to fix and allot to the members percentage quotas of an annual turnover or total of
production. Another is to allocate a fixed number of units of production to members. The quota method is the more flexible since
the percentage do not have to be revised as market demand expands or contracts, the only circumstances calling for a revision are
the addition of new members or the withdrawal of existing members. Quotas can normally be transferred and, in fact, will be
purchased by any member who considers that he can produce the additional amount represented by the quota more cheaply; this
introduces an element of competition. Or quotas can be purchased and the producer concerned closed down.291
Manufacturers may at times agree not to fully use their manufacturing capacity by keeping their machines idle during a
specified period of time either to overcome the adverse economic conditions or to earn higher profits by creating
conditions of scarcity through manipulating the flow of supplies in the market.
Some agreements which involve restriction of production may be beneficial: specialisation agreements, joint production,
research and development agreements, restructuring cartels and standardisation agreements may in some circumstances be
considered desirable.292
Case Law under the MRTP Act, 1969
Not many cases attracting this clause came before the Commission for inquiry. Some of the typical cases are discussed
below to enable proper appreciation of the scope of this provision:—
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— RRTA v Hindustan Pilkington Glass Workers Ltd and Window Glass Ltd,293 entered into an agreement with
Surat Cotton (Proprietors of Navin Glass Products) to prevent Surat Cotton from making or selling certain glass
products in consideration of payment of agreed compensation by Pilkington and Window Glass. The agreement
also provided that Surat Cotton was to sell its existing stocks to them and that it would keep its plant idle or scrap
the same and would not associate with any other person for making and selling the specified products. Pilkington
and Window Glass also arrived at a common marketing arrangement through Associated Patterned and Wired
Glass (APWG), a Company promoted by them for the purpose. APWG was assigned the task of procuring all
orders for the products manufactured by Pilkington and Window Glass and to distribute the same in equal
proportion between the said two promoting companies for execution. On the application of the RRTA, that the
said agreements were meant to limit the output and supply of glass products to eliminate competition, the
Commission passed the “cease and desist” order, and declared the impugned clauses of the agreement void.
— In the case of Andhra Pradesh Paper Mills Ltd, and nine others, it was alleged that these paper manufacturers
were changing the pattern of production of paper to adversely affect the flow of supplies of ordinary white
printing and writing paper. The case was, however, closed after enquiry by the Commission on being informed
that the Paper (Control of Production) Order, 1974 had since come into operation and that the ordinary white
printing and writing paper was no longer in short supply.294
— The Indian Jute Mills Association formulated a scheme for 15% reduction of production in Jute goods by its
members. Rejecting the contention of the Association, that in the prevailing condition in jute industry, its
members agreed to restrict their output so that efficient units among them may not go ahead with the production
and thereby elbow out the less efficient units among them, the Commission held that the impugned scheme had
the effect of restricting competition. The Commission observed that:
If only the efficient units were allowed to produce the Jute goods, their cost of production would have been
lower than the cost of production of less efficient units. When competition takes its logical course, there is no
distortion of competition (as claimed by the association). Undistorted competition does not mean that less
efficient units of production should be propped up by artificial support to continue in production even though
forces of demand and market price did not justify their continuance.295
The inquiry was, however, terminated by the Commission following the Allahabad High Court judgement in JK Synthetics
v RD Saxena that the Commission had no jurisdiction over expired agreements.296
RESTRICTION ON INVESTMENT AND TECHNICAL DEVELOPMENT
There are different ways, direct and indirect, for eliminating competition. The imposition of restriction on the deployment
of any machinery or the use of any manufacturing process, for production of goods is a direct way to achieve this purpose.
Such restriction can be put by an entrepreneur, who has a dominant say and/or share in the market for goods of any
particular description, and who either provides his technical knowledge to other, or avails of the production facilities of
other smaller units engaged in the same line of activity. Such arrangements are, however, too conspicuous and are rarely
resorted to openly.
Case Law under the MRTP Act, 1969
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Not many cases of this nature came up for inquiry by the Commission under MRTP Act, 1969. Two such typical cases are
discussed below:
— Bata,297 engaged in the manufacture of leather and rubber canvas footwears, entered into agreements with small
scale manufacturers for purchase of footwear, to be sold by it under its own brand. The agreements prohibited
these manufacturers from purchasing raw material and components from parties other than those approved by
Bata. It also required them to use the moulds sold/supplied by Bata exclusively for manufacturing footwear for
Bata’s requirement. The Commission held these conditions imposed by Bata, as restrictive trade practice and
prejudicial to the public interest.
— Sarabhai M Chemical Pvt Ltd,298 manufacturer of pharmaceutical products, entered into certain long term
agreements with Merck of West Germany seeking technical know-how for the manufacture of fine chemicals,
pharmaceuticals, vitamins, etc., and for rendering certain services. One of the agreements provided that Merck
shall not directly or indirectly, either by itself or by its licensees or agents, manufacture within the Union of India
any of the items covered by the agreement, and shall not package, sell or distribute such products within the
Union of India. The evidence revealed that Sarabhai manufactured only 76 items out of 598 items listed in the
agreement and many of these products had not been manufactured by Sarabhai at all. When, Jayant Vitamins,
another company in the pharmaceutical business, approached the Indian subsidiary of Merck for know-how, it
refused to permit its use on the ground that it was bound by the restraint clause of the agreement with Sarabhai.
Holding that, the impugned clause of the agreement as a barrier to entry of other intending manufacturers in the
relevant field and, therefore, a restrictive trade practice within the meaning of section 2(o) of the Act, the
Commission declared it void.
Case Law under the Competition Act, 2002
Refusal to provide dumpers and hywas for handling of cargo and their intra-port transportation inside the Paradip Port was
held to be in violation of section 3(3)(b) in the case of Dumper Owner’s Association.299 The Port had delegated the power
to issue gate passes to the Association. It had also capped the number of dumpers which could be operated at its premises
to 368 and 280 members of the Association owned 368 dumpers. It was held that by issuing the gate passes only to the
dumpers of its members, the Association had used this responsibility in its favour with a view to control the services of
dumpers inside the Paradip Port prohibited area. Also, by denying Swastik Stevedores Pvt Ltd and other stevedores who
were not enlisted with it for the said service and who were dependent on it because of limited availability of the other
sources of supply of dumpers amounted to limiting and controlling the provision of the services of dumpers inside the
Paradip Port prohibited area which is in contravention of the provisions of section 3(1) read with section 3(3)(b) of the
Competition Act, 2002.
Cases related to pharma sector
In many cases, namely, Case No.C-127/2009/MRTPC (Varca Drugs & Chemists v Chemists & Druggists Association
Goa);300 Case No. 20/2011 (Santuka Associates Pvt Ltd v All India Organisation of Chemists and Druggists);301,302 Suo
moto Case No. 05 of 2013 (Re Collective boycott/refusal to deal by the Chemists & Druggists Association, Goa, Glenmark
Co and Wockhardt Ltd, etc.), the Commission has unequivocally held that imposing the requirement of NOC for the
appointment of chemists/druggists/stockists/super stockists and/or imposition of PIS charges is anti-competitive in terms of
the Competition Act, 2002. It directed these chemists and druggists associations and their members to cease and desist from
indulging in such anti-competitive trade practices.303 [Note: COMPAT has set aside the Commission orders against
AIOCD. See discussion uder section 3(3)(a)]
Again, in the Case No. 30 of 2011 (Peeveear Medical Agencies, Kerala and AIOCD),304 the Commission vide its order
dated 9 December 2013 found that the practice of NOC was prevalent in the State of Kerala and the same was leading to
problems for the consumers by limiting or controlling the supply of drugs in the market. The Commission held the conduct
of AIOCD and its State affiliate All Kerala Chemists and Druggists Association (AKCDA) to be in contravention of the
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provisions of section 3(3)(a) and 3(3)(b) read with section 3(1) of the Act. Apart from imposing monetary penalty on
AKCDA, the Commission, further, had directed AKCDA and AIOCD to file an undertaking that the practices carried on
by their members such as the issue of grant of NOC for appointment of stockists, fixation of trade margins, collection of
PIS charges and boycott of products of pharmaceutical companies have been discontinued.’305 [Note: COMPAT had set
aside the Commission orders against AIOCD. See discussion uder section 3(3)(a)]. Similar ruling was held by the
Commission in the case of Re Rohit Medical Store,306 against Macleods Pharmaceuticals Ltd and others for imposing
NOC requirement and mandating payment of PIS charge prior to the appointment of stockists in the state of Himachal
Pradesh.307
The Commission in another matter found Karnataka Chemists & Druggists Association (KCDA)308 to have indulged in
the practice of mandating NOC prior to the appointment of stockists by pharmaceutical companies. The Commission,
further, held that the association could not evade its liability under the provisions of the Competition Act, 2002 by
attributing the impugned conduct to any particular office bearer(s). The evidence on record was held to be sufficient to
establish that opposite party-1 had contravened the provisions of the Act by mandating the requirement of NOC for
appointment of stockists by pharmaceutical companies. The Commission noted, that, it had previously held in multiple
cases that such practice of mandating NOC as a pre-requisite for appointment of stockists amounts to limiting and
restricting the supply of pharmaceutical drugs in the market, in violation of the provisions of section 3(1) read with section
3(3)(b) of the Act. Monetary penalties had also been imposed on the erring regional and district-level chemists and
druggists associations who were found to be perpetrating the anti-competitive conduct.309 The Commission also observed
that despite various orders by the Commission in similar cases with respect to this behaviour of chemists and druggists
associations, these associations had not abstained from indulging in such anti-competitive conduct but rather had been
repeatedly following the same. Instead of desisting from such an activity, the associations were mandating the NOC
requirement, either verbally (in order to avoid any documentary evidence/proof) or under camouflaged
congratulatory/intimation letters, with a view to hide their apparent anti-competitive behaviour behind these benign
nomenclatures. The Commission held that the use of such nomenclature, viz., “Stockist Appointment Form” instead of
NOC, would not alter the character of the document being an NOC in practice. The Commission, further, observed:
5.36 Chemists and druggists associations existing in different regions and states had been unabashedly indulging in the practice of
mandating NOC requirement prior to the appointment of stockists. In a fair and competitive market, players should be given an
equal and unhindered opportunity and freedom to operate and compete on merits. It was evident from the Commission’s previous
cases that chemists and druggists associations had made NOC a mandatory requirement prior to the appointment of stockists by
pharmaceutical companies. Requirement to seek NOC was a hindrance that dissuades new/existing stockists to enter/expand in a
market and the practice amounts to an entry barrier for the pharmaceutical stockists. It must also be to the great distaste of
pharmaceutical companies of being required to procure NOC before appointment of a new stockist. Besides the pecuniary
considerations of the business, influence or interference with the choice of a distributor of a pharmaceutical company would
restrict their freedom to do business with persons of their choice. A pharmaceutical company would wish to select
distributors/stockists of their preference, without interference by a third party. However, it was observed in various cases that
pharmaceutical companies were succumbing to the practice of seeking NOC, in acquiescence with associations. The fact that the
impugned practice was being followed by the pharmaceutical company at the instance of the association makes the pharmaceutical
company also culpable for participation in the anti-competitive activity. The Commission was unable to fathom the reason behind
these pharmaceutical companies in not exercising the option of reporting such anti-competitive acts to it (Commission). Instead, by
cooperating with the NOC requirement of the associations, pharmaceutical companies came to be perceived as perpetrators of such
anti-competitive practice. Needless to say, such practices under the diktat of the associations restricted the supply of goods or
services in the market, thereby, distorting the forces of fair play. The behaviour had been continuing despite stringent orders in the
past; yet the perpetrators had not shown inclination to desist from such anti-competitive practices.
The Commission noted that despite several orders of the Commission proscribing the anti-competitive practices of state
and regional chemists and druggists associations in inter alia mandating NOC for appointment of stockists, the
associations were continuing to indulge in the practices. Thus, to create some deterrence, the Commission decided to
impose a penalty on KCDA at the rate of 10% of its income based on the Income and Expenditure account for two
financial years filed by it with the Commission. With regard to the individual liability of the office bearers of KCDA in
terms of the provisions of section 48 of the Competition Act, 2002 the Commission decided to impose a penalty at the rate
of 10% of their income based on the income tax returns (ITRs) filed by them.
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Re Bengal Chemist and Druggist Association (BCDA)310, the conduct of BCDA to force its members to not to give
discounts on the MRP in the sale of medicines to customers and then forcing the defiant members to shut their shops as a
punishment measure was held to amount to directly or indirectly determining, the sale prices of drugs and controlling and
limiting the production/supply of medicines in violation of the Act. The Tribunal by order in May 2016 approved the
finding against BCDA of contravention of sections 3(3)(a) and 3(3)(b). But the penalty imposed on the office-bearers and
members of the Executive committee of BCDA was set aside on the ground of violation of principles of natural justice and
the penalty on BCDA was reduced from 10% to 1% of the average turnover for the last three preceding financial years.
In yet another ruling311 against Chemist and Druggist Association, the Commission held that KCDA by mandating NOC
as a necessary pre-requisite for appointment of stockist by any pharma company in the territory of the State of Karnataka,
limited and controlled the supply of drugs in the market in violation of the provisions of section 3(1) read with section
3(3)(b) of the Act.312 The Commission, however, could not find any evidence to prove that payment of PIS charges was a
mandatory pre-requisite to launch new drugs. In another matter, the Commission found evidence against the Chemist
Association which mandated NOC and PIS payments.313
Mandatory NOC requirement in the form of different nomenclature like “congratulatory letter” or “Stockist Appointment
Form”, etc. has also been held to be in violation of section 3(3)(b).314 It has been argued in a few cases that in lines with
the recommendations contained in the Mashelkar Committee’s report, NOC is an effective instrument to avoid unhealthy
competition and prevent excess supply in the market. The Commission however observed that the recommendations of the
Mashelkar Committee report were mainly aimed at combating the distribution of spurious, counterfeit and questionable
quality drugs and they did not suggest that the associations can undertake the task of mandating NOC prior to the
appointment of stockists by pharmaceutical companies.315
Appointment of stockists is the right of every pharmaceutical company and the same should be based on commercial
wisdom and fair market practices. It has been emphasised time and again that practices like the NOC not only replace the
commercial business decision of pharmaceutical companies by the decisions of these trade associations, but also affect the
distribution chain by bringing inefficiencies in the distribution channels. The Commission, considering the peculiar nature
of pharmaceutical industry and its impact on the end-consumers, has on multiple occasions advised the pharmaceutical
companies to approach the Commission for a proper legal recourse for problems created by the associations.316
Cases related to film associations
In an information317 filed with the Commission, it was alleged by the Informant, a movie director that the Malayalam
movie associations had indulged in anti-competitive behavior as they forced various actors, technicians, producers,
financers, not to work or associate with the Informant in any of his project due to the Informant’s efforts to streamline
working conditions of artists and for the initiative “Cinema Forum”, which envisaged collaboration between film makers
and distributors to make low budget movies with new actors. The Commission after a detailed investigation found the
conduct and practice of Association of Malayalam Movie Artists (AMMA), Film Employees Federation of Kerala
(FEFKA), FEFKA Director’s Union, FEFKA Production Executive’s Union and their five Office Bearers to be in
contravention of the Competition Act, 2002. The Commission after a collective reading of all the statements, evidence and
material available on record, came to the conclusion that the opposite party did influence its members, producers and
financers for not working with the Informant and this tacit understanding between the members of opposite party led to
boycott of the informant. Thus, in the absence of opposite party being able to rebut the presumption of its practices having
an appreciable adverse effect on competition in the market, the Commission held the opposite party guilty of the
contravention under section 3(1) read with section 3(3)(b) of the Act. The Commission thus, passed a cease and desist
order and imposed penalties of the Associations calculated at the rate of 5% of their average income. Penalty was also
imposed on the office bearers of these associations.
In Kannada Grahakara Koota,318 an association of viewers filed an information against Karnataka Films Chamber of
Commerce (KFCC), Karnataka Television Association (KTVA), KFDA, Kannada Film Producers Association (KFPA),
Kannada Chalanachitra Academy (KCA) and Karnataka Film Artists, Workers and Technicians Union (KFAWTU) for
alleged contravention of Competition Act, 2002 in “not allowing the release and broadcast of any dubbed content, within
the State of Karnataka.” According to the information, KFCC, having significant influence over the market, refused to deal
with those who do not follow its directions of restricting the exhibition of non-regional films. KTVA was alleged to
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pressurise TV channels not to telecast dubbed content. The other parties were also indulged in similar activities. A list of
dubbed films/shows which were not permitted to be released was also attached to the information.319 The Director General
in its report of 29 April 2015 found KFCC (controlling the film industry in Karnataka and prohibiting dubbed content in
films), KTVA (association controlling the television industry in Karnataka and prohibiting dubbed content in the form of
television programmes) and KFPA (association of producers in Karnataka and indulging in boycotting the cinema theatres)
guilty of anti-competitive behavior. Relevant market was taken to be as “production and exhibition/telecast of Films and
TV programs in the State of Karnataka” and “visual film in the form of feature film or television serial or any other
programme such as documentary etc.” The Director General found evidences against KFCC, recognised as the
representative of the entire Kannada film industry having substantial market power, indicating to the fact that it had
imposed restriction on the distribution and exhibition of dubbed films in Kannada language. Evidently, dubbed versions of
shows like “Koffi shop” of Zee TV, “Jasoos Vijay” (2004), “Veera Nari Jhansi Rani” (2011), “Satyameva Jayate” (2012)
faced stiff resistance from these bodies and were prevented from airing on TV, sometimes through threatening the channels
or advertisers and sometimes through acts of demonstrations including violence.320 Also, KFPA was involved in the
practice of restricting the other language films by boycotting the cinema theatres which do not obey their decisions.
The Commission noted through the Director General’s report that apart from the noted resistance against dubbed content
of shows like “Jasoos Vjay”, “The Sword of Tipu Sultan”, “Ramayan”, “Malgudi Days”, “Satyameva Jayate”, there was
no data of dubbed films in the past years in Karnataka. Commission also referred to its 2011 order321 where it passed
directions against the film associations in West Bengal accused of similar anti-competitive behavior. The Commission held
the actions of KFCC, KTVA and KFPA as anti-competitive. “The prohibition on the exhibition of dubbed content, both
films and/or television programmes, prevents the competing parties in pursuing their commercial activities.” Any
agreement or joint action taken by these associations would attract section 3(3). Also, individual action of these
associations could be covered under the scope of “Agreements” under section 3(3)(b) of the Competition Act, 2002 which
makes the act per se invalid. According to the Commission, such anti-competitive behaviour deprives the consumers of the
choice to watch the kind of programme (dubbed or original) he/she chooses to see. Noting the depth of the market of more
than 200 channels, the Commission held the argument of loss of opportunity of local artistes as “baseless and
illogical”.322 Through this order, Commission has retained the position it took in the Bengal case of treating such ban as
anti-competitive. The Commission passed cease and desist order against the three associations and imposed penalties on
them.323
Taking a holistic appreciation of facts and events the Tribunal in the case of Karnataka Film Chamber of Commerce v
Kannada Grahakara Koota,324 concluded that the Appellant and KTVA acted in concert to counter dubbed content and
thus dismissed the appeal. The Tribunal relied on the Supreme Court ruling in the case of CCI v Co-ordination Committee
of Artists and Technicians of WB Film and Television325 which held as follows:
One can clearly view that prohibition on the exhibition of dubbed serial on the television prevented the competing parties in
pursuing their commercial activities. Thus, the CCI rightly observed that the protection in the name of the language goes against
the interest of the competition, depriving the consumers of exercising their choice. Acts of Coordination Committee definitely
caused harm to consumers by depriving them from watching the dubbed serial on TV channel; albeit for a brief period. It also
hindered competition in the market by barring dubbed TV serials from exhibition on TV channels in the State of West Bengal. It
amounted to creating barriers to the entry of new content in the said dubbed TV serial. Such act and conduct also limited the supply
of serial dubbed in Bangla, which amounts to violation of the provision of section 3(3)(b) of the Act.
In the case of Re Kerala Cine Exhibitors Association (KCEA),326 it was alleged that Kerala Film Exhibitors Federation
(KFEF), Film Distributors Association, Kerala (FDAK) and Kerala Film Producers Association (KFPA) were acting as a
cartel. The theatres in Kerala were classified as Class A & B. However, members of Kerala Cine Exhibitors Association
(KCEA) despite having classification of A or B class theatre were denied fresh releases. It was agreed between KFEF,
FDAK and KFPA that the new movies will only be released in theatres which had modern facilities like AC, DTS,
cafeterias, toilets, etc. however, it was noted by the Commission that the said terms were used as a garb to control the new
releases as many theatres of the members of KFEF which did not have these facilities were getting new releases whereas
many theatres of the members of the KCEA which have these facilities were denied new releases. The restrictions were
held to limit the market of film distribution/exhibition business in the State of Kerala and led to control of the film industry
clearly in contravention of section 3(3)(b) read with section 3(1) of the Competition Act, 2002. The COMPAT327 also held
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that in the absence of any provision in the constitution or the bye laws under which a ban could be imposed on the
screening of certain types of films, the Commission was right in holding that it violated section 3(3)(b).
Kerala Film Exhibitors Federation (KFEF), association representing film theatres in Kerala with 315 members was in
question again in the case of Re Crown Theatre.328 It was alleged that KFEF in September 2012, directed its members to
strike/stop screening films in their theatres as a mark of protest against an increase in service charge and certain policies of
the State Government of Kerala towards film industry and in October 2012, it was decided to indefinitely close down the
cinema halls. Apprehending huge losses due to the coming release date of English movie “Skyfall”, Crown Theatre
resigned from the membership of KFEF. It was alleged that KFEF, after resignation, directed the distributors in the State of
Kerala to abstain from giving Tamil and Malayalam films to it. Since, KFEF was not able to furnish any cogent evidence
or reason to counter the allegations, the conduct of KFEF was found to be anti-competitive amounting to controlling and
limiting the supply of Malayalam and Tamil films in the State of Kerala, in contravention of section 3(1) read with section
3(3)(b) of the Act.
In the case of UTV Software Communications Ltd, Mumbai v Motion Pictures Associations, Delhi,329 the Commission
held that the rules of Motion Pictures Association and other Associations restricting their members not to deal with non-
members, making compulsory the registration of each film before release in their territories, restrictions regarding unfair
hold back period for exploitation of satellite, video, DTH and other rights and act and rules regarding penalising members
who do not follow the dictates of the Association are anti-competitive and violative of section 3(3)(b).330
Re PV Basheer Ahamed,331 Film Distributors Association (Kerala) (FDAK), by issuing directions vide circular dated 1
December 2011 to all its members restricting the distribution of films produced and directed by Malayalam filmmakers
Shri Kamal and Shri Jayaraj and subsequently suspending the M/s Liberty Distributors for not complying with the
direction, tried to control the film distribution business in the State of Kerala. The suspension amounted to a concerted
action/boycott by the Opposite Party. The Commission held the decisions of the FDAK which were taken collectively by
its members and were subsequently implemented by them amounted to contravention of section 3(1) read with section
3(3)(b) of the Competition Act, 2002.
In the case of M/s Cinemax India Ltd (now known as PVR Ltd),332 M/s Cinemax India Ltd (now known as M/s PVR Ltd)
engaged in the business of exhibition of films at its cinema halls (39 properties having 138 screens and 33,522 seats across
the country including in Kerala) alleged that M/s Film Distributors Association (Kerala) [FDA(K)] having 221 distributors
in Kerala as members dictated/imposed the revenue sharing mechanism unilaterally on it. It was held that FDAK has not
allowed the Informant to negotiate independently with individual distributors and fixed the revenue sharing agreements as
per their mutual arrangements which in effect compelled the Informant to adopt the percentage revenue sharing as fixed by
the association. The Commission observed:
This cartelised behavior of the Opposite Party has snatched the freedom of negotiation from the Informant on price/revenue sharing
mechanism for exhibition of films in one to one agreements between the Informant and other individual distributors. The Opposite
Party has also taken action against its members who did not accept its terms and conditions regarding revenue sharing
arrangements. The above actions of the Opposite Party have therefore caused appreciable adverse effect on the competition and
harmed the competition in the market of Malayalam film exhibition in the State of Kerala both for the Multiplexes and traditional
theatres.333
In a case, filed by Reliance Big Entertainment Pvt Ltd,334 against Tamil Nadu Film Exhibitors Association (TNFEA) (now
known as Tamil Nadu Theatre Owners’ Association). Reliance obtained distribution rights for film titled Osthi in Tamil
language, which was a remake of Hindi film (Dabbang), from Balaji Real Media Private Ltd Reliance then granted the
said exclusive distribution rights of the film for the Territory of Tamil Nadu, Kerala and Karnataka to M/s Kural TV
Creations Pvt Ltd Further, it assigned the Satellite Rights of the said film to Sun TV Network Ltd TNFEA, biggest and
most powerful Association of cinema theatre owners in Tamil Nadu, with about 80–90% exhibitors as its members
directed its member theatre owners not to screen this film since SUN TV was owing certain sum to the some members of
the Association. TNFEA was found to enjoy a position in the market of film exhibition in Tamil Nadu that enabled it to
take decisions to control the market and restrict the services in the market for the producers and distributors. Based on the
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video clip of the press conference of General Secretary of the association held on 3 December 2011, the documentary
evidences furnished by the distributors, newspaper reports as well as the minutes of meetings, it was concluded that the
boycott on films dealt by Sun TV was in violation of section 3(3)(b) of the Act and a penalty at the rate of 10% of its
average turnover calculated as per the Income/Receipts of the association was imposed by the Commission. In appeal, it
was argued the rules and regulations of Central Circuit Cine Association (CCCA) are an internal agreement amongst
members, not to deal with non-members and the same did not attract section 3(3)(b) of the Competition. The Tribunal,
holding the decision of the Commission to be correct, refused to buy the argument and held that the decision taken by the
association were certainly decision by the “association of enterprise” or “association of persons” and these persons were
certainly in the trade of identical “goods” or “services” and lastly their action certainly resulted or had the effect of
restricting or limiting the supply.335
In the case of FICCI-Multiplex Association of India,336 the respondents namely United Producers/Distributors Forum
(UPDF), The Association of Motion Pictures and TV Programme Producers (AMPTPP) and the Film and Television
Producers Gild of India Ltd (FTPGI) were held to be behaving like a cartel. Members of the UPDF who are competitors
and controlling almost 100% of the market for production and distribution of Hindi pictures in multiplexes in India were
acting in concert to fix prices in infringement of section 3(3)(a) of the Competition Act, 2002, and also limiting/controlling
supply by refusing to release Hindi films for exhibition in multiplexes to members of the informant hence violating section
3(3)(b). It was further alleged, that UPDF and its members had collectively boycotted the multiplex cinema operators in
violation of section 3(3)(c) of the Act. After a dispute on the revenue sharing ration, UPDF through letters had instructed
all producers and distributors including those who are not the members of UPDF, not to release any new film to the
members of the informant for the purposes of exhibition at the multiplexes operated by the members of the informant.
COMPAT found no fault in the finding of the Commission and dismissed the appeal.337
In another case against Karnataka Film Chamber of Commerce,338 it was alleged that the Association resorted to threats
and boycott to stop the release of dubbed content in the State of Karnataka. The Commission examined the issue of
creation of entry barriers for dubbed Kannada cinemas on the ground of protection of language, culture and livelihood of
artists/technicians of Kannada film industry and found the same to be non-justifiable. The Commission held that it should
be a film producer’s/artist’s choice as to whether his film should be dubbed or not. Similarly, viewers should have the
choice to watch a movie/programme. Any such regulation/restriction by an association falls foul of competition law
provisions.339 KFCC was found guilty for recidivism340 for continuing the anti-competitive conduct, despite strict and
unambiguous order of the Commission to cease and desist from such anti-competitive conduct thereby making itself liable
for action under section 42 of the Act.
Other cases
In the case of Re Ghanshyam Dass Vij,341 the bye-laws of SDA entailing geographical restriction and NOC requirement
on newly appointed distributors before starting business of distribution of the products of any Company were held to limit
and control the supply and distribution of FMCG products in area of Sonipat. The bye-law also had a provision of
imposition of fine in case any business was started without the NOC. Moreover, it was provided therein that if any outside
person or stockist enters the authorised area of SDA member by violating the prescribed area for sale by the company then,
on the complaint of affected party, such person shall be prevented from doing so. Since, the Association could not show as
to how the impugned clauses resulted into accrual of benefits to consumers or made improvements in production or
distribution of goods in question or as to how the same did not foreclose competition, it was held that the prerequisite of
NOC foreclosed the competition by hindering entry of new players in the market and geographical restrictions by stopping
any dealer from selling products outside leads to reduction of choice and consequent benefit to consumers. The
Commission passed a cease and desist order against the Association. In the case of Re M/s Shivam Enterprises,342 it was
alleged that Kiratpur Sahib Truck Operators Co-operative Transport Society Ltd allowed only the trucks owned by its
members to engage in freight transport of goods from Kiratpur region. Even though M/s Shivam Enterprises obtained an
order for providing freight transport services to M/s Ambuja Cements Ltd to transport cement from their warehouse in
Kiratpur region for distribution by quoting lower rates in comparison to members of the society, it was obstructed by the
members of the society on various occasions in executing its contract of transportation. Also, it was alleged that the
Association did not allow truck owners to communicate directly with the individual customers who availed the freight
transportation services and forced its members to abide by the rates fixed by it. It was also noted by the Commission that
non-members prohibited from operating within the area covering fifty (50) villages which fell within the territory of the
Society. Accordingly, it was held that members of the society, which were competing enterprises, agreed with each other
to limit supply of the service of freight transport by trucks in Kiratpur region by prohibiting any independent transporter
from operating in the market and thereby in violation of section 3(3)(b) of the Competition Act, 2002.
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Re Jyoti Swaroop Arora,343 it was held that various enterprises engaged in real estate development business had an
arrangement/understanding amongst themselves to adopt an anti-competitive modus operandi/practices. Making provision of
services by builders/developers contingent upon acceptance by buyers of certain clauses incorporated in the sale agreements, was
held to tantamount to controlling the provision of services in contravention of section 3(3)(b) of the Act.
In the Sugar Mills344 case, it was alleged by Indian Sugar Mills Association and others that M/s Indian Jute Mills Association,
Gunny Trade Association (GTA) and others were involved in anti-competitive behaviour. From the analysis of the documents,
production statistics and submissions by the various parties, it was found that though there was a high demand, the production of
A-Twill had reduced. The prices had increased constantly in the case of A-Twill bags at one hand and the production had
decreased on the other hand, though sufficient production capacity was available. The jute manufacturers were not utilising their
capacity to the optimum as their capacity utilisation for the sacking was ranging from 60% to 70% though there was a soaring
demand. The supply of A-Twill bags was much less than the requirements of the sugar industry. The production of B-Twill was
also ranging between 7 to 8 lakh MT and it could not be said that the production of A-Twill was reduced due to the production of
B-Twills. This clearly showed that the production and supply of the A-Twill jute bags had been restricted and controlled by the jute
manufacturers deliberately to affect the price and fair competition in the market. The limiting and controlling production and
supply in the market in a concerted manner through understanding by the members of IJMA and GTA was found to be in
contravention of the provisions of section 3(3)(b) of the Competition Act, 2002. The Tribunal345 set aside the order of the
Commission on the grounds of violation of principles of natural justice. The Tribunal also held that there was no evidence on
record to prove that there was an agreement between GTA and IJMA about fixation of price of A-Twill jute bags or that the price
of such bags was fixed by GTA after discussion with IJMA. The COMPAT held that the finding of violation of section 3(3)(a) and
3(3)(b) were unsustainable and deserved to be set aside. The COMPAT noted:
93. In the light of the above noted principles, it was to be seen whether IJMA had formed a cartel with GTA or entered into an
agreement for fixing the price of A-Twill jut bags and thereby violated section 3(3)(b) of the Act. A careful scrutiny of the record
showed that neither the informants produced nor the DG could collect any substantive evidence to prove that there was an
agreement between GTA and IJMA about fixation of price of A-Twill jute bags or that the price of such jute bags was fixed by
GTA after discussing the matter with the members of IJMA or non-members jute mills or that there was a meeting between the
representatives of the two entities. Rather, the facts brought on record to show that none of the 30 members of IJMA, who were
also the members of GTA, was on the sub-committee constituted by GTA for DPB. The material produced by the informants or
collected by the DG unmistakably showed that neither there was any meeting between the representatives of the two entities,
namely, IJMA and GTA and no deliberation had taken place between their members on the issue of fixation of price of A-Twill
jute bags.
The case of M/s Puja Enterprises,346 related to allegation of bid-rigging in the tender for polyester blended duck ankle
boots rubber sole for the period from 1 December 2011 to 30 November 2012. The Tender Enquiry consisted of 45 items
of different sizes and colours of the product, as in the previous Rate Contract for the year 2010/11 which was awarded to
the eleven parties who were also holding the Rate Contract for the year 2009/10. On scrutiny of the tenders for year
2011/12 opened on 29 July 2011, it was found that the difference in quoted prices of different bidders was in a very narrow
range and all the tenderers barring one, had restricted the quantity to be supplied by it during the Rate Contract period.
Nine tenderers had also stipulated the maximum quantity to be supplied by them to a particular Direct Demanding Officer
(DDO). This was stated to indicate a pre-determined, collusive and restrictive bidding pattern or cartel formation by the
bidders thereby violating the various provisions of the Competition Act, 2002. It was noted by the Director General that the
parties by putting in quotations quantity restrictions both in terms of total quantity to be supplied during the Rate Contract
period, as well as limitations of order quantity per DDO, restricted the options of DDOs of procuring the product from any
one or more Rate Contract holders as per the choice of the DDOs. This inter se agreement/arrangement of parties, made
with a view to limit and control the supply of the product and to share the market by way of mutual allocation, amounted to
bid rigging and was in violation of the provisions of section 3(1) read with sections 3(3)(b), 3(3)(c) and 3(3)(d) of the
Act.347
In the case of Aluminium Phosphide Tablets (ALP) Manufacturers,348 there was allegation of anti-competitive conduct in
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the tender and procurement of ALP required for preservation of central pool food grains by Food Corporation of India
(FCI). The CMD of FCI reported of identical bids and similar reduction margin post negotiation by suppliers of ALP
during the last eight years. It was alleged that due to the cartel like behaviour of the suppliers, price of ALP tablets nearly
doubled during the period 2007/09 and likely to rise further. The commission based on the data on record held that quoting
of same prices by suppliers in spite of being located at different places with different manufacturing and transportation cost
could not be mere coincidence and was the result of prior meeting of mind. The Commission relied on US case law to
conclude that a cartel existed:
7.30 ... in the case of American Tobacco Co v United States349, the U.S. Supreme Court had stated that ‘no formal agreement is
necessary to constitute an unlawful conspiracy. MRTPC in the case of Ghai Enterprises Private Ltd and Quality Ice creams (RTP
18 of 1983) had concluded that ‘pre-ponderance of probabilities’ in a case might lead to an inference of concerted action. In Bengal
Tools Ltd350 and Re Excel Industries Ltd351, it has been held that quoting identical prices even when cost of production varies is a
presumption in favor of a cartel and the same is a restrictive trade practice.
The collective action of identical bids, common entry in the premises of FCI before submission of bids were held to be
indicative of “plus” factors in support of existence of understanding between parties and not just an instance parallel
pricing thereby violating section 3(3)(d) of the Competition Act, 2002. Further, collective boycott of the tender of 2011
thereby limiting the supply of ALP tablets to FCI was held to be in violation of section 3(3)(b).352
The concerted action of explosive suppliers in the case of Coal India Ltd v Gulf Oil Corp Ltd to stop the supply of
explosives is violation of section 3(3)(b). [Since the period of stoppage of supply was during certain days in 2006/07, i.e,
before the section 3 of the Act came in to force, no action could be taken by the Commission against explosive
manufacturers.]353
In the case of Uniglobe Mod Travels Pvt Ltd,354 information was filed against Travel Agents Federation of India (TAFI),
Travel Agents’ Association of India (TAAI), Agents Association of India (IAAI) for calling a boycott against a few
international airlines, on account of the shift from “commission basis” fee structure to “transaction fee” structure for the
travel agents, and the demand to restore the former business model. Uniglobe Mod Travels Private Ltd, a travel agent and a
member of TAFI and TAAI, did not heed to the boycott call, which resulted in its expulsion from the Association. [It was
important for a travel agent to be a member of TAAI, IATA, IAAI or the TAFI in order to enjoy certain benefits like
submission of passport forms in the passport office; to obtain tourism license from Department of Tourism, necessary for
getting airport passes from Department of Civil Aviation; Registration at Embassies as well as to submit visa forms, etc.]
The travel agents were also directed by the Associations to return the unsold ticket stock to the airline. TAFI had also
circulated a pro forma of the “SQ Capping Letter” to be signed and returned by all its members. Further, TAFI threatened
its members with suspension and expulsion by various media including posting the same on a specially created website
“no-to-zero. in”, if they failed to comply with the direction of the Association. It was complained that TAFI and others
operated in a cartel-like manner and its impugned actions constituted “collective boycott” and were indicative of a
horizontal agreement which limited supply of Singapore Airlines (SQ/Singapore Airlines) tickets and hence had a harmful
market effect which is prohibited under the provisions of the Competition Act, 2002. The Commission considered case
laws from US and EU to analyse the prevalent law.
(a) Group boycotts, or concerted refusals by traders to deal with other traders, are a forbidden category meriting per
se condemnation. They have not been saved by allegations that they were reasonable in the specific
circumstances, nor by a failure to show that they ‘fixed or regulated prices, parceled out or limited production, or
brought about a deterioration in quality and they were banned even when they operated to lower prices or
temporarily to stimulate competition.355
(b) Such agreements, no less than those to fix minimum prices, cripple the freedom of traders and thereby restrain
their ability to sell in accordance with their own judgement.356
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(c) The concept of decision of an association of undertakings is given a very wide interpretation. Decisions can
include, not merely formal decisions adopted by an association under any procedures laid down in its constitution
or founding documents but also the constitution itself, any rules governing the association’s operations, binding
regulations made by the association and any non-binding recommendations made by it. Similarly, the concepts of
agreement and concerted practice among undertakings have been interpreted widely.357
(d) Agreements can include unwritten agreements and “gentlemen”s agreement’ as well as formal contracts.
Moreover, an agreement entered into by a trade association may be held to amount to be an agreement between
its members.358
The Commission also took note of a few MRTP decisions to hold that boycott calls given by trade associations are per se
restrictive trade practices.359 The Commission, after going through the e-mail correspondences, advertisements in various
newspapers and hoardings/bill boards in Mumbai held that it was clear that TAFI issued a directive call asking its
constituent members to boycott the sale of tickets of Singapore Airlines. It is also evident that TAFI, in order to secure
compliances asked its members to submit capping letters to Singapore Airlines and directed them to stop dealing with the
members who were not supporting the call for “boycott”. TAAI and IAAI also participated actively in the boycott call and
issued directives to their members to stop the sale of Singapore Airlines tickets.
68.1.2 A decision taken by a trade association which has the purpose of fixing prices, or limiting the output of members, or
allocating the market among its members, will be prohibited under section 3 of the Act as a form of anti-competitive co-ordination,
a view held by international competition authorities (refer to case laws cited earlier). Similarly, the Act prohibits the individual
members of a trade association from entering into an agreement or engaging in a concerted practice which limits output or allocates
the markets. This will be the case regardless of whether the intention is to restrict competition or not.360
While analysing the factors enumerated in section 19(3) of the Competition Act, 2002 it was found that there was no
accrual of benefits to the consumers or improvements in provisions of services by the boycott of sale of Singapore Airlines
tickets. On the other hand the consumers had been deprived of the tickets of Singapore Airlines to the extent of non-
availability of tickets through the travel agents of TAFI, TAAI and IAAI and their choice had also been restricted to the
extent of drop in the sale of Singapore Airlines tickets. Furthermore, it was held that the boycott could not be said to have
led to promotion of technical, scientific and economic development by means of production or distribution of goods or
provision of services. Therefore, TAFI, TAAI and IAAI by giving a call for boycott against SQ were held to had
contravened the provisions of section 3(3) (b) read with section 3(1) of the Act. Further opposite parties namely IATO,
ADTOI and ETAA by their tacit conduct had supported the call for boycott hence contravened section 3(1) read with
section 3(3)(b) of the Act.361
In another matter362 it was alleged that the different associations of film technicians and craftsmen had negative
agreements such that producers were not allowed to take any craftsperson who is not a member of the respective
association. The associations boycotted the producers who appointed a craftsperson from outside the associations. It was
alleged that these made unreasonable demands and threatened the film and television content producers of boycott in case
their demands were not met. The Commission noted that the hiring of skilled workers who were non-members was
allowed only after issuance of NOC. The Vigilance Committee through its inspection at the shooting sites ensured that the
member to member working rule was complied with. After inspection by the Vigilance Committee, if the producers were
found to be hiring non-members of the OPs, the Committee would intimate the producers that such non-members be
removed or the non-members be enrolled as members. Therefore, it was held that the abovementioned clause of the
agreement imposed a restriction on the freedom of the producers to hire craftsmen as per their desire in violation of section
3(3)(b).
Cases in which no contravention of section 3(3)(b) was found
In the case of Royal Agency,363 it was held that short break in the regular supplies of drugs was not conclusive to fix the
liability under the provisions of the Act. Royal Agency was appointed by M/s Franco-Indian Pharmaceuticals Private Ltd
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as a distributor for sale of its drugs and medicines vide an agreement dated 10 July 2013. It was alleged that Franco-Indian
Pharmaceuticals Private Ltd stopped the supply of drugs to Royal agency due to the pressure from the Association when it
refused to become its member and obtain NOC to carry out its business in Goa. The Commission, however, noted that
there was only a short break in the supply of drugs between July and December 2013 and there was no evidence on record
to prove any diktat or circular from the Association to do the same. Also, membership of Association was not a sine qua
non for getting distributorship which is proved by the fact that Royal Agency got the distributorship of two drug
companies despite being a non-member.
Existence of an agreement is essential for imposing liability for violation of section 3(3)(b).[M/s Metalrod Ltd v M/s
Religare Finvest Ltd (RFL),364 and Yashoda Hospital and Research Centre Ltd v India Bulls Financial Services Ltd
(IFSL)365]: In both these cases, the Director General concluded that levying of foreclosure charges by RFL or India Bulls
had the motive of preventing switch over and make exit expensive, etc., and thereby restricting the borrowers from availing
the option of making early repayment so as to clear of the loan prior to the loan tenure. The Director General concluded
such conduct to be violative of section 3(3)(b) of the Competition Act, 2002. The Commission did not agree with the
Director General’s conclusion and held that for the applicability of the section there must be two or more enterprises
engaged in identical or similar trade of goods, provision of services. Therefore, imposition of foreclosure charges by IFSL
could not be said to be covered under the provision without any proof of concerted action or existence of any sort of
agreement with any other enterprise engaged in similar trade of providing loans against mortgage of property.
In the Tyre Manufacturers case,366 the Commission held that mere exchange of views and opinions and sharing of
information relating to common issues to the tyre industry cannot be termed as an anti-competitive behavior until and
unless a tacit understanding or concerted action is proved to be found restricting competition. Commission concluded that
the tyre companies were not in a position to profit from limiting the supply by willful under-utilisation of capacity.
In Prints India v Springer India Pvt Ltd,367 it was alleged that by entering into co-publishing agreement, the research
institutes had violated provisions of section 3 of the Act by directly determining sale price, controlling the supply of the
journals by imposing unfair conditions of furnishing commercially sensitive information violating and sharing the market
by way of allocation of types of goods, i.e., print version and e-journal. It was however held by the Commission that
entering into co-publishing agreement signed between Springer India and eight other institutes is not indicative of anti-
competitive agreement according to the provisions of the Act.
44.26. The Commission agrees with the DG that the genesis of all the allegations under section 3 lies in the co-publishing
agreements and therefore DC has analysed these agreements in entirety for violation of section 3. As a matter of fact, when the
institutes published their journal themselves, the total distribution rights (India as well as world-wide) were vested with Prints
India. Now, the distribution rights are demarcated as domestic and world-wide and for domestic subscription, Springer may not be
the sole distributor of print version. By virtue of co-publishing agreement, the institutes are able to benefit from the online
expertise of Springer India, which helps in improving the impact factor, thus getting better recognition and reputation for their
journals. With the online format, Indian authors/researchers are able to connect and get exposure to international sphere, which
motivates them to undertake better quality research and in turn open the possibility of more research/innovation in India Most
importantly, the institutes are well within their right to outsource the entire publishing job favor of a particular entity. Hence, there
is no breach of section 3 of the Act in respect of co-publishing agreement signed between Springer India and the leading
institutes/societies of the country engaged in academic research.
In the case of The Air Cargo Agents Association of India,368 the Commission held that the introduction of Cargo Accounts
Settlement System (CASS) was not anti-competitive in terms of section 3(3)(b) of the Competition Act, 2002. It agreed
with the Director General’s report to conclude that CASS did not limit or restrict the services in the air cargo agency
market. Since CASS was not mandatory in India and was only a pilot project, it did not pose any financial burden upon the
members of Air Cargo Agents Association of India (ACAAI) because the airlines had to pay the joining fees and not the
cargo agents (members of ACAAI). The Commission further observed that CASS vis-à-vis the current physical system of
clearance in the air cargo industry, was scientific and efficient. CASS was a global phenomenon, having much advantage
to both the carriers and agents and it would enhance administrative efficiencies as well as reduce operational costs. The
benefits of economies of scale, standardisation and automation in the collection and distribution of revenue were also
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associated with CASS and having CASS programme would lead to creation of neutral settlement office, elimination of loss
of invoice, enhanced financial control, reduced personnel and administrative costs, etc.369
In the case of HMT Cinema370, Informant was aggrieved by the conduct of opposite parties in restricting the
producers/distributors of Malayalam films to not supply Malayalam films to him. The Commission while observing that it
was the sole discretion of the individual producer/distributor of a movie to engage theatres for exhibiting movies and that
Kerala Film Producers Association and its office bearers had no role and power to insist an individual producer/distributor
to release a particular movie in a particular theatre, also noted that there were incidents of illegal copying/recording of the
Malayalam films for piracy in the Informant’s theatre. Further, Commission noted that opposite parties had no authority to
direct the distributors/producers to release or not to release any film in any particular theatre and that they had not given
any oral/written directions to anyone regarding the distribution of Malayalam films in Bengaluru. The Commission noted
that a film producer/distributor who had invested a huge sum of money for creating the content of a film had every right to
release its movie in the theatre of his choice as per its business strategy and it had every right to protect the movie content
from illegal recording, i.e., “piracy”.
In the case involving Cochin Port Trust371, it was alleged that the transporters, who were registered with the “Turn
System”, were not allowed to operate for EXIM containers and if they did so, they were not allowed to get back into the
“Turn System” again. Due to this, the supply of trailers for EXIM containers was being affected, thereby raising rates for
EXIM trade. The Commission found that the total number of container trailers to which the users had access to was 900
(approx.) out of which 800 were owned by the opposite parties. However, the Commission held that there was insufficient
evidence to show that the remaining 100 trailers were denied an opportunity to operate in the Informant port. Further, there
was no evidence to suggest that membership was denied to any of the transport operator or that the non-members were
restricted to provide services to the users willing to avail the services of the independent trailers. Thus, the Commission
noted that there was insufficient evidence to hold a contravention of Section 3(3)(b) read with section 3(1) of the
Competition Act, 2002.
SUB-SECTION (3)—CLAUSE (C)—ALLOCATION OF AREA OR MARKET
Among the dealers of a manufacturer, division of market is commonly arranged through allocation of territory or area in
which each dealer is required to operate. The manufacturer may designate a territory as the primary responsibility of a
particular dealer and obligate him to use his best efforts to exploit the allocated market or area.
Restriction designed to achieve territorial or market (i.e., customer) allocation may take many forms. Generally speaking, it
is done under the terms of an agreement, which either prohibits the dealer from selling to customers outside a designated
area or by confining the dealer to sell the goods to specified category(ies) of customers. Such a restriction can also be
indirectly practised by not assigning any territory or customers as such, but by withdrawing any concessions, by imposition
of penalty or by requiring the defaulting dealer to share his commission with the dealer whose area or market has been
encroached upon.
These agreements are essentially agreements not to compete; “I won’t sell in your part of the market if you don’t sell in
mine”.372 In such scheme, competing firms may divide sales territories on a geographic basis or assign specific customers
or types of customers to specific members of the cartel. Geographical market sharing agreements may be more effective
than price-fixing from a cartel’s point of view, because the expense and difficulties of fixing common prices are avoided.
Policing the agreement amongst the members is relatively simple, because the mere presence of a competitor’s goods in
one’s own “patch” reveals cheating.373
The territorial or market restriction imposed by the manufacturer may result in imperfect competition, and thereby reduce
the customer’s choice. Often, it might be used by the manufacturer to enhance the monopoly power of his dealers so that
the manufacturer, in turn, could extract higher prices from them. It may also enable the dealers to engage in price
discrimination. These agreements undermine competition by limiting the scope of the more efficient producers within the
group to sell beyond their geographical boundaries or to take on customers whom they have not previously supplied. This
type of restriction is therefore likely to make it more difficult for firms to lower their unit costs of production through the
exploitation of economies of scale.374 It is sometimes argued in favor of geographic market sharing agreements that they
should be permitted since they reduce the distribution costs of the producers, who are relieved of the need to supply
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outside their exclusive geographic territories or to categories of customers other than those allotted to them. This is
unconvincing, as it does not explain why the benefit claimed is dependent upon the horizontal agreement. If a producer
found it profitable to do so, it would want to sell outside its allotted territory or class of customer and in determining the
profitability of doing so it would take distribution costs in to account. All the agreement does so is to foreclose this
possibility. Potential competition is removed with the same adverse effect upon consumer welfare that other hard core
restrictions may produce: a reduction in output and an increase in price.375
This practice, however, can be usefully employed by a manufacturer to increase the efficiency of his operations and that of
his dealers by providing certain measures of product promotion, by increase in the range of customers to be contacted by
the dealer and cost reduction for self and the dealers.
Where imposition of territorial restriction is a normal feature in an industry on account of its peculiar circumstances or
when such restriction is imposed only at the level of the first line of distributors, it may be justifiable. In the case of beedi
industry, territorial restrictions were placed on the first line of distributors, but not at lower levels of wholesaler and
retailers who were free to trade in any brand of beedies. It was felt that in the absence of such a restriction, each distributor
was likely to limit his dealings to two or three large wholesalers leaving the small ones without supply of the products. The
territorial restriction was found beneficial to the small wholesalers and retailers for ensuring adequate supplies of beedies
and also to make the distributors accountable to provide marketing services on a more equitable and wider basis.
Where a product (e.g., domestic solar hot water system, coolers, solar stills) requires frequent and prompt after-sale
service, allotment of territories for marketing of goods so that the dealers in one area may be in sole service to the
customers, such a restriction would not be hit by clause (c); in the absence of such a restrictive provision, dealer in one
area may give such service at an increased cost to the consumers in other areas leading to additional burden on them.376
The other forms of market sharing arrangements may, for instance, be:
(1) by type of goods or nature of services;
(2) by number of customers;
(3) by nature of customers;
(4) by establishing quotas for sale;
(5) by any other similar way.
Section 3(3)(c) by its very nature is not applicable to any agreement between the principal and his agent because the said
provision applies to an agreement restricting the purchaser in the course of his trade from acquiring or otherwise dealing in
any goods other than those of the seller or any other person. The agent is obviously not a purchaser of goods from the
principal. These provisions may apply in case of principal to principal contract.
Cases under the Competition Act, 2002
In the Case of Director General (Supplies & Disposals) v Puja Enterprises Basti,377 there were allegations of bid-rigging
in the tender for polyester blended duck ankle boots rubber sole for the period from 1 December 2011 to 30 November
2012. The Tender Enquiry consisted of 45 items of different sizes and colours of the product, as in the previous Rate
Contract for the year 2010/11 which was awarded to the eleven parties who were also holding the Rate Contract for the
year 2009/10. On scrutiny of the tenders for year 2011/12 opened on 29 July 2011, it was found that the difference in
quoted prices of different bidders was in a very narrow range and all the tenderers barring one, had restricted the quantity
to be supplied by it during the Rate Contract period. Nine tenderers had also stipulated the maximum quantity to be
supplied by them to a particular Direct Demanding Officer (DDO). This was stated to indicate a pre-determined, collusive
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and restrictive bidding pattern or cartel formation by the bidders thereby violating the various provisions of the
Competition Act, 2002. It was noted by the Director General that the parties by putting in quotations quantity restrictions
both in terms of total quantity to be supplied during the Rate Contract period, as well as limitations of order quantity per
DDO, restricted the options of DDOs of procuring the product from any one or more Rate Contract holders as per the
choice of the DDOs. This inter se agreement/arrangement of parties, made with a view to limit and control the supply of
the product and to share the market by way of mutual allocation, amounted to bid rigging and was in violation of the
provisions of section 3(1) read with sections 3(3)(b), 3(3)(c) and 3(3)(d) of the Act.378
In the case of Re Shri Ghanshyam Dass Vij,379 the bye-laws of SDA entailing geographical restriction and NOC
requirement on newly appointed distributors before starting business of distribution of the products of any company were
in question. It was held that the members of SDA by agreeing to such bye-laws have disturbed the forces of free trade and
limited competition amongst the distributors of FMCG products in the area of Sonipat. It was further observed by the
Commission that the Association actually enforced geographic area restriction upon the members.
59. With regard to the imposition of geographical restrictions on the dealers/distributors, the following evidences were collected by
the DG:
(i) From the NOC records maintained by opposite party-5 [Sonipat Distributor (FMCG) Association Sonipat] i.e. the NOC
book, one of the reasons for cancelling the earlier dealership in case of NOC No. 7 was mentioned as ‘selling in other
distributor’s area’.
(ii) In the Executive Meeting dated 21 April 2011, opposite party-3 directed Shri Rajendra, Proprietor of M/s Ganpat Rai
Naveen Kumar to refrain from selling products supplied by distributors located outside Sonipat.
(iii) Statement dated 20 June 2014: Shri Vinod Kumar, Proprietor of M/s Vinod Enterprise’s complained before opposite
party-5 against the Informant for selling opposite party-1’s products in the area allocated to him.
60. The Commission observes from the above evidence that opposite party-5 has been dictating its members to limit their sale only
in the areas allocated to them. The diktats of opposite party-5 are apparent in the form issued to the company, wherein, the reason
for the issuance of the same was quoted as “selling in other distributor’s area’. Further, in the Executive Meeting dated 21 April
2011 a Proprietor, Shri Rajendra, was directed to refrain from selling products supplied by distributors located outside Sonipat and
the complaint of M/s Vinod Enterprise to opposite party-5 was about the Informant selling in its allocated area as against the so-
called agreed arrangement.
Sonipat Distributor (FMCG) Association, Sonipat and its office bearers were directed to cease and desist and were ordered
to modify its bye-laws in light of the contraventions found and observations made by the Commission in this order so as to
bring the same in accord with the provisions of the Competition Act, 2002. Further, in exercise of the powers under section
27(g) of the Act, the Commission directed it to put in place, in letter and in spirit, a “Competition Compliance Manual” to
educate its members about the basic tenets of competition law principles.
In Jet Airways (India) Ltd and Kingfisher Airlines Ltd case,380 the Commission on examining the
agreements/arrangements entered into between Jet Airways and Kingfisher Airlines noted that none of the agreements
could be said to have the effect of either determining the airfares or limiting the supply or allocating the market in terms of
the provisions of section 3(3)(a), 3(3)(b) and 3(3)(c) of the Act because:
Such kind of agreements/arrangements were not exclusive but had also been entered into with large number of domestic as well as
international airlines including NACIL (Air India). Market share of both the parties remained constant even after passing of almost
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two years of the public announcement. In fact Kingfisher Airlines reported losses in subsequent years ending March, 2009 and
March, 2010.
Re-protection Agreement entered into between Jet Airways and Kingfisher Airlines on 21 May 2009 was an agreement which had
limited application and could be invoked only when there is disruption in the schedule of either of the party due to unforeseen
reason. When such occasion arose it enabled the airline whose schedule had been interrupted to transfer its passengers on another
airline operating on the same route. Such agreement cannot be said to be one which either determines purchase or sale price, or
limits or controls production, supply, markets etc. or provision of services, or which allocates the market.
Interline Traffic Agreement of 24 October 2008 was an internationally accepted practice amongst the airlines worldwide to enter
into such kind of Interline Agreements. It is also borne out from the record that Jet Airways has entered into MITA with 140
airlines across the world including Air India and Kingfisher and similarly Kingfisher Airlines has 88 such agreements with various
airlines including Air India.
The Interline Electronic Ticketing (IET) arrangement is only a technical requirement following ITA. Both Jet and Kingfisher have
such agreements with 65–80 airlines including Air India. This agreement only facilitates issuance of Interline E-Ticket document
and does not involve any commercial benefits.
In the case of Prints India v Springer India Pvt Ltd,381 it was alleged that by entering into co-publishing agreement, the
research institutes had violated provisions of section 3 of the Competition Act, 2002 by directly determining sale price,
controlling the supply of the journals by imposing unfair conditions of furnishing commercially sensitive information
violating and sharing the market by way of allocation of types of goods, i.e., print version and e-journal. It was however
held by the Commission that entering into co-publishing agreement signed between Springer India and eight other
institutes was not indicative of anti-competitive agreement according to the provisions of the Act.
Case Law under the MRTP Act, 1969
In India, the practice of area allocation is widely prevalent. A large number of cases of this type came up for enquiry
before the MRTP Commission, from time to time. These cases, by and large, were disposed of on undertaking under
section 37(2), furnished by the respondents that they will not indulge in this restrictive trade practice.382
Some of the typical cases involving area allocation are discussed below:
In RRTA v Usha Sales Pvt Ltd,383 Usha Sales had entered into agreements in a standard form with its distributors for sale
of its products like sewing machines, fans, water coolers and diesel engines, which, inter alia, provided that:
Clause 2: This agreement applies to sale of the agreement products only from your selling point at ...
The case came before the Commission on the application of the RRTA, and after hearing the parties, it observed that:
Clause 2 did not relate to restrictive trade practice as it did not allocate territories but only specified selling points. The clause did
not define area or market territory within which the goods could be sold by the dealers. The use of word “only” in clause 2 limited
the operations of the dealers to the selling points but it did not purport to limit the area or market for the disposal of the goods.
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Clause 2 was also not covered by section 33(1)(g). Regarding the Registrar’s submission that clause 2 was hit by section 2(o)
because of the legal implications of the clause itself, the Commission held that the clause was completely innocuous so far as its
effect on competition was concerned. It could have no effect on competition between the respondent and its competitors, i.e. on
interbrand competition. Further, it could have no effect on competition between the respondent’s own dealers. A dealer at one
selling point was not precluded from competing with a dealer at another point. Nor was the first dealer immune from competition
of other dealer. There was evidence to show that dealers at one place had sold goods to customers belonging to another place or
coming from another place. Further, there was evidence to show that in the same area or territory, there were several dealers
competing with each other. Even in respect of areas where there was only one dealer each, there would be free competition on the
borderline between the two areas. If customers of one area prefer one selling point to a more distant selling point, the blame cannot
be put at the door of clause 2. Clause 2, therefore, did not relate to restrictive trade practice.
In RRTA v Tata Engineering and Locomotive Co Ltd,384 Telco entered into agreements, in a standard form, with its dealers
for the sale of its Diesel Vehicles (truck and bus chassis). The RRTA, in his application under section 10(a)(iii) to the
Commission, inter alia, alleged that the agreements provided for territorial restriction and allotment of markets, which was
a restrictive trade practice. The impugned clauses of the agreements provided that Telco agreed to sell and deliver to the
dealers certain commercial vehicles for resale in a certain territory or area, but it was not precluded from entering into any
dealership agreement with any other person in the said territory or area. It was also provided that dealers would promote
sale of the said vehicles within the said territory. It was further provided that the dealer should not, either directly or
indirectly and either alone or in conjunction with others promote the sale of or sell any of the said vehicles to any person or
party outside the said territory, nor shall he sell the same to any person or party within the said territory if the said vehicles
were intended to be used outside the said territory. In the event of any of the said vehicles being deemed by Telco to have
been sold for use outside the said territory, Telco shall be entitled to recover from the dealer and the dealer shall be liable
to pay to Telco an amount equivalent to 4% of the price charged by Telco. It was claimed by Telco that if there was no
area allocation, persons in the backward areas will not be able to get bus and truck chassis manufactured by it and the rate
of Commission allowed by the respondent to its dealers was so low that there was no scope for competition from dealers in
other areas in the country. The Commission, rejecting this claim, observed that if areas are not allocated to dealers, there
will be competition between dealers of Telco, as they will compete with its other dealers in parting with a part of their
commission or giving facilities or benefits to buyers. It was argued on behalf of Telco that:
(i) the domestic market in India consists of a vast sub-continent with diverse conditions of demand and it is
necessary to have a wide geographical distribution of vehicles and it is necessary to make equitable distribution
of vehicles by taking into account various factors;
(ii) it needs a network of dealers so that its sales take place and the dealers can maintain the service stations, spare
parts, stock and workshops all over the country. Unless the dealer is assured of customers in his own area, he will
not have the necessary initiative to maintain the optimum level of service stations, workshops and spare parts.
The company regarded after-sale service of crucial importance to serve its consumers and maintain reputation of
its vehicles;
(iii) the rates of sales tax in different States being different, if territorial restrictions are removed there would be a
tendency for purchaser to gravitate to States with lesser sales tax which, apart from loss of revenue to the State
will distort the pattern of supply and distribution.
These arguments, however, did not find favour with the Commission, and holding the territorial restriction a restrictive
trade practice, the impugned clauses of the agreements were declared void.
The Supreme Court, on appeal by Telco,385 reversed the Commission’s ruling, observing that:
The domestic market in India is spread over this vast sub-continent with very diverse conditions of road, population and demand. It
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is essential for the community, the consumer and the manufacturer to have an equitable geographical distribution of his vehicles ...
public interest requires that the channels of communication should be open throughout the country ... A user of Telco vehicles
expects to get all over the country the service of a high standard enjoined by Telco upon its dealers. Telco on its part also needs a
country-wide network of dealers so that sales take place and the dealers can maintain the service stations, spare part stocks and
workshops with the requisite equipment, machinery and trained personnel all over the country ... Commercial vehicle is highly
complex mechanical product. When Telco sells a vehicle it also has a responsibility that the vehicle is kept running and maintained
in the optimum condition. Telco must preserve its reputation and ensure that the vehicles are only sold by dealers who have the
requisite facilities and organisation to give the proper after-sale service. Unlike most consumer products, a commercial vehicle
involves a continuous relationship between a dealer and consumer ... Vehicles of Telco are in keen demand, both because of their
quality as also because of the assurance of efficient after-sale service by the network of Telco dealers. These requirements cannot
be met unless there is a network of dealers with specific territories ... There are many commercial agreements under which the
territories are divided among distributors and such agreements do not constitute restrictive trade practice, where the whole object is
to ensure fair, efficient and even distribution particularly of a commodity which is in short supply and in great demand ... The
question of competition cannot be considered in vacuo or in a doctrinaire spirit. The concept of competition is to be understood in a
commercial sense. Territorial restriction will promote competition whereas the removal of territorial restriction would reduce
competition. As a result of territorial restriction there is in each part of India open competition among the four manufacturers. If the
territorial restriction is removed, there will be pockets without any competition in certain parts of India.
Re Hindustan Lever Ltd,386 the Commission considered the provision in the agreement entered into by Hindustan Lever,
which is engaged in the production of consumer products like vanaspati and toilet preparations, with its re-distribution
stockists requiring that the stockist shall not re-book or in any way convey, transport or despatch parts of stock of products
received by him outside the aforesaid town (Poona) except when he is so expressly directed in writing by the Company.
The Commission held that this inter-town restriction fell under sections 33(1)(g) and 2(o) of the MRTP Act, 1969 and
declaring the impugned clause of the agreement relating to area allocation void, passed the “cease and desist” order. On
appeal, the Supreme Court387 upheld the Commission’s order and dismissed the appeal, taking into account the nature of
goods involved in the agreement.
In RRTA v Mahindra and Mahindra Ltd,388 by an Ex parte order for failure to appear, the territorial restriction imposed on
its dealers by Mahindra (which is engaged in the manufacture of motor vehicles-jeeps), was held to be restrictive and
struck down by the Commission. Later, on review application, the matter was heard by the Commission and its application
was dismissed. Thereafter, on appeal the Supreme Court389 set aside the order of the Commission, being not a speaking
order and not based on any material to justify the effect of competition on the trade practice, in line with Telco’s case.
In RRTA v Spencer & Co Ltd,390 holding that the ratio of Telco case was not applicable to the facts of the case inasmuch
as Spencer is engaged in the manufacture of products like refrigerators and air conditioners with are neither highly
mechanical nor scarce, the Commission held that the territorial restriction would eliminate competition between dealers of
the Respondent, inter se and its effects will be more noticeable in the border areas of the two territories where the customer
will not have any choice between the two dealers although the customer might prefer a dealer on the other side of the
border of his territory for whatever reasons, whether quality of service or the terms of sale, etc. The restriction is not
connected with inter-brand competition. The competition between the Respondent as manufacturer and other
manufacturers in the line and competition between their respective distributors is not at all affected. The competition that is
affected is the competition between the dealers of the Respondent inter se. The Respondent itself has only 20% of the total
trade in the products. The competition affected is only intra-brand competition in this part of the trade. Even here, in the
large cities there is more than one dealer and the competition between the dealers of the Respondent would be determined
by the distance between the shop of the dealer and the residence of the consumer. The competition affected would,
therefore, be on the borders of the territories of the dealers. The Commission allowed the benefit under the gateway of
section 38(1)(h).
If dealers are required to sell at particular sale points, it will not tantamount to “area allocation”, so long as there is nothing
further in the agreement to prevent them from operating in other areas.391 Absence of territorial or area restriction should,
however, always be clearly evident in the agreement, even when the manufacturer/supplier merely desires the dealers to
bestow more attention in a particular area. From a mere recital in the standard letter of appointment of a stockist, with
blank space with the name of the state in which a particular stockist was situated, it did not automatically follow that the
stockist is prevented from venturing outside the area; and more so when there was no specific clause in the letter of
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appointment stating that the stockist must operate only within a particular area and there was absence of any other cogent
evidence to support the charge of area-restriction.392
While restriction on distributors in regard to export or re-selling for export is a restrictive trade practice falling under
clause (a) of section 33(1), Re Cyclon Products Ltd, a manufacturer of cycle and rickshaw chains, the Commission held
that it was not prejudicial to public interest as the manufacturer did not restrict the distributors from exporting, but only
required them to obtain his consent; such consent was necessary to enable the manufacturer to comply with the various
export procedures which could not be complied with by the distributors independently. The Commission also observed that
this practice did not directly or indirectly discourage competition to any material degree in the concerned trade/industry
and was not likely to do so.393
Provisions of the following nature in the agreement had been regarded as objectionable:
— We have pleasure in appointing you as one of our distributors for marketing our products in the Eastern Region
subject to following terms ... The manufacturer was directed to amend the clause in such a way as to expressly
permit the dealers to operate in other areas, also.394
— Holding that the stipulation in the distributorship agreement requiring the distributors to confine their
responsibility for sale to a specified area, which may be extended to other areas by mutual consent is restrictive
under clause (g), the Commission allowed the modification as follows: The distributors shall be free to canvass
for orders in other areas provided he makes arrangement for adequate after-sale service.395
— It is mutually agreed that you will be operating in the following areas and you will take prior clearance from the
company before approaching any direct consumer to avoid cross interest of other distributors who may be
operating in the same areas. This provision was directed by the Commission to be modified as follows:
As you have expressed your desire to concentrate in the following areas for the time being for promotion of
sales of the company’s products, the company has agreed to it. In case you desire to operate in other areas in
future, you can do so on obtaining prior written consent of the company, which consent shall not be
unreasonably withheld.
— Your marketing area for our products will be ... district as a non-exclusive basis. This provision in the agreement
was directed to be modified to read as follows: we are pleased to offer you distributorship for promotion and sale
of our products on a non-exclusive basis. You shall concentrate your efforts to further the sales of the said
products within the area of ... district to the best of your ability.
— While holding that the stipulation requiring the wholesellers to sell the products within the allotted areas as
restrictive trade practice of area allocation, the letters of appointment were directed to be amended as follows:
The wholesalership/stockistship will cover responsibility to handle the distribution and sale of the company’s
products. The wholeseller/stockist will, however, primarily promote sales in the area specified in the agreement.396
— Re McDowell & Co Ltd,397 territorial restriction imposed by it on its franchise-holders manufacturers/bottlers, to
the effect that they were to confine their selling operations to areas allocated to them and prohibited them from
selling their products at any place outside the respective areas was held to be a restrictive trade practice. The
contentions of the respondent, inter alia, that, there was no restriction on competition to any material degree as;
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(i) the territories allocated to each bottler is very large, (ii) there was no possibility of a bottler competing in the
area allocated to another bottler purely on economic considerations in view of the prohibitive costs involved in
the distribution and collection of the bottles outside its own territory, was not accepted by the Commission. The
Commission observed that in view of the relatively small share of McDowell in the soft drink industry and the
relatively large areas allocated to each bottler, the territorial restriction as at present may not be, to any material
degree, restrict or discourage competition, but the possibility of these restrictions inhibiting competition at a later
stage cannot be ruled out if and when the market share of the said respondent increases significantly. Denying the
benefit under section 38 of the MRTP Act, 1969 the Commission directed that the agreement should be modified
as follows:
The company authorises the bottler to prepare and bottle beverages as herein prescribed and to sell the same
under the Trade Marks with a view to promoting the market for these products primarily in and throughout the
territory.
SELLING AGENCY ARRANGEMENTS
An agent merely represents his principal in dealings with third parties, and therefore, a restriction imposed by the principal
on his agent cannot be a case of impairment of competition because one cannot compete with one self. In case of genuine
agency agreement, territorial restriction would not be a restrictive trade practice.398 Whether a particular arrangement is an
agency agreement or not depend upon the facts of each case. As indicated under section 182 of the Indian Contract Act,
1872 representative character and derivative authority may be said to be the distinguishing features of an agent. Broadly
speaking, the ingredients of an agency agreement can be said to be the following:399
(i) Property in goods did not vest in the agent;
(ii) To all intents and purposes, the agent had merely to carry out the services for the principal in the matter of sale of
the product;
(iii) It is the principal, who would quote for the product in response to the enquiries;
(iv) the principal would directly execute the orders and compensate the agent by way of commission on the invoice
value;
(v) principal would undertake to guarantee the products supplied to customers against defects in the material or
workmanship.
Re Shetty’s Pharmaceuticals & Biologicals Ltd,400 following its order in401 Re Delhi Cloth & General Mills Co Ltd
(wherein it was held that defining of areas and payment of remuneration as Commission to the wholesale agents in various
areas as set out in the respective agreement are permissible modes of transacting the respondent’s own business of sale
through wholesale agents), the MRTPC held that the agreements entered into with the agents cum propagandists appointed
by the respondent company to operate in the respective areas to propagate and sell the products of the Company, being a
genuine agency agreement, did not fall within the ambit of the prohibition on territorial restriction within the meaning of
clause (g) of section 33(1).
Re Vardhman Spinning & General Mills Ltd,402 MRTPC, inter alia, observed that mere use of the word “agent” by a party
in an agreement does not necessarily establish the relationship of agency in the legal sense. A condition whereby the entire
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responsibility is imposed on the agent for the payment of the price of the goods would be antithetical for a true agency
agreement in view of the provisions of section 212 of the Indian Contract Act, 1872. In such a situation, even if the profit,
which the so called selling agent is to earn, is in the form of commission at a certain percentage of the value of goods sold,
it would nonetheless be a relationship on principal to principal basis. Any restriction as regards party(ies) to whom the
goods may be sold and/or any territorial restriction would be hit by clauses (g) and (a) of section 33 of the Act.
It is the sweet will of the producer to appoint a dealer or continue the dealership. The dealership is a contract breach of
which may result in civil liability but it is neither unfair nor restrictive trade practice.403
Case Law in USA
In USA, vertical market allocation usually involves the allocation of a territory or customer market by a manufacturer or
franchisor to whole sale distributor or retail dealer. The purpose of vertical market restrictions is usually to curtail “intra-
brand competition”, i.e., competition among the distributors of a single supplier’s product. It generally provides that each
dealer must refuse to sell the product to anyone who has his residence or place of business outside the dealer’s assigned
area, thus precluding any “shopping” by customers among the various dealers in the same “brand”. The agreement, thus,
has the effect of providing a monopoly to each dealer in the sale of the supplier’s product. Although the concept of closed-
territory distribution has been there for many years, the courts and the Federal Trade Commission have considered its
legality in detail in White Motor Co v US,404 wherein, Supreme Court forth-rightly acknowledged that it did not know
enough of the economic and business stuff out of which closed-territory distribution emerges to say anything meaningful
about it.
In US v Arnold Schwinn & Co,405 the Supreme Court made no serious efforts to examine the economics of the practice.
The Court determined that a manufacturer or franchisor who sells his product to dealers cannot lawfully impose territorial
or customer restriction on them. Such restrictions were, therefore, to constitute per se violations. The Schwinn decision
specifically condemned market allocation arrangements whereby distributors were prohibited from selling to customers
outside a designated territory. The decision left open the possibility that “location” clause and “area of primary
responsibility” clauses would be upheld. Location clause restrains the distributor from selling in other than a designated
location. Area of primary responsibility clauses provide for specified geographic areas that are designated as primary
responsibility of a particular dealer in order to obtain proper servicing and part distribution by the franchised retailers.
The Schwinn decision was reversed by the Supreme Court in Continental TV Inc v GTE Sylvania.406 There the court held
that territorial or customer restrictions would be subject to the rule of reason. GTE Sylvania involved a challenge to the
legality of a location clause in franchise agreement. Under the clause, the defendant Sylvania, a national manufacturer of
television, required its franchisees to sell products only from approved locations. The admitted purpose of the restriction
was to inhibit “intra-brand” competition among Sylvania’s retailers so that Sylvania could compete more effectively in
“inter-brand” competition, i.e., with manufacturers of other television brands. By granting exclusive location rights,
Sylvania sought to obtain aggressive dealers who would be free of cut-throat intra-brand competition and, therefore, have a
greater incentive to promote Sylvania’s product. Using this marketing strategy, Sylvania increased its share of national TV
sales from negligible 1% or 2% to about 5%. The facts indicated that without the employment of this strategy, Sylvania
might have had to withdraw from the market completely. The plaintiff contended that Sylvania’s location restriction was
per se illegal under the Supreme Court decision in Schwinn. The Supreme Court, although, agreeing that Schwinn was the
governing law, determined that that case had been wrongly decided. The Court, accordingly, overruled Schwinn and went
on to hold, in broad terms, that all non-price vertical restrictions, including all forms of territorial and customer market
allocations (not just location clauses) would be tested under the rule of reason. The rationale for Court’s ruling was that
vertical restrictions often do have “redeeming virtues” in that they can operate to insulate dealers from what might
otherwise be ruinous intra-brand competition while stimulating competition at the inter-brand level. The GTE Sylvania
decision ended much of the confusion that had existed under the Schwinn per se rule.
In the case of US v Topco Associates Inc,407 Topco’s stand that Topco brand products needed territorial division to
maintain its private level programme and to enable it to compete with larger chains was upheld by the District Court, but
reversed by the Supreme Court of United States observing that Topco Scheme of allocating territories to minimise
competition at the retail levels being a horizontal restraint constituted per se violation of section 1 of Sherman Act, 1890
and was not subject to rule of reason.408 The US Supreme Court in the case held that territorial allocations were horizontal
restraints.
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Division of markets by competitors is unlawful in and of itself, according to a US Supreme Court ruling given as early as
in 1899.409 Rejected in 1951 as justifications for territorial allocation were contentions that the agreements were ancillary
to main transactions (a joint venture) and an exercise of the right to licence a trade mark, where the restraint, at issue, went
far beyond mere protection of the trade mark.410 Where allotment of territories through trade mark licenses was part of an
unlawful resale price fixing scheme and an aggregation of trade restraints, the Court held that they were unlawful, without
inquiring into business or economic justification, impact on the market or reasonableness.411 Rules under which members
of an association of locally owned “full service” truck lessors, who had a reciprocal service arrangement with other
members, were prohibited from competing in each other’s territories or from opening a franchise with a national truck
rental firm constituted a per se horizontal market division and were not ancillary to the service arrangement or any other
lawful activity.412
The territorial restrictions contained in a franchise agreement were vertical restraints subject to a rule of reason analysis
because the restriction did not act as a bar to entry or competition in the relevant market, which encompassed much, if not
all, of the fast food industry. The primary relationship between the dual distributing franchisor and the franchisee was
vertical and the territorial allocation did not tend to reduce inter-brand competition. Rather than having a pernicious effect
on competition, the franchising system and its territory allocation policy had fostered entrance into the market place by
many different purveyors of fast food. Further, the franchisor’s refusal to allow the franchisee to operate in some areas did
not restrict its right to trade in those areas independently of the franchisor. Thus, the territorial restrictions had no adverse
effect on inter-brand competition under rule of reason analysis.413
A covenant, not to compete as incidental to sale is not held to be violative of the Sherman Act, 1890. Such covenant
should, however, be ancillary to legitimate business transaction and it should not be primarily directed towards the
elimination of the owner as a competitor. In Lektro-Vend Corp v Vendo Corp,414 restrictive covenant incidental to the sale
of stock in a vending machine manufacturing firm and to an employment agreement with the owner of the firm, which
prohibited him from engaging in competitive activity for 10 years were held to be reasonable and not attracting section 1 of
the Sherman Act, 1890. An agreement by a seller of an airline not to compete with the vendee for 3 years was not
illegal.415 An agreement by the Stockholders and president of a selling company not to engage in the fishing business for
10 years in the immediate vicinity was not illegal.416 A non-competitive agreement ancillary to the sale of a liquid spray
device firm which prevented the owner-president of the firm from competing with the new owner for a period of 5 years
throughout the US, Mexico and Canada, after his 5 year employment contract with the new owner had terminated, did not
restrain trade in violation of the Sherman Act, 1890.417 A clause contained in a newspaper merger agreement forbidding
the seller to engage in, work for, operate, or be connected in any way with any business or other activity, directly or
indirectly competitive with the business of the surviving firm did not violate the Sherman Act, 1890.418 A non-competitive
agreement prohibiting a terminated employee of a veterinary drug firm that operated in four states from competing in any
of the four states for five years was reasonable and, hence, not violation of Sherman Act, 1890.419
Where, however, there is ability to control the market, or an intention to preclude potential competition by horizontal
division of product-markets, the restriction covenant would be illegal. A restriction covenant in a sales agreement
precluding one buyer of a portion of a computer testing business from competing with another buyer of the remainder of
that business amounted to a per se illegal horizontal division of product-markets because the purpose and effect of the
agreement was to preclude potential competition between successor firms. The rule of reason applicable to covenants
ancillary to sale of a business did not govern here, since the seller retained no interest capable of being protected, and one
buyer could not extract such an agreement from the other buyer. It was held that the agreement was not necessary to
effectuate the sale, but was a part of a general scheme to dispose of business by carving out separate market preserves for
each of the successor entities.420 The agreement of one of the important radio condensor manufacturers not to compete
with the others for 10 years, his further agreement that tools used by them will not be sold in the open market and an
agreement between the two continuing parties limiting the disposition of the tools and providing for their storage in
escrow, constituted suppression of competition, and when done by the partner capable of controlling the industry, are
illegal.421 The fact that a restraint of competition was not limited to the locality where the seller was doing business tended
to show an intention on the part of a towing company to get more than reasonable protection incidental to the good-will of
the business sold.422
It seems clear, however, that a court will be most likely to view a vertical territorial or customer restriction favourably
when the following conditions are present:
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(a) there is significant competition in the inter-brand market;
(b) the manufacturer imposing the restrictions is not in a strong market position;
(c) the circumstantial evidence indicates that the manufacturer is imposing the restriction for legitimate business
reasons rather than for anti-competitive purposes; and
(d) the manufacturer does not have less restrictive alternatives available that would enable it to compete more
effectively at the inter-brand level.
Cases: EU
In the case of Suiker Unie v Commission,423 the Commission held that the criteria of co-ordination and co-operation laid
down by the case-law of the Court of Justice, far from requiring the elaboration of an actual plan, must be understood in
the light of the concept inherent in the provisions of the Treaty relating to competition, according to which each economic
operator must determine independently the commercial policy which he intends to adopt in the common market. Although
that requirement of independence does not deprive undertakings of the right to adapt themselves intelligently to the
existing or anticipated conduct of their competitors, it strictly precludes any direct or indirect contact between such
operators the object or effect whereof is either to influence the conduct on the market of an actual or potential competitor
or to disclose to such a competitor the course of conduct which they themselves have decided to adopt or contemplate
adopting on the market.
In Carglass Cartel case,424 it was held that the Competitors, by coordinating among themselves for the supply of carglass
parts to all the major car manufacturers in the EEA, distorted the normal process of procurement of carglass parts through
which the suppliers would, had it not been for the cartel, have competed with each other. The fact that the competitors
shared customers and co-ordinated prices was likely to have a significant impact on carglass deliveries, in particular as the
competitors involved, Saint-Gobain, Pilkington and AGC, are the main suppliers and, together with Soliver, jointly
account for more than 90% of deliveries of carglass parts in the EEA, making the four suppliers almost unavoidable
trading partners. It was furthermore noted that, even if a previously agreed allocation of a contract was sometimes not
implemented in practice, it did not mean that the cartel arrangements did not have an anti-competitive object. It was noted
that for the purpose of application of Article 81(1) of the Treaty there is no need to take into account the actual effects of
an agreement when it has as its object the prevention, restriction or distortion of competition within the common market.
Consequently, it is not necessary to show actual anti-competitive effects where the anti-competitive object of the conduct
in question is proved. Therefore, the competition-restricting object of the arrangements is sufficient to support the
conclusion that Article 81 of the Treaty and Article 53 of the EEA Agreement apply. The likelihood of those arrangements
having the effect of restricting competition leads to the same conclusion.
In Animal Feed Phosphate cartel,425 the cartel ensured European wide coordination according to the objective needs at all
stages and for all geographic areas. Compensations for volumes sold beyond/below the allocated quotas and targets were
evaluated and operated at national level or between specific countries or specific operators, deciding even on the particular
commercial channel or customer that could serve to attain the target. Prices and sales conditions were coordinated at
country level irrespective of whether or not intermediate regional sub-arrangements applied in a given period. For the
whole duration of the cartel, the traditional stronghold of companies or groups of companies in certain territories was
reflected in how allocation and pricing took place, in the implementing mechanisms deployed and in the negotiations
leading to deliberate changes in the logistics (changing first to the regional setting, then progressive reversion towards a
more centralised model) and in keys for quota sharing. Hence, the principle that “home markets” were to be respected and
that each producer was to be allocated the equivalent of its prior level of sales so that the market distribution existing at the
time of the basic arrangements or of subsequent revisions, was to be preserved as agreed in the basic arrangements, was
consolidated in the so-called “Copenhagen quotas”. They were the basis for subsequent renegotiations. Those examples
also show that changes in the cartel were not abrupt but that they took place only when consensus had been reached
amongst the parties, after joint preparation and negotiation and the rules under discussion continued to apply during
negotiations. Therefore, the cartel as such was never discontinued until its termination.
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In Graphite electrodes cartel case,426 it was held that in attempting to cope with difficult market conditions or falls in
demand, undertakings must use only means that are consistent with the competition rules. Price-fixing and market-sharing
are certainly not legitimate means of combating difficult market conditions. Nor are undertakings entitled to flout
Community competition rules because of alleged overcapacity.
SUB-SECTION (3)—CLAUSE (D)—AGREEMENTS RELATING TO BID RIGGING OR
COLLUSIVE BIDDING
Explanation to sub-section (3) defines “bid-rigging” to mean “any agreement, between enterprises or persons referred to in
sub-section (3) engaged in identical or similar production or trading of goods or provision of services, which has the effect
of eliminating or reducing competition for bids or adversely affecting or manipulating the process of bidding.” In simple
words, it is an agreement amongst the Competitors joining hands together at the time of bidding with the object to distort
competition. Such agreements are referred to as “knock out” generally.
“Bid Rigging” and “Collusive Bidding”
It is pertinent to mention that section 3(3)(d) of the Competition Act, 2002 uses both the expressions, “bid-rigging” and
“collusive427 bidding”. Both these terms are normally used interchangeably to describe many forms of illegal anti-
competitive bidding. However, common thread running through these activities is that they involve some kind of
agreement or informal arrangement among bidders, which limits the competition.428 The Competition law treats
agreement between bidders which results in to bid rigging on presumptive rule approach, meaning thereby that once the
essential ingredients constituting bid rigging are established, there is no further need to launch in to elaborate enquiry to
find out impact of such conduct on the market and adverse effect on market is presumed. In that situation the burden shifts
on the contravening parties to rebut the presumption by showing that their conduct does not result in to appreciable adverse
effect on competition in India.429
The Supreme Court in the case of Excel Crop Care Ltd v CCI,430 discussed that the two expressions “bid rigging” and
“collusive bidding” are interchangeably used. The Court observed:
34. As the Leigman of the law, it is our task, nay a duty, to give proper meaning and effect to the aforesaid ‘Explanation’: it can
easily be discussed that the Legislature had in mind that the two expressions are inter-changeably used. It is also necessary to keep
in mind the purport behind section 3 and the objective it seeks to achieve. Sub-section (1) of section 3 is couched in the negative
terms which mandates that no enterprise or association of enterprises or person or association of persons shall enter into any
agreement, when such agreement is in respect of production, supply, distribution, storage, acquisition or control of goods or
provision of services and it causes or is likely to cause an appreciable adverse effect on competition within India. It can be
discerned that first part relates to the parties which are prohibited from entering into such an agreement and embraces within it
persons as well as enterprises thereby signifying its very wide coverage. This becomes manifest from the reading of the definition
of “enterprise” in section 2(h) and that of ‘person’ in section 2(1) of the Act. Second part relates to the subject matter of the
agreement. Again it is very wide in its ambit and scope as it covers production, supply, distribution, storage, acquisition or control
of goods or provision of services. Third part pertains to the effect of such an agreement, namely, ‘appreciable adverse effect on
competition’, and if this is the effect, purpose behind this provision is not to allow that. Obvious purpose is to thwart any such
agreements which are anti-competitive in nature and this salubrious provision aims at ensuring healthy competition. Sub-section
(2) of section 3 specifically makes such agreements as void. Sub-section (3) mentions certain kinds of agreements which would be
treated as ipso facto causing appreciable adverse effect on competition. It is in this backdrop and context that ‘Explanation’
beneath sub-section (3), which uses the expression ‘bid rigging’, has to be understood and given an appropriate meaning.
It could never be the intention of the Legislature to exclude ‘collusive bidding’ by construing the expression ‘bid rigging’
narrowly. No doubt, clause (d) of sub-section (3) of section 3 uses both the expressions ‘bid rigging’ and ‘collusive bidding’, but
the Explanation thereto refers to ‘bid rigging’ only. However, it cannot be said that the intention was to exclude ‘collusive
bidding’. Even if the Explanation does contain the expression ‘collusive bidding’ specifically, while interpreting clause (d), it can
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be inferred that ‘collusive bidding’ relates to the process of bidding as well. Keeping in mind the principle of purposive
interpretation, we are inclined to give this meaning to ‘collusive bidding’.”
“The judges were, therefore, of the opinion that the two expressions were to be interpreted using the principle of noscitur a sociis,
i.e. when two or more words which were susceptible to analogous meanings were coupled together, the words could take colour
from each other.
Emphasising on process of “collusive tendering”, the Court in Excel Crop Care Ltd431 observed that “collusive tendering
was a practice whereby firms agreed amongst themselves to collaborate over their response to invitations to tender. Main
purpose for such collusive tendering was the need to concert their bargaining power, though, such a collusive tendering
had other benefits apart from the fact that it could lead to higher prices.”
Collusive bidding or bid rigging may be of various types, namely, agreements to submit identical bids [Level Tendering,
however, is extremely suspicious and is likely to attract the attention of Competition Authorities], agreement as to who
shall submit the lowest bid, agreements for the submission of cover bids (voluntarily inflated bids/Complementary
Bidding), agreement not to bid against each other [Bid Suppression], agreements on common norms to calculate prices or
terms of bids, agreements to squeeze out outside bidders, agreements designating bid winners in advance on a rotational
basis or on a geographical or customer allocation basis [Bid Rotation].432 Sub-contracting, often is a part of entire scheme
of bid rigging. Competitors, who agree not to bid or submit a losing bid, frequently receive sub-contracts or supply
contracts in exchange from the successful bidder.
“Process for Bidding”
The term “process for bidding” under the explanation to section 3(3) includes “would cover every stage from notice
inviting tender till the award of the contract and would also include all the intermediate stages such as pre-bid clarification
and bid notifications”.433
Under section 64 of the Sale of Goods Act, 1930 a combination between intending bidders to refrain from bidding against
each other had been held not to be illegal.434 In the United Kingdom, knock-out agreements are covered by the Auctions
(Bidding Agreements) Act, 1927. The said Act provides that if any dealer agrees to give or gives or offers any gift or
consideration to any other person as an inducement or reward for abstaining or having abstained from bidding at a sale by
auction, either generally or for any particular lot, or if any person agrees to accept or accepts or attempts to obtain from any
dealer any such gift or consideration as aforesaid, he shall be guilty of an offence under the Act.435
In a system of tendering, competition is of the essence. If the tenders submitted by those taking part are not the result of
individual economic calculation, but of knowledge of the tenders by other participants or of concertation with them,
competition is prevented, or at least distorted or restricted.436 Regardless of whether they aim at price fixing, procurement
allocation, maintaining of previously agreed market shares, or distribution of geographic markets, all forms of public
procurement bid-rigging are illegal and are sanctioned as infringements of competition law.437
“Engaged in”
In the bid rigging case of Pune Municipal Corp, the issue before the Commission was that in a scenario where there is
clear evidence and even acknowledgement of bid rigging in a tender process, can the bidders still contend that they are not
covered by the provisions of the Competition Act, 2002 as they were not in that business activity at the time of bidding.
Whether in the context of section 3(3)(d) of the Act the phrase “engaged in” ought to be accorded the literal meaning or a
meaning that advances the objective of the Act? Literal meaning would imply that the phrase would cover only those
business(s), which the parties “were” or “are” actually engaged in; the other interpretation would include even those
business(s) which the parties propose to undertake and for which they submit bid. The Commission noted that it was a well
settled principle of law that when two interpretations are feasible, the one that advances the remedy and suppresses the evil
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has to be preferred as envisioned by the legislature. The Commission held that it is the business activity of the parties that
they are actually bidding for and the one regarding which the violation of law has been alleged which is relevant for the
purpose of the applicability of section 3(3)(d) the Competition Act, 2002 rather than any other business activity(s) parties
“were” or “are” actually engaged in. If the parties are allowed to escape the grasp of the Act by considering them as not
competitors on the pretext that they are actually engaged in varied businesses, it will defeat the very purpose of the
provisions of section 3(3)(d) of the Act.438
Behaviour Patterns held to be suspicious439
Bid rigging can be difficult to detect. However, suspicions may be aroused by unusual bidding or something a bidder says
or does. An agreement (in collusion) not to respond to an invitation to tender until after discussions with other persons
invited to tender, is also a bid rigging offence. Certain patterns in bids can give rise to suspicion of collusion. Situations of
suspicious behaviour include the following (illustrative and not exhaustive):
1. The bid offers by different bidders contain same or similar errors and irregularities (spelling, grammatical and
calculation). This may indicate that the designated bid winner has prepared all other bids (of the losers).
2. Bid documents contain the same corrections and alterations indicating last minute changes.
3. A bidder seeks a bid package for himself/herself and also for the competitor.
4. A bidder submits his/her bid and also the competitor’s bid.
5. A party brings multiple bids to a bid opening and submits its bid after coming to know who else is bidding.
6. A bidder makes a statement indicating advance knowledge of the offers of the competitors.
7. A bidder makes a statement that a bid is a “complementary”, “token” or “cover” bid.
8. A bidder makes a statement that the bidders have discussed prices and reached an understanding.
Also, for a collusive behavior to become successful, it is necessary that the parties to the agreement agree on a common
course of action, monitor that parties are abiding by it and establish ways to punish the deviant. Although bid rigging can
occur in any economic sector, there are some sectors in which it is more likely to occur due to particular features of the
industry or of the product involved. Such characteristics tend to support the efforts of firms to rig bids:440
(a) Small number of companies
(b) Little or no entry. When few businesses have recently entered or are likely to enter a market because it is costly,
hard or slow to enter, firms in that market are protected from the competitive pressure of potential new entrants.
(c) Market conditions: Significant changes in demand or supply conditions tend to destabilise ongoing bid-rigging
agreements. A constant, predictable flow of demand from the public sector tends to increase the risk of collusion.
At the same time, during periods of economic upheaval or uncertainty, incentives for competitors to rig bids
increase as they seek to replace lost business with collusive gains.
(d) Industry associations: Associations have been used by company officials to meet and conceal their discussions
about ways and means to reach and implement a bid rigging agreement.
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(e) Repetitive bidding: The bidding frequency helps members of a bid-rigging agreement allocate contracts among
themselves. In addition, the members of the cartel can punish a cheater by targeting the bids originally allocated
to him.
(f) Identical or simple products or services: When the products or services that individuals or companies sell are
identical or very similar, it is easier for firms to reach an agreement on a common price structure.
(g) Few if any substitutes. When there are few, if any, good alternative products or services that can be substituted
for the product or service that is being purchased, individuals or firms wishing to rig bids are more secure
knowing that the purchaser has few, if any, good alternatives and thus their efforts to raise prices are more likely
to be successful.
(h) Little or no technological change. Little or no innovation in the product or service helps firms reach an agreement
and maintain that agreement over time.
Cases under the Competition Act, 2002
In a suo moto case,441 taken up on an anonymous complaint against the four public sector insurance companies viz. M/s
National Insurance Co Ltd (NICL), New India Assurance Co Ltd (NIACL), Oriental Insurance Co Ltd (OICL) and United
India Insurance Co Ltd (UIICL) the Commission held that these companies did not form a “single economic entity” and
they rigged the tender floated by the Government of Kerala on 18 November 2009 for selecting insurance service provider
for implementation of the “Rashtriya Swasthya Bima Yojna” (“RSBY”) for the year 2010/11. It was also held that they
formed a cartel and quoted higher premium rates in response to the aforementioned tender. The Commission relied on; (a)
minutes of the meeting held by companies on 7 December 2009 at Kochi to discuss the “Tender Notice on RSBY dated 18
November 2009 of Government of Kerala to discuss about sharing of business and submission of quotation for the above
business” (b) the financial bids submitted by OPs prior to finalisation of the tender; and (c) the business sharing
arrangement concluded subsequently after finalisation of the tender. Accordingly, a cease and desist order along with a
penalty at the rate of 2% of their average turnover of the last three financial years was imposed.442
The Tribunal443 while noting that the arrangement arrived at by the companies leading to bid rigging was in the nature of
cover bidding whereby NICL, NIACL and OICL submitted bids higher than that of UIICL, creating a false impression of
genuine competition, approved the order of the Commission. The Tribunal rejected the argument that Appellants could be
considered as subsidiaries of DFS. The Tribunal observed that a subsidiary status was available only to companies or a
body corporate and a department of the Government was neither a company nor a body corporate, and by its very nature
cannot be subsidiaries. Further, the argument that the Appellants were a “single economic entity” because they were driven
by a common objective of carrying out obligations of State and were “State” in implementing the health insurance schemes
and other social obligations under Directive Principles of the Constitution, was also rejected as it was noted that there was
no constitutional obligation on the Appellants under the Directive Principles to provide health insurance to all. The
Tribunal noted that the minutes of the meeting which caused the initiation of inquiry by the Commission were a
contemporaneous record of the intent of the meeting and decisions taken. Further, it was held that the bid rigging
arrangement executed by the Appellants was in the nature of cover bidding whereby three of them agreed to submit bids
which were higher than the bid of UIICL. The Appellants, through their separate bids created an impression of genuine
competition. This misleading facade resulted in UIICL not ending up as a lone qualifying bidder. It was argued that the
companies had incurred huge losses since the introduction of the Comprehensive Health Insurance Scheme, and therefore,
it was decided by the insurance companies to share the burden of the losses and take risk mitigation measures. They also
argued that United India Insurance did in fact reduce its losses with the cooperation of the other insurance companies and
the intention of the agreement was not to make supernormal profit. The Tribunal however, rejected this argument and held
that if the Appellants wanted to share risks, they could have bid as a consortium without contravening section 3 of the
Competition Act, 2002.
In the case of Gulshan Verma v UOI,444 the Commission received complaints of bid rigging and tender process
manipulation in the supply of medical equipment and medical systems [pre-fabricated modular operation theatre along
with preparation scrub and dirty linen room] to Government hospitals. The Commission noted:
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6.9 The parties named in the information have manipulated the process of bidding by reaching an understanding not to compete.
M/s MDD Medical Systems (India) Pvt. Ltd (MDD) and M/s Medical Product Services (MPS) submitted complementary bids to
avoid any question being raised on lack of competition in the bidding process. These two entities were not to compete with MDD
but they were only filing ‘cover’ or ‘courtesy’ bids so that the procurement process did not get stalled due to the lack of enough
competition. MPS and MDD have sought to reduce the competition in the bidding process by entering in to an understanding with
PES to submit technical deficient bids and cover the bid of M/s PES Installation Pvt. Ltd (PES) in order to manipulate the process
of bidding.
The Commission accordingly held the three firms guilty of violation of section 3(3)(d). However, in light of penalty
awarded in the 2010 case, the Commission did not deem it fit to impose penalty again.
Previously, in the case of A Foundation of Common Cause v PES Installations Pvt Ltd,445 the Commission held PES,
MDD and MPS to be involved in bid rigging in the tender for supply, installation, testing and commission of modular
operation theatre and medical gases manifold system to Sports Injury centre, Safdarjung Hospital, New Delhi. The
Commission considered the evidences appropriate enough to conclude prior meeting of minds to manipulate the process of
tender. The commonality of errors in the bid documents, abnormally high bid prices quoted by the losing bidders as
compared to L-1 bidder should have provoked the procuring to doubt the entire process.
The COMPAT446 in its order also held that factors proved like the huge disparity in the rates between the MDD on one
hand and PES and MPS on another, the identical price bids in respect of the O & M percentages between PES and MPS, as
also the common typographical errors and other common errors hold that there was guilty meeting of minds in between the
three competitors. It was noted that a conspiracy in criminal law does not normally have a support of direct evidence and
the finding there is more or less inferential. It was held that there was clinching inference that there was meeting of minds
of a nature as would be in contravention of section 3(3)(d). The COMPAT however, in light of Commission not giving
reasons447 for imposing penalty of 5% of turnover or considering any aggravating or mitigating factors coupled with the
fact that the parties were involved in cartelisation for the first time, reduced the penalty to 3% of annual turnover of parties.
In Coal India Ltd v Gulf Oil,448 case was filed against explosive manufacturers/suppliers along with their associations,
Explosive Manufacturers Welfare Association (EMWA) and Explosive Manufacturers Association of India (EMAI). Coal
India had been using different kinds of explosives for its coal mining operations depending on the coal mines and procured
those explosives from manufacturers through a tender process. The Commission, on the basis of records, that showed
identical bids for the years 2004/05, 2005/06 and 2006/07, concluded that the opposite parties rigged the bidding process.
However, since all these years were prior to the notification of section 3 of the Competition Act, 2002, no action could be
taken. The Commission, in the absence of any evidence or any record of identical bids in the years 2008/09 did not rule
against the opposite parties. The Commission, however, held the boycott of e-reverse auction of 2010 by explosive
manufacturers to be violative of section 3(3)(d).
The COMPAT449 agreed with the decision of the Commission and rejected the arguments of the appellants that they took
an independent decision not to put in price bids. It was held that the parties had under the panel of EMWA, avoided the
reverse auction system. It was noted that the prices had went up by 45% somewhere in the year 2005 and on basis of those
high prices only further contract came to be finalised in 2008 which was to last up to 2011. They did not want the process
of electronic reverse auction because in that case they would have been required to quote a price lesser than the one which
was prevalent in case of their running contract. However, in light of mitigating factors like first time breach and to protect
their ability to deliver the goods in an efficient manner the COMPAT taking reference to its earlier decision in the MDD
Medical Systems case reduced the penalty to extent of total of 10% penalty imposed by the Commission.
In the case of Re Aluminium Phosphide Tablets (ALP) Manufacturers,450 there was allegation of anti-competitive conduct
in the tender and procurement of ALP required for preservation of central pool food grains by Food Corporation of India
(FCI). The CMD of FCI reported of identical bids and similar reduction margin post negotiation by suppliers of ALP
during the last eight years. It was alleged that due to the cartel like behavior of the suppliers, price of ALP tablets nearly
doubled during the period 2007/09 and likely to rise further. The commission based on the data on record held that quoting
of same prices by suppliers in spite of being located at different places with different manufacturing and transportation cost
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cannot be mere coincidence and is the result of prior meeting of mind. The Commission relied on US case law to conclude
that a cartel existed:
7.30 ... in the case of American Tobacco Co v United States451, the U.S. Supreme Court had stated that ‘no formal agreement is
necessary to constitute an unlawful conspiracy. MRTPC in the case of Ghai Enterprises Private Ltd and Quality Ice creams (RTP
18 of 1983) had concluded that ‘pre-ponderance of probabilities’ in a case might lead to an inference of concerted action. In Bengal
Tools Ltd452 and Excel Industries Ltd Re453, it has been held that quoting identical prices even when cost of production varies is a
presumption in favor of a cartel and the same is a restrictive trade practice.
The collective action of identical bids, common entry in the of FCI before submission of bids are indicative of “plus”
factors in support of existence of understanding between parties and not just an instance parallel pricing thereby violating
section 3(3)(d) of the Competition Act, 2002. Further, collective boycott of the tender of 2011 thereby limiting the supply
of ALP tablets to FCI was held to be in violation of section 3(3)(b).
COMPAT454 agreed with the decision of the Commission and refused to treat the identical pricing as mere price
parallelism.
The term ‘Process for bidding’ used in the explanation in section 3(3) would cover every stage from notice inviting tender till the
award of the contract and would also include all the intermediate stages such as pre-bid clarification and bid notifications also and
once inference is reached on the basis of the interpretation of section 3(3) explanation there would be no question of dearth of
jurisdiction on the part of the Commission to firstly order the investigation into the matter and also to inquire itself into the
complained illegality.455
The Commission observed:
28. We have absolutely no quarrel with the proposition that the Director General must investigate according to the directions given
by the Commission under Section 26(1). There is also no quarrel with the proposition that the Director General shall record his
findings on each of the allegations made in the information. However, it does not mean that if the information is made by the FCI
on the basis of tender notice dated 8 May 2009, the investigation shall be limited only to that tender. Everything would depend
upon the language of the order passed by the CCI on the basis of information and the directions issued therein. If the language of
the order of section 26(1) is considered, it is broad enough. At this juncture, we must refer to the letter written by Chairman and
Managing Director of FCI, providing information to the Commission. The language of the letter is clear enough to show that the
complaint was not in respect of a particular event or a particular tender. It was generally complained that appellants had engaged
themselves in carteling. The learned counsel Shri Virmani as well as Shri Balaji Subramanian are undoubtedly correct in putting
forth the argument that this information did not pertain to a particular tender, but it was generally complained that the appellants
had engaged in the anticompetitive behaviour. When we consider the language of the order passed by the CCI under section 26(1)
dated 23 April 2012 the things becomes all the more clear to us. The language of that order is clearly broad enough to hold, that the
Director General was empowered and duty bound to look into all the facts till the investigation was completed. If in the course of
investigation, it came to the light that the parties had boycotted the tender in 2011 with pre-concerted agreement, there was no
question of the DG not going into it. We must view this on the background that when the information was led, the Commission had
material only to form a prima-facie view. The said prima-facie view could not restrict the Director General, if he was duty bound to
carry out a comprehensive investigation in keeping with the direction by CCI. In fact the DG has also taken into account the
tenders by some other corporations floated in 2010 and 2011 and we have already held that the DG did nothing wrong in that. In
our opinion, therefore, the argument fails and must be rejected.456
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Similarly, in the case of supply of spares to Diesel Loco Modernization Works,457 tender was floated by DLMW for
procurement of feed valves used in diesel locomotives. It was noticed that all the three RDSO approved venders quoted
identical rates of Rs 17,147.54 for the feed valve per piece. This rate was further found to be 33% higher than the last
purchase rates.
In the case of M/s Bio-Med Pvt Ltd,458 Government of India had been procuring the QMMV vaccines for the Hajj pilgrims
since 2002. During the period between 2002 and 2007, M/s GlaxoSmithKline Pharmaceutical Ltd (GPL) was the lone
bidder for the tenders and it single-handedly supplied the entire tendered quantity. With the entry of M/s Bio-Med Private
Ltd in the market in 2004, the bidding process became more competitive. However, as soon as the Bio-Med became
ineligible in 2011 due to enhanced eligibility requirements, GPL and M/s Sanofi, Mumbai, instead of competing,
substantially increased the prices and divided the tendered quantity amongst them. On enquiry, they were unable to
establish any major increase in the cost of manufacturing the said vaccine or any prove any other factor contributing to the
raised price. The Commission also noted that the opposite parties were in touch with each other proved through visitor’s
register of the Government Medical Store Depot (GMSD) indicating the simultaneous visits made by the representatives of
opposite parties. Also, peculiar market conditions, including, the presence of only 3 suppliers of the QMMV vaccines
together with the tendering process make the market conducive to collusion especially since (i) the product is
homogeneous; (ii) there is a fixed demand in the market; and (iii) suppliers are repetitive bidders. The Commission held
GPL and Sanofi to be in violation of section 3(3)(d) of the Competition Act, 2002. The Tribunal459, however, overturned
the decision of the Commission. The Tribunal noted that the existence of a scenario conducive to cartelisation was not
enough and cogent evidence must be adduced or collected to prove anticompetitive arrangement or agreement. Further,
mere suspicion, howsoever, strong it might be could not be made basis for recording a finding of collusive bidding or bid
rigging. COMPAT took note of the fact that Sanofi had, in its reply to the Director General, explained its conduct for the
year 2011 stating that it did not tender a bid for the entire quantity because in the previous years, it had remained
unsuccessful and had had to destroy large quantities of the vaccine thereby incurring huge losses. GPL had submitted that
the decision to not tender a bid for the whole quantity was owing to the time period to meet the demand (11–12 days)
being too short. The COMPAT was of the view that these explanations given by GPL and Sanofi were plausible and
tenable but had been wholly disregarded by the Director General who seemed to have pre-judged the issue. The COMPAT,
thus, held that there was no direct or indirect evidence on record linking the meeting of GPL and Sanofi to the matching of
quotations or tender quantities. Accordingly, the COMPAT allowed the appeal thereby setting aside the impugned order
and the penalty imposed by the Commission.
Re M/s Sheth & Co:460 a matter taken up by the Commission on the information of the Comptroller and Auditor General
(CAG) on Defense Sector, alleging of cartelisation among 13 manufacturers/suppliers of CN container461 to the ordnance
factories. The price bids submitted by the Opposite Parties to the tenders issued by the ordinance factories were either
identical or similar with minor variations in a very narrow price band. The Director General relied on OECD guidelines to
note that a market which has small number of suppliers, little or no entry, stable demand conditions, identical products or
services and few or no substitutes, small number of manufacturers, geographical proximity, absence of new entrants,
predictable and stable demand, standardised product, non-availability of substitutes, etc., indicates that the market is
conducive to cartelisation.
34. ... Considering the remote possibility of availability of any direct evidence in cartel cases, the existence of an anti-competitive
practice or agreement can be inferred from the conduct of the colluding parties. Such conduct may include a number of
coincidences and indicia which, taken together and in absence of any plausible explanation, points towards the existence of a
collusive agreement. In the light of the definition of the ‘agreement’, as noted supra, the Commission has to find sufficiency of
circumstantial evidence on the benchmark of “preponderance of probabilities.
38. The law is well settled that price parallelism per se is not enough to establish an agreement in contravention of section 3 of the
Act. However, in the present case, price parallelism coupled with peculiar market conditions like few enterprises with same
owners, stringently standardised product, predictable demand, etc., unequivocally establishes that the conduct of the Opposite
Parties of quoting identical/similar price bids was only due to collusive tactics adopted by them in violation of section 3(1) read
with section 3(3)(a) and section 3(3)(d) of the Act.
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The Commission in light of facts held the opposite parties to be guilty of violation of sections 3(3)(a) and 3(3)(d) read with
section 3(1) of the Competition Act, 2002. Their agreements had not only resulted in creation of barriers to new entrants
but also foreclosed competition by hindering entry into the market. Only a handful of entities control the already limited
market and make every possible attempt to share the bids amongst themselves.462 While looking the issue of proper
reading and appreciation of evidence, the Tribunal463 after looking that the report and the detailed objections to that report
stated that the decision was given on mere assumptions and mis-reading of the evidence, without entertaining the
objections filed by the appellants and others. The Tribunal observed:
45. The Commission did not even advert to objections raised by the appellants and other manufacturers to show that the market
conditions were not conducive to collusive bidding and there was no evidence of any agreement between them. In the
questionnaire circulated among the suppliers, the Dy. DG had specifically asked them whether there was any meeting of mind and
each one of them answered in negative. The Dy. DG could not collect any independent evidence to prove that the suppliers had met
before submitting their bids in response to the different Tender Enquiries or they had reached some consensus on the pricing of the
product. Therefore, the theory of meeting of mind propounded by the Dy. DG and approved by the Commission was liable to be
rejected.
With respect to quoting of similar prices, it noted that though the quoting of similar/identical prices can lead to the
suspicion of cartelisation, but other additional factors also need to be present to make a conclusive finding about the same.
The factors that the Director General had cited for supporting the allegation of cartelisation was the quoting of identical or
near similar price by the companies. No other evidence was given to show actual collusion between them. The Tribunal
also noted that the commission had not taken into account the legitimate justifications being given for the similarity in
prices.
48. The reasons put forward by the appellants for substantial similarity in the prices quoted by them and other suppliers in response
to various Tender Enquiries were plausible. As noted by the Dy. DG and the Commission, the market of CN containers with disc
was confined to the three Ordnance Factories. The product was required to be manufactured strictly in conformity with the
specifications prescribed by the concerned authority. The suppliers had quoted the price keeping in view the last purchase price
which was available on the website of the Ordnance Factories and in view of the fact that the supplies were to be made only to
three Ordnance Factories, the suppliers had the temptation to quote the price keeping in view the last purchase price. Therefore, in
the facts and circumstances of the case, identity of price cannot be treated as abnormal phenomena.
The appeals were allowed and the order passed by the Commission was set aside.
In another matter, due to increased theft and sabotage in various parts of rail lines, a tender notice was floated by South
Eastern Railway for procurement of Anti-Theft Elastic Rail Clips with Circlips from RDSO approved firms. In response
thereto, 29 approved firms submitted offers. The rate quoted by most of the firms was at 66.50 (all inclusive). The quantity
quoted by each of the firms was far less than 50% of the total tender quantity. It is alleged in the case of M/s Orissa
Concrete and Allied Industries Ltd,464 that the quoted rate was about 10% higher than the neighboring Railways’ last
purchase rate. The Commission found that all the 29 firms, despite different freights/manufacturing costs quoted identical
bids which were in the range of Rs 66.49 to Rs 66.51 without any reasonable explanation. Further, the quantity quoted by
the each of the bidders was less than 50% of the total quantity. These facts were not denied or disputed by any of the
opposite parties. It was also noted on scrutiny of the bid documents that the 19 firms had similar handwriting in which the
prices were quoted in figures and words in their respective bid documents. A cease and desist order was passed by the
Commission.465
In the LPG, cartel case,466 Indian Oil Corporation Ltd had invited bids for supply of 105 lakh, 14.2 Kg capacity cylinders
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with SC valves to various bottling plants in 2010/11. Out of 63 bidders 50 were qualified for opening of price bids. The
bids of large number of parties were exactly identical or near to identical which indicated of some sort of agreement and
understanding between the bidders. Out of 50 bidders 37 belonged to different groups so it was usual to get such identical
bids in different States. On investigation it was found that the LPG cylinder manufactures met in a Hotel in Mumbai before
the date of submission of price bids and discussed tenders. The manufacturers were held responsible for cartels and
infringement of section 3(3) of the Competition Act, 2002. It was observed that market conditions (predictability of
demand), small number of suppliers, few new entrants, active trade association, repetitive bidding, homogenous products,
few or no substitutes and lack of significant technological changes are facilitating factors of cartelisation and all these
factors were present in this case. The CCI imposed a penalty at the rate of 7% of the average turnover of the each
company.467 The Supreme Court has recently set aside the penalty imposed on LPG gas cylinder manufacturers. The apex
court noted that the bidders had to quote the lowest even if their manufacturing cost was higher. The main purpose behind
this was to remain in the fray and not to lose out business coupled with transparency in the market regarding prices of a
standardised product. As per the Court, while the meeting before the tender raised suspicion, despite 19 parties not
attending the meeting, they quoted identical/similar price. This as per the Court showed that the meeting was not for
pricing. The Court held that the market conditions prevalent were that of an oligopsony and parallel behavior was not the
result of any concerted practice. It was observed that in an oligopsony, parallel pricing simplicitor would not lead to the
conclusion that there was a concerted practice and there has to be other credible and corroborative evidence.468
In the case of Jupiter Gaming Solutions,469 the Commission held that a mere fact that the opposite party submitted
detailed replies defending not only itself but also the opposite party, was not sufficient to indicate that the two were in a
tacit arrangement in violation of section 3(3)(d) of the Competition Act, 2002.
In the case involving Delhi Metro Rail Corp Ltd (DMRC),470 the informant was restricted from participating in the tenders
for the supply of Medical Operation Theatre (MOT) and Medical Gas Pipeline System (MGPS) due to the eligibility
criteria laid out by DMRC and others to restrict parties who were found guilty of bid-rigging/cartelisation. It was argued
that in view of the limited market players in the field of supply of MOT and MGPS, a condition in the tenders ousting
majority players would not only be anti-competitive but would also effect the ex-chequer as there was a probability of
remaining players exploiting the monopolistic regime. Further, it was argued that neither the Commission nor the
Appellate Tribunal either directed or observed that the Informant or the other two companies be denied participation in
future tenders of MOT or MGPS. The Commission rejected these arguments and observed:
The Opposite Parties, in this case, are buyers/consumers, and a purchaser/buyer has right to prescribe such terms and conditions for
purchase of commodities in the market which it considers apt. A restraint prescribed in the tender document which is applicable
uniformly can never be construed as discriminatory or unfair. It is a reasonable practice followed by the Opposite Parties to safe
guard their interest and also the interest of the public at large. The Commission also observes that order of the Commission
imposing penalty on Informant was known to the public at large. An action on the part of the Opposite Parties to insert the
impugned clause in the tender document based on the order of the CCI cannot be deemed as concerted action.
In M/s Responsive Industries Ltd,471 the Informant alleged cartelisation by the opposite parties in the tenders floated by
North Western Railway (NWR) for supply of “PVC Flooring”. It was contended that as per railway policy, the Product
was to be procured by the Indian Railways from Research Designs and Standards Organisation (RDSO) approved suppliers
only and the opposite parties were the only three vendors approved by RDSO for supply of the Product. It was alleged that
all three RDSO approved firms had been quoting less than Rs 300 per sqm in the tenders floated by NWR and other
railway zones, before and in the calendar year 2013. However, from June 2014 onwards the rates were increased
substantially by all three firms which were alleged to be as a result of collusion. The Commission, however, noted that the
Informant chose only select tenders for assessing the rates quoted by the opposite parties and failed to make further
inquiries regarding the rates quoted by other zonal railways. Opposite parties argued that the decision to quote increased
rates was triggered by events such as stringent testing procedure being introduced by Indian Railways. The Commission
observed that the Informant while making the allegations of collusive behavior against the opposite parties in the
Information did not examine the market conditions or the conduct of the opposite parties holistically and proceeded to
deduce that the increase in rates was on account of collusion based on limited information available with it. It was held that
if such decision had been taken by the opposite parties independently and rationally as a business decision, it cannot be
faulted with merely because it led to increase in prices. While there was no direct evidence to show meeting of minds, there
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was also no circumstantial evidence that indicates collusion amongst the three opposite parties. Accordingly, no
contravention of the provisions of section 3 of the Competition Act, 2002 by opposite parties was observed by the
Commission.
In the matter related to Amul Dairy,472 Informant was aggrieved by the terms and conditions of the tender dated 12 May
2016 floated by Amul Dairy inviting offer for boiler for its dairy plant in Anand, Gujarat and alleged contravention of the
provisions of section 3 of the Competition Act, 2002. It was alleged that putting a condition in the tender which results into
making only one manufacturer a preferred supplier is anti-competitive as it showed there was an
arrangement/understanding between the parties to disqualify all other manufacturers/distributors of burners which amounts
to bid rigging and collusive bidding in contravention of section 3(3)(d) of the Act. The Commission noted that a party
floating the tender is a consumer and it has the right to decide on the appropriate eligibility conditions based on its
requirements. The Commission also observed that in a market economy, consumers’ choice is considered as sacrosanct and
in such an economy, a consumer must be allowed to exercise its choice freely while purchasing goods and services in the
market. A consumer can decide what is the best for it and will exercise its choice in a manner which would maximise its
utility that is derived from the consumption of a good/service. The Commission observed that Amul Dairy might have
some specific needs while constructing the boiler in its plant and to achieve that standard/quality, it might have mentioned
the name of “Weishaupt” as the preferred manufacturer in the list of preferred makes of bought out items. Further, it was
noted from the list of “preferred makes of bought out items” provided in the tender that for each product (except the
burner), it had given the names of more than one preferred manufacturers, indicating that Amul Dairy was open to
procuring from different manufacturers.
Under the provisions of section 3(3)(d) of the Act, bid rigging shall be presumed to have adverse effect on competition
independent of duration or purpose and also, it is immaterial whether benefit was actually derived or not from the cartel.
In the matter related to DC Fans473, the Commission found three parties to have entered into an arrangement to rig the
bids and to share the market by mutual allocation of the tenders amongst themselves in contravention of the provisions of
section 3(1) read with section 3(3)(c) and 3(3)(d) of the Act. It was proved through leniency application made by one of
the parties and via call records that the parties shared the tender rates amongst themselves.
The Act requires that the prices quoted in tenders are decided by the bidders on the basis of their own cost and evaluation
of market conditions. It prohibits price quotes that are an outcome of consensus amongst the bidders.
In a case of alleged bid-rigging, if a holistic, not isolated, assessment of the evidence on record points to the fact that
identical prices quoted by the bidders are not a result of any market force but a consequence of consensus amongst them,
the same is conclusive of contravention of section 3(3)(d) read with section 3(1) of the Act. Further, as noted by the
Hon’ble Supreme Court in Excel Crop Care Ltd (supra), quoting of identical prices in tenders is a strong evidence of bid-
rigging and the same cannot be taken as a mere coincidence unless a plausible explanation is given in a clear and cogent
manner.474
Past conduct in bid rigging cases
For the purpose of inquiry into bid-rigging, it is inherently relevant to undertake a holistic assessment of the facts and
circumstances, including the behaviour of the parties in other relevant tenders, to determine the existence or absence of
collusion. Isolated analysis of the conduct of the parties in one or two tenders alone may not result in such assessment.475
Bid rigging was alleged in the tender for supply of cement to State of Haryana. All parties quoted higher rates and bid for
lower volumes in comparison to previous tender rates in an attempt to share the bid. The Commission relying on evidence
collected during the course of investigation like quoting of unusually higher rates than the rates quoted in the previous
tender, determining different basic prices for supply of cement at the same destination through reverse calculation, quoting
of quantity by 7 out of 9 participating parties in a manner that the total bid quantity almost equals the tendered quantity that
too in departure from the previous years, quoting of rates for the districts in a manner that all the OPs acquire L1 status at
some of the destination(s), etc., clubbed with proof of communication through call records during the period close to the
date of tender amongst the officials of the OPs, held that the parties colluded to rig the bid.476
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Bid rigging was alleged in the tenders floated by Western Coalfields Ltd for coal and sand transportation. Based on
evidence like quoting of identical quotes upto the last decimal in all the jobs in all the four impugned tenders despite
different cost data of each participant, last minute filling of price schedule in the office of the Informant; existence of
records of financial dealings amongst the parties; identity of price quotes even in previous tenders floated by the
Informant; and the efforts of CIMTA for upward revision of rates offered by the Informant, corroborated by call data
records, the Commission held that bid rigging took place in the tenders floated by Western Coalfields.477
Bid rigging was alleged in the tender floated by Delhi Jal Board for supply of PAC (poly aluminum chloride) and Liquid
Chlorine (LC).478 It was alleged that Aditya Birla Chemicals (India) Ltd (ABCIL), Grasim Industries Ltd (GIL) and
Punjab Alkalies and Chemicals Ltd (PACL) colluded to quote similar prices. The Commission noted that despite the
locational difference of the manufacturing facilities of the bidders, bidding price was very close to each other. The narrow
range of quoted prices, seen in conjunction with the inexplicable trends and patterns in cost of production and freight rates
stated by the bidders, it was established that the various cost components were adjusted to arrive at the quoted prices
agreed upon by the bidders in concert. Further, the dealers of GIL and GACL were occupying similar positions in the
tenders floated by other municipal corporations which gave them the opportunity to exchange all vital information. In
absence of any justification for the alleged beahviour, the Commission held the parties to be liable. One of the judges in
the dissent note observed that there was no direct evidence of meeting of minds or of entering into an agreement. It noted
that the evidence on record and the plausible justifications to the conduct of GACL have not been tested by the Director
General or in the majority order and the conduct does not adequately fit the “plus factors” or gets covered by the “standard
of proof” in cartel cases as promulgated in the various decisions of the Commission.
Allegation of bid rigging was made in the tender floated by MAHAGENCO for coal liasoning, to supervise the quality and
quantity of coal supplied to its TPSs (Thermal power stations) from the subsidiaries of Coal India Ltd. The Commission
noted that the bidders had divided the TPSs amongst themselves by quoting rates in response to the tenders floated by
MAHAGENCO in a manner that each of the colluding bidders got the TPSs of their choice. Such anti-competitive
arrangement was proved through various pieces of evidence like quoting of identical basic rates, quoting of rates in a
manner that each could get the chosen TPSs. Such parallel conduct and market allocation was further proved from the
various plus factors which were noted by the Director General including: no plausible explanation or justification for
quoting identical basic rates in 2005 tender, no justification for quoting lower rates for chosen TPSs and remaining two
bidders quoting higher rates for such TPSs in a mutual way so as to allocate TPSs amongst themselves, purchasing of
tender documents by the bidders on same dates, exchange of letters/pre-bid queries and financial transactions including
sharing of ledgers and cooking of books by bogus entries to show losses in MAHAGENCO tenders.479
In another case, bid rigging was alleged in the joint tender floated by Public Sector Oil Marketing Companies (PSU
OMCs) on for procurement of anhydrous alcohol.480 The Commission found 18 sugar mills aided by two trade
associations to have rigged the bid. This was evidenced from the prices quoted, quantities offered and the explanations
given by the parties. The practice of pre-concerted prices was evident from the fact that the trade associations through its
meetings and other communications coordinated such practice. The Commission noted that there was no satisfactory
explanation for bidders reaching the same basic price and net delivered cost, pattern of similarity in the amount of quantity
quoted, quoting of identical freight charges despite substantial variance in distance between the distilleries of the bidders
and the depots. The collusion was strengthened from the fact that the bidders utilised the platform of ISMA and also acted
on the signals emitted by EMAI which influenced the bidding behavior of the parties.
Bid rigging of tenders for procurement broadcasting services of various sporting events was discovered after leniency
application was filed by Globecast. It was later admitted by both ESCL and Globecast that they were involved in the
exchange of commercially sensitive information with each other for the tenders floated by various broadcasters. As a
result, they did not effectively compete in the bidding process and gave a pretence of competition to the broadcasters. The
Commission held that that ESCL and Globecast operated a cartel in the sporting events held during the period 2011–2012.
They exchanged information and quoted bid prices as per their arrangements from July 2011 to May 2012 in violation of
Section 3(3)(d).481 In light of the information (various vital evidences in the matter which disclosed the modus operandi of
the cartel) and support provided by the 1st applicant 100% reduction in penalty to Globecast was granted. The evidences
furnished by ESCL added value to the ongoing investigation and were thus granted 30% reduction in penalty.
Also refer to Notes under sub-section (3) – clause (a) ibid.
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EXCEPTION – SECTION 3(3): EFFICIENCY ENHANCING JOINT VENTURE
AGREEMENTS
A proviso to sub-section 3(3) provides for an exception to the agreements covered by the said sub-section. It reads as
under:
Provided that nothing contained in this sub-section shall apply to any agreement entered into by way of joint ventures if such
agreement increases efficiency in production, supply, distribution, storage, acquisition or control of goods or provision of services.
Any joint venture agreement having the effect of increase in efficiency in production, supply, storage or control of goods
or supply of services is outside the scope of horizontal agreements prohibited under sub-section (3) in terms of proviso
thereto. Whether the agreement increases the efficiency in production, etc., or not is subjective in nature and can only be
considered by the Commission during the course of enquiry. This is one of the gateways which can be urged by the
enterprise or the person charged with the contravention of sub-section (1)/(3).
In Association of Third Party Administrators v General Insurers (Public Sector) Association of India,482 an information
was filed by Association of Third Party Administrators against General Insurers (Public Sector) Association of India
(Opposite Party). The Opposite Party was a voluntary association of four public sector General Insurance companies, viz.,
National Insurance Co Ltd, The New India Assurance Co Ltd, The Oriental Insurance Co Ltd, and United India Insurance
Co Ltd. It was alleged that the association was to set up as a Joint Venture to make a Third Party Administrator (TPA) for
providing health Insurance claims management service jointly and thereby abuse its dominant position. The Commission,
however, closed the matter and made the following observation:
The proposed JV is clearly with an object to enhance efficiencies and cannot be construed as cartel like conduit. It is also not
causing any appreciable adverse effect on competition between various insurance companies of the nature mentioned in section
19(3) of the Act. If the proposed JV proves to be inefficient, gradually customers would stat switching to other insurance
companies and the inter-brand competition would resolve the position in the market.
The Commission also discussed the joint venture efficiencies in the FICCI – Multiplex Association of India case,483 and
observed that the exemption granted to such efficiency increasing agreement is limited in as much as it exempts such
agreements from the purview of the presumption inbuilt in section 3(3) of the Competition Act, 2002 with respect to
appreciable adverse effect on competition. It is not a blanket exemption from the entire provisions of section 3 of the Act.
The Commission held that, the producers/distributors had failed to show as to how the impugned agreement increased
efficiency in production, supply, distribution, storage, acquisition or control of goods or provision of services. On the
contrary, it was noted that the alleged agreement controlled/limited the supply of films to the multiplexes besides,
increasing the price of tickets as mentioned above. In the circumstances, it was concluded that the contention of the
opposite party based on the proviso to section 3(3) of the Act was wholly misplaced and had to be rejected.
US
In the United States, sections 1 and 2 of the Sherman Act, 1890, section 5 of the Federal Trade Commission Act, 1914 and
section 7 of the Clayton Act, 1914 are relevant to involvement of competitors in the relevant, market, integration of
economic activity in such a market, elimination of competition of parties within a joint venture and collaboration within a
reasonable time period.484 Various guidelines have been issued by the DoJ and the FTC: the 2000 Antitrust Guidelines for
Collaborations among Competitors (the Competitor Collaboration Guidelines), the 1996 Statements of Antitrust
Enforcement Policy in Health Care (the Health Care Guidelines) and the 2010 Horizontal Merger Guidelines.”485 The
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lawfulness of a joint venture is generally determined through principles governed by section 1 of the Sherman Act, 1890
through the per se unlawful standard or the rule of reason.
EU
Article 101 of the TFEU applies only to horizontal agreements that may affect trade between Member States.486 Only non-
full function joint ventures fall under the ambit of Article 101 of the TFEU.487
As a joint venture forms part of one undertaking with each of the parent companies that jointly exercise decisive influence and
effective control over it, Article 101 does not apply to agreements between the parents and such a joint venture, provided the
creation of the joint venture did not infringe EU competition law. Article 101 could, however, apply to agreements between the
parents outside the scope of the joint venture and with regard to the agreement between the parents to create the joint venture.”488
Where there are several parent companies, the exercise of decisive influence by them can be presumed where they control all the
shares in the joint venture, and where, on the basis of factual evidence, they have joint management power.489
VERTCAL AGREEMENTS
In order to determine, whether, any agreement is in contravention of section 3(4) read with section 3(1) of the Competition
Act, 2002, the following five essential ingredients of section 3(4) have to be satisfied:490
(a) There must exist an agreement amongst enterprises or persons,
(b) The parties to such agreement must be at different stages or levels of production chain, in respect of production,
supply, distribution, storage, sale or price of, or trade in goods or provision of services,
(c) The agreeing parties must be in different markets,
(d) The agreement should be of the nature as illustrated in clauses (a) to (e) of sub-section (4) of section 3 of the Act,
(e) The agreement should cause or should be likely to cause AAEC.
Section 3(4) of the Act envisages an agreement between enterprises or persons “at different stages or levels of the
production chain in different markets. In common parlance of international competition laws, this nature of agreements is
called “vertical restraints”. Internationally, these agreements reflect dynamics between manufacturers-retailers;
manufacturers-distributers or distributers-retailers existing at different levels in the production and supply chain. A
manufacturer/service provider and the consumer cannot ever be said to be part of any “production chain” or even operating
in “different markets” because a consumer does not participate in production and at the same time, the market for any good
or service must include the producer and the consumer. There cannot be any market that only has the producer or the
consumer. Therefore, both are, by definition, part of the same relevant market. Any “agreement” between the
producer/service provider and consumer occurs after inter-brand or intra-brand competition has already played out and
therefore such agreements with the end consumers do not have any competition aspect. Economic theory supports the view
that if any such restraint is imposed by a manufacturer/service provider on the end consumer, it would be resolved over
time since the consumers would start shifting to competitors who do not impose such restricting conditions.491 Section
3(4) of the Act envisages an agreement amongst enterprises or persons at different stages or levels of the production chain
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in different markets. An end consumer, who was not in a position to impair the supply side of the market, was not part of
any production chain in a market.492
In order to determine if the agreements entered between opposite party and the authorised dealers are in the nature of an
“exclusive distribution agreement” or “refusal to deal” or “resale price maintenance” under section 3(4)(c) and 3(4)(d) and
3(4)(e) of the Competition Act, 2002 respectively, the Commission needs to determine if such agreements cause an AAEC
in the market based upon the factors listed in section 19(3) of the Act. It is pertinent to note that clauses (a)–(c) of section
19(3) deal with factors which restrict the competitive process in the markets where the agreements operate (negative
factors) while clauses (d)-(f) deal with factors which enhance the efficiency of the distribution process and contribute to
consumer welfare (positive factors). An agreement which creates barriers to entry may also induce improvements in
promotion or distribution of goods or vice-versa. Thus, whether an agreement restricts the competitive process is always an
analysis of the balance between the positive and the negative factors listed under section 19 (3)(a)–(f).493
SUB-SECTION (4)—CLAUSE (A)—TYING ARRANGEMENTS
“Tie-in arrangements” has been defined in Explanation (a) to sub-section (4). It corresponds to section 33(1)(b) of the
MRTP Act, 1969 where it was considered as a Restrictive Trade Practice. Under the Competition Act, 2002 Tie-in
Agreement is dealt under vertical anti-competitive agreement. It is not illegal per se but if it causes appreciable adverse
effect on competition, then it becomes illegal.
A tying arrangement is one, under which a seller agrees to sell a product or service (the tying item) only on the condition
that the buyer agrees (i) to buy a second (tied) product from the seller, or (ii) not to buy the tied product from any other
supplier.494 The effect of the arrangement is that a manufacturer or supplier of goods makes the buyer of goods to buy
some goods or services, which he does not want, along with the goods which he wants for use or for re-sale.495 Tying
arrangements deny competitors free access to the market for the tied product, not because the party imposing the tying
requirements has a better product or a lower price but because of his power of leverage in another market. At the same
time, buyers are forced to forgo their free choice between competing products.496 Tying arrangement or condition need
not be expressly embodied in the written contract and may be inferred from a course of conduct.497
Types of Tying Arrangement
Tying arrangement may be of various types:
1. Tie-in Sales
(a) Contractual Tying – This kind of tying may be the result of a specified contractual stipulation. E.g.,
Company requiring the users of its nail guns and nail cartridges to purchase nails exclusively from it.
(b) Withdrawal or withholding of guarantee – a supplier may withdraw or withhold the benefit of guarantee
unless the buyer buys/uses the supplier’s components as opposed to that of any third party.
(c) Refusal to supply – this kind of tie-in is executed by refusing to supply the tying product unless the buyer
purchases the tied product.
(d) Technical Tying – this occurs when the tied product is physically integrated in to the tying product.
Separation of the tied product from the tying product is not possible.
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2. Full Line Forcing – An extreme version of tying arrangement is “Full-line forcing”, where the buyer of a product
is coerced by his supplier to buy the complete range of his products, though not desired to be so bought. Such
practices, though widespread in trade, are prima facie reprehensible, as they force the buyers to forego their
choice among products which compete with the tied product. They also deny competitors free access to the
market for the tied product.
3. Quantity Forcing – the retailer in such kind of arrangement is required to purchase a minimum quantity of certain
product.
4. Fidelity Discount – the retailer receives discounts based on the proportion of its sales coming from the
manufacturer.
Tying arrangements are generally to be found where the tying product is either more popular or is in short supply and the
tied product is slow-moving and less in demand. By such an arrangement, the manufacturer or supplier can increase and
expand the share of the tied product in the market. Such practice may also be resorted to when a manufacturer or supplier
of a popular and established product introduces a new product in the market and wants its sale to be pushed up, and in
which case he ties-up the new product with the established product. If the new product is not bought in a specified
quantity, the buyer’s order for the popular product is likely to be refused.
Tie-in agreements are not per se illegal. It is generally accepted today that such arrangements are a normal feature of
commercial life and may in fact have some pro-competitive effects like bringing efficiency to the tying product, promote
efficiency or help in achieving economies of scale.
Tying may also directly lead to supra-competitive prices, especially in three situations. Firstly, if the tying and the tied product can
be used in variable proportions as inputs to a production process, customers may react to an increase in price for the tying product
by increasing their demand for the tied product while decreasing their demand for the tying product. By tying the two products the
supplier may seek to avoid this substitution and as a result be able to raise its prices. Secondly, when the tying allows price
discrimination according to the use the customer makes of the tying product, for example the tying of ink cartridges to the sale of
photocopying machines (metering). Thirdly, when in the case of long term contracts or in the case of after-markets with original
equipment with a long replacement time, it becomes difficult for the customers to calculate the consequences of the tying.498
Tying versus Bundling
A tying arrangement occurs when, through a contractual or technological requirement, a seller conditions the sale or lease
of one product or service on the customer’s agreement to take a second product or service. In other words, a firm selling
products X and Y makes the purchase of product X conditional to the purchase of product Y. Product Y can be purchased
freely on the market, but product X can only be purchased together with product Y. The product that a buyer is required to
purchase in order to get the product the buyer actually wants is called the tied product. The product that the buyer wants to
purchase is called the tying product. Examples of tying include the tied sales of machines and complementary products, the
tied sales of machines and maintenance services, as well as technological ties that force consumers to buy two or more
products from the same supplier due to compatibility reasons. More often, tying is a sales strategy usually adopted by the
companies to promote/introduce a slow-selling or unknown brand when it has in its portfolio a fast-selling or well-known
product, over which it has certain market power.499
Price bundling is a strategy whereby a seller bundles together many different goods/items for sale and offers the entire bundle at a
single price. There are two forms of price bundling - pure bundling, where the seller does not offer buyers the option of buying the
items separately, and mixed bundling, where the seller offers the items separately at higher individual prices. From producers
perspective, mixed bundling is usually preferable to pure bundling, both because there are fewer legal regulations forbidding it, and
because the reference price effect makes it appear even more attractive to buyers. Bundling is used as a strategic pricing tool by the
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producers to price discriminate among groups of buyers with different preference schedule in order to capture larger pie of social
surplus thus generated.500
Having discussed tying and bundling, it is important to underscore the fact that there is a subtle difference between the two
concepts. The term “tying” is most often used when the proportion in which the customer purchases the two products is not
fixed or specified at the time of purchase, as in a “requirements tie-in” sale. A bundled sale typically refers to a sale in
which the products are sold only in fixed proportions (e.g., one pair of shoes and one pair of shoe laces or a newspaper,
which can be viewed as a bundle of sections, some of which may not be read at all by the customers). Bundling may also
be referred to as a “package tie-in.” It is also true that various foreign courts have occasionally used the two terms
interchangeably.501
Generally, the following conditions are necessary and essential in respect of anti-competitive tying:502
1. Presence of two separate products or services capable of being tied:
In order to have a tying arrangement, there must be two products that the seller can tie together. Further,
there must be a sale or an agreement to sell one product or service on the condition that the buyer purchases
another product or service (or the buyer agrees not to purchase the product or service from another supplier).
In other words, the requirement is that purchase of a commodity was conditioned upon the purchase of
another commodity.
2. The seller must have sufficient economic power with respect to the tying product to appreciably restrain free
competition in the market for the tied product:
An important and crucial consideration for analysing tying violation is the requirement of market power. The
seller must have sufficient economic power in the tying market to leverage into the market for the tied
product. That is, the seller has to have such power in the market for the tying product that it can force the
buyer to purchase the tied product. The whole basis of inference of anti-competitive effect in respect of tying
arrangement is that there is existence of market control of the tying device. There must be some leverage in
the tying product to justify any allegation about anti-competitive effect of tying arrangement in regard to tied
products.503
3. The tying arrangement must affect a “not insubstantial” amount of commerce:
Linked with the above requirement, tying arrangements are generally not perceived as being anti-competitive
when substantial portion of market is not affected.
Cases under the Competition Act, 2002
No section 3(4)(a) violation was proved in the following cases:
In Ajay Devgn Films v Yash Raj Films,504 the COMPAT agreed with the observation of the Commission that the
agreement between producers and film distributors to screen one movie with the other was a vertical tie-in agreement but
there was no appreciable adverse effect on competition. It was also noted that not even a single independent theater owner
came forward with any complaint against Yash Raj Films. No tangible evidence was available that theatre owners were
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coerced. It was up to theater owners to accept or not to accept offer made by Respondent and it was proved on record that
number of theaters owners did not accept alleged tie-in arrangement. It was established that substantial numbers of single-
screen theatres were available to Appellant for exhibiting his movie. Therefore, it could not be said that there was denial of
access to Appellant, of theatre.
In-built component of catering charges included in the tickets of Rajdhani/Shatabdi/Duranto trains was held to be not bad
keeping in mind the security, safety and hygiene of passengers in the IRCTC case.505 The Commission observed:
122. ... Rajdhani/Shatabdi/Duranto trains are designed as premium products of railways which give fast, assured and comfortable
journey to the passengers. There are 1200 odd trains in the Indian Railways in which catering services are provided either through
mobile catering or through static catering available at en route stations. There are only 61 trains (Rajdhani-20, Shatabdi-22 and
Duranto-19) in which compulsory catering is provided. This is only 5% of the total trains in which catering is not compulsory. The
compulsory catering is provided in these premium trains because they have very limited stoppages and for short duration where it
is not possible to provide quality catering from outside. The coaches of these trains are especially designed with hot cases and cold
cases to provide fresh and hot meals/beverages to the passengers. If the passengers are allowed to carry their own food then the
business of quality catering services in these premium trains will become financially unviable and in case of late running of these
trains/disruption of traffic those passengers who carry their limited food will not get food items in such trains. The situation may
lead to public complaints against the railways. Allowing food from outside may lead to security, safety and hygiene problem in
these premium trains.
Again, in the Apple Inc Case,506 it was complained that Apple Inc entered into some secret exclusive contracts/agreements
with Vodafone and Airtel for sale of iPhone [iPhone 3G/3GS] which gave Airtel and Vodafone exclusive selling rights.
The iPhones sold by them were compulsorily locked, thereby meaning that the handset purchased from either of them
should work only on their respective networks and none other. They introduced iPhone-specific internet plans which were
costlier than their normal internet plans, thus compelling not only existing customers to pay extra for using internet on their
iPhone but also prospective iPhone purchasers to leave their respective network providers and to compulsorily opt for
expensive mobile telephony services. Unlocking the phone would result in loss of all warranties and no third party
applications would run on it. Director General found this arrangement between Apple, Airtel and Vodafone to be in the
nature of tie-in arrangement as specified under section 3(4) of the Competition Act, 2002. However, no violation of
competition law was concluded.
The Commission assessed the agreement in the framework of sections 19(3)(a), (b) and (c) by posing the following
questions:
(i) Did the agreement prevent Airtel and Vodafone customers to use other smart phones?
(ii) Did the agreement prevent unlocked iPhone users to use services of other mobile service provider?
(iii) Consequently, is there a foreclosure effect of the agreement on any of the two markets – smartphone and mobile
services?507
Relying on the market share statistics of smartphones in India as provided by the Director General, the Commission
observed that Apple had a share of less than 6% in the market of smart phones during the period 2008/11. Furthermore,
share of GSM subscribers using Apple iPhone to total GSM subscribers in India was miniscule (less than 0.1%). Similarly,
relying on the data provided by the Director General on mobile service provider, the Commission observed that no
operator had more than 35% market share in an otherwise competitive mobile network service market. As none of the
impugned operators had a market-share exceeding 30%, that smartphone market in India was less than a tenth of the entire
handset market and that Apple iPhone had less than 3% share in the smartphone market in India, it was highly improbable
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that there would be an AAEC in the Indian market. The Commission also noted that a consumer having a mobile handset
(smartphone or otherwise) is free to exercise his choice for availing network services without any restrictions.
Furthermore, the network operators do not require any particular handset to be purchased by the customer in order to avail
its network services. Moreover, the lock-in arrangement of iPhone to a particular network was for only for a specific period
and not perpetual, a fact known to prospective customer. It was therefore difficult to construe consumer harm from the
“tie-in” arrangement between the opposite parties. The Commission observed that there was no restriction on consumers to
use the network services of opposite parties to the extent that the network services can be availed on any mobile handset,
even an unlocked iPhone purchased from abroad. Further, a consumer who had purchased a locked iPhone in India and
paid the unlocking fees was free to choose the network operator of his choice.508
In the case of Financial Software and Systems Pvt Ltd,509 even though the Director General concluded that the agreement
between ACI and its customers de facto amounted to a tie-in arrangement since it put a condition on the licensee to avail
professional services from ACI along with the license for BASE24 software and this fell within the ambit of section
3(4)(a) of the Competition Act, 2002, the Commission held that ACI Banks being the buyers/consumers were not part of
the production chain, therefore, the agreement did not fall within the purview of section 3(4) of the Act.
In the Intel case,510 it was complained that since the Informant (M/s ESYS Information Technologies Pvt Ltd) and Intel
were operating at different levels or stages of the same production chain, by compelling the Informant to sell its low
demand products along with the high demand products Intel contravened the provisions of section 3(4)(a) of the Act which
prohibits tie-in arrangements. The Commission while agreeing that the Informant and Intel were operating at different
stages or levels of the production chain in different markets as Intel was a manufacturer of a wide range of IT components,
peripherals, computer systems, etc. and the Informant was one of the distributors of Intel refused to hold section 3(4)(a)
violation as there was no evidence on record to hold that Intel was putting any condition before any distributor that it
would provide its high demand products only if the distributor purchased its low demand products also. Rather, Intel
provided more incentives to those distributors who achieve the targets with reference to its low demand products which
had a logical business explanation and devoid of any adverse effect on competition.511
A builder/developer of plots/flats and a maintenance service provider for such plots/flats are not in different level of
production (Omaxe Ltd case).512 Therefore, the provisions of section 3(4) of the Act are not applicable. Also, the end
consumers cannot be said to be at any level of production chain in different market. So, the agreements entered into
between the Informant and opposite parties were not covered under the provisions of section 3(4) of the Competition Act,
2002.513
In the Arshiya Rail Infrastructure Ltd (ARIL),514 it was alleged that by forcing the Private Container Train Operator
(PCTOs) to agree to the maintenance clause of the Concession Agreement, Ministry of Railways (MoR) resorted to tie-in
arrangement. MoR required PCTOs to agree to get the maintenance of their wagons to be done by MoR in order to get
permission to transport goods in containers over the rail network. However, keeping in mind the safety standards and the
Railway administration, having expertise in maintenance of hardware, i.e., racks, brake vans and containers, being the only
entity which could have done the maintenance, it was held that there was no violation of section 3(4).The Commission also
noted that on purely theoretical grounds, tie-in arrangement could be a strategic action on part of a business entity if it has
a dominant position in one product and wishes to promote a product in which it is a laggard. Resorting to tie-in, it would
be able to promote one product on the basis of reputation of the other.
In a case filed against DTH service providers,515 (Tata Sky Ltd, Dish TV India Ltd, Reliance Big TV Ltd and Sun Direct
TV Pvt Ltd),516 it was alleged that forcing the purchaser of their DTH Services to also buy/take on rent the Set Top Boxes
(STBs) procured by them, they were violating section 3(4). Also, since the DTH service providers controlled more than
80% of the market there was appreciable adverse effect on competition. The Commission however, ruled out any section
3(4) violation.
18.32 A manufacturer/service provider and the consumer cannot ever be said to be part of any “production chain” or even
operating in “different markets” because a consumer does not participate in production and at the same time, the market for any
good or service must include the producer and the consumer. There cannot be any market that only has the producer or the
consumer. Therefore, both are, by definition, part of the same relevant market. Any “agreement” between the producer/service
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provider and consumer occurs after inter-brand or intra-brand competition has already played out and therefore such agreements
with the end consumers do not have any competition aspect.
Where the customer is well aware about the product being offered to him and is not forced to choose the service of home
solutions along with buying paints, 3(4) violation cannot be proved. In a case involving Asian Paints Home Solutions
(APHS),517 no case of tie in arrangement was proved as Color Concepts was a franchisee of APHS and there was nothing
on record to indicate any tie-in arrangement between it and Asian Paints. [The Relevant Market in this case was Providing
Home Solution services for Painting homes in geographical area of Kolkata]. There was no agreement between the
enterprises involved in the same activities which can be treated as anti-competitive. None of the provisions of section 3(3)
and section 3(4) read with section 3(1) would be applicable to the said case.
In Hyundai Motor India Ltd case518, it was alleged that designated sources of supply for complementary goods like
lubricants, CNG kits and car insurance for dealers which resulted in a “tie-in” arrangement. However, the Commission
agreed with the justification provided by the company that there existed legitimate business interest for cancellation of
warranty upon use of non-CEV CNG kits and non-recommended oils/lubricants as HMIL would be bearing the cost of the
warranty. In case of car insurance services, the Commission held that since it was not mandatory for consumers to select
car insurance from the list of insurance services suggested by HMIL there was no tie-in arrangement. With respect to tying
in of oils and lubricants, the CCI observed that the practice followed by Hyundai to get the lubricants supplied by two
specified dealers only and that too at pre-fixed price resulting in price discrimination did not accrue any benefit to the
dealers as well as the consumers/purchasers of the cars. Further, the practice of taking royalty by the two oil companies
and threatening termination of dealership in case of non-compliance by the dealers was held to be anticompetitive. The
NCLAT set aside the order and held that the Commission did not rely upon any evidence to prove that dealerships were
terminated on account of using other lubricants.519
Case Law under the MRTP Act, 1969
A tying arrangement cannot be defended on the plea that the number of units (or quantity) of the two products—the tied
and the tying one sought to be sold, are not identical.520 The value of the tied product is also immaterial; it may have more
or less value, in terms of money, in relation to the tying product. What is important is the desire, the intensity of demand at
the particular point of time and keenness of the buyer to purchase or possess the tying product. As the average buyer is
more or less helpless in the market, the supplier does everything to increase his sales and aggregate profits, which he
would not be able to achieve if the two products were sold separately. By tying the two products, he succeeds not only in
reducing or eliminating competition, but also removes buyer’s resistance to the tied product.
Requiring the buyers of cars to pay towards the servicing of cars with the sale price,521 tying-up post-warranty services
with sale of refrigerators,522 collection of service charges simultaneously with sale of TV set even during the free service
period under warranty,523 obligation to enter into a service contract on purchase of intercom equipment,524 requiring a
stabiliser to be bought along with a Refrigerator525 to force to buy tyre-lock, petrol tank lock, helmet and mat along with a
scooter,526 to require tyre flaps to be bought along with tyres/tubes,527 forcing dealers to buy bathing soap along with
washing soap, requiring the buyers of pressure cookers, as a condition of such purchase, to buy containers/separators along
with it, requiring buyers of motor-cycles to obtain accessories only from such dealers as specified by the supplier of motor-
cycles, requiring the buyers of duplicating machine to buy and use stencils, inks and spare parts of that company only
during the period of warranty, quoting the price of scooter as inclusive of the cost of helmet and comprehensive insurance
policy without giving any indication that the purchase of helmet or securing the insurance policy is optional,528 are all
cases of tie-up. Insistence of a gas distributor to buy a gas stove as a condition to the gas connection529 (which includes
indifference as well as delay on the part of the dealer in making available the gas connection or gas cylinder to those who
refuse to purchase the said item),530 also amounts to tie-up. However, when only a small percentage of the allottees of gas
connection, have, in fact, purchased gas stoves from the dealer, a charge of alleged tie-up would not be sustainable.531 The
Banks prescribing a condition precedent to the allocation of a locker that fixed deposits in varying sums be made is also a
tying arrangement which is hit by the definition of restrictive trade practice.532 Imposition on the wholesalers an
obligation to lift a particular quantity of the products, not by reason of the market demand, but on account of the target
fixed by the respondent will tantamount to dumping of goods or tie up of one product with another, attracting this
clause.533 Some of the other typical cases of tying arrangement or full-line forcing, which came before the Commission
and which were held to be contrary to public interest, are of the following nature:
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— Purchase of products of specified minimum invoice value in a year—Bharat Gears,534 Glaxo Laboratories (I)
Ltd535
— Placement of orders of a particular minimum size—Chandan Metal.536 (A contrary view was taken Re Khira
Steel,537 where the assortment or type of furniture to be covered in the order was not imposed.)
— Maintenance of stocks by wholesale dealers of a minimum specified value.
— Maintenance of stocks by wholesale dealers of a minimum specified value/range—Godrej and
Boyce;538Calcutta Chemicals,539 Rallis.540
— Purchase of such stocks by the distributors, as may be required by the manufacturer at its direction—Hindustan
Lever Ltd541
— Purchase of specified number of items of different varieties and of specified value— Bata;542 Carona Sahu.543
— Clubbing of products—Singer Sewing Machine;544 TT Pvt Ltd545
— Requirement of entire production to be lifted by the sole selling agents—Amar Dye-Chem Ltd;546 Weston
Electronics.547
— Requiring the wholesalers to buy from the manufacturer all its products such as flavours, food, colour
preparations, aromatic compounds, synthetic essential oils, etc. in such assortment of minimum quantity as
agreed upon by mutual consent, and to maintain in stock a representative range of all the said products and to
display the same prominently in their show rooms—Bush Boake Alen (India) Ltd548
— Requiring the dealers to place orders (i) for specified minimum quantity of paper and paper board unrelated to the
market conditions with the result that dealers with comparatively lower financial capacity were at disadvantage as
against the dealers with higher financial resources, and (ii) for all varieties of respondent’s products, thereby
adding to their inventory cost and placing undue restraint on their resources, which ultimately imposed
unjustified costs and restriction on the consumers—Titagarh Paper Mills Co Ltd.549
— Provisions of undermentioned nature in the agreement between the supplier and its stockists (in the nature of
dumping of goods, which might not be fast moving or which, as per the market conditions, a particular stockist
might not want to deal in):
(i) In any event we shall have the right to despatch such products in such quantities as in our opinion and best of
judgement is necessary to meet the market requirements and ensure availability of our products. The supplies
if so made shall be accepted by you and paid for as per terms applicable to supplies made to you in the
normal course.
(ii) We shall be entitled to sell to you such quantities of our new products as and when introduced with due
intimation. You shall be bound to accept the same so as to ensure adequate availability and you shall pay for
such supplies according to the usual terms and conditions of payment. The quantity of such initial supplies
will be determined on the basis of market potential of the town/area in which you are located/operating.
(MRTPC directed deletion of the first clause and modification of the other clause as follows: We shall sell to you
such quantities of our new products as and when introduced, in such quantities ordered by you subject to
availability of stocks. You shall pay for such quantities supplied to you according to the usual terms and
conditions of payment.)—Lakme Ltd550
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— A provision in the agreement between the manufacturer of domestic solar hot water systems, cookers and solar
stills and its authorised dealers that “dealer shall place a firm order of four numbers domestic solar hot water
systems with at least one being 250 litres capacity—Jyoti Ltd551
— A stipulation in the agreement with the dealer in the context of sales targets—“as a dealer of our company, you
are required to sell our products as per directions given by the company from time to time”— LG Balakrishnan &
Bros Ltd552
— Execution of an undertaking by the authorised semi-wholesale dealers, as a condition of their appointment by the
manufacturer that we shall receive through the guarantor a quarterly allocation of your goods and shall endeavour
to submit indents for the quantities so allocated taking a wide cross-section of the qualities—Binny Ltd553
— Organising a gift scheme for promoting the sale of products, whereunder to be eligible, the participants were to
first purchase goods of a certain minimum value—Mangal Deep.554
— A stipulation in the agreement with the dealers that they will, without any right or recourse, accept such lesser
quantities than that ordered, which the manufacturer in his sole discretion choose to supply. [Under the consent
order under section 37(2), the relevant clause in the agreement was modified to read as follows: All orders placed
by the dealer will be executed by the manufacturer as expeditiously as possible, subject to availability of
stocks]—Lakme Ltd555
— A provision in the agreement that the wholeseller shall lift targeted quantity of all items provided by the
manufacturer. [The Commission observed that the imposition of such a condition was not by reason of the market
demand and it tantamounted to dumping of goods and tie-up of one product with other. Grant of incentive to
wholesellers who lifted the targeted quantity was also held to be impermissible and hit by clause (e) of sub-
section (1) of section 33]—Gajra Bevel Gears Ltd556
— A requirement laying down for compulsory purchase of a minimum of 100 rolls of the product per month by the
stockists. (As the quantity required to be compulsorily bought did not depend upon the actual demand in the
market and, as such, if the demand be less than 100 rolls per month then it would tantamount to dumping of
unwanted quantity of goods)—Fibreglass Pilkington Ltd557
— A provision in the agreement requiring the dealer (held by the Commission to be a soleselling agent) to maintain
two months’ stocks does not amount to full-line forcing attracting clause (b), in as much as non-availability of a
particular item at a particular time and consequential delay in the supply of such item on demand is likely to
cause disruption in the use of costly machines needed for drilling in a sophisticated construction and mining
projects—Sandvik Asia Ltd558
— Re Radhakrishnan International School,559 the forcing of its students to take at least one full booklet consisting
of 20 “Fate tickets” worth Rs 5 each and recovery of the value of the unsold tickets from the students as a part of
the school fees was held to be restrictive trade practice in terms of section 33(1)(b) read with section 2(o)(ii).
— Re Hindustan Vaccum Glass Ltd,560 it was held that fixation of sales targets for its selling agents and the
obligation cast on them to ensure a minimum monthly take-off renewable every six months, and that the
agreement for supply of goods was liable to be terminated without notice at the Company’s discretion if the off-
take fell short of the minimum quantity was held to be hit by section 33(1)(b).
— Requiring purchase of detergents like Surf, Rin and Laundry soaps which are slow moving items with toilet soaps
like Lux, Rexona and Liril which are in great demand. (The Commission observed that it is merely a case of use
of one’s market power to dispose of products which do not have a genuine competitive edge over similar
products manufactured by others and such a practice is bound to distort competition.)—Hindustan Lever Ltd561
— Charging of joint advertisement rates for publication in different issues of the Daily Newspaper—Statesman,562
(A contrary view was, however, taken Re Mathrubhumi).563
— Re Mangalore Refinery and Petrochemicals Ltd,564 the Commission held that composite issue of non-convertible
debentures and partially convertible debentures does not amount to a restrictive trade practice of tie-up under
clause (b) of section 33(1).
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Tie-up was not held as restrictive by the MRTPC in the following cases:
— Meecon Pvt Ltd v Premier Automobiles Ltd565 Insistence of the manufacturer that an air conditioner can be fixed
in the car only by an authorised dealer during the warranty period, does not amount to tie-up, as the condition is
for the period of warranty only and that, too, is to ensure that the job of installing an air conditioner does not
affect the performance of the car, considering that fixing the air conditioner would be intermeddling with the
engine of the car, which requires trained technicians to undertake it. (Commission, in this case, relied on the
judgement in Mahindra & Mahindra Ltd v UOI566 that every restraint in commercial activities is not to be
regarded as impermissible under the law and has to be tested on the touch-stone of reasonableness.)
— Shree Sivakami Computer Services Pvt Ltd v DCM Data Products (a unit of DCM Ltd):567 Refusal to sell spares
for data processing machines (DCM Galaxy/4) by its supplier except when the buyer had entered into a
maintenance agreement or is on call-service, which was optional at the volition of the buyer of the machine, is
not a restrictive trade practice of tie-up. [The Commission held this view because (i) in view of the restriction
imposed under the Import and Export Policy of the Government, the Spare Parts and accessories imported by the
respondent would be just sufficient to meet its obligations under the maintenance agreement or under call-service
scheme, (ii) the respondent company is not engaged in the business of purchase and sale of Spare Parts and
accessories of DCM Data processing machines as dealer, (iii) the standard agreement under which the sale of the
machine was made, inter alia, specified that the respondent, if requested, will provide the purchaser with
maintenance service for machine and repair or replacement of parts as long as they are generally available on the
basis of the prices, terms and conditions prevailing at that time, (iv) the respondent had offered to disclose the
names of foreign suppliers from whom the spares and parts could be imported and there were certain spares
which were available in the Indian market and could be easily procured, and (v) under the import and export
policy of the Government actual users were permitted to apply for licence for import of non-permissible spares of
any indigenous plant, machinery or equipment having imported components.]
— Re Machinery Manufacturers Corp Ltd,568 which is engaged in the manufacturing and marketing computers, an
educational Institute imparting practical training in computer service alleged that the respondent company is
tying-up after-sales service with sale of computers and manipulating the maintenance charges. After inquiry,
MRTPC held that the respondent company was not indulging in any restrictive trade practice due to the following
reasons:
(i) There was no tie-up except that a purchaser of the computer system was left with no other choice but to enter
into an annual maintenance contract with the respondent, in the absence of drawings of the system which the
respondent refused to part with and due to the consequent inability of a third engineer called for repairs to
detect the fault in the machine, (ii) Each Computer system was a highly sensitive machine, with its own
integrated circuitry and certain unique features of design and structure (iii) Any outside agency other than the
manufacturer, might not be able to locate a fault or defect in a computer system or render efficient after-sales
service merely if the manuals and drawings of the particular system were made available to that agency, (iv)
After-sales service maintenance involved replacement of defective components compatible with the
particular computer system, (v) The refusal to disclose to the customer the circuit designs, drawings and
other unique features of a particular computer system was not violative of any provisions of the MRTP Act,
1969 as the technical know-how of a manufacturer was his intellectual property which he was not obliged to
part with under any law, (vi) As regards allegation of manipulation of charges for maintenance service,
substantial evidence was not available and the practice was not found to be falling within section 2(o).
Further, the Commission observed that considering the paucity of evidence and the paramount need for
quick development of computer industry and urgent need for introduction of computerisation in
industry, public utilities and offices, and indeed in every field, they had erred on the side of caution in
deciding the issues involved in favour of the respondent.
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— Re Orient Paper and Industries Ltd,569 the respondent company offered to its preference shareholders the option
of conversion of their shares into debentures, which carried with it an obligation to buy an additional debenture
for cash at par. The tie-up of purchase of one debenture in cash as a pre-condition to the conversion was alleged
to attract section 33(1)(b) of the Act. The Commission held that the option accorded to the existing preference
shareholders to buy debentures with certain condition did not amount to a tie-up under section 33(1) (b) of the
MRTP Act, 1969 as—(i) the issue of debentures was with the consent of the shareholders obtained in general
body meeting and with the approval of the Controller of Capital Issues; (ii) the respondent company appeared to
have issued the debentures with a view to giving some relief to the preference shareholders who were getting
extremely low return on their investments; (iii) there was no compulsion on the existing preference shareholders
to accept the offer, as a number of them had not accepted the offer and debentures unsubscribed by them were
offered to others; (iv) the rights of such preference shareholders had not been withdrawn or distorted as a result of
the issue of the debentures and they could continue to hold on to their shares.
In following cases, the MRTPC held that the impugned agreement did not involve tying arrangement:
— Obligation of minimum guaranteed turn over or sales target, as mutually agreed between the manufacturer and its
dealers—Ex-Cell-O India.570
— Imposition of obligation on the dealers to stock and display in their show-rooms goods (without specifying the
kind thereof) of certain minimum value—Steel Age Industries Ltd571
— Stipulating a condition in the agreement entered into by a manufacturer with its distributors/stockists, requiring
them to maintain sufficient quantity of spares for all equipments and machines produced by the respondent and
sold by them. (The Commission noted that neither the quantity of goods which the distributors/stockists must
maintain is specified in the agreement nor there is any hint of full-line forcing or tie-up therein and there was no
complaint from any stockist or distributor that the respondent had dictated terms in respect of the quantum of
stock of spares required to be maintained by him. Further, it is common prudence that a distributor or stockist
must maintain adequate stock of spares of the machinery which he sells to his customers so that when the
machinery requires repairs or replacement of any spare part, the customer is assured of immediate remedial
action, and any hold up due to absence of spares is, undoubtedly, bound to cause not only inconvenience but also
escalation of costs—Atlas Copco (India) Ltd572
In any tying arrangement it is, however, necessary to prove that (i) the products involved in the alleged arrangement are
distinct and separate items, (ii) the buyers of the products recognise them as such, and (iii) the main (tying) product and
other products have distinct and separate markets. If by usage of the trade or practice in vogue in the industry to which
they belong, the various products in question are sold together as a combined item, there will be no tie-up.
There should be adequate evidence of tie-up. For example, merely because a good percentage of cooking gas supplies were
accompanied by the sale of hot plates, it did not ipso facto suggest that those customers were compelled by the supplier of
gas to purchase hot plates against their volition. Such an inference would be too remote a possibility for the purpose of
driving home the charge of tie-up sales—Pragati Flame.573
In business circles, tying arrangements are sought to be justified under the following circumstances:—
— For the protection of the seller’s goodwill. For instance, a manufacturer of television sets tying the servicing
thereof in the contract of sale.
— Where the seller has a legitimate interest in assuring the proper functioning of complex sophisticated equipment,
which has been newly developed.
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— For optimum and advantageous utilisation of two (or more) products, where separate sales thereof have led to
widespread consumer dissatisfaction.
— Where substitute(s) for the tied product are not available in the market in adequate quantity.
Case Law in USA
The Sherman Act, 1890, the Clayton Act, 1914, and the Federal Trade Commission Act, 1914 all deal with the problem of
tying arrangements. Under section 1 of the Sherman Act, 1890 a tying agreement can be an unreasonable restraint of trade.
Under section 2 thereof, a tying arrangement may constitute monopolisation or attempted monopolisation. The statutory
provision specifically addressed to the tying problem is section 3 of Clayton Act, 1914. Section 5 of the Federal Trade
Commission Act, 1914 also deals with tying agreements.
In Fortner Enterprise Inc v US Steel Corp, the Court made these observations as to the showing which had to be made
regarding power in the tying product:
Decisions rejecting the need for proof of truly dominant power over the tying product have all been based on a recognition that
because tying arrangements generally serve no legitimate purpose that cannot be achieved in some less restrictive way, the
presence of any appreciable restraint on competition provides sufficient reason for invalidating the tie. Such appreciable restraint
exists whenever the seller can exact some power over some of the buyers in the market, even if his power is not complete over
them.574
The Courts in the USA have repeatedly held that tying arrangements are per se unlawful under section 1 of the Sherman
Act, 1890 and section 3 of the Clayton Act, 1914 or both for they “serve hardly any purpose beyond the suppression of
competition”.575 They are unreasonable in, and of themselves, whenever a party has sufficient economic power with
respect to the tying product to appreciably restrain free competition in the market for the tied product, and a “not
insubstantial” amount of inter-State commerce is affected.576
It was perhaps in International Business Machines Corp case,577 that the courts in the USA began to turn towards a per se
approach in tying arrangements. Dismissing the IBM’s appeal, the court held that leasing of tabulating and other machines
manufactured and sold by it upon the condition that the lessees shall use with such machines only tabulating cards
manufactured by appellant constituted a violation of section 3 of the Clayton Act, 1914. The Court noted that the appellant
made and sold 3000 million cards annually, 81% of the total and its rival the remaining 19%. These facts and others left no
doubt that the effect of the condition in appellant’s leases “may be to substantially lessen competition”, and that it tended
to create monopoly, and had in fact been an important and effective step in the creation of monopoly.
International Salt Co v US,578 was probably, the first case in which the court, for the first time, used per se language. The
decision affirmed a summary judgement that leases of patented salt dispensing machines violated section 3 of the Clayton
Act, 1914 and section 1 of the Sherman Act, 1890 in that they obligated the lessee to use the machines only with salt
purchased from the lessor. In 1944, applicant sold salt for about $5,00,000 for use in the machines. That was enough. The
Court said that “the volume of business affected by these contracts cannot be said to be insignificant or insubstantial and
the tendency of the arrangement to accomplishment of monopoly seems obvious”. The Court also said that “it is
unreasonable, per se, to foreclose competition, from any substantial market”. It was decided that “The question whether
market power in the tying product can be presumed based on the existence of a patent on that product is currently pending
before this Court.”
In the case of US v Jerrold Electronics Corp579 the Court held:
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With the extension and continual operation of the system, the anticipated problems began to arise. They were of such a magnitude
that Shapp’s organisation was completely tied up analysing them and designing new equipment to cope with them. Also, there
were several instances in which aspiring community system operators had obtained Jerrold’s standard equipment through its
distributors and attempted to install systems with unsatisfactory results. Under these circumstances, it was decided that no Jerrold
equipment would be sold for community purposes until gear adequate to the task had been developed... The Government contends
that Jerrold’s policy and practice of selling on a system basis only and of making sales only in conjunction with a service contract
constituted unlawful tie-ins in violation of § 1 of the Sherman Act (15 U.S.C.A. § 1) and § 3 of the Clayton Act (15 U.S.C.A. §
14). It also asserts that the provision in the 103 series contracts for the exclusive use of Jerrold equipment for the addition of extra
channels to the system, and the provision in all of the contracts not to install unapproved, non-Jerrold equipment, violated these
sections of the anti-trust laws.580
In Times-Picayune Publishing Co v US,581 the court held that there was no violation of section 1 of Sherman Act, 1890
where products were identical and the market the same. Thus, requiring purchases of advertising space in the morning
newspaper to buy space in the evening newspaper of the same publisher was held as not a tying arrangement. The Court
said that “the common core of the adjudicated unlawful tying arrangement is the forced purchase of a second distinct
commodity with the desired purchase of a dominant “tying” product, resulting in economic harm to competition in the
“tied” market. Here, however, two newspapers under single ownership at the same place—sell indistinguishable products
to advertisers; no dominant “tying” product exists (in fact, since space in neither the Times-Picayune nor the States can be
bought alone, one may be viewed as “tying” as the other); no leverage in one market excludes sellers in the second,
because for present purposes the products are identical and the market the same—”. The Court further observed that “the
record in this case—does not disclose evidence from which demonstrably deleterious effects on competition may be
inferred—”.
The key question of the validity of tying agreements again came up before the court in US v Loew’s Inc,582 The court after
examining the whole issues held that the tying agreements were illegal and violative of the Sherman Act, 1890. The
complainants asserted that the defendants had, in selling to television stations, conditioned the license for sale of one or
more feature films upon the acceptance by the station of a package or block containing one or more unwanted or inferior
films. No combination or conspiracy among the distributors was alleged. The sole claim of illegality rested on the manner
in which each defendant had marketed his product. The successful pressure applied to television station customers to
accept inferior films along with desirable pictures was the gravamen of the complaint. The Court said that power to
appreciably restrain competition is “presumed when the tying product is patented or copyrighted”, and, when there is no
patent or copyright, power can be shown by evidence of “the tying product’s desirability to consumers or from uniqueness
in its attributes”.
In FTC v Brown Shoe Co,583 Brown, the country’s second largest shoe manufacturer, owned some retail shoe stores. In
addition, some 650 retail stores were considered by the Court to be “franchised” Brown stores, although only 259 of these
had actually executed franchise agreements. Such agreements provided that the store “will concentrate” on Brown shoes in
return for Brown’s provision of architectural plans, merchandising records, services of a Brown field representative, and
group insurance at lower rates than the retailer could individually obtain. The participating stores concentrated on Brown
Shoes in varying degrees and Brown admitted that it did not grant these benefits to retailers who did not participate in the
franchise programme. There were 70,000 to 1,00,000 retail shoe outlets in the nation. The Commission held the franchise
programme in violation of Federal Trade Commission Act, 1914 (section 5) and Clayton Act, 1914 (section 3). In the
Court of Appeals,584 the appellate court reversed the order of FTC. The Supreme Court upheld the Commission’s order
and observed that:
Brown’s franchise program obviously conflicts with the central policy of both section 1 of the Sherman Act and section 3 of the
Clayton Act against contracts which take away freedom of purchasers to buy in an open market. ... We reject the argument that
proof of competitive effects must be made for ... The Commission has power under section 5 to arrest trade restraints in their
incipiency without proof that they amount to an outright violation of section 3 of the Clayton Act or other provisions of the anti-
trust laws. ... The Commission acted well within its authority in declaring the Brown franchise program unfair whether it was
completely full blown or not.
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Justification most often advanced in defence of a tying arrangement is the protection of goodwill of the manufacturer of the
tying device. This plea, however, fails in usual situation because the specification of the type and quality of the product to
be used in connection with the tying device is protection enough. The only situation, in which the protection of goodwill
necessitating the use of tying clause, could be asserted, where specifications for a substitute would be so detailed that they
could not practicably be supplied.585 It was held that the sale of a patented ignition system on agreement that the
contractee use or sell only the manufacturer’s units or parts with the system did not violate section 3 of the Clayton Act,
1914 as the restriction was necessary protection of manufacturer’s goodwill. Where others are capable of manufacturing
the tied-in product suitable for use in connection with the tying-product, the defence of justification fails.586 Tying of
computer memory devices and central processing units was not held as justified for reasons of goodwill or customer
preference, because less restrictive alternatives to the tie-in were available.587 Where machines leased were of a very
complicated nature, it was not objectionable to require the lessee to obtain all replacement parts from the lessor.588
Likewise, the possibility that boat instrument panels and stern drive units were technologically interdependent might
justify tying the sale of instruments to the units.589 The required use of the tied-up product may be justified on the basis
that the use of other products adversely affects the mechanical operation of the product (e.g., required use of oil or parts,
where mechanical operation of a manufacturer’s motor-cycle could be adversely affected). A manufacturer has the
undoubted right to require a dealer not to sell as genuine parts, any parts that are not genuine inasmuch as such a
requirement is designed to maintain the goodwill of the public toward the manufacturer’s products.590 An agreement by a
company, by which was given the right to use a trade name as part of its company name, not to deal in any product which
was a substitute for the product bearing that trade name was held not to be violative of the law.591 Arrangement made
under which gasoline pumps were leased to retailers on the condition that the lessee use only the lessor’s brand of gasoline
through such pumps were held lawful.592 Tying the sale of storage silos to unloaders was justified on business grounds by
a record of complaints from customers (50% dissatisfied customers over a seven year period), who had been allowed to
buy the unloaders alone; the principal reasons for the complaints were that in spite of the seller’s educational efforts, its
customers did not install the unloaders in containers having correct mechanical tolerances, or their containers lacked a
sufficiently slippery inside surface, comparable to seller’s glass lining, to allow the particular material to have the gravity
down feed needed to permit the unloader to function.593 A manufacturer’s policy practice of selling its community
television antenna system equipment only as full systems and only in conjunction with a compulsory service contract was
reasonable during the period that CA TV Systems were first being installed, but not thereafter, in view of customer
inexperience in the field, inadequate customer financing, devotion of the manufacturer of most of its reserves in developing
the new industry, and the need for co-operation with public institutions in various areas; and without the policy, a wave of
CA TV system failures might have resulted with disastrous results to the manufacturer. An automobile manufacturer’s
requirement that dealers should sell only genuine parts and not to sell or use in the repair of motor vehicles manufactured
by the manufacturer spurious parts, did not violate section 3 of the Clayton Act, 1914; and particularly when the records
showed that competition in the sale of automobile replacement parts had substantially increased through the period during
which the contract provisions complained of were in force. In this context, it was also observed that even though it may be
that competition would have increased more rapidly in the absence of such provision, such was not the substantial
lessening of competition, which the Clayton Act, 1914 was designed to protect.594 Thus, in essence, the justification for
tying arrangement to provide adequate service and proper repair parts is a question of fact.595 Further, mere limitation on
the supply of products by a manufacturer did not necessarily lead to an inference of tie-up.596 It was held that a
distributor’s tying arrangement allegation against the manufacturer was without merit, since the manufacturer merely
limited the distributor to dealing in some products (foundry abrasives), rather than tying abrasives to equipment and parts
and the manufacturer did not condition the sale of the more marketable one upon the purchase of the other, a sine qua non
in a charge of tie-up.
Some other instances of tying arrangements in the USA are the following:
— A news association requiring a newspaper to subscribe to both its morning and evening papers.597
— A Sole Distributor’s refusal to deal with a retailer because the retailer refused to display and/or sell unwanted
goods supplied to him by the distributor.598
— Requiring advertises over TV to purchase advertising space in newspapers.599
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Case Law in EU
In the Microsoft case,600 the European Commission initiated antitrust proceedings against Microsoft for anti-competitive
tying. The Commission stated that Microsoft’s practice of tying Internet Explorer to the Windows operating system
restricts the competition between competing web browsers, reduces consumer choice, and infringes the EC Treaty rules on
abuse of a dominant position under Article 82 of the Treaty.
In Stergios Delimitis v Henninger Bräu AG601 it was stated that:
in order to assess whether the existence of several beer supply agreements impedes access to the market as so defined, it is further
necessary to examine the nature and extent of those agreements in their totality, comprising all similar contracts tying a large
number of points of sale to several national producers (judgment in Case 43/69 Bilger v Jehle).602 The effect of those networks of
contracts on access to the market depends specifically on the number of outlets thus tied to national producers in relation to the
number of public houses which are not so tied, the duration of the commitments entered into, the quantities of beer to which those
commitments relate, and on the proportion between those quantities and the quantities sold by free distributors ... If an examination
of all similar contracts entered into on the relevant market and the other factors relevant to the economic and legal context in which
the contract must be examined shows that those agreements do not have the cumulative effect of denying access to that market to
new national and foreign competitors, the individual agreements comprising the bundle of agreements cannot be held to restrict
competition within the meaning of Article 85(1) of the Treaty. They do not, therefore, fall under the prohibition laid down in that
provision.
In the case of BPB Industries Plc and British Gypsum Ltd v Commission of the European Communities,603 system tying
selected merchants in Great Britain to BG was held to constitute a serious abuse of BG’s dominant position, in particular
because, first, most of the payments form a pattern in which BG offered the scheme to large customers of Iberian and,
secondly, the payments were made in consideration of exclusive purchase ties.
In the case of Langnese-Iglo GmbH v Commission of the European Communities,604 the Commission held:
Where it is necessary to assess the impact on access to the market of networks of exclusive agreements, account must be taken of
the number of sales outlets tied to the producers in relation to the number of retailers not so tied, the quantities to which those
commitments relate and the proportion between those quantities and those which are sold through retailers that are not tied; it must
also be borne in mind that the extent of tying-in brought about by such networks, important though it may be, is only one factor
amongst others pertaining to the economic and legal context in which the assessment must be made.
Consumer Protection Act, 1986
Consumer Protection Act, 1986, as originally framed, did not cover complaints against Restrictive Trade Practices and did
not provide redressal to the consumers against such practices. The Consumer Protection (Amendment) Act, 1993 has,
however, extended the jurisdiction of this Act by covering the RTP vide Clause (nnn) of section 2 of the Consumer
Protection Act, 1986. Insofar as the restrictive trade practice is concerned, there is concurrent jurisdiction in the
Competition Commission and Consumer Disputes Redressal Authorities set up under the Consumer Protection Act, 1986.
Thus, an aggrieved person can approach any of these two forums, for redressal of his grievance.
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SUB-SECTION (4)—CLAUSE (B)/(C)—EXCLUSIVE SUPPLY AND DISTRIBUTION
AGREEMENT
The exclusive supply and distribution agreement has been defined in Explanations (b) and (c) to sub-section (4). An
exclusive dealing arrangement is one, where two or more enterprises agree that one or both will deal exclusively with the
other and refuse to deal with third parties in respect of a commodity or class of commodities, a specified service or class of
services. In its report on collective discrimination, the UK Monopolies Commission classified exclusive dealing
agreements into three categories;
(i) the sellers agree to sell only to certain buyers;
(ii) the sellers agree to sell to only certain buyers in exchange for agreements by those buyers to buy only from those
sellers;
(iii) agreement among buyers to buy only from certain sellers.
Exclusive dealing agreements originate principally to cater to the manufacturer’s need to promote his branded products at
all stages of distribution, down to the consumer. When a manufacturer indulges in the practice of exclusive dealing, his
competitors are prevented access to that market and the dealers are denied the freedom to handle competing products. In
this process, the consumer is also restricted in his choice among the number of competing products.
Exclusive dealing arrangement may be resorted for maintaining or strengthening the already established monopolistic
position. Also, when a cartel manages to include a high proportion of the important distributors/dealers within such
arrangement, the entry of a newcomer may be effectively blocked. Such trade practice may, then, substantially lessen
competition, by limiting the channels of distribution for the independent competitors, and it may tend to create a monopoly
in that line of business. The technique and effect of exclusive dealing are, thus, described by the US Attorney-General’s
National Committee Report:605
Unlike tying agreements, exclusive arrangements may in fact promote vigorous competition and need not signal coercive market
power in the seller. They may be preferred by customers as assuring a steady adequate source of supply, affording protection
against price fluctuations. For the seller, an exclusive arrangement may reduce selling expenses and encourage an evenly scheduled
economically planned production. Above all, exclusive arrangements can protect the market position of weaker competitors against
more powerfully entrenched rivals and also enable new entrants to gain a foothold by assuring a definite volume of business in the
beginning stages.
On the other hand, exclusive arrangements may also clog competition in the channels of distribution. To the extent a seller blankets
the market with exclusive arrangements, to that extent the opportunity of rivals to compete is restricted. Whenever a seller through
pre-empting access to consuming markets restricts his rivals’ opportunities to compete, the potential impairment of the competitive
process readily appears ...
Exclusive dealing arrangements, which, by and large, are bilateral and are linked up with territorial restriction, are mostly
prevalent in India. This practice is resorted to, in one or more, of the following ways:
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(i) Manufacturer may require his dealers or distributors to purchase goods exclusively from him, and restrain them
from dealing in competitors’ products.
(ii) Manufacturer may agree not to sell the goods to other buyers, or if sold to other buyers it will be only on terms
and conditions which will be favourable to the exclusive buyer; the exclusive buyer, in turn, may promise not to
deal in competitors’ products.
(iii) Under a reciprocal arrangement, the exclusive buyer may agree to buy certain goods from the manufacturer on
the condition that the latter would also buy certain other goods only from the former.
Exclusive dealing may be stipulated in a written agreement, but more often than not, the dominant manufacturer enforces
exclusive dealing by oral instructions to its dealers under coercion or threat that dealership would be cancelled. An
exclusive dealing arrangement may, however, not be construed as restrictive trade practice, if the effect on competition is
too remote to be substantial, or if the transaction is in the form of a bona fide agency agreement,606 or the arrangement is
necessitated because of any market exigency and lasts for a short period of time. Exclusive dealing may not always be a
restrictive trade practice; its adverse effect on competition has to be proved to hold it as such. A manufacturer may indulge
in exclusive dealing for genuine reasons, e.g., to reduce the cost of distribution, to provide better after-sales service, to
ensure supply of genuine spare parts to the consumers, to exercise effective control over the dealer in the matter of price
which may be charged to the consumers and timely delivery to maintain his business reputation and goodwill in the
commercial circles. Nevertheless, exclusive dealing has a tendency to foreclose the outlets to the competitors, adversely
affecting competition in the relevant market and which may eventually become prejudicial to public interest. Therefore,
unless the advantages, arising out of exclusive dealing arrangement are overwhelming and enure to the consumers, it may
not be treated as not restrictive.
Exclusive Supply Agreements [Section 3(4)(b)]
“Exclusive supply agreement” includes any agreement restricting in any manner the purchaser in the course of his trade
from acquiring or otherwise dealing in any goods other than those of the seller or any other person [Explanation (b) of
section 3(4)]. It corresponds to section 33(1)(c) of the MRTP Act, 1969 and was treated as a restrictive trade practice.
A manufacturer, who offers a sales contract conditional on the buyer’s accepting not to deal in the goods of a competitor,
may have exclusive supply agreement.
The purpose in forbidding contracts of sale made upon the agreement or understanding that the purchase shall not deal in the goods
of the seller’s competitor, which may adversely affect competition, is not to prevent the mere possibility of that consequence, but
to prevent the agreement, which, in circumstances, will probably affect competition.607
The European Commission in its “Guidelines on Vertical Restraints”608 highlighted important factors to be considered
while assessing possible adverse effect on competition:
1. The main competition risk of exclusive supply is anticompetitive foreclosure of other buyers. The market share of the
buyer on the upstream purchase market is obviously important for assessing the ability of the buyer to “impose”
exclusive supply which forecloses other buyers from access to supplies. The importance of the buyer on the downstream
market is however the factor which determines whether a competition problem may arise. If the buyer has no market
power downstream, then no appreciable negative effects for consumers can be expected.609
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2. The higher, the tied supply share and the longer the duration of the exclusive supply, the more significant the foreclosure
is likely to be.610
3. The market position of the competing buyers on the upstream market is important as it is only likely that competing
buyers will be foreclosed for anti-competitive reasons, i.e., to increase their costs, if they are significantly smaller than
the foreclosing buyer. Foreclosure of competing buyers is not very likely where these competitors have similar buying
power and can offer the suppliers similar sales possibilities. In such a case, foreclosure could only occur for potential
entrants, who may not be able to secure supplies when a number of major buyers all enter into exclusive supply
contracts with the majority of suppliers on the market.611
4. Entry barriers at the supplier level are relevant to establishing whether there is real foreclosure. In as far as it is efficient
for competing buyers to provide the goods or services themselves via upstream vertical integration, foreclosure is
unlikely to be a real problem. However, often there are significant entry barriers.612
5. Countervailing power of suppliers is relevant, as important suppliers will not easily allow themselves to be cut off from
alternative buyers. Foreclosure is therefore, mainly a risk in the case of weak suppliers and strong buyers. In the case of
strong suppliers the exclusive supply may be found in combination with non-compete.613
6. Lastly, the level of trade and the nature of the product are relevant for foreclosure. Anti-competitive foreclosure is less
likely in the case of an intermediate product or where the product is homogeneous. Firstly, a foreclosed manufacturer
that uses a certain input usually has more flexibility to respond to the demand of his customers than the
wholesaler/retailer has in responding to the demand of the final consumer for whom brands may play an important role.
Secondly, the loss of a possible source of supply matters less for the foreclosed buyers in the case of homogeneous
products than in the case of a heterogeneous product with different grades and qualities. For final branded products or
differentiated intermediate products where there are entry barriers, exclusive supply may have appreciable anti-
competitive effects where the competing buyers are relatively small compared to the foreclosing buyer, even if the latter
is not dominant on the downstream market.614
Cases under the Competition Act, 2002
In the case involving Delhi Metro Rail Corp Ltd,615 (DMRCL), it was alleged by one M/s Pandrol Rahee Technologies
Pvt Ltd, [a joint venture between Pandrol International Ltd, UK and Rahee Industries Ltd, Kolkata] that DMRCL and
others were involved in exclusive dealing for supply of rail fastening systems and ballast less track in metro rails in favor
of Patil Vossloh Rail Systems Pvt Ltd [Joint Venture between M/s Patil Group of Industries, Hyderabad and M/s Vossloh
Rail System (Gmbh Germany)]. It was further alleged that DMRCL while providing consultancy services to upcoming
metro rail projects specifically nominated Vossloh for providing fastening systems and ballastless track. Exclusive dealing
in favor of Vossloh was also alleged against Bangalore Metro Rail Corporation Ltd (BMRCL) and Kolkata Metro Rail
Corporation Ltd (KMRCL). It was further complained that the tender issued by the Ministry of Railways for rail fasteners
for metro rail projects also confined the actual choice to rail fasteners issued by Patil Vossloh and considering the
restricted nature of the market where government-owned corporations made all their purchases on the basis of standards
fixed by the Ministry, the allegation was that these corporations as well as the Ministry had conspired to only use the
product made by one manufacturer.
The Commission reiterated the legal principle on public procurement contracts. Emphasis was laid on decision of the
Supreme Court in Nagar Nigam v Al Faheem Meat Exports Pvt Ltd:616
It is well settled that ordinarily the State or its instrumentalities should not give contracts by private negotiation has been carried
out by the High Court itself, which is impermissible. We have no doubt that in rare and exceptional cases, having regard to the
nature of the trade or largesse or for some other good reason, a contract may have to be granted by private negotiation, but
normally that should not be done as it shakes the public confidence. The law is well-settled that contracts by the State, its
corporation, instrumentalities and agencies must be normally be granted through public auction/public tender by inviting tenders
from eligible persons and the notification of the public-auction or inviting tenders should be advertised in well known dailies
having wide circulation in the locality with all relevant details such as date, time and place of auction, subject-matter of auction,
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technical specification, estimated cost, earnest money Deposit, etc. The award of Government contracts through public-
auction/public tender is to ensure transparency in the public procurement, to maximise economy and efficiency in Government
procurement, to promote healthy competition among the tenderers, to provide for fair and equitable treatment of all tenderers, and
to eliminate irregularities, interference and corrupt practices by the authorities concerned. This is required by Article 14 of the
Constitution. However, in rare and exception cases, for instance during natural calamities and emergencies declared by the
Government. Where the procurement is possible from a single source only; where the supplier or contractor has exclusive rights in
respect of the goods or services and no reasonable alternative or substitute exists; where the auction was held on several dates but
there were no bidders or the bids offered were too low, etc., this normal rule may be departed from and such contracts may be
awarded through ‘private negotiations’.
20. In the second case i.e., Sachidanand Pandey v State of West Bengal,617 Justice O. Chinnappa Reddy, after considering various
decisions of the apex court, summaried the legal propositions in the following terms: On a consideration of the relevant cases cited
at the bar the following propositions may be taken as well established: State owned or public owned property is not to be dealt with
at the absolute discretion of the executive. Certain precepts and principles have to be observed. Public interest is the paramount
consideration. One of the methods of securing the public interest when it considered necessary, to dispose of a property by public
auction, or by inviting tenders. Though that is the ordinary rule, it is not an invariably rule. There may be situations where there are
compelling reasons necessitating departure from the rule but then the reasons for the departure must be rational and should not be
suggestive or discrimination. Appearance of public justice is as important as doing justice. Noting should be done which gives an
appearance of bias, jobbery or nepotism. The public property owned by the State or by an instrumentality of the State should be
generally sold by public auction or by inviting tenders. This Court has been insisting upon that rule, not only to get the highest
price for the property but also to ensure fairness in the activities of the State and public authorities. They should undoubtedly act
fairly. Their actions should be legitimate. Their dealings should be above board. Their transactions should be without aversion or
affection. Nothing should be suggestive of discrimination. Nothing should be done by them which gives an impression of bias,
favouritism or nepotism. Ordinarily, these factors would be absent if the matter is brought to public auction or sale by tenders. That
is why the Court repeatedly stated and reiterated that the State owned properties are required to be disposed of publicly.
The Commission also noted some observations on the need of transparency in public procurements in India.618 The
Director General who found prima facie that the metro rail corporations as well as the Ministry had contravened section
3(4) (entering into agreement that can adversely affect competition), section 4(2)(a)(i) (imposing discriminatory or unfair
conditions in purchase of goods), and section 4(2)(c) of the Competition Act, 2002. The Director General took the view that
where government policy has the effect of ensuring that only a tender for a proprietary product is issued, as opposed to a
general tender, it would result in both an anti-competitive agreement with the chosen supplier as well as the abuse of a
dominant position. The commission, however, did not find any violation of section 3(4). The Commission, in its order, has
gone with the view that the Ministry as well as the metro rail companies, being consumers in this case, cannot be held to
have fallen afoul of competition law. It noted:
82. Competition concerns arise only in a particular market and for any market to exist, there has to be at least one producer/seller
and one consumer/buyer who exchange a product or service for a price. Further, the market exists because the product or service
has certain embedded utility and hence value. Competition laws are meant to ensure that competing producers/sellers do not
destroy free and fair competition that should exist amongst them or do not exploit their consumers or competitors due to market
power. This principle applies to all entities within any production chain. For any given product or service, the production chain can
be said to end where the last transaction takes place and after which point the utility of the product or service is consumed by the
person who buys it. The buyer may itself be producing some other product or service which is not part of the specific production
chain of the first product, which is, a consumable for the buyer. But here, the buyer would have the status of a consumer.
83. A consumer must be allowed to exercise its consumer choice and freely select between competing products or services. This
right of consumer’s choice must be sacrosanct in a market economy because it is expected that a consumer would decide what is
best for it and free exercise of consumer choice would maximise the utility of the product or service for the consumer. For an
individual, that consumer’s choice is based on personal assessment of competing products or services, their relative prices or
personal preferences. For any other type of consumer, this process of decision making in exercise of consumer’s choice is more
structured and reflected in procurement procedures. Such a consumer may use experts or consultants to advise, do its own technical
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assessment, take advice of others it may trust or even purchase from known and reliable sources. The process of such decision
making may result in purchase by nomination or limited tender or open tender. Normally, open tenders without a brand bias are
desirable as it may give the best value for money. However, each of the purchase process is acceptable and valid as a process of
decision making. The consumer is the best judge. In case of public entities, the entity is a representative consumer on behalf of the
public. There are administrative mechanisms in place for carrying on the due process of exercising consumer’s choice on behalf of
the public. Of course, there could be competition concerns in rare cases where a monopoly buyer exercises the option in an
anticompetitive manner but the present case is not in that category. Here the exercise of the option by various Metro projects has
been done in the interest of reliability and safety.
Again, in the case filed against ACI Worldwide Solutions Pvt Ltd,619 it was alleged that the ACI’s stipulation to its
BASE24 customers to obtain professional services only from it or entities authorised by it amounted to an exclusive supply
agreement as provided under section 3(4)(b) of the Competition Act, 2002. However, the Commission ruled out the
allegation since ACI Banks were the buyers/consumers and were not a part of the production chain and therefore, the
agreement did not fall within the purview of section 3(4) of the Act.620
In the Intel Semi-conductor case,621 M/s ESYS Information Technologies Pvt Ltd, appointed as an authorised distributor
of Intel’s products, alleged that despite complying with all the terms and conditions of the Agreement and achieving more
than the sales target, Intel terminated the Agreement with the Informant on 23 July 2010 without giving any cogent reason.
As per the Informant, Intel terminated the Agreement because despite pressure from Intel not to deal with the products of
its competitors, the Informant started dealing with the products of M/s Advance Micro Devices (AMD), a competitor of
Intel, from late 2009 and launched its machines with AMD chips with wide publicity in February, 2010. Denying the
distributors not to deal with the products of its competitors, Intel was alleged to contravene the provisions of section
3(4)(b) of the Competition Act, 2002. However, it was found by the Director General report, the Agreement did not
prohibit and rather provided for the distributors to deal in competing products of Intel subject to intimation. Further, OEMs
and other distributors were dealing with the products of the competitors of Intel. No material or evidence was found that
Intel prevented ESYS from dealing with the products of its competing companies. In fact, the rival of Intel, AMD has also
confirmed to the Director General that they did not come across any instance of exclusivity insisted by Intel in India to its
distributors. Hence, no case of contravention of the provisions of section 3(4)(b) of the Act was made out against Intel.
In the case of Dhanraj Pillay v Hockey India,622 Indian Hockey Federation (IHF) in collaboration with Nimbus Sport was
organising World Series Hockey League (WSH). HI adopted the regulations relating to unsanctioned events and
accordingly modified its Code of Conduct (CoC) Agreement with players to include the clauses related to disciplinary
action such as disqualification from Indian National Team for any participation in unsanctioned events. HI along with FIH
also announced that they intended to introduce their own league in India in 2013. Complaint was filed pertaining to the
alleged imposition of restrictive conditions by HI, on players for participation in un-sanctioned prospective private
professional leagues resulting in undue restrictions on mobility of players and on prospective private professional leagues
leading to denial of entry to competing leagues. It was alleged that CoC Agreement entered by HI with the players was an
exclusive supply agreement and the restrictive conditions included thereunder, constitute a violation of section 3(4) of the
Act. The Commission did not agree with the Director General’s conclusion and held the CoC as a vertical agreement. It
observed:
artist agreement respondent side argument relate under exclusive dealing
10.13.3. The key aspect of a vertical relationship is that the agents in such a relation should be at different stages of the production
chain. Competition concerns in a vertical relationship arise if one of the agent on account of its market power is able to impose
unreasonable restraints on the other, that are likely to cause an appreciable adverse effect on competition. In context of this case,
HI is the buyer of services of hockey players for the production/organisation of any hockey event. This relationship between HI
and the players is, hence, tantamount to a vertical relationship where HI and the players are at different stages of the production
chain. The standards applied to test the effect of vertical restraints on competition have already been spelt out in the Commission’s
Order in case no. 24 of 2011, Sonam Sharma vs. Apple Inc. There the Commission held that for concluding that a vertical
agreement has caused an appreciable adverse effect on competition, the person imposing the vertical restriction should be in a
dominant position and the intent behind the restriction should be foreclosure, without any obvious efficiency justifications.
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The Commission held that the FIH regulations and the restrictive conditions were inherent and proportionate to the
objectives of HI and cannot be fouled on per se basis till there was any instance where they were applied in a
disproportionate manner, for which there was no evidence at present.
10.13.5. a. Sanctioning an event is a regulatory function of sports bodies and cannot be found foul of, per se, for violation of
competition laws. It is necessary to prove that the application of system was not in accordance with sporting objectives. b.
Requirement of NoC does not amount to a blanket restriction to play in other events involving foreign teams/clubs. Requirement of
NOC arises from the efficiency dimensions that it introduces to the game and therefore some restrictive effects can be considered
as proportionate. CoC Agreement not only includes the conditions related to participation in other events, but also includes
standards of behaviour and conduct such as: players are expected not to indulge in verbal/physical abuse towards other
players/officials/members of public; disputing the official decisions; charging towards officials in an aggressive manner; failure of
following dress protocols, hostility towards Anti-Doping Control Test Officer; use of illegal drugs etc. Some of these standards are
critical to the sport and can warrant a ban for life. Including a statement to that effect cannot be fouled unless there is an instance of
disproportionate bans being imposed on players for small breaches.
In the case of Cine Prekshakula Viniyoga Darula Sangh v Hindustan Coca Cola Beverages Pvt Ltd (HCCBL),623 it was
alleged that the agreement entered between HCCBL and INNOX Leisure Private Ltd (ILPL) was in the nature of exclusive
supply agreement. As per the agreement, during the currency of agreement, HCCBPL would act as “preferred beverage
provider” for supply of non-alcoholic beverages to ILPL owned multiplex cinema theatres located in various cities in
India. It was argued by the opposite parties that there was intense competition between suppliers of non-alcoholic
beverages to compete for obtaining such contract with multiplexes and the fact that many multiplex owners like
Adlabs/Big Cinemas, Cinemax and Waves Cinema had been switching over their suppliers periodically was pointed out.
HCCBPL submitted that it was able to enter into such agreements with multiplexes having only 214 screens in India
whereas its competitor PEPSICO had entered into similar agreements with a large number of multiplexes having about 600
screens. Accordingly, it was observed by the Commission, the HCCBL did not have a dominant position in the relevant
market. Also, considering the fact about market share of HCCBL and Pepsi Co, the relevant geographical market could not
be confined to the closed market inside the premises of multiplexes owned by ILPL who is only operating 38 multiplexes
in India having 144 screens. The Commission accordingly concluded in light of submission by HCCBPL that the supply of
products made to multiplexes constituted less than 0.3% of the total supply of such products sold in India and taking into
account the volume of business of total beverages market in India, there could not be appreciable adverse effect on
competition because of exclusive supply agreement between HCCBPL and ILPL or other such organisations unless shown
otherwise on the basis of cogent material.
In the 2011 case of Explosive Manufacturers Welfare Association,624 Coal India entered in to a five year private
agreement with IOCL-IBP for supply of explosives, without inviting any tender. IOCL-IBP was given a quantity
preference of 20% of the total yearly requirement and 10% price preference over the members of IP. It was complained
that this amounted to exclusive supply agreement having appreciable adverse effect on competition. The commission, after
examining the facts and the provisions of section 19(3) of the Act concluded that there was no entry barrier that was
created in the market due to contract with IOCL-IBP since about 80% of the supplies were still outsourced from the
suppliers other than IOCL-IBP. The arrangement did not drive existing competitors out of the market since other
consumers of the product were free to source from any supplier in the market. The suppliers in the market were also free to
supply to other consumers including Coal India. Any supplier, even if it was a new entrant, if otherwise eligible, could
have still participated in the tender process. Arrangement of continued supply of certain minimum quantities of explosives
did not foreclose competition in the market.
In Ajay Devgn Films v Yash Raj Films Pvt Ltd,625 it was alleged that Yash Raj Films before the release of the movie “Ek
Tha Tiger” had put a condition on single screen theaters that if they wanted to exhibit the film Ek Tha Tiger they would
have to simultaneously agree to exhibit the other film Jab Tak Hai Jaan (JTHJ) at the time of Diwali. It was urged that any
single screen theater owner (exhibitor) who did not agree to booking his theater for both the films was not to get the right
to exhibit a single film. It was further urged that while some theaters entered into agreement with the aforesaid parties
some did not agree to this and did not enter into an agreement. Contention raised was that the agreement effectively
ensured that exhibitors only screen one particular film produced by one particular producer to the exclusion of the others in
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the market and therefore it amounted to exclusive supply agreement. However, the Commission observed that firstly the
agreements were voluntarily accepted by the alleged theater owners and it was their decision whether to accept such
agreement or not to accept. This is apart from the fact that these agreements were also for a particular period therefore it
could not be as if the theater owners were coerced not to show any other movie after that period. Thus, such agreement was
not held to be exclusive supply agreement.
In Jindal Steel & Power Ltd v Steel Authority of India Ltd,626 information was filed with the Commission alleging anti-
competitive behaviour of Steel Authority of India Ltd (SAIL) under section 3(4) of the Competition Act, 2002 by Jindal
Steel & Power Ltd (Informant). As per the information, SAIL had entered in to memorandum of understanding with Indian
railways for exclusive supply of rails. According to the informant, the MOU was hit by section 3(4) of the Act as it was an
exclusive supply agreement which causes or likely to cause appreciable adverse effect on Competition since, it prevented
the other suppliers of rails in the market, an opportunity to put forth their bids as no tender was floated by Indian railways.
The informant alleged both anti-competitive agreement and abuse of dominant position by SAIL. Seeing the nature of the
case, the CCI directed the Director General to conduct investigations. The Commission, in agreement with the conclusions
of the Director General, declared that the market of long rails according to the RDSO specification in India is the “relevant
market” in consistency with section 2(t) of the Competition Act, 2002 where demand side replacement (products whose
demand can be substituted with each other) is the decisive factor in sketching the contours of the relevant product. The
Commission referred to a variety of studies on the steel industry which established that in long range products, namely
structurals and rails, there is very little switching in demand. Consequently, structurals and rails cannot be considered as
exchangeable and substitutable products and therefore, the relevant market cannot include both rails and structurals as
raised by SAIL.
However, after agreeing with Director General over relevant market and Enterprise issue, the Commission held that the
MOU between SAIL and IR did not have any appreciable adverse effect on competition because:
(a) Indian Railways in selecting SAIL did not do anything as at that time and it provided safety for bringing in of
RDSO compliant rails which minimises the deal price and the cost of insecurity.
(b) Considering the wielding capacity and the R & D technology, SAIL was more competent supplier than the
Informant, JSPL.
(c) The information on rail market pictures that supply of rails to non-IR entities amount to 25% of the rails market
and hence, SAIL cannot be said to be restricting competition or causing appreciable adverse effect on
competition within India.
(d) The MOU between SAIL and IR is rational on both price and quality and is not anti-competitive. SAIL has
continuously upgraded to meet the standards which are internationally comparable. Large scale operations of
SAIL reflect that its profitability would not be affected even if the MOU was not signed. Therefore, no intention
of anti-competitiveness can be inferred from the MOU.
MR R PRASAD, (dissenting): held that the MOU was anti-competitive and it foreclosed market for the Informant because it
happened after SAIL’s knowledge of JSPL’s activities to establish a rail mill. He stressed on the Constitutional principles
and said that the Government can create monopoly in market in public sector but it cannot allow abusing its position or
using its dominance in anti-competitive manner. Any exclusive distribution agreements, discriminatory practices, inserting
conditions in purchase or sale of goods and denial of market access breach the economic liberty and equality before
law.627 It is always logical to go for competitive bidding in which the buyer would get minimum prices. Also, due to the
competition in the market, the availability and assurance of supply would be greater. Therefore, as per the dissenting order,
the MOU restricts IR to buy rails from any other supplier except SAIL, thereby contravening section 3(4)(b) of the Act.
In Shamsher Kataria (Informant) v Honda Siel Cars India Ltd,628 Commission received information against Honda Siel
Cars India Ltd, Volkswagen India Pvt Ltd and Fiat India Automobiles Ltd, alleging anti-competitive practices whereby the
genuine spare parts of automobiles manufactured by them were not made freely available in the open market. Agreements
entered with the authorised dealers were alleged to contain restrictive clauses requiring the dealers to source the spare parts
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only from its authorised vendors. The Director General found these agreements in the nature of exclusive supply
agreements in violation of section 3(4)(b) of the Competition Act, 2002. The Commission observed that the Original
Equipment Suppliers (OES) supplying spare parts pursuant to agreements/arrangements cannot supply spare parts directly
into the aftermarket without seeking prior consent of the Original Equipment Manufacturers (OEM). Although it was
argued by the Opposite Parties that they did not restrict sale of spare parts after prior consent in the aftermarket, the
Director General’s investigation did not reveal any instance where written consent has been granted by OEMs to OESs to
supply spare parts directly into the aftermarket. The Commission observed: respondent
20.6.42 Therefore, the Commission is of the opinion that both in the mature and the developing competition law regimes of the
world, refusal to access branded or alternate spare parts and technical manuals/repair tools, necessary to repair sophisticated
consumer durable products, such as automobiles, is frowned upon, since such practices restricts consumer choice besides
foreclosing the market for repairs/maintenance contracts by independent repairers. The fact that the competition law agencies of
both mature and developing countries have reached the same conclusions, i.e., requiring the removal of practices that limit the
availability of spare parts and repair tools, is illustrative of the fact that irrespective of the size, nature of level of development of
the automobile industry of such countries, the practices of the OEMs were found to restrict consumer choice and foreclose the
aftermarkets and were held to be anticompetitive in nature. Therefore, after analysing the comparative case laws of other mature
and developing competition law jurisdictions and the facts of the present case, the Commission is of the opinion that:
(i) the OEMs like, Skoda, Mahindra, Nissan and Fiat which completely restrict the access to spare parts and diagnostic tools
coupled with an absolute cancellation of warranty if cars are repaired by independent repairs, completely foreclose the
market for independent repairers, create barriers to entry and deprive consumers of any choice in the aftermarket for
spare parts and repairs. Further, the agreements also contained clauses requiring the authorised dealers to source spare
parts only from OEMs or their approved vendors. The Commission is in agreement with the findings of the DG that such
agreements are in the nature of exclusive supply and distribution agreements and such practices amounted to refusal to
deal under the terms of section 3(4)(b), 3(4)(c) and 3(4)(d) of the Act.
(ii) The OEMs like, BMW, Ford, Honda, Maruti, Tata Motors, Volkswagen, Hindustan Motors and Toyota, have no clauses
in their authorised dealer agreements which prohibit over the counter sales, however, the DG based upon its
investigation and the submissions of the independent service providers have concluded that, in practice very limited
sales actually take place subject to the discretion of the OEMs and their authorised dealers. Even if such OEMs could
contend that they allow the genuine spare parts of their models of automobiles to be available in the open market, the
DG has discovered that none of such OEMs allow their diagnostic tools to be available in the open market. Further, all
such OEMs have adverse warranty implications if the owners of their brand of automobile use the services of an
independent service provider outside the distribution network. The Commission has discussed earlier that spare parts are
required by the owners of automobiles for getting their automobiles repaired, and not as a product in itself. Therefore,
the availability of spare parts in exclusion of the requisite diagnostic tools, manuals etc., required for using such spare
parts and effectively repairing an automobile, have negligible effect on reducing the anti-competitive foreclosure effects
on the market for independent service providers. Further, the agreements also contained clauses requiring the authorised
dealers to source spare parts only from OEMs or their approved vendors. The Commission is in agreement with the
findings of the DG that such agreements are in the nature of exclusive supply and distribution agreements and such
practices amounted to refusal to deal under the terms of section 3(4)(b), 3(4)(c) and 3(4)(d) of the Act.
(iii) General Motors and Mercedes-Benz are the only two that to a limited extent allow the sale of their genuine spare parts
over the counter to actual owners of General Motor automobiles and to independent repairers, respectively. However,
such OEMs do not allow the sale of diagnostic tools and repair manuals to independent repairers and further the
warranty on such automobiles get invalidated if the owners use the services of independent service providers. Further,
the agreements also contained clauses requiring the authorised dealers to source spare parts only from OEMs or their
approved vendors. Therefore, even in cases of OEMs like General Motors and Mercedes-Benz, which allow over the
counter sale of genuine spare parts, in effect foreclose the market for independent repairers and other service providers
and even such OEMs are, as mentioned above in violation of section 3(4)(b), 3(4)(c) and 3(4) (d) of the Act.
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In the case of Ramamurthy Rajagopal v Doctor’s Associates Inc,629 it was averred that Clause 5(b)(ii) of the “Subway”
franchisee agreement which required the informant to purchase all food, equipment, beverages, and other products or
services used in the restaurant exclusively from an approved distribution centre for maintaining identical standards across
all the stores constituted a violation of section 3(4) of the Competition Act, 2002. The clause further included purchase of
only approved carbonated beverages like Coca-Cola and Lemon Tea from the authorised distributor Jyothi International. It
was argued that the same beverages were available in the open market at a much lesser price than that is being delivered by
an approved distributor. However, the Commission observed that the allegations did not have any AAEC in the market
[market of services of franchisee for a fast food restaurant chain/quick service restaurant chain in Chennai], since the size
of the concerned market was huge as compared with the market size of “Subway” food chain business. Therefore, the
impact of such restriction, if any, was negligible. Hence, no violation of section 3 was held.
In the case of Amit Auto Agencies,630 the informant trading in Truck and Trailer parts in the State of Rajasthan was
appointed as the sole selling agent of M/s King Kaveri Trading Co. It was complained that the opposite party infringed
section 3(4) of the Competition Act, 2002 by imposing unfair conditions in the contract including restrictive clauses such as
not to deal with the products of the competitors, directly or indirectly. A restriction was also imposed on informant not to
sell similar products supplied by any other party. The agreement, it was contended was an “Exclusive Supply Agreement”.
However, the Commission found no merits in the allegations when it was tested on the touchstone of section 19(3) of the
Act. Alleged clauses of the agreement did not create barriers to new entrants in the market or likely to drive the existing
competitors out of the market or had the potential to foreclose the competition by hindering entry into the market.
Therefore, in light of the presence of many competing traders, it was held that the agreement did not cause any AAEC in
relevant market of Truck and Trailer Components/parts and accessories in the State of Rajasthan.
In Manoj Hirasingh Pardeshi v Gilead Sciences Inc, USA,631 The tripartite license agreement between Gilead Sciences
Inc, USA, Medicines Patent Pool (MPP) and Indian Pharmaceutical companies for the exclusive supply of Active
Pharmaceutical Ingredient (API) by Gilead was held to not violative of section 3(4)(b) of the Act as no AAEC was caused.
The Commission noted:
23. The ARV drugs market had been growing consistently and more and more brands/drugs were being launched by Indian
pharmaceutical companies which not only benefit the Indian consumers but also the international consumers. The industry had
been experiencing constant improvement and changes in the production of the ARV drugs and chances are that the alleged
tripartite agreement will only help the market grow because of the OP sharing the technical know-how of third line drugs with
other companies. Moreover, in India, the third line ARV drugs have not taken off. NACO has not entered into the territory of third
line treatment as presently no patient has reached the stage where third line treatment may be required to be prescribed and it
restricts itself more to the first line treatment with very few patients being given second line treatment. Even if the contention of
the informant is accepted that the license agreements were anti-competitive, still there would be no appreciable adverse effect on
competition since only the private practitioners who recommend the drugs in question, and cater only to a miniscule number of
patients as compared to the national AIDS control programme.
EXCLUSIVE DISTRIBUTION AGREEMENTS [SECTION 3(4)(C)]
Exclusive distribution agreement includes any agreement to limit, restrict or withhold the output or supply of any goods or
allocate any area or market for the disposal or sale of the goods [Explanation (c) to section 3(4)]. It also corresponds to
section 33(1)(g) of the MRTP Act, 1969 and was treated as a Restrictive Trade Practice.
“Exclusive distribution agreement in broader sense means an arrangement between the supplier and distributor wherein the
distributor sells the product/s within a defined area or to a particular group/category of customers.”632 Such arrangements
particularly affect intra-brand competition as they restrict entry of another player into the market. It may also affect the
inter-brand competition since the outlets of distribution are limited thereby impeding competition amongst players engaged
in several similar services. However, it may be noted that such arrangement can be objectively justified on certain grounds
like protection from free riding, efficient management of sales of products, economic efficiency, etc.633
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The European Commission in its “Guidelines on Vertical Restraints”634 highlighted important factors to be considered
while assessing possible adverse effect on competition:
1. The market position of the supplier and his competitors is of major importance, as the loss of intra-brand
competition can only be problematic if inter-brand competition is limited. The stronger the “position of the
supplier”, the more serious is the loss of intra-brand competition.635
2. The “position of the competitors” can have a dual significance. Strong competitors will generally mean that the
reduction in intra-brand competition is outweighed by sufficient inter brand competition. However, if the number
of competitors becomes rather small and their market position is rather similar in terms of market share, capacity
and distribution network, there is a risk of collusion and/or softening of competition. The loss of intra-brand
competition can increase this risk, especially when several suppliers operate similar distribution systems.
Multiple exclusive dealerships, i.e. when different suppliers appoint the same exclusive distributor in a given
territory, may further increase the risk of collusion and/or softening of competition. If a dealer is granted the
exclusive right to distribute two or more important competing products in the same territory, inter-brand
competition may be substantially restricted for those brands. The higher the cumulative market share of the
brands distributed by the exclusive multiple brand dealers, the higher the risk of collusion and/or softening of
competition and the more inter-brand competition will be reduced. If a retailer is the exclusive distributor for a
number of brands this may have as result that if one producer cuts the wholesale price for its brand, the exclusive
retailer will not be eager to transmit this price cut to the final consumer as it would reduce its sales and profits
made with the other brands. Hence, compared to the situation without multiple exclusive dealerships, producers
have a reduced interest in entering into price competition with one another.636
3. “Entry barriers” that may hinder suppliers from creating new distributors or finding alternative distributors are
less important in assessing the possible anti-competitive effects of exclusive distribution.637
4. Foreclosure of other distributors is not a problem if the supplier which operates the exclusive distribution system
appoints a high number of exclusive distributors in the same market and these exclusive distributors are not
restricted in selling to other non-appointed distributors. Foreclosure of other distributors may however become a
problem where there is “buying power” and market power downstream, in particular in the case of very large
territories where the exclusive distributor becomes the exclusive buyer for a whole market. An example would be
a supermarket chain which becomes the only distributor of a leading brand on a national food retail market. The
foreclosure of other distributors may be aggravated in the case of multiple exclusive dealership.638
5. “Buying power” may also increase the risk of collusion on the buyers’ side when the exclusive distribution
arrangements are imposed by important buyers, possibly located in different territories, on one or several
suppliers.639
6. “Maturity of the market” is important, as loss of intra-brand competition and price discrimination may be a
serious problem in a mature market but may be less relevant in a market with growing demand, changing
technologies and changing market positions.640
7. “The level of trade” is important as the possible negative effects may differ between the wholesale and retail
level. Exclusive distribution is mainly applied in the distribution of final goods and services. A loss of intra-brand
competition is especially likely at the retail level if coupled with large territories, since final consumers may be
confronted with little possibility of choosing between a high price/high service and a low price/low service
distributor for an important brand.641
8. A manufacturer which chooses a wholesaler to be his exclusive distributor will normally do so for a larger
territory, such as a whole Member State. As long as the wholesaler can sell the products without limitation to
downstream retailers there are not likely to be appreciable anti-competitive effects. A possible loss of intra-brand
competition at the wholesale level may be easily outweighed by efficiencies obtained in logistics, promotion etc.,
especially when the manufacturer is based in a different country. The possible risks for inter-brand competition of
multiple exclusive dealerships are however higher at the wholesale than at the retail level. If one wholesaler
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becomes the exclusive distributor for a significant number of suppliers, this may not only reduce competition
between these brands but may also lead to foreclosure at the wholesale level of trade.642
The agreements between entities constituting one enterprise cannot be assessed under the MRTP Act, 1969. The
Commission has relying on the internationally accepted doctrine of “single economic entity” refused to examine the
agreement under section 3 of the Competition Act, 2002. In the case of Exclusive Motors Pvt Ltd,643 it was alleged that the
exclusive distribution agreement between Automobili Lamborghini SPA and its Group Company Volkswagen Group Sales
Pvt Ltd (Volkswagen India) was in violation of section 3(4)(c) of the Act, since it excluded Exclusive Motors Pvt Ltd and
the other prospective dealers to become the importers and dealers of the opposite party products (super sports cars). The
Commission held that the agreement between M/s Lamborghini and its Group Company Volkswagen India could not be
considered to be an agreement between the two enterprises as envisaged under section 2(h) of the Act.
In the case of Re Ghanshyam Dass Vij,644 it was noted that there was a vertical restraint imposed on the distributors to
supply the products in the area limited by the company and the arrangement was monitored and enforced by the sales staff
of Bajaj. The reason for termination of dealership of Shri Ghanshyam Das Vij was because he did not abide by the diktats
to restrict supply to the area allocated to him. However, it was noted by the Commission that since, in the market structure
of FMCG products, Bajaj had no position of strength in comparison with other brands it was unlikely to cause any
appreciable adverse effect on competition. Therefore, no violation of section 3(4)(c) was held to have been committed.
In the case of Sonam Sharma v Apple Inc,645 it was complained that Apple Inc entered into some secret exclusive
contracts/agreements with Vodafone and Airtel for sale of iPhone [iPhone 3G/3GS] which gave Airtel and Vodafone
exclusive selling rights. The iPhones sold by them were compulsorily locked, thereby meaning that the handset purchased
from either of them shall work only on their respective networks and none other. They introduced iPhone-specific internet
plans which were costly than their normal internet plans, thus compelling not only existing customers to pay extra for
using internet on their iPhone but also prospective iPhone purchasers to leave their respective network providers and to
compulsorily opt for expensive mobile telephony services. Unlocking the phone would result in loss of all warranties and
no third party applications would run on it. Director General found this arrangement between Apple, Airtel and Vodafone
to be in the nature of tie-in arrangement as specified under section 3(4) of the Act. It was submitted by Director General
that the agreement entered by Apple in India with various Mobile Network Operators (MNOs) were for a specified period
of two-three years at a given point of time. In view of the foregoing, Director General concluded that the agreement of
Apple India and Apple Inc with Airtel and Vodafone for distribution and sale of 3G and 3GS models of iPhones was
neither exclusive nor for very long/undisclosed duration. Accordingly, these agreements were held to be not violative of
section 3(4)(c) of the Act. It was also observed that Apple’s exclusive agreement with the two service providers was
announced and widely known, and that consumers were informed at the time they purchased their iPhones of the necessity
of these tied cellular services, which in themselves were not exclusive as iPhone could be purchased both with an Airtel
and a Vodafone service.
In the Hathrus Automobile Dealers,646 Global Automobiles Ltd (GAL) had floated an advertisement in the open market to
appoint dealers for the two wheelers (motorcycles and scooters) manufactured by the Company. Following the
advertisement the members of the Automobile Dealers Association were appointed dealers of GAL for marketing and
selling of the two wheelers manufactured by it. A Letter of Intent (LoI) was signed between the GAL and each of the
dealers across the country. It was complained that the conditions of LoI included restrictive clauses such as not to deal with
the products of its competitors, restricting the areas of operation, etc. Clause 3 of the LoI provided: “You shall not either
directly or through a sister concern deal in or accept any other two wheeler agency or dealership except with the specific
written approval of the company.”647 LoI was held to be a vertical agreement since GAL was engaged in the activity of
production and marketing two wheelers while its dealers were engaged in sale of two wheelers manufactured by GAL and
also providing after sales services. Therefore, GAL and its dealers were at different stages of production chain and were in
different markets. It was also observed that the LoI did restrict the dealers from acquiring the dealership of any other two
wheeler manufacturers or otherwise dealing with their products. The Commission noted that “while ascertaining AAEC in
case of any agreement that falls under section 3(4), the possibility of AAEC has to be examined at both levels of
production and supply chain in both separate markets where the agreeing parties operate.”648 Hence, it had to be examined
whether the LoI caused or was likely to cause AAEC in the market of manufacture of two wheelers and in the market in
which dealers of GAL were operating or in both. It was further noted:
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12.10 Normally the competition in the different level of production-supply chain may possibly be adversely effected when both
entities to the agreement posses some market power in their respective spheres of market. This is probably the reason that in EU
vertical agreements are not given much of a thought unless both parties possess at least 30% market share in the respective
markets.
Since both the parties in the case had no significant presence (GAL had 50 dealers across the country and less than 1%
share in terms of volume of sale) and were fringe players, none of them were capable of causing any AAEC in any of the
markets. The Commission disagreed with the Director General’s report and held that the agreement between GAL and its
dealers did not cause any adverse effect on competition.
In the case of Shamsher Kataria (Informant) v Honda Siel Cars India Ltd,649 it was found that the agreements/letters of
intent entered into between the OEMs and the OESs had clauses which restricted the ability of the OESs to supply spare
parts directly to third parties or in the aftermarket without the prior written consent of the OEMs. Since, none of the
present Opposite Parties held valid Intellectual Property Rights (IPRs) for any of their spare parts in India to claim
exemption under section 3(5)(i) of the Competition Act, 2002 agreements between OEMs and the local OESs were found
to contain exclusive distribution agreements and refusal to deal clauses in contravention of the provisions of section 3(4)(c)
and (d) of the Act, respectively. Also, the agreements between the OEMs and their authorised dealers had certain clauses
that specifically restricted the sale of spare parts over the counter to third parties, which were in the nature of exclusive
distribution agreements and amounted to refusal to deal under section 3(4)(c) and 3(4)(d) of the Act.
In Hyundai Motor India Ltd case,650 it was alleged that the exclusive dealership arrangements entered in to by HMIL
forced the dealers to procure spare parts, accessories and all other requirements, either directly from HMIL or through
vendors approved by HMIL. Further, it was alleged that the dealers were required to obtain prior consent of HMIL before
taking up dealerships of another brand. The Commission, however, found no contravention by HMIL on the allegation of
the exclusive dealership arrangement or refusal to deal. It was held that the mere requirement of prior consent does not
amount to foreclosure. Moreover, the CCI found no evidence to demonstrate that HMIL restricted its dealers from
acquiring dealerships of competing manufacturers.651
Case Law under the MRTP Act, 1969
The MRTPC had the occasion to deal with large number of cases652 on exclusive dealing. Some of the typical cases are
discussed below:
In Telco v RRTA,653 exclusive dealing and territorial restriction imposed on the dealers came up for consideration by the
Supreme Court. The Supreme Court held that, in the circumstances of that particular case, where the dealers are required to
make a heavy investment in the stocking of commercial vehicles and spare parts and in the maintenance of service stations
to provide after-sale service to the buyers of commercial vehicles, exclusive dealership, did not impede competition, but
promoted it. The Court further observed that exclusive dealings led to specialisation and improvement in after-sale service
and by specialising in each make of vehicle and providing the best possible service, the competition between the various
makes was enhanced. Earlier, in this case, the MRTPC had held654 exclusive dealing as restrictive trade practice, but the
respondent was allowed gateways under clauses (a), (b) and (h) of section 38(1) of the MRTP Act, 1969.
In RRTA v Centron Industrial Alliance Pvt Ltd,655 agreements entered into by Centron, a manufacturer of safety razor
blades, with (i) Home Products Marketing Agency and (ii) RCH. Barar & Co, for sale of former’s products came up before
the Commission. The agreement with Home Products was found to be an agency agreement and the Commission held that
clause (c) of section 33(1) was, therefore, not attracted. However, while holding it to be restrictive under clause (a) of
section 33(1), the Commission observed that exclusivity of the respondent’s agent did not affect competition considering
the basic feature of the industry, i.e., the respondent’s market share was 10% as against Malhotra’s dominant position with
more than 75% market share and giant conglomerate Hindustan Lever having as much share as the respondent. The
exclusive arrangement was, therefore, imperative for the survival of the respondent and for competition. However, its
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agreement with Barar & Co relating to exclusive dealing was held to be restrictive in nature as the same was on principal-
to-principal basis.
In RRTA v Usha Sales Pvt Ltd,656 the Commission, while holding that the stipulation regarding exclusive dealing in
agreements with its dealers amounted to restrictive trade practice, allowed gateways under clauses (b) and (h) of section
38(1) in respect of sewing machines and diesel engines in view of nature of the products, and the need for after-sale
service. Regarding water coolers the Commission held that exclusive dealership would hardly have any impact on the
competitive situation, as only a small market was covered by the exclusive dealers of Usha Sales. Rejecting the claim of
gateway under clause (b), the gateway under clause (h) of section 38(1) was, however, allowed. In respect of fans, the
Commission observed that sales of Usha fans through its exclusive dealers were only 1/5th of its total sales while the
remaining 4/5th sales were through dealers who were dealing in competing brands also. The Commission held that
exclusive dealership in fans also passed through gateway (h) under section 38(1), as not affecting competition to a material
degree. The respondent undertook to discontinue the system of exclusive dealers in fans in all towns with a population of
one lakh or less. The Commission held that this safeguard would remove any impediment to competition which exclusive
dealings in fans was likely to create.
In RRTA v Swadeshi Mills Co Ltd,657 there was exclusive dealing agreement with stockists who had opened approved
retail shops. The Commission held that the arrangement amounted to a restrictive trade practice of exclusive dealing
covered under section 33(1)(c). But, the restrictive trade practice was allowed to pass through gateway (h) under section
38(1), as the adverse effect of the exclusive arrangement on the competitive situation in the trade as a whole would be
negligible or marginal. The Commission found that proportion of textile trade affected was only 0.06% if both organised
and unorganised sectors were taken into account and it was 0.12% if only organised sector was taken into account. The
Commission, in deciding the case, was probably influenced by the following judgements of US Supreme Court:
(i) Standard Oil Co v US (Standard Stations)658—In this case the Court adopted a rule which seemed to make the
legality of an exclusive dealing arrangement turn almost entirely upon the percentage of the relevant market
foreclosed by virtue of the arrangement (the so called “quantitative substantiality” test). The court reasoned that
serious difficulties would arise if any attempt is made to undertake a more searching inquiry into the economic
effects of such arrangements by the judiciary.
(ii) Brown Shoe Co659—In this case, which was decided under section 5 of the Federal Trade Commission Act, 1914
the Federal Trade Commission ruled that section 5 prohibits any exclusive dealing arrangement that effectively
forecloses competitors from “a significant number” of outlets. On this basis, a plan was invalidated under which
some 650 franchised dealers of America’s second largest shoe manufacturer received various considerations in
return for the promise to purchase shoes “primarily” from Brown. The Supreme Court affirmed the
Commission’s order.
In RRTA v Standard Mills Co Ltd,660 Mafatlal Group of Mills appointed, through standard form or letter, several parties as
its “approved retail shops”. The arrangements were exclusive. The Commission, following its order in RRTA v Swadeshi
Mills case, held that the ratio was equally applicable to the instant case, though the market share of the retail shops in the
instant case was 8% as against 3% share of Tata Group of Mills. The respondents’ market share in the organised sector was
only 4.6% while it was only 2.3% of the total production in the organised and unorganised sectors.
In RRTA v Goetze India Ltd,661 the Commission held that exclusivity in respect of any wholesaler was not likely to impair
or distort competition in the relevant product. Similarly in RRTA v Shriram Pistons & Rings Ltd,662 exclusivity at
wholesale level was held to be not a restrictive trade practice in the relevant market to which it related.
In RRTA v MICO,663 the respondent filed an application under section 37(2) justifying exclusive dealing with its stockists
and distributors on the terms and conditions contained in its four types of agreements for distribution of fuel injection
equipment. The Commission accepted the company’s contention that the exclusive dealing was justified on the ground of
after-sale service to be provided, and the heavy investment required to be made by the distributors. The Commission
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observed that specialised service, need for supply of genuine spare parts, essentially wholesale nature of distributor’s
business and customer’s option to avail of neutral sources of supply, justified exclusivity of authorised distributors.
Re Usha International Ltd,664 the Commission held that the stipulation in the dealership agreement to the effect that the
dealers will not deal in products of other manufacturers without the respondent’s written approval constituted restrictive
trade practice of exclusive dealing attracting section 33(1)(c), notwithstanding the fact that such dealers (styled as
nominated dealers) enjoyed special advantage of business premises being provided by the respondent. However, following
the judgement, Re Usha Sales Pvt Ltd,665 and in view of the fact that the number of such dealers is only 80 as against other
category of dealers (i.e., authorised dealers), which numbered as much as 1400 and with whom there is no exclusive
dealing stipulation, the Commission allowed this restrictive covenant in respect of nominated dealers to pass through the
gateway under clauses (b) and (h) of section 38(1).
Re Tea Trade Association of Cochin,666 under one of the rules of the respondent Association and instructions
communicated by it by circulars, members of the respondent Association were not allowed to solicit customers or orders
from outside the Cochin market. The sellers who were not registered with the association or who had not paid their fees
were not permitted to offer their tea for auction in the said market. This was held to be a restrictive practice, and on an
application made under section 37(2), the respondent Association was however, allowed to amend the Rules.
Re Mohan Meakins Ltd,667 which had entered into franchise agreements with bottlers for the manufacture, bottling and
selling its products viz. Soft Drinks, the Commission held that reasonable restrictions on the franchise-holders to protect
the quality of the products will be in public interest and are justified. There is an element of risk of mix-up or
contamination in the utilisation of the same plant for bottling products similar to those of Mohan Meakin. Therefore,
restriction in the bottling of such products as are similar to those in this case can be regarded as reasonable; but the present
agreement goes far beyond this reasonable restriction in as much as it stipulates that “the manufacturer shall not
manufacture/bottle any other product(s) at the plant”. Therefore, Article III in its present form is violative of section
33(1)(c) read with section 2(o) of the MRTP Act, 1969. In order to remove the taint of restrictiveness the relevant clause in
the agreement was directed to be modified on the following lines:
The manufacturer shall manufacture products at the plant strictly according to know-how and instructions of the company and the
samples approved by it, using only, raw material sold by the company for the purpose and the manufacturer shall not
manufacture/bottle at the plant any other products which are liable to be confused with the company’s products.
An analysis of the cases which came up before the Commission shows that exclusive dealing was held to be restrictive in
the following circumstances:
— When dealers are required not to deal directly or indirectly in the sale of similar goods.668 (In consideration of
the restrictive covenant imposed by the manufacturer, it may be agreed by him not to appoint any other party to
distribute the goods during the currency of the agreement.)
— When there is a categorical condition in the agreement that, the purchaser shall not buy from any other party,
specified products for sale in India.
— Even though an agreement is termed as a sole selling agency agreement, if the terms of agreement show that the
dealings are, in fact, to be on a principal to principal basis.
— Where a manufacturer of a product—pressure cooker and its spare parts, is required under an agreement to
manufacture them only for the distributor exclusively.
— Any agreement between a producer of gramophone records and artists, requiring them to enter into a long-term
contract for giving performance exclusively to the said producer.
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— Where, by an agreement between an Indian manufacturer and a foreign collaborator, the Indian manufacturer is
restrained to sub-licence the technology and the foreign collaborator is prevented from setting up or carrying on
any similar competing business in India.
— Where a manufacturer of medicines denies to his dealers/agents the freedom of choice of medicines
manufactured by others, on the plea that they might mix sub-standard drugs of rivals with the drugs of the
pharmacy. (Restrictions imposed by the manufacturer to the effect that (i) the agents shall not do any other
business, in the same building (business place), and (ii) the agents should not sell medicines manufactured by
themselves, is, however, not unreasonable and would be allowable in public interest).669
On the other hand, exclusive dealing arrangements have not been regarded as restrictive by the Commission in the
following circumstances:
— When a company faces stiff competition from a foreign company having such exclusive dealing arrangements.
— Where a manufacturer has a very little share in the market and is also pitted against dominant and giant
undertakings having a preponderant share in the market, and exclusivity in dealing may be necessary for the
survival of the manufacturer
— When the product is of a nature which requires efficient and specialised after sales-service, hire-purchase facility,
prompt repair and supply of spare parts therefor, effective implementation of the warranty, etc., subserving
consumer interest.
— Exclusive dealership agreement between a manufacturer of diesel pumps and his dealers does not restrict
distribution in any area or prevent competition. [Product involved in the agreement; manufacturer’s market share,
choice of consumers in buying; after sales service were some of the points taken in to account in deciding
restrictive effect]670
— If the impact of exclusive dealership on competition is marginal, and in particular:
(i) when there are sufficient number of suppliers of the product;
(ii) where there was no dearth of outlets in the trade in any place where the company’s dealers are located;
(iii) when exclusivity applied only to first line of distribution (i.e., wholesalers) and not to the second line of
distribution (i.e., retailers).
Case Law in USA
Sewing up market outlets with arrangements under which a customer is precluded from dealing in the goods of the
Supplier’s competitors is the crux of the violation of the US anti-trust law. Exclusively dealing activity may manifest itself
in two ways, viz., (i) through the exclusive dealing contract requiring the customer not to use or deal in goods of
competing suppliers, and (ii) through requirements contract, i.e., supplying all or a stated percentage of a customer’s needs
pursuant to contract, which achieves the same effect as to suppliers. The statutory ban covers, both the negative and
positive approaches to such restrictions.
Under section 3 of the Clayton Act, 1914 it is unlawful for any person engaged in commerce, in the course of such
commerce, to lease or make a sale or contract for sale of goods, for use, consumption or resale within the United States or
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fix a price charged therefor, a discount from or rebate upon such price, on the condition that the lessee or purchaser thereof
shall not use or deal in the goods of any competitor of the lessor or seller, where the effect thereof may be to substantially
lessen competition or tend to create a monopoly in any line of commerce. In Packard Motor Co v Webster Motor Car
Co,671 it was, however, held by the US Supreme Court that when an exclusive dealership is not a part and parcel of a
scheme to monopolise, and effective competition exists at both the seller and buyer levels, the arrangement should be
upheld as reasonable and lawful restraint of trade.
A sales agency agreement is not illegal per se under the Clayton Act, 1914 ban against restrictions on using or dealing in a
competitor’s goods. In CBS Business Equipment Corp v Underwood Corp Inc,672 it was held that the agreement created a
genuine sales agency. The agency was not permitted to enter into the contract of sale or to bill the ultimate consumer; it
had no power to collect the purchase price, extend time for payment or comprise the amount; the agent was required to
account for inventory and report on sale efforts to suppliers; express provision existed for the return of all inventory on
termination of agent’s appointment; legal title of goods remained with the supplier. Here, the agent did not have the right
to deal in the goods of others to the extent they competed with its assigned products and this was not violation of law.
Whether the contract is one of sale, rather than agency is a question of fact. Where the products are bought outright by a
dealer from the supplier and the dealer on its own behalf procured business in respect of suppliers’ products and carried on
its own business for itself and not for the supplier, it was not an agency agreement.673 Where a large manufacture of dress
and clothing pattern entered into so called “contracts of agency” with some 20,000 retail stores, prohibiting the dealers
from handling the goods of any competitor, the contracts were held to be offensive and unlawful under section 3 of the
Clayton Act, 1914 as it was evident that they were, in reality, contracts of sale.674
When a business is sold and the seller agrees not to compete, such an agreement does not fall within the condemnation of
the Clayton Act, 1914.675
Some of the interesting cases in the United States are discussed below:—
— International Boxing Club v US:676 Boxing promotion corporation cannot require boxers to box exclusively for
the corporation as a condition of participating in championship matches. The illegal purpose of the restriction was
to exclude other corporations from the business of promotion.
— Englander Motors, Inc v Ford Motor Co:677 An automobile manufacturer cannot require, in his franchise
agreements, that his dealers exclusively handle the manufacturer’s car’s parts and accessories.
— US v American Smelting and Refining Co:678 An exclusive selling arrangement was found to be an agreement to
fix prices and to divide markets and was held to be illegal.
— Curly’s Dairy Inc v Dairy Co-op Association:679 There were no unlawful effects upon competition where a
company lent money conditioned upon the customers’ purchase of all or part of their requirements from the
company which was lending money.
— Standard Fashion Co v Magrane-Houston Co:680 Selling of dress patterns only to those retailers who agreed not
to deal, in its place of business, patterns of any other make, was violative of Clayton Act, 1914.
— FTC v Motion Picture Advertising Service Co:681 It is unlawful for a producer and distributor of advertising
films requiring the theatre owners to display advertising films furnished to them.
— Standard Oil Co of California v US:682 Obtaining of undertaking from the dealers to purchase all their
requirements of one (or more) products from the seller is unlawful.
As a general rule, exclusive dealing contracts cannot be justified on so called economic considerations. As exceptions,
following considerations can, however, be asserted:
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— that an arrangement was essential to start an industry or was of advantage to the public;
— that arrangement was beneficial to purchasers to give continued supply;
— that it enabled the perfection of a better product;
— that it was necessary to allow recovery of a substantial investment in research;
— that it was desired by the customers, so as to hold one manufacturer responsible for the functioning of an entire
system.
SUB-SECTION (4)—CLAUSE (D)—REFUSAL TO DEAL
Normally, it is the prerogative of an enterprise to choose and decide its distribution channel and persons/entities it wants to
deal with, unless it has appreciable adverse effect on competition in the market. “Refusal to deal” includes any agreement
which restricts, or is likely to restrict, by any method the persons or classes of persons to whom goods are sold or from
whom goods are bought; [Explanation (d) to section 3(4)]. It corresponds to restrictive trade practice as defined in section
33(1)(a) of the MRTP Act, 1969. It would include both refusal to sell and refusal to buy.
In these types of arrangements, an enterprise, generally with stronger market power refuses to deal with its customers or
suppliers. The obvious effect in such scenario is that the downstream market gets affected due to such refusal. It may also
be noted that no enterprise is obliged to supply its products to any company/supplier/distribu-tor. However, under certain
circumstances, such conduct may attract the provisions of the Act which will depend on case to case basis. “The provision
does not restrict the right of the trader or manufacturer engaged in an entirely private business, freely to exercise his own
independent discretion as to the parties with whom he will deal, unless the purpose is to create or maintain monopoly.”683
This clause broadly corresponds to clause (e) of section 6(1) of the U K Restrictive Trade Practices Act, 1956.684 It covers
bi-lateral (vertical) agreements between a manufacturer/seller and the buyer stipulating that (a) the buyer shall not sell the
goods obtained from the seller to a particular person (or class of persons), or (b) the manufacturer/seller shall not sell his
goods to anyone else, except the buyer (or a class of buyers). This provision also seeks to cover concerted and
conspiratorial refusals to deal, group boycott of dealers or suppliers and combinations for covering others’ business
policies. It is not the purpose of this provision to deny the right of a manufacturer or a supplier, to decide about his network
of dealers or choose his customers. This is so in countries like USA also, where it has been observed that: “we have not yet
reached the stage where the selection of a trader’s customers is made for him by the Government”.685 Mere non-supply of
goods to a dealer does not amount to refusal to deal, unless it is the outcome of non-adherence to some restrictive
covenant, e.g., tie-up sales, re-sale price maintenance, area restriction, etc. What is required to be seen in these cases is the
effect of such practice on competition and whether it results in, or is likely to result in, foreclosing markets to competitors
and/or to coerce the dealers to adopt trade practices which they might not otherwise adopt.686 It is open to a manufacturer
to devise its market policy in such a way as to be able to compete effectively with other manufacturers.687 The policy of a
manufacturer for appointing a limited number of dealers, distributors or wholesalers in a particular area for marketing the
goods is not refusal to deal so long as there is nothing in the agreement with them precluding appointment of other
dealers.688 In other words, to suit one’s own business requirements, such number of dealers, as deemed expedient, may be
appointed or dealers may not be appointed for certain areas at all, wherein marketing of goods may be undertaken by the
manufacturer himself.689 Such a measure would not amount to refusal to deal with any dealer who is not appointed for
distribution of products or supply of services. Likewise, termination of dealership on ground of poor performance of a
dealer690 or because of shady dealing or improper conduct of a dealer691 would not tantamount to refusal to deal.
Termination of the distributorship, as a punitive action by the manufacturer for distributor’s failure to comply with the
condition of minimum off-take, contained in the distributorship agreement, does not amount to refusal to deal.692 Where a
new stockist is appointed in an area in place of the existing one and the latter is refused supply on the ground that there was
default on his part in making payments for the goods supplied or that supplies cannot be made to him on account of
shortage of goods, there would not be any charge of refusal to deal. A standard business practice of the manufacturer to
deal with its dealers/stockists in a particular area, and not to encourage direct inquiry from others, being based on
economic consideration of minimising costs is not a restrictive trade practice within the meaning of this clause.693
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Refusal to sell may not be categorical, but it may be implied in the dilatory tactics or discriminatory terms of sale which
may be more onerous than those accorded to other dealers. In fact, dilatory tactics constitute a more subtle form of refusal
to sell since their aim is either to put a customer in a position where he is unable to place an order or to postpone without
valid reason the execution of an order. Restriction on the intending buyers and other visitors from entering the place of a
reduction sale and the compulsion to buy entry cards for the purpose would be in the nature of refusal to sell.694 A
stipulation in the dealership agreement that sub-serving dealers will be appointed with prior permission of the
manufacturer/supplier would tantamount to refusal to deal.695 A stipulation in the agreement precluding the dealer from
dealing with co-operative societies and State Governments, who are to be exclusively catered by the manufacturer himself,
does not attract clause (a), in view of the possible reluctance of the said bodies to deal through agents or middleman.696 A
concerted action by an Association through issue of direction to its members that they shall not deal with any particular
person or category of persons and thereby boycotting the goods of, or dealings with, such person(s) would amount to
refusal to deal.697 Issue of Circulars to various pharmaceutical manufacturing Companies by the Association of Chemists
and druggists threatening that if the said manufacturing companies dealt with the State Co-operative organisations and
appointed them as Stockists granting them sale rights, it would expose the manufacturing companies to a boycott by the
members of the Association was held to be the restrictive trade practice of refusal to deal.698
Boycott, per se, is restrictive in nature, and the onus of establishing that it does not harm the public interest lies on the
person(s) indulging in it.
Boycott is rarely justified as not being restrictive. One such exceptional situation may, however, be when the Articles of
Association of the Trade Association, registered under the Companies Act, 1956 restricts the membership on the basis of
territorial limit.
The following requirements must be satisfied for the application of the provision on refusal to deal:
1. The would-be customer shows that the business has been substantially affected, or that it is unable to carry on
business as a result of not being able to obtain adequate supplies of a product on usual trade terms.
2. The inability to obtain adequate supplies must result from a lack of competition among suppliers.
3. The would-be customer must be willing and able to meet the supplier’s usual trade terms.
4. The product must be in ample supply.
5. The refusal to supply has an adverse effect on competition in a market, or is likely to do so. [There are numerous
possible instances in which a refusal to deal would not give rise to objections. The customer may, for example,
not be considered a reliable trading partner, perhaps because of a history of not honouring its debts. The dominant
firm may have difficulties in meeting all the demand it faces: it may, for example, be experiencing a shortage of
raw materials,699 production capacity constraints, or its production or distribution capabilities may be disrupted]
The primary competition concern likely to arise as result of a refusal to supply is that competition will be distorted in a
market downstream from the (upstream) market for the refused input.700 The concept of a refusal to deal covers not only
situations of pure or straightforward refusal, but also instances of agreement by the entity to deal but under unreasonable or
uneconomic conditions. Charging excessive prices (as well as being potentially abusive in itself), may amount to an
effective refusal to deal.701
Concerns may likewise arise where foreclosure on the downstream market also leads to anticompetitive foreclosure on the
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upstream market for the refused input if it gives rise to so-called customer foreclosure - in other words, if it becomes more difficult
for potential entrants on the upstream market to find customers and the refusal to supply thus raises entry barriers on the upstream
market. This in turn may have anti-competitive effects downstream if as a result downstream rivals to the firm face higher input
prices and are therefore obliged to charge higher output prices. Another scenario, where consumer harm may occur is where the
dominant firm uses refusals to supply in order to punish downstream competitors who are trying to enter upstream, and this
punishment mechanism is credible in the light of the factual circumstances of the case.702
The imposition of an obligation to supply may have an adverse impact on the incentives of a firm to invest in the supply activity in
question, given the risk that competitors may “free ride” on that investment. At the same time, consumer harm may also arise
where the competitors that the dominant firm forecloses are as a result of the refusal prevented from bringing to market innovative
goods or services, and the refusal to supply thus stifles follow-on innovation to the detriment of consumers. This may be the case if
the firm which requests supply does not intend to limit itself to essentially duplicating the goods or services already offered on the
downstream market by the dominant firm, but intends to produce new goods or services for which there is a potential consumer
demand.703 Indeed, supplying access to the input may spur incentives to invest and innovate in the downstream market by both the
dominant firm and its competitors.704
The sine qua non for the application of competition law is that the enterprise from whom supply is requested must enjoy
substantial market power in the market for the refused input, not simply by reference to its market share but also by taking
account of the full range of constraints which it faces, and in particular the ease with which its position may be challenged
by existing or potential competitors. It should in this context be added, however, that the refused input need not have been
traded previous to the refusal; it is sufficient that there be actual demand for it on the part of potential purchasers.
Case Law under the Competition Act, 2002
In the case of Vinayaka Pharma,705 it was observed by the Commission that All Kerala Chemists and Druggists
Association indulged in the practice of asking for mandatory NOC/clearance certificate from it before appointment of any
new stockist. It was also threatening the pharmaceutical companies to follow its diktats by threatening them that it would
boycott the products of non-complying pharmaceutical companies. Also, it was found that the refusal to deal/supply the
medicines by M/s Alkem Laboratories Ltd to Vinayaka Pharma for want of NOC was because of the intervention of the
Association. However, the agreement between Alkem Laboratories Ltd and the Association was not held to be an
agreement between entities at different stages or levels of the production chain in different markets in terms of the
provisions of section 3(4) of the Competition Act, 2002.706
The Commission, therefore, relied on its earlier order in the Dr L H Hiranandani Case (Case No. 39 of 2012) to note that
even if the agreement is not falling under section 3(3) or 3(4) of the Act, it is amenable to the jurisdiction of the
Commission under section 3(1) if the same has an appreciable adverse effect on competition (AAEC). With that
background in mind, the Commission considered the arrangement/understanding between the Association and Alkem
Laboratories Ltd as an agreement amenable under section 3(1) of the Act subject to establishment of AAEC.
7.25 Under the preamble and section 18 of the Act, the Commission is under a duty to prevent practices having adverse effect on
competition, to promote and sustain competition in markets, to protect the interests of consumers and to ensure freedom of trade
carried on by other participants in markets, in India. Therefore, one of the functions of the Commission is to eliminate practices
having adverse effect on competition. The facts revealed in the information and established during the investigation clearly bring
out the potential consumer harm due to the impugned conduct of the Opposite Parties in healthcare sector besides lessening of
competition.707
In light of previous cases involving chemists and druggists associations where the diktats of the Association are followed
by the members without any hesitation, the Commission held that the denial of supply to unauthorised stockists by various
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pharmaceutical companies like Alkem Laboratories Ltd undoubtedly affected the competition in the market adversely and
appreciably.708 Note: The Tribunal on 10 May 2016 set aside the Commission’s decision in PK Krishnan v Paul
Madavana. The Tribunal held that there was a violation of the principles of natural justice since no opportunity was
extended to the office bearers to present their defense. Further, the Tribunal questioned as to how an arrangement between
parties entered into under coercion could be termed as an “agreement”. Besides, it was found by conclusive evidence (both
at the stage of investigation and during the final hearing before the Commission) that the informant was a stockist of
Alkem prior to filing of the information with the Commission. Further, no proof of any demand of “No Objection
Certificate” was established against Alkem and the informant had admitted that it suppressed material facts while filing the
information. While this fact was not considered material in the final order of the Commission, it was viewed adversely by
the Tribunal. The Tribunal also set aside the penalty on Mr ANM Kurup as well as the direction asking Mr Kurup and Mr
Thomas Raju not to associate with AKCDA affairs for two years. The Tribunal noted that the Commission cannot make an
order or issue a direction which would directly or indirectly impinge upon the provisions of other statutes.
In the case of Shamsher Kataria (Informant) v Honda Siel Cars India Ltd709 (facts discussed in earlier section), the
Director General noted that a large number of Original Equipment Manufacturers (OEMs), particularly those having
foreign affiliations, were sourcing large number of spare parts from overseas suppliers and such overseas suppliers were
not supplying spare parts to any entities apart from the OEMs. The Director General, therefore, concluded that in such
situations there may be a possibility of the existence of an unwritten arrangement between the OEMs and the overseas
suppliers for ensuring that the spare parts are supplied to the OEMs or its authorised vendors only, which would be in
violation of section 3(4)(c) and 3(4)(d) of the Competition Act, 2002. Again, with regard to the agreements between the
OEMs and their authorised dealers, the Director General found that certain clauses of the agreements specifically restricted
the sale of spare parts over the counter to third parties, which were in the nature of exclusive distribution agreements and
amounted to refusal to deal. The Director General found that there was AAEC on competition in terms of section 19(3) of
the Act in the market of spare parts for each OEM owing to the practices adopted by the OEMs in each of the secondary
markets of spare parts and repair and maintenance services.
The Commission was of the view that none of the present three OEMs were eligible to seek exemption under section
3(5)(i) of the Act for the agreements entered between OEMs and OESs. The Commission held that the Opposite parties,
either specifically through their agreements or otherwise through understanding with their dealers, had restricted/prohibited
the sale of spare parts over the counter, thereby resulting in prescribing exclusive distribution agreements and refusal to
deal in terms of sections 3(4)(c) and 3(4)(d) of the Competition Act, 2002.
In Ghanshyam Dass Vij v Bajaj Corp Ltd,710 Bajaj was engaged in manufacture and sale of FMCG products while the
distributors/dealers/bulk purchasers distributed the products of various companies including those of Bajaj. It was
complained by the informant, who was the dealer of Bajaj till August 2012, that Bajaj orally advised him not to sell the
products outside the area of Sonipat town and when the Informant did not adhere to the advice, he was removed and
replaced by another dealer. It was alleged that appointing exclusive dealer/stockist for Sonipat Area and refusal to deal
with the Informant was a vertical restraint in violation of section 3(4) of the Act. It was observed that Bajaj Corp had
allocated area of business to every dealer and did not want them to infiltrate into the territory of the other dealer. It was
noted that there was a vertical restraint imposed on the distributors to supply the products in the area limited by the
company and the arrangement was monitored and enforced by the sales staff of Bajaj and the reason for termination of
agreement with the informant was that he did not abide by the arrangement. Bajaj was held by the Director General to have
contravened section 3(4)(d) of the Act since it stopped the supply of goods to any deviant distributor and restricted its
distributors from supplying Bajaj products to retailers who came from an area outside the territory allocated to the
distributor by the company. However, it was also noted by the Commission that the Indian FMCG market offered a level
playing ground for both domestic and international brands and some of the major FMCG companies operating in India
were ITC Ltd, Hindustan Unilever Ltd, Nestle India, Parle Agro, Britannia Industries Ltd, Marico Ltd, Godrej Consumer
Products Ltd (GCPL), Colgate-Palmolive (India) Pvt Ltd, Procter & Gamble Co (P&G), Anand Milk Union Ltd (AMUL),
etc. In terms of hair oil categories, Marico was a leading FMCG Indian manufacturer providing consumer products and
services in the areas of Health and Beauty. Its products included Parachute, Oil of Malaba, Hair & Care, Nihar, Shanti, etc.
Other brands, apart from Bajaj, included Dabur India Ltd, Emami Ltd, Figaro, etc. All this indicated that the market of hair
oil was wide and consumers had various brands as options to choose from proving the fact that Bajaj did not have a
position of strength in the sector in comparison with other brands unlikely to affect the inter-brand competition in the
market.
The Commission in light of lack of evidence indicative of creation of barriers to new entrants in the market or to suggest
driving any existing competitor out of the market, disagreed with the conclusion of the Director General that the vertical
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restraints imposed by Bajaj on its distributors caused appreciable adverse effect on competition in the market which
contravene section 3(4) of the Act.
In the case of Financial Software and Systems Pvt Ltd,711 the Director General found that a combined reading of clauses
of the agreement (between ACI and ACI Banks) with ACI’s decision to not grant consent to third parties including M/s
Financial Software and Systems Private Ltd beyond July 2013 amounted to a refusal to deal agreement within the meaning
of section 3(4)(d) of the Act. The Commission however, was of the view that the Director General had examined the
agreement between ACI and ACI Banks wherein ACI Banks were the buyers/consumers and therefore would not be part of
the production chain. Accordingly, the agreement was not held to fall within the purview of section 3(4) of the Competition
Act, 2002.
In the case of Magnug Graphics,712 it was alleged that M/s Nilpeter India Pvt Ltd entered into an agreement with the M/s
SaiCom Codes Flexo Print Pvt Ltd (a competitor to the informant) whereby the former refused to deal with the Informant
and by doing so. As per the Director General M/s Nilpeter India Pvt Ltd (a manufacturing company of label printing) and
M/s SaiCom Codes Flexo Print Pvt Ltd (procurer/user of the said machine), were enterprises operating at different stages
or levels of the production chain in different markets and the agreement between them whereby Nilepter was denying
service support and spare part support to the Informant on complaint of SaiCom was a vertical agreement in terms of the
provisions of section 3(4)(d) of the Act. However, the Commission rejected the Director General’s report and held that
there was no violation of section 3(4) whatsoever and observed:
9.32 ... By virtue of the provisions contained in section 3(4) of the Act any agreement amongst enterprises or persons at different
stages or levels of the production chain in different markets, in respect of production, supply, distribution, storage, sale or price of,
or trade in goods or provision of services, including – (a) tie-in arrangement; (b) exclusive supply agreement; (c) exclusive
distribution agreement; (d) refusal to deal; (e) resale price maintenance, shall be an agreement in contravention of sub-section (1) if
such agreement causes or is likely to cause an appreciable adverse effect on competition in India. In the present case, the Opposite
Party No. 4 being a buyer/consumer is not part of any production chain and as such the provisions of section 3(4) of the Act are not
attracted.
In the 2011 INOX Case,713 it was alleged that both Hindustan Coca Cola Beverages Pvt Ltd and INOX Leisure Pvt Ltd
violated the provisions of sections 3(4)(b) and 3(4)(d) read with section 3(1) of the Act by entering into anticompetitive
agreement dated 1 September 2010 which completely foreclosed the competition within the relevant production market of
bottled water and other soft drinks within the premises of multiplexes owned by ILPL by choking the entry for
competitors. However, it was observed that there was intense competition in the beverage industry throughout India and a
large number of competitors in the market were vigorously competing with each other for sale of their respective products.
In respect of certain outlets buyers entered into agreement with the suppliers on “preferred beverage supplier” or even
“exclusive supply agreement”. But, in light of intense competition amongst suppliers, for obtaining such contracts so as to
sell their products. Every competitor had full opportunity to negotiate and obtained such contracts. It was evident from the
fact that a large competitor of HCCBPL (PEPSICO) had entered into similar agreements with a large number of
multiplexes having about 600 screens as against the multiplexes where HCCBPL had been able to enter into such
agreements relating to only about 214 screens in India. These facts clearly showed that neither there was any AAEC in
India as a result of alleged agreement between HCCBPL and ILPL, nor any refusal to deal or denial of market access.714
In the 2011 case of Explosive Manufacturers Welfare Association,715 Coal India entered in to a five year private
agreement with IOCL-IBP for supply of explosives, without inviting any tender. IOCL-IBP was given a quantity
preference of 20% of the total yearly requirement and 10% price preference over the members of IP. It was complained
that this amounted to exclusive supply agreement having appreciable adverse effect on competition. The commission, after
examining the facts and the provisions of section 19(3) of the Competition Act, 2002 concluded that there was no entry
barrier that was created in the market due to contract with IOCL-IBP since about 80% of the supplies were still outsourced
from the suppliers other than IOCL-IBP. The arrangement did not drive existing competitors out of the market since other
consumers of the product were free to source from any supplier in the market. The suppliers in the market were also free to
supply to other consumers including Coal India. Any supplier, even if it was a new entrant, if otherwise eligible, could
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have still participated in the tender process. Arrangement of continued supply of certain minimum quantities of explosives
did not foreclose competition in the market.
In the Yash Raj Films (YRF) case,716 it was urged that the agreements ensured that the exhibitor in the chain was unable to
screen any film by any other producer/distributor which may be available in the market. This refusal to deal confined to the
meaning assigned to the explanation of section 3(4)(d) of the Act. However, the Commission observed that the restriction
was not likely to create any appreciable adverse effect on competition as not a single independent theater owner came
forward with any complaint against YRF. No tangible evidence was available that theatre owners were coerced by
Respondent. It was up to theater owners to accept or not to accept offer made by Respondent and it was proved on record
that number of theaters owners did not accept alleged tie-in arrangement. It was established that substantial number of
single screen theaters, were available to Appellant for exhibiting his movie. Therefore, it could not be said that there was
denial of access to theatre to Ajay Devgn Films.
In Eros International case,717 the Commission observed that the refusal to deal as per the provisions of section 3(4) would
involve agreement between the players operating at different levels of production or supply chain. It was observed that
there was no such situation as there was no business dealing between associations and non-members. In fact, the business
transactions were between the members of associations and entities who were the non-members. There was no case of a
vertical agreement between two entities involved in these cases - an entity which was a member of the association and an
entity which was a non-member, stipulating that the said member or non-member cannot engage in transaction with some
third entity.
In the case of Jindal Steel and Power Ltd (JSPL) v Steel Authority of India Ltd,718 it was complained that through the
MOU of 2003, SAIL entered into an exclusive supply arrangement with Indian Railways (IR) which resulted in denial of
market access to JSPL by foreclosing a substantial part of the relevant market. As per the information, the MOU contained
exclusive supply obligations and resulted in refusal to deal in contravention of section 3(4) of the Competition Act, 2002.
Further, it was alleged that the effect was of restricting IR’s ability to fulfill its requirements for rail from sources other
than SAIL. The MOU indirectly imposed restraint on IR so that IR cannot deal with other sellers during the exclusivity
period even if other suppliers are able to provide better quality rails and at more competitive prices. Director General’s
report can be summarised as follows:
• SAIL and IR were dominant enterprises within their markets;
• The commitment to buy total requirements of IR from SAIL forecloses completely for the competition in the
market for the manufacturers of long rails to the effect relationship, though the cause of the abuse lies in the
relevant market of procurement of long rails;
• The MoU is not open for any review of procurement therefore it is a perpetual agreement whereby IR cannot
procure long rails from any other source except SAIL, which makes the foreclosure effect more severe;
• The MoU was an attempt to counter the threat of competition from JSPL and is in contravention section 4(2)(b)
of the Act;
• IR by adhering to its own specifications as laid down by RDSO has limited and restricted technical or scientific
development relating to manufacture of long rails and is thus in contravention of section 4(2)(b)(ii) of the Act;
• the decision to enhance SAIL’s production capacity to meet IR’s requirements was taken in 2001 whereas JSPL
had informed about its intention to set up production units in 1999, this thus is a denial of market access in
contravention of section 4(2)(a)(i) of the Act;
• There is a denial of market access by SAIL to other purchasers in violation of section 4(2)(c) of the Act;
• The exclusivity clause in the MoU creates a vertical restraint in contravention of section 3(4)(d); and
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• There is an appreciable adverse effect on competition under the terms of section 19(3) of the Act.
However, the Commission found the MoU between SAIL and IR as an agreement to supply rails on a continuous basis, as
rational both on price and non-price considerations and is not anti-competitive. The Commission observed that SAIL’s
abusing its dominant position was based on three conditions – a) open ended contract b) removal of review clause c) lack
of an exit clause does not hold ground on the reading of the MoU and the actual processes on ground. The Commission
observed:
146. The lack of an exit clause, the Commission observes, does not lead to foreclosure of the rail market as alleged by the
informant. Firstly, the informant’s rails are still under field tests. The contention that the exclusivity provision of the MoU imposes
a refusal to deal’ condition is not tenable as the field testing of JSPL is still on in terms of their usage on private sidings. Secondly,
and more significantly the market for rails is emerging and, with expansion of port infrastructure and dedicated freight containers,
the market for rails is expected to see considerable growth with expansion of private sidings. The MoU has not hindered
competition in the rail market. The allegation that SAIL as a dominant player has strategised to create entry barriers by locking IR
into a long-term MoU is not borne out by the available evidence. As of now, the market for rails is between two players and can be
characterised as a bilateral monopoly. The MoU signed in 2003 was a rational outcome and the review in 2010 with no other
contending supplier of comfort remains rational. The Commission therefore, finds that the MoU between SAIL and IR is not
anticompetitive and does not lead to foreclosure of the market. The Commission therefore closes the case.
In Wiley India Pvt Ltd719, it was observed that the denial/refusal to deal did not affect the inter-brand competition in the
STM market. The Commission observed that the miniscule presence of opposite parties did not affect the end-users at
large and further, the Informant could also switch to other publishers. Hence, the restriction imposed by opposite parties
was held to not have an adverse affect on the competition landscape in the distribution market of STM journal.
Case Law under MRTP Act, 1969
The following are some typical cases, where the Commission held that there was no refusal to deal:
Re Pieco Electronics & Electricals Ltd,720 a dealer of the company complained to the Commission that the company was
withholding supplies of goods to him. On inquiry, it was found that the supplies were withheld on account of delayed
payments and failure to furnish declarations in form “E” for exemption in the payment of sales tax despite repeated
reminders by the company. The dealership agreement, inter alia provided that All Company’s products to be supplied
under this Agreement shall be paid off in cash upon delivery ...”. As the dealer’s conduct was not free from blame, the
Commission came to the conclusion that the Company was not indulging in restrictive trade practice.
Re Borax Morarji Ltd,721 the Commission received information that M/s Borax Morarji Ltd has refused to supply Boric
Acid IP Grade in bulk quantities to a few customers. On inquiry, it was found that because of price control, the price of
Boric Acid IP Grade costs the company Rs 14,720 whereas the controlled price is Rs 8,014. On the other hand, Boric Acid
Technical Grade is sold at Rs 13,980 per tonne (including mark-up profit of 5%). Considering that the IP Grade Boric Acid
is a “Bulk Drug” to be prescribed by qualified and experienced Opthalomogists and Dermatalogists and considering that it
is uneconomic to produce IP Grade, in view of the price control, the company adopted the policy of supplying Boric Acid
IP Grade only to parties actually engaged in the manufacture of drugs, prices of which are fixed in accordance with the
Drugs (Price Control) Order, 1979 and to hospitals and other governmental medical and health agencies. As the customers,
who complained against the company did not fall in the aforesaid category, being mere re-packers, the company did not
supply IP Grade Boric Acid to them. The Commission found the supply policy of the company reasonable, even if it
resulted in refusal to sell IP Grade Boric Acid to some parties. This practice does not obstruct the flow of capital or
resources into the stream of production and does not impose on the consumer (user) unjustified costs or unjustified
restriction. The Commission held that the policy of restricting the supply of this product to genuine users, hospitals and
similar Government institutions is in public interest.
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Re Jugaldas Damodar Mody & Co,722 on a complaint lodged with the Commission, it was alleged that 23 traders, under
an agreement dated 5 January 1984, have formed a Cartel under the name “Oman Dates Committee”, for the import of dry
dates from Oman. The members of the said group, acting in concert, have refused to deal with the complainant and to
supply his requirement of dates to him. Further, in spite of his being a dealer in dates for the last about 50 years, he has not
been included in the committee. The Commission observed that the agreement entered into between the Sultanate of Oman
and the group aforementioned did not embody any exclusivity clause restricting the Sultanate to sell the entire produce
only to this group or obligating this group to purchase the entire produce of dates in that country. The import of dry dates
was permitted under Open General Licence and as such anybody may import dry dates from a foreign country. The group,
which was importing dry dates from Oman, on the basis of firm orders of its constituent members in varying quantities
according to their respective requirements, was under no obligation to part with any quantity to a competitor, in trade, a
fortiori when the competitor is free to get supply direct from Oman or other countries. Also the members of the group were
under no obligation to include the complainant in their group, when being a competitor-in-trade he is free to import dry
dates from that very country, individually or combinedly with others. The complaint was, accordingly, dismissed by the
Commission. (An earlier agreement dated 20 August 1978, whereunder the respondents negotiated the purchase of entire
available quantity of dates, was held to be Exclusive Dealing.723 There was no such stipulation in the agreement dated 5
January 1984 referred to herein above.)
Re United Breweries Ltd (UB) and Indo Lawenbrau Breweries Ltd (ILB),724 the respondents were engaged in the business
of production, distribution and marketing of beer and entered into a mutual agreement whereby ILB, the second
respondent, was to manufacture the product in accordance with the technical know-how and expertise, provided by UB, the
first respondent, and sell the beer to UB, which had at its disposal an extensive and effective marketing organisation.
Certain clauses of the agreement, which were alleged to be restrictive trade practices, were as under:
(a) With the object of ensuring effective marketing and distribution of the beer, ILB shall sell to UB the said beer at prices
to be mutually agreed upon. The parties shall disclose to each other all necessary information, data, working costs and
other expenses and costings necessary to enable them to arrive at such agreement (clause 2); (b) in consideration of the
obligation undertaken by UB under the agreement, ILB shall carry out its manufacturing processes in the manner approved
by UB and permit UB to have the technical direction of its manufacturing and processing of beer. In particular, ILB shall
appoint such personnel nominated by UB from time to time, whose expenses shall be borne by ILB (clause 5); (c) ILB
shall not, without the consent of UB, during the currency of the agreement, engage or be concerned or interested, whether
directly or indirectly, in the manufacture of beer other than such as will be manufactured by ILB in pursuance of the
agreement (clause 12).
The respondents contended that the agreement was for the mutual benefit of the parties and to optimise the production and
supply of beer in the ultimate interests of the beer industry and the consumers in turn. Further, the restrictions against
manufacturing beer for any party other than the first respondent (UB), were necessary as a safeguard to ensure purity and
quality of the brands marketed by UB, and were covered by the gateways of section 38(1)(b) and (h) read with the
balancing clause thereunder.
Looking to the details of the arrangement, the clauses of the agreement relating to selling of beer at mutually agreed prices
to UB and the restriction relating to appointment of personnel were not held to be restrictive trade practices under section
33(1)(a) of the MRTP Act, 1969 as—(i) there was no strict prohibition to sell the beer to parties other than the first
respondent (UB); the only condition was that royalty was to be paid to UB which was not restrictive, and (ii) the restriction
on the liberty of ILB in the appointment of personnel was incidental and natural in the background and terms and
conditions of the agreement.
However, clause 12 of the agreement restraining the second respondent (ILB) from manufacturing beer other than under
the agreement was held to be a restrictive trade practice under clause (g) of sub-section (1) of section 33 whereby an
agreement to limit, restrict or withhold the output or supply of any goods or allocate any area or market for the disposal of
goods was deemed to be a restrictive trade practice. The Commission declared the said clause 12 of the agreement as void,
as no substantial and definable benefits were shown to proceed from the exclusivity clause of the agreement except to
ensure purity and quality of the brands marketed by UB, which were being taken care of by other clauses of the agreement.
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Thereafter, a review application was made by the respondents, under section 13(2) of the MRTP Act, 1969 read with
section 114 and Order XLVII of the Code of Civil Procedure, 1908, and regulations 85 of the MRTPC Regulations, 1974,
for review/amendment of the Commission’s order, inter alia, on the grounds that:
(1) The purpose of clause 12 in the agreement was to protect the quality and purity of the products and to ensure that the
beer of inferior quality was not mixed up with the beer marketed by the first respondent (UB); (2) the Commission’s Order
dated 4 June 1986 be partially amended to direct deletion of only the undesirable parts of clause 12 of the agreement
having a taint of restrictiveness, as was done Re Mohan Meakin Ltd;725 (3) the Commission had held Re Mohan Meakin
Ltd, that reasonable restrictions on the franchise holders to protect the quality of the products was in public interest and
justified; (4) the Commission’s order be partially amended as to retain the non-objectionable part of clause 12 so that the
manufacturer (second respondent) did not manufacture/bottle at the plant any other products which were liable to be
confused with the products of first respondent.
The review application was opposed by the Director General on the plea that (1) there was no similarity between the
Mohan Meakin case and the instant case, as the former manufactured soft drinks where the allegation related to purchase of
raw-materials, whereas in the instant case, second respondent used only the technical know-how and did not purchase any
raw-material from first respondent; (2) In the case of Mohan Meakin Ltd, the agreement entered into by Mohan Meakin
with its bottlers provided that—(a) it shall impart technical assistance to the bottlers, (b) permit them to use its trade mark
on the soft-drink bottles, (c) bottlers shall obtain raw-materials only from Mohan Meakin Ltd, and (d) ensure that the
products were made in accordance with the technical know-how provided by Mohan Meakin Ltd.
The Commission observed that: (1) The manufacture of beer involved fairly a complicated process unlike the preparation
of soft drinks from concentrates and syrups; (2) Even though there were basic differences in the agreements in the two
cases, it was found that the nature of restriction placed in both the cases was similar inasmuch as the purpose was to
protect the purity and quality of the product and, therefore, to restrain the users of the know-how from producing and
dealing with any other product; (3) In the instant case also, if the second respondent were to decide to undertake the
manufacture of another quality of beer and market it on its own, it should not lead to any confusion with the product of
first respondent. Due to the similarity in the nature of restriction in both the cases and on the same analogy of reasonable
restrictions, as was applied in the Mohan Meakin case, to protect the quality of the products in public interest, the
Commission modified its order dated 4 June 1986 to the extent that instead of deleting the clause 12 of the agreement, the
respondents were allowed to continue it on modified lines as follows:
ILB shall be free to produce, market and sell any other product including beer based on its own know-how or that of a third party,
as the case may be, except that in engaging itself in any such activities, it shall be ensured that it will not infringe the rights of UB
as to the technology, quality, purity, trade mark and get up of UB’s products and will not undertake production and sale of any
products likely to be confused with UB’s products.
Re Sandvik Asia Ltd, Sandvik—respondent No. 1 and Atlas Copco (India) Ltd (Atlas)- respondent No. 2,726 Sandvik, a
manufacturer of Tungston Carbide tipped integral drill steels and allied items granted sole selling agency rights for
marketing its products to Atlas, under a regular agreement, which was approved by the Central Government under the
provisions of section 294AA of the Companies Act, 1956. In his complaint to the Commission under section 10(a)(iii) read
with section 37 of the MRTP Act, 1969 the Director General stated that the arrangement under the agreement, in fact, is on
principal to principal basis though referred therein as sole-selling agency. His contention was that the arrangement
provided only one channel of distribution, and hence it was hit by clause (a). The Commission holding the agreement as an
agency arrangement concluded that the impugned agreement is not restrictive, as alleged. The following are some of the
typical cases involving refusal to deal:
Re Bikaner Ice Factory727—It was noticed by the Commission that the respondents had entered into an ostensible
dealership agreement with one another under the nomenclature “United Ice Traders”. Under this agreement M/s United Ice
Traders obtained an exclusive right to take delivery of the entire daily production of ice of the factories of the respondents.
The agreement also provided that M/s United Ice Traders shall also be entitled to recover damages from the manufacturers
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(i.e., respondents), if they supply their products directly to any other person, although the said firm was not itself
manufacturing any ice and was a combination of these Respondents, in the guise of a separate concern. By resorting to this
practice, M/s United Ice Traders was in a position to command the market and fix the price of ice in any manner they
considered advantageous. The Commission passed a “cease and desist” order and the so called partnership agreement was
also declared void.
Re Rajasthan Chemists Association728—Here the two respondents were Association, operating in Rajasthan and
Maharashtra respectively, having chemists and druggists as their members who deal in the products of pharmaceutical
concerns, including Glaxo. The allegations were that first respondent (in Rajasthan) has actually boycotted, and the second
respondent (in Maharashtra) has threatened of boycott, the food products of Glaxo in order to secure higher trade margins,
and thereby distorting, restricting or preventing competition and affecting the flow of supplies of food products in the
market in such a manner as to impose on the consumers unjustified costs and restrictions. Following an amicable
settlement between the parties, the Commission, while directing the respondent-association to desist from boycotting the
products of any manufacturer of pharmaceutical or food products in future, made the following observations in its order,
viz.: (i) it’s true that the boycott was only confined to food products of Glaxo, which were not pharmaceutical products and
as such could be had from other outlets, i.e., other than the licensed chemists and thereby not affecting the availability in so
far as the consumers are concerned, it is not weighty enough to depart from the view consistently taken by the Commission
in the past that group boycott is a restrictive trade practice, (ii) it is not for the Commission to sit in judgement over the
reasonableness or otherwise of margins allowed by the manufacturers to the chemists, but then at any rate use of such a
weapon, like boycott distorts and restricts competition, (iii) the mere threat of boycott carried by Respondent No. 2, i.e.,
the association in Maharashtra is not a restrictive trade practice, and (iv) that neither the benefit of gateways spelt out in
section 38(1)(b) and (h) nor the balancing clause was available.
Re Rohtak Public Goods Motor Union729—The evidence showed that (i) the respondents prevented the non-member
operators to carry on their transport business freely with a view to eliminate competition in the market in the transport
business and to achieve their object they resorted to man-handling and assaulting the non-member truck operators, (ii)
whereas the member truck operators were permitted to carry full truck load from Rohtak, others who are not members of
the respondent union were not allowed to carry more than 20 quintals of load with the result that they were at a
disadvantage in competition with their brethren truck operators who were members of the union, and (iii) all this resulted
in compelling the customers to engage the trucks for transportation of goods only through the respondent union and pay
whatever rates they demanded. The respondents were held to be guilty and a “cease and desist” order was passed by the
Commission.
Re India Truck Union, Mahwa (Rajasthan)730—Out of the four alleged trade practices, viz.: (i) forcing the customers to
hire trucks from members only, (ii) preventing non-members from loading the goods, (iii) imposing and charging extra-
levy for supply of trucks for certain destinations, and (iv) maintaining transport charges at unreasonable level by limiting
supply of services, the first three were admitted and the last mentioned was proved to the extent that the respondent had
been fixing, maintaining and revising (upward) freight rates. While passing the “cease and desist” order against the
respondent union, the Commission, inter alia, made the following observations:
(i) even if the respondent union were registered as a Trade Union, it does not come within the ambit of the exemption in clause (d)
of section 3, as earlier held Re Bharatpur Truck Operators’ Union,731 in as much as the exemption contemplated therein is
available only to a Trade Union of workmen or employees formed for their own reasonable protection as such workers or
employees; the truck operators who constitute the so called Trade Union, in this case, cannot be considered as ‘Workmen or
Employees, (ii) the deposition by the witness produced by the respondent union to the effect that there has been no dispute with the
traders of the area in regard to the supply of trucks by the union or rates charged by it, is of no avail, (iii) as for the three practices,
viz., forcing customers to hire trucks from members only, preventing non-members from loading the goods, and fixing, maintaining
and upwardly revising the transport charges (notwithstanding whether or not the said charges were fixed at unreasonable level
and/or whether, it resulted in limiting supplies), their adverse impact on competition is patent in as much as there is no competition
amongst the members in the matter of freight rates to be charged and non-member transport operators, who are not allowed to lift
the goods in the area controlled by the Union are precluded from competing with the members, (iv) Gateway vide clause (a) of
section 38(1), which essentially deals with the character of goods traded in, is not applicable in this case in as much as restrictions
imposed on members and non-members and fixation of rates is not designed to protect the public against injury in connection with
the consumption, installation or use of the goods concerned, (v) since the alleged restrictions extended over the entire area in which
the respondent union is operating, the impact of the aforesaid practices cannot be taken as marginal or nominal, (vi) the impugned
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trade practices are not saved from an order under section 37(1) by virtue of being expressly authorised by any law, as there is
nothing to indicate that the rates fixed by the respondent union have the approval of the State Government in the manner provided
under section 43 of the Motor Vehicles Act, 1939 (i.e., to say under the directions of the State Transport Authority duly notified in
the Official Gazette, inter alia, in the interest of preventing un-economic competition among motor vehicles); the mere fact that the
union is associating with the Directorate of Agriculture and Marketing, Government of Rajasthan, does not clothe the impugned
restrictive trade practices with the authority of any law.
Re Madras Piecegoods Merchant Association732—It was alleged that the association (i) prohibited its members to give
interest-free credit beyond 30 days, and (ii) restrained its members from dealing with brokers or indenting agents who are
not registered with it or with dealers blacklisted by it. The Commission, agreeing with the contention of the respondent-
association that the relevant bye-law prevents rich traders from cornering the market by exploiting the financial incapacity
of other traders to sell goods on credit and hence a measure to promote competition, held that the first allegation did not
lead to any restrictive trade practice. The bye-laws relating to prohibition of dealings with unregistered brokers, and
indenting agents and blacklisted dealers were, however, held to be restrictive tantamounting to collective refusal to deal
and unwarranted also as no statute prescribed any rules or regulations for any businessman to act as broker or indenting
agent and it should be open to any member to have or not to have dealings with or through any broker or indenting agent.
Re Bombay Piecegoods Merchants’ Mahajan (Association)733—The notice of enquiry issued by the Commission covered
three rules of the Association, arraigned as restrictive trade practices:
Firstly, the credit sales and payment rules framed and followed by the respondent-Association made it compulsory for its
members to get the payments from their customers within a specified period; in other words, these rules prevented the
members from extending credit facility beyond specified period. In justification thereof, it was pleaded that the restriction
is designed to make the trade more disciplined and healthy and to regularise deteriorating payment rules. The purpose
being to ensure that trading is confined only to those merchants who can make the payments within the specified period
thereby avoiding the possibility of bad and doubtful debts. Following its earlier judgement Re Madras Piece Goods
Merchant’s Association, (wherein it was held that the prohibition against grant of interest-free credit for more than 30 days
prevented the rich traders from cornering the market by exploiting the incapacity of the other traders in business to sell
goods on credit and hence is neither anti-competitive nor tended to distort, restrict or prevent competition), it was held that
the rule regulating the period of payment does not give rise to any restrictive trade practice.
Secondly, the procedure formulated by the Association, required its merchant-members to report the names of purchasers
who defaulted in making payment within the specified period and under which all outstanding contracts of the members
flouting the rules of the Association would be cancelled automatically by the textile mills concerned. Appreciating the
exception taken by the RRTA to the said procedure laid down in the rules for contemplating drastic disciplinary action
against the defaulting sellers by invoking disciplinary proceedings leading to severance of business relations with them and
the threat of boycott of the defaulting members by the mills, the Commission observed that it, no doubt, frowns on group
boycotts, but then there are certain aspects of the present case which necessitated different approach. These are (i) the
procedure does not involve any arbitrary or biased action, (ii) the procedure provides for mediatory action by the trade
association and it is only when this effort fails that disciplinary action takes the form of severance of business relations
with the defaulter, and (iii) the apparent harshness of punishment of severance of business relations is mitigated by
providing that business relations can be restored on payment of nominal fine—a simple and objective approach.
Thirdly, the members were required to ensure that the buyers of goods are members of the concerned textile trade
associations of Bombay; in other words, the requirement was to deal only with members of the textile associations in so far
as sales are concerned. Following its earlier judgement Re Madras Piece Goods Merchants’ Association (whose bye-laws
prohibited the members of the association from dealing with brokers or indenting agents who are not registered with the
said association), the Commission observed that this restraint was a restrictive trade practice, inter alia, involving refusal
to deal. Accordingly a “cease and desist” order was passed by the Commission in respect of this practice.
Re Delhi Yarn Merchants Association (Regd)734—Five trade practices indulged in by the respondent, which is an
association of traders dealing in yarn and is registered under the Societies Registration Act, 1860 as amended by Punjab
Amendment Act, 1957, were alleged by the RRTA. The impugned trade practices were (i) charge of “Dharmada” (ii)
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prohibition imposed on the members in regard to allowing interest-free credit beyond specified period and laying down the
interest rate to be charged beyond interest-free period, (iii) restraining the members from dealing with either non-members
or even members who have been brought under Kayada Committee, (iv) requirement of obtaining a certificate from the
Association before any member engaged in brokerage business in yarn, and (v) authority vested in the Chairman of the
Association to fix rates of yarn during emergency. While the first two trade practices, viz., charging of Dharmada and
regarding interest-free credit, etc., were not held to be restrictive in nature, in regard to the remaining three, “cease and
desist” order was passed by the Commission, with corresponding directions to delete or modify the impugned regulations.
In its order, the Commission following its judgement Re Madras Piece Goods Merchants Association, inter alia, observed
as under:
(i) The contention that the respondent is not a trade association within the meaning of section 2(o) and that its
actions in implementing the impugned rules and regulations do not constitute a trade practice falling within the
purview of section 2(u), is devoid of any force, as already held by Commission Re Madras Piece Goods
Merchants Association;
(ii) Collection of “Dharmada” being a recognised practice openly resorted to in many trades in India, hallowed by
custom, which is spent for socially useful purposes is not a restrictive trade practice, in as much as it does not
amount to “manipulation of prices” and to order its discontinuance would be a retrograde step affecting the public
interest adversely. At any rate the additional cost passed on by the dealer to the consumer on account of
Dharmada being an insignificant part of the total sale price considering that it comes to 25 paise for a sale of yarn
costing about Rs. 5,000/- its impact on competition would be nominal and hence it was as well entitled to the
gateway under clause (h) of section 38(1);
(iii) The bye-law containing the restriction on grant of interest-free credit beyond a specified period etc. prevents the
members from cornering the market by exploiting the incapacity of other traders in the business to sell goods on
credit;
(iv) The contentions that the restriction on dealing with non-member is meant for the protection of members as the
Association can have no control over non-members and the prohibition imposed on members to have dealing
with any person brought under the Kayada Committee, which has been set up to settle disputes between Members
or to deal with violations of the rules and orders of the Managing Committee and General Body is intended to
enforce discipline among the members, are not tenable and in particular as there is no provision in the regulations
for re-admission of the defaulting members who are brought before the Kayada Committee, after they have
complied with their decision, with the result that they can never again get into the mainstream of trade and
compete with other members;
(v) The plea that the restriction on doing brokerage business in yarn market, without obtaining a certificate from the
Association, was meant to ensure that only persons with a clean business dealings work as brokers so that
members do not fall prey to unscrupulous brokers was not acceptable;
(vi) In the absence of any in-built guarantee that the power vested in the Chairman to fix rates of yarn during
emergency (i.e., when there is unusual scarcity of yarn and there is need to ensure that such situation of shortage
is not exploited to the detriment of consumers), will not be used when there is no scarcity, this provision has
potential for mischief; and not only that, fixing of prices by any association implies that the members have
formed a cartel for fixing prices thereby eliminating competition.
Re All India Organisation of Chemists and Druggists,735 the Commission, inter alia, observed that Boycotts are nothing
but refusal to deal, plain and simple, which is statutorily recognised to be per se a restrictive trade practice under clause (a)
of section 33(1) of the Competition Act, 2002 and they fall within the mischief of clause (o) of section 2 also. Boycott
could be by way of understanding among those perpetrating it or by word of mouth among them, and merely because of
the absence of a circular calling upon the sellers to boycott it could not be said that there was no boycott. Undoubtedly,
Article 19(1)(g) of the Constitution of India provides the right to carry on business and by necessary implication provides
the right not to carry on business, but this did not imply that the right not to carry on business exercised by a dealer in
concert with fellow dealers could be exercised with the purpose of boycotting someone’s products [Septran range of
products manufactured by Burroughs Wellcome (India) Ltd, in the instant case] to that person’s detriment. Also, shelter
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cannot be taken under section 51 or section 37 of the Indian Contract Act, 1872 and this apart, the MRTP Act was a code in
itself and was in addition to, and not in derogation of, any other law.
Following are some other cases, where the MRTPC held that clause (a) of section 33(1) was attracted:
— Agreement between Allied Distributors, the sole-selling agent and Bengal Potteries, the manufacturer, requiring
the latter to sell its entire production of crockery to the former.736
— Methodex Business Systems and West End Trading Co, the sole selling agents requiring Weston Electronics to
market the entire range of its products viz., electronic calculators and cassette tape recorders through the said sole
selling agent.737
— Appointment of selling agent for the entire country by Mysore Kirloskar for sale of its lathe and precision
machine tools, etc., and stipulating not to appoint any other selling agent during the agreed period.738
— Rallis India Ltd, sole distributors of Ralliwolf Ltd, requiring its distributors (i) to make full use of its service
stations for service and maintenance of Ralliwolf products, (ii) to sell the Ralliwolf products only to dealers
approved and recognised by Rallis.739
— Mahindra & Mahindra, manufacturer of automobiles restraining its distributors (i) from appointing any dealers
of their choice, and (ii) from selling the jeeps and spares to Government and semi-Government authorities.740
— Ex-cello India, requiring its distributors to appoint such number of dealers, for sale of its products like propellers,
axle shafts, as are in its opinion necessary.741
— Bata, restraining (i) the small scale producers with whom it entered into arrangement for buying footwear, from
purchasing raw materials from parties other than those approved by Bata, and (ii) prohibiting them from selling
additional production arising as a result of enhancement in their capacity to any other party and/or at prices
without Bata’s approval,742
— Agreement between Colour-Chem and its three distributors, viz., Hoechst, Chika and Indokem, (i) requiring
Colour-Chem to regulate its production of dyes and dye-stuffs in a mutually agreed pre-determined manner; and
(ii) requiring these distributors not to sell the agreement-products to any competitor of Colour-Chem as also to
appoint stockists only in consultation with Colour-Chem.743
— Godrej, restraining its wholesalers and distributors from selling its products, viz, refrigerators, typewriters, steel
furniture, etc. to any person, who may use them as loss leaders.744
— Binny, stipulating with its semi-wholesale dealers that the later will distribute the goods to the approved retailers
as per list furnished by Binny and according to instructions issued by it from time to time.745
— Ghee Merchants’ Association,746 which came up before the Commission, it was observed that the constitution of
this association, which was registered for doing the business of selling ghee on whole sale basis in Greater
Bombay, inter alia, contained unduly wide powers in the matter of admission to membership. Holding it as a
restrictive trade practice, the Commission declared the impugned conditions void.
— Truck Operators Union,747 the constitution of the union enabled the existing members to keep out new entrants
from the market of transportation of fruits and vegetables on arbitrary grounds. It was alleged before the
Commission that if any transporter attempted to enter the market and offered to transport fruits and vegetables, he
was restrained to do so by force. While ordering modification of the impugned clause of the constitution of the
Union, a “cease and desist” order was passed against the union, inter alia, prohibiting it from stopping any truck
operator, whether, member of the union or not, from entering the fruits and vegetable market and offering to
undertake the transportation services.
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— LPG Distributors’ Association, the members of the association were restrained from selling burners of those
manufacturers who sold (or advertised) the sale of burners through shops other than the LPG distributors. This
was held to be restrictive, violating clause (i).
— Motor Merchants’ Association,748 its members were directed not to deal with non-members in the vicinity of the
area of operation of the association. Any member, who failed to comply with the same, was threatened with
boycott. This was held to be restrictive trade practice.
— General Merchants’ Association,749 the Association, under a “cease and desist” order was prohibited from
levying any penalty or fine or boycotting any member who sold any article at a price lower than that fixed by the
Association, and also prohibited from boycotting those dealing with non-members of the Association.
— Association of Motion Picture Studios,750 pursuant to a decision taken at a meeting of the Joint Dispute
Settlement Committee the respondent through its circular directed its members including the All India Film
Producers’ Council and Indian Motion Picture Producers’ Association to refrain from making use of, or dealing
with, Ramnord Research Laboratories Pvt Ltd The boycott of the services offered by the said Laboratory was
held to be a restrictive trade practice, which led to the passing of a “cease and desist” order by the Commission.
The Commission also observed that the undertaking given by the respondent not to repeat the said restrictive
trade practice does not preclude the Commission from passing the “cease and desist” order under section 37(1).
— Bombay Cotton Waste Merchants Association,751 two restrictive trade practices were alleged, namely (1) by
means of resolution a restriction was imposed on the members of the Association not to deal with non-members,
and (2) boycott of Century Spinning Manufacturing Co Holding them to be restrictive trade practices,
Commission closed the case under section 37(2), inter alia, accepting the undertakings:
(i) not to restrict members directly or indirectly to deal with non-members;
(ii) not to impose any condition on its members to boycott the goods manufactured by Century Spg. and Mfg. Co
Ltd, or any other Mills provided that they treat its members on equal and identical terms and conditions
including those mentioned in circular No. 191 of the Mills Owners Association, Bombay;
(iii) Not to refuse direct supply of cotton waste to consumers.
— Retail and Dispensing Chemists Association, Bombay,752 the respondent directed all the wholesalers and retailers
to boycott the Nestle’s product till its demands are invariably met by the company. The impact of chemists’
boycott on competition could by no stretch of imagination be considered negligible. The boycott represents an
attempt to deny the consumers certain products to which they are used and, therefore, the hardship to such
consumers is patent. The Commission accordingly passed “cease and desist” order.
— Motor Lorry Owners & Operators Union, Pithapuram (AP) and three other Lorry Owners’ Associations,753 it
was alleged that the four Lorry Associations at four places in Andhra Pradesh were resorting to restrictive trade
practices by acting in concert in fixing the freight rates and dislocating public distribution system in Andhra
Pradesh, inter alia, by not allowing the transport contractors of Civil Supplies Corporation to hire other lorries at
the existing market rates, and further that the Association is not allowing the transport contractors to place even
their own lorries in the sugar factories and the Association is forcing the transport contractors to hire lorries from
its members on the rates fixed by it. The excerpt from the Commission’s order in the inquiry held under section
37 read with sections 2(o) and 33(1)(j) of the MRTP Act, 1969, is given hereunder:
In support of the Notice of Enquiry, the DG led the evidence of one Mr. Rajeev Sharma, examined as AW-I,
He produced certain documents which have been duly exhibited. If one reads his evidence, it is noticed that
the Lorry Owners Associations are alleged to be physically preventing independent contractors from hiring
other lorries at the existing market rates and are even physically preventing the transport contractors to ply
their own lorries from the sugar factories. This is the maximum that can be said to have emerged from the
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deposition of AW-1, Mr Rajeev Sharma, Mr. S. Gupta, JDG, appearing for the DG, was unable to show me in
reply to my questions as to how these activities of the Lorry Owners Association can amount to any trade
practice, let alone restrictive trade practice even if Mr. Rajeev Sharma, Witness of the DG is believed that the
Lorry Owners Association are indulging in acts of physical obstruction, they cannot be said to have been
indulging in any trade practice. Physical obstruction of any person may amount to criminal offence for which
appropriate remedy is the filing of complaint and criminal prosecution. In any case, the said activities do not
come under section 33(1) (i) of the MRTP Act, nor do they come under section 2(o) of the Act.
Then, the third allegation is that the Lorry Owners’ Association is forcing transport contractors to hire lorries
from their own members on the rates fixed by them. It is difficult to accept the allegation because it is
impossible to hold that an Association can physically force the transport contractors to hire lorries from its
own members at the rates fixed by it. At the most, Lorry Owners Association may require every-one of its
members to give on hire a lorry at the rates fixed by it and not any lower rate. If this is so, it would be a case
of restrictive trade practices covered by section 33(1)(j) of the MRTP Act, 1969. But unfortunately that is not
what the third charge mentioned in the Notice of enquiry says nor is there any evidence to the effect that any
of the Lorry Associations has called upon its members not to give on hire lorries except on rates fixed by it.
Though, in fact, this may be so. Unfortunately it cannot be said from what has been mentioned in the
evidence and in the certain documents which have come on record that Lorry Owners Associations have
fixed certain rates and are insisting that the lorries must be hired at those rates only whether those lorries
belong to them or belonging to others. In the absence of a specific allegation in the Notice of Enquiry to that
effect and in the absence of clear cut evidence before the Commission, it is not possible for me to issue any
order restraining the respondents from indulging in any particular restrictive trade practices.
— Boycott of goods of a manufacturer by its dealers is a restrictive trade practice prejudicial to the interests of the
public as it has the effect of depriving them from having access to the goods of that manufacturer.754
Case Law in USA
It has been held that, in the absence of any purpose to create or maintain a monopoly, a trader or manufacturer engaged in
an entirely private business may freely exercise his own independent discretion as to the parties with whom he will deal;
and that he may announce in advance the circumstances under which he will refuse to sell.755 This right of freely selecting
one’s customers, known as the Colgate doctrine, has not yet been overruled, but has gradually narrowed down
considerably. Under the doctrine a manufacturer, having announced a price maintenance policy, may bring about
adherence to it by refusing to deal with customers who do not observe that policy. A seller may not police his suggested
resale prices or secure adherence thereto by any means beyond merely declining to sell to customers who will not observe
his announced policy.756
A manufacturer may, control original sales of its products through agents (i.e., through agency distribution system). It is
only when a manufacturer restricts its sales by others that a restraint of trade comes into play.757 If a manufacturer may
sell to whom he pleases, it is extremely logical that he may restrict his sales as to quantity, and sell to his customers such
quantities as he may see fit.758 The refusal of an automobile manufacturer to grant a franchise to an applicant and its
substitution of another applicant for the prospective distributor did not violate the Sherman Act.759 An automobile
manufacturer’s termination of a dealer’s franchise was justified when, among other things, the dealer did not sell enough
automobiles or parts and did not co-operate with the manufacturer’s policies and programmes.760 A terminated home
appliances dealer charging that his supplier had refused to renew his franchise agreement because the dealer had filed an
anti-trust suit against the supplier had no cause of action against the supplier and whatsoever, harm he may have suffered
by the supplier’s action was not redressable.761 The anti-trust laws deal with promoting competition, and not with
unsatisfactory contractual relationships beyond their stipulated periods of effectiveness and accordingly, a newspaper
dealer’s contention that a dealer who has filed an antitrust action against his supplier should be immune from termination,
subject only to such equitable defenses as unclean hands was liable to be rejected.762
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On the other hand, a newspaper was enjoined from refusing to accept advertisements for publication where the reason for
such refusal was that the advertiser had advertised or proposed to advertise by any other media.763 Likewise, a company
engaged in production and distribution of bananas was prohibited from coercing any person to accept bananas, either
greater or lower in quantity or at higher price than such person would otherwise accept, by threatening to refuse to sell any
bananas.764
It was held by the US Supreme Court in Lorain Journal Co v US,765 that “the right claimed by the Publisher as a private
business concern to select its customers and to refuse to accept advertisement from whomsoever it pleases is neither
absolute nor exempt from regulations. Its exercise as a purposeful means of monopolising inter State Commerce is
prohibited by the Sherman Act”.
Some of the interesting trade practices which have been dealt with under the US anti-trust law are enumerated below:
Cancellation of Distributorship Contract
An oil company did not violate the anti-trust Laws by exercising its contractual right to cancel a distributor’s contract
when it was faced with a contemplated sale by the distributor of its business assets to a person who was unacceptable to the
oil company as a distributor.766
Since an oil company was justified in terminating a distributorship agreement because of the distributor’s poor financial
condition and failure to develop as a full time distributor, charges that the oil company violated section 2 of the Sherman
Act, 1890 by attempting to monopolise the market for its materials was dismissed.767
In the absence of any contention that the supplier tried to prevent the distributor from selling its products, but merely that
the exclusive franchise once held by the complaining distributor was awarded to another party, was insufficient for any
action under section 1 of the Sherman Act, 1890.768
Distribution System Change
A newspaper’s shift from a dealer system of distribution to an agency system was not unlawful.769
Inducing Breach of Contract
Defendants engaged in the manufacture, sale and repair of saw frames and Blades were restrained from inducing
purchasers to breach contracts with competitors by offering bids below the prices of the competitors as a part of an alleged
attempt to create a monopoly.770
An outdoor advertising company was prohibited from urging, coercing or inducing any national advertiser, advertising
agency or other similar person to refuse to enter into, breach, or change any contract for poster advertising with any other
person.771
Molesting Customers of Competitor
A linen supply company was prohibited from threatening any customer of another company that it will not, after the
competitor has gone out of business, furnish that customer with any linen supply service or with adequate or desirable
linen supply service.772
Use of Leased Premises
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Defendants engaged in the business of producing legitimate theatrical attractions, booking such attractions, and operating
theatres were each prohibited from leasing any theatre to any person upon the condition, and from imposing upon such
lessee by any other contract the condition, that the leased theatre is not to be used for the presentation of such
attractions.773
Practices Outside the Area of Fair and Honest Competition
A conspiracy to destroy a competitor by means inimical to free and full flow of inter-State trade, e.g., proselyting of key
employees, wrongful taking of trade secrets, use of intentionally false statements concerning plaintiff’s financial condition,
interference, with plaintiff’s source of raw materials, disturbing of plaintiff’s employees, constituted per se violation of
section 1 of the Sherman Act, 1890.774
Promotional Give-aways
A newspaper’s promotional programme for its new Sunday edition, which included free samples for a period of five
weeks, was not unreasonable and evidenced no monopolistic intent. There was no proof that sampling for such a time
period was unusual in the newspaper business.775
Kickbacks
Oculists were enjoined from accepting any dispenser of optical goods or services any payment arising out of sale of optical
goods or services to any patient of such oculists. An optical company was prohibited from making any payment to any
refractionist or oculist arising out of the sale of goods or services.776
A group boycott, or concerted refusal to deal, is one of the intrinsically per se violation of section 1 of the Sherman Act,
1890.777 Independent businesses cannot form a common plan which has the effect of significantly reducing their
competitor’s opportunity to buy or sell the commodity in which the group competes.778
Boycott
Boycott may be explained as a collective refusal to deal with a person. Generally speaking, it is resorted through a trade
association, pursuant to its rules, regulations or bye-laws under threat of expulsion, if violated by any member. Formation
of a trade association with the object of restricting its membership to a few persons for mutually sharing the benefits which
may arise from the membership would also attract this clause.
SUB-SECTION (4)—CLAUSE (E)—RESALE PRICE MAINTENANCE
Resale Price Maintenance (RPM) could prevent effective competition both at the intra-brand level as well as at the inter-
brand level. When a minimum resale price maintenance was imposed by the manufacturer of a particular brand,
distributors were prevented from decreasing the sale prices. In other words, the mechanism did not allow the dealers to
compete effectively on price. The stifling of intra-brand competition results in higher prices for consumers. RPM, when
enforced at the instance of the distributors/dealers, was particularly problematic since it helped maintain collective interest
of the downstream players, i.e., the distributors, to maintain higher resale prices, causing consumer harm. RPM could
decrease the pricing pressure on competing manufacturers when a significant player imposes minimum selling price
restrictions in the form of maximum discount that could be offered by the dealers who were in interlocking relationship
with multiple manufacturers. It was known that RPM as a practice by multiple manufacturers was conducive for effective
monitoring of cartel. Higher prices under RPM could exist, even when a single manufacturer imposed minimum RPM.
This was more likely in case of multi-brand dealers who had significant bargaining power because of their ability to
substitute one brand with another. Further, it leaded to another likely anti-competitive effect of higher prices across all
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brands even if there was no upstream or downstream conspiracy, because preventing price competition on a popular brand
would result in higher prices of competing brands as well, including those that had not adopted RPM. Thus, minimum
retail price RPM had the effect of reducing inter-brand price competition in addition to reducing intra-brand
competition.779
The term has been defined in Explanation (e) to sub-section (4). RPM is a form of price-fixing. Whenever, a manufacturer
sets the price at which a retail shop, which he does not own, must re-sell his products to the public, or at which a wholesale
business, he does not own, must resell that product to a retailer, the practice is known as re-sale price maintenance.780
RPM may be resorted to either individually or collectively. Under individual-RPM, the supplier prescribes the wholesale
and/or the retail prices for the resale of goods and takes action to enforce the same. Collective-RPM is an arrangement
whereby suppliers of goods decide among themselves the wholesale and/or retail prices for resale of goods by the buyer(s).
RPM is referred to as “vertical” restriction in the anti-trust terminology, in contra-distinction to price-fixing arrangements
among manufacturers/suppliers in respect of sale of goods or among buyers in respect of purchase of goods covered by
clause (a) of section 3(1). When RPM is enforced, the price of goods becomes the same at all points of resale irrespective
of the differences in location, the character and quality of the services provided with the goods, and the different demands
on the resources of the wholesalers or retailers, as the case may be.
RPM has to be distinguished from direct price maintenance by a manufacturer, who owns a chain of retail stores and
stipulates the price at which each of these must sell his products. Such direct price maintenance is prevalent in India in a
number of industries, e.g., footwear (by Bata, Carona Sahu, etc.), textiles (by Gwalior Rayon, Reliance Textiles, etc.).
Likewise, there may be “agency” arrangement where the wholesaler or the distributor may be a mere agent of the
manufacturer and he sells on behalf, and on the account, of the manufacturer. Such cases fall outside the scope of RPM, as
the ownership of goods continues with the manufacturer who sells through the media of such wholesale or retail outlets.
The resale price may take any of the following three forms:
(a) A fixed price at which the product is to be sold;
(b) A maximum price, above which the product may not be sold;
(c) A minimum price, below which the product may not be sold;
The wholesaler or retailer has no discretion to deviate from the price stipulation as aforesaid while reselling the goods. Not
infrequently, a “suggested” or “list” price is issued by the manufacturer (or the supplier), or the price is printed on the
container. Whether or not the suggested price is, indeed, only a suggestion may not be easily clear; it may also be not clear
whether it will be enforced by the manufacturer concerned. This may become ascertainable from the understanding
between the manufacturer and the wholesaler or the conditions surrounding the transaction.
The resale prices are supported and enforced by the supplier’s power to withhold supplies of goods. In the wake of such
fear, which exists in our country in view of sellers’ market in most of the established products, wholesaler or retailer would
abide by the price stipulation. The RPM policy is, thus, the technique for preventing price competition among
manufacturers and distributors. The form of RPM, which is widely prevalent in India, is the “fixed” price or “maximum”
price stipulations. This is justified on the ground that in conditions of shortages, it would prevent arbitrary price rise by the
wholesalers or retailers and curb the tendency of profiteering on their part. It is perhaps for this reason that the Competition
Act, 2002 permits the fixing of maximum prices by suppliers of goods provided the wholesalers or retailers are given
liberty to charge prices lower than the stipulated maximum prices.
The goods which can be subjected to RPM are branded or proprietary goods, as distinguished from non-branded goods.
Non-branded commodities like flour, pulses, groceries and vegetables cannot, likewise, be controlled where they pass
through various trade channels. Control requires identifiable features. Consequently, the branded goods like
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pharmaceuticals and cosmetics are subjected to RPM arrangements. Goods like textiles, though branded, are scarcely
affected due to intense competition and wide variety of substitutes.
Clause (e) of section 3(4) has two ingredients, viz., (i) the sale of goods, which is made by the manufacturer/supplier in the
wholesale or retail outlets, is preconditioned to the effect that resale thereof should be on stipulated price, and (ii) the
agreement therefor should not have clearly provided that prices lower than the stipulated price may be charged. In other
words, where an agreement to sell goods, which is entered into on principal to principal basis, contains a provision about
resale price by way of recommended price or maximum (ceiling) price, there should be freedom to charge lower price and
it should be so stated in unequivocal words. This clause covers vertical agreements in the marketing channel, in contrast to
the horizontal price maintenance arrangement. Such vertical agreements are frowned upon because it prevents price
competition amongst whole sellers, distributors or dealers, which ultimately affects the consumers adversely. There can be
certain benefits which can accrue as a result of RPM like Inter-brand Competition – reducing price competition amongst
distributors, better services and reducing free riding and facilitating new entry.
Recently, the Commission imposed a penalty of Rs 87 crore (0.3% of the company’s average relevant turnover in the last
three financial years from 2013/14) on Hyundai Motor India781 for unfair business practices with respect to providing
discounts for cars. The company was found guilty of indulging in resale price maintenance by way of monitoring of
maximum permissible discount level through discount control and penalty mechanisms for non-compliance of the discount
scheme. The Commission noted that the Discount Control Mechanism, maintained the resale price of Hyundai cars, which
did not result in any consumer benefits but the imposition of upper limits on discounts that dealers may offer to final
consumers through the discount control mechanism of the HMIL, led to loss of intra-brand price competition. The NCLAT
has set aside the order mainly claiming the CCI relied upon the report of the Director General alone without conducting an
inquiry under Section 27 of the Competition Act, 2002 based on appreciation of relevant evidence.782 NCLAT held that the
order of CCI order is silent on the evidence relied upon to show that fines were imposed on dealers under the discount
control mechanism.
Case Law under the MRTP Act, 1969
A large number of cases, involving “fixed” or “maximum” price stipulations by manufacturers of goods, came up for
inquiry before the Commission, by and large, on applications made by the then RRTA (later known as Director General) or
suo motu under section 10(a)(iii) or (iv). In these cases manufacturers were directed to make it unequivocally clear by use
of suitable words that their wholesalers or retailers, as the case may be, are free to charge prices lower than those
indicated.783
A stipulation in the agreement that the dealers shall sell the goods at the price not exceeding the maximum or
recommended price after adding thereto sales tax, octroi, insurance charges and other levies, if any imposed by the local
authority or Government, would not, however, constitute a restrictive trade practice, provided it is also clearly stated that
the dealers are free to sell the product below that price. Issue of a price list, at which sales are made by the manufacturer to
its distributors or stockists, without any indication therein that the products are required to be resold by them to their
customers at the said or any price is not hit by clause (f).784 A departure was made by the Commission in respect of the
agreement entered into by Sandvik Asia Ltd, Pune with Atlas Copco India Ltd, Bombay wherein a condition was imposed
on the latter to allow quantity discounts/value discounts, and, which, thus, had the effect of fixing the resale price as
directed by the respondent. The Commission closed this inquiry with the observation that even though the transactions
between the two parties were on principal to principal basis, the agreement is one of sale selling agency for all intents and
purposes, and thus the emerging marketing arrangement did not distort, restrict or prevent competition.785
Re Mohan Meakins Ltd,786 a stipulation in the franchise agreement entered into by it with the bottlers for bottling and
selling its soft drinks, that, the latter shall sell the products only at prices fixed in consultation with the former was held to
be resale price maintenance. Commission, while observing that although consultation did not necessarily bestow any right
of veto, the inherent nature of parties to the agreement provided a significant measure of superiority to Mohan Meakinvis-
a-vis the bottlers, and in such circumstances “consultation” could, in effect, amount to directive. A “cease and desist” order
was passed by the Commission, inter alia, with the usual direction to provide in the agreement that the bottlers are free to
sell the products at prices lower than the recommended prices.
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Re Infra (India) Ltd787 the Commission, while settling the conflict in its earlier two judgements viz., Re Rallis India
Ltd788 and Re E Merck Ltd,789 and agreeing with the views expressed in the Rallis case, opined that the respondent cannot
be held guilty of restrictive trade practice for fixing prices of pharmaceutical products in accordance with Drug (Price
Control) Order of 1995; and that it would not be necessary to mention expressly in the Price List that retailers are free to
sell products below their respective prices mentioned in the price list (following the direction laid down by the Supreme
Court Re Cynamida India Ltd,790 that prices fixed by Drug (Price Control) order would be in the nature of a legislative
action, generating force of law.
Contemporary Legislations
The public policy against resale price maintenance, collective and individual, has hardened in most of the industrialised
countries in recent years. Some countries have totally prohibited all forms of RPM. Others have formulated a more ad hoc
approach to control the more obvious abuses.
Canada prohibited unconditionally in 1951 all forms of RPM, finding that it represents a real and undesirable restriction on
competition by private agreement or law and its general tendency is to discourage economic efficiency. Sweden banned
resale price maintenance in 1954. “Suggested” prices are permitted only where it is made clear to the consumer that
resellers are free to disregard them. France, since 1953, has had a particularly strong law making all RPM illegal.
Exemptions are available, on ministerial order, for a limited period on grounds connected with special services attaching to
the sale of the commodity, the expenses necessary to launch a new product, severe losses caused by “loss leading”, etc. As
a result, compulsory RPM is stated to have largely disappeared in France. Similar is the situation in Denmark. Since 1956
resale prices may not be maintained unless exemption is given by the Monopoly Control Board. Newspapers and books are
exempted. Norway, since 1959, has also adopted the prohibition policy, and “suggested” individual resale prices are legal
under the supervision of a Price Directorate.
In the United States, collective RPM is prohibited by the Sherman Act, 1890. In 1939, the Miller-Tydings Act made
individual RPM legal on a federal basis for inter-state trade providing that the laws of the state where the prices were being
enforced permitted this through “fair trading” legislation.
For decades, the position in US was not the same as it stands today. The venerable Dr Miles Medical case791 condemned
per se the resale price maintenance (RPM) agreements. Although, the Dr Miles decision was attacked by the Colgate
Doctrine792 and several legislative amendments,793 the subsequent developments794 reinstated the Dr Miles dicta as good
law till 2007 [In US v Colgate, the Court stated that as long as the manufacturer is not a monopoly, s/he can choose with
whom s/he wishes to deal with or not; Orson Inc v Miramax Film Corp,795 “[v]ertical restraints of trade, which do not
present an express and implied agreement to set resale prices, are evaluated under the rule of reason.”] In the case of
Leegin Creative Leather Products, Inc v PSKS, Inc,796 the rule of resale price maintenance was sought to be understood as
per the rule of reasonableness. The same, as aforementioned, was applied in Gordon v Lewiston Hospital797 as well. It was
only after Leegin,798 when the US Supreme Court reversed Dr Miles dicta and held that RPM is no longer condemned per
se but is instead to be treated under the rule of reason.799
Opinion in Britain moved against the practice much more slowly. In 1964800 Resale Prices Act was passed. It is regarded
as one of the most vigorous legal attacks on RPM to be found in any country. There is a general presumption that resale
price maintenance is contrary to the public interest but provision is made for suppliers to apply for exemption before the
Restrictive Practices Court from the general prohibition by reference to certain criteria set out in the Act. Exemption may
be granted where the abolition of RPM would be detrimental to consumers for a number of reasons, viz.,—
— that abolishing price maintenance would reduce the quality or variety of goods available;
— that abolition would reduce the number of shops;
— that abolition would lead in general to higher prices in the long run;
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— that abolition would create a danger to health; or
— that abolition would interfere with proper pre-sales or post-sales services.
In addition, there is a tail-piece requiring that any detriment to consumers resulting from abolition should outweigh the
detriment resulting from the continuation of resale price maintenance. Manufacturers seeking exemption under the Resale
Prices Act, 1964 are, however, permitted to continue to fix and enforce resale prices until the case had been decided by the
Restrictive Practices Court. Once a case has been decided, the decision applied to all goods of a particular class, not merely
to those of the manufacturer concerned in the representative case.
Case Law from EU
Unlike the US, EU competition law consistently has considered RPMs as a hard core restriction. As per the Block
Exemption 2010, resale price maintenance is a strict exemption. In the case of Pronuptia de Paris gmbh v Pronuptia de
Paris Irmgard Schillgallis,801 the Commission held that the provisions which impair the franchisee’s freedom to
determine its own prices are restrictive of competition. Further, as per the case of SA Binon & cie v SA Agence et
Messageries de la presse,802 “Provisions which fix the prices to be observed in a contract with third parties was held as a
restriction. However, in the case of Beguelin Import Co v Import-Export Co803 the Commission opined that punishment
can be escaped if the restriction of competition is insignificant or if it is of minor importance.” The 2010 “EU Vertical
Restraint Regulations”804 have further made it clear that resale price maintenance is a hardcore restriction and the
exemptions and safe harbour provisions introduced in other vertical restraint agreements will not apply to vertical
agreements that establish a fixed or minimum resale price.
Case law under the Competition Act, 2002
In Ghanshyam Dass Vij v Bajaj Corp Ltd,805 Bajaj was engaged in manufacture and sale of FMCG products while the
distributors/dealers/bulk purchasers distributed the products of various companies including those of Bajaj. It was
complained by the informant, who was the dealer of Bajaj till August 2012, that Bajaj orally advised him not to sell the
products outside the area of Sonipat town and when the Informant did not adhere to the advice, he was removed and
replaced by another dealer. It was alleged that appointing exclusive dealer/stockist for Sonipat Area and refusal to deal
with the Informant was a vertical restraint in violation of section 3(4) of the Competition Act, 2002. Apart from the
complaint of imposition of territorial restrictions it was alleged that Bajaj indulged in resale price maintenance by
prescribing rate at which its products were to be re-sold by the dealers to the retailers in order to ensure that there was no
intra-brand competition or price competition of its products. Furthermore, Bajaj’s decision to terminate the dealership of
the Informant indicated that it was strict in enforcing its mandate. The Director General concluded that the conduct of
imposing such vertical restraint was in contravention of section 3(4)(e) of the Act.
However, it was also noted by the Commission that the Indian FMCG market offered a level playing ground for both
domestic and international brands and some of the major FMCG companies operating in India were ITC Ltd, Hindustan
Unilever Ltd, Nestle India, Parle Agro, Britannia Industries Ltd, Marico Ltd, Godrej Consumer Products Ltd (GCPL),
Colgate-Palmolive (India) Pvt Ltd, Procter & Gamble Co (P&G), Anand Milk Union Ltd (AMUL), etc. In terms of hair oil
categories, Marico was a leading FMCG Indian manufacturer providing consumer products and services in the areas of
Health and Beauty. Its products included Parachute, Oil of Malaba, Hair & Care, Nihar, Shanti, etc. Other brands, apart
from Bajaj, included Dabur India Ltd, Emami Ltd, Figaro, etc. All this indicated that the market of hair oil was wide and
consumers had various brands as options to choose from proving the fact that Bajaj did not have a position of strength in
the sector in comparison with other brands unlikely to affect the inter-brand competition in the market.
The Commission in light of lack of evidence indicative of creation of barriers to new entrants in the market or to suggest
driving any existing competitor out of the market, disagreed with the conclusion of the Director General that the vertical
restraints imposed by Bajaj on its distributors caused appreciable adverse effect on competition in the market which
contravene section 3(4) of the Act.
It was complained by ESYS Information Technologies Pvt Ltd,806 that Intel was compelling it to sell its low demand
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products along with the high demand products and it was also alleged that by denying the distributors not to deal dictated
the retail price of its products to the distributors in contravention of section 3(4)(e) of the Competition Act, 2002 which
prohibits re-sale price maintenance. However, it was observed by the Director General that the agreement only talked of
suggested prices but left the final prices to the sole discretion of the distributor. The Commission also noted that contrary
to the allegation of the Informant, clause 4(d) of distributor agreement expressly provided that distributors were free to sell
the Intel products at a price suggested by the distributors. Also, it was held by the Commission that monitoring of resale
price by Intel was a macro level exercise and cannot be termed as resale price maintenance in terms of section 3(4)(e) of
the Act. The Commission found no evidence of any anti-competitive act of Intel through price monitoring. Thus, the
Commission was of the view that there is nothing on record to substantiate the allegation that Intel is maintaining the resale
price in terms of section 3(4)(e) of the Act.
In the case of M/s Shubham Sanitarywares,807 the Commission observed that:
Offering differential discounts to different group of buyers may be a practice followed within the industry and it could be the
avenue for competition enabling the players to compete with each other by offering higher discounts to consumers as large
numbers of items are brought. Thus, the practice of offering differential discounts to different consumers i.e. less discount for retail
buyers and a higher discount for bulk buyers (such as institutions, builders, colonisers and persons of importance) may not be
construed as a violation of section 3(4) of the Act but maintaining the specific rate of discounts to different consumers as the policy
of differential discounts which were forcibly implemented by M/s Hindustan Sanitarywares & Industries Ltd (HSIL) on their
dealers may be construed as a violation of section 3(4)(e) of the Act subject to this practice causing an Appreciable Adverse Effect
on Competition (AAEC) in markets in India. The Commission noted that the dealer had the flexibility to pass the discount to the
end consumers within the prescribed range provided by the Opposite Party. Thus, the allegation of the Informant that by specifying
the varied rate of discount for different groups of customers the M/s Hindustan Sanitarywares & Industries Ltd (HSIL) had
maintained resale price under section 3(4)(e) of the Act was not substantiated. Moreover, there was no AAEC held to be caused
due to the aforesaid scheme of discounts.
The Tribunal had approved the order of the Commission.808
Quoting of different rates of the same product indicates that prima facie, there is no resale price maintenance restraint
existing.809
In the case of Wiley India Pvt Ltd810, it was contended that the opposite party issued a directive to all its subscription
agents asking them to offer a maximum discount of 3% to customers. The Commission was of the view that restriction
regarding maximum discount to be given was in the nature of resale price maintenance (RPM), as the aforesaid directive
fixed the lower limit of the price of journals. However, in view of the negligible market share of the opposite parties in the
market of STM journal, the impact of such RPM would be limited and not likely to have any appreciable adverse effect on
competition. Accordingly, no contravention of section 3(4)(e) of the Competition Act, 2002 was held to be found.
Re-selling is an important factor for proceeding under section 3(4)(e). In the Ola matter811, it was alleged that the cab
aggregators, by setting the prices to be charged by their driver-partners to the riders, have indulged in resale price
maintenance in contravention of Section 3(4)(e) of the Act. The Commission however noted that in app-based taxi
services, the opposite parties do not sell any good/service to the drivers that the drivers resell to the riders. Therefore, when
the drivers offer the physical service of transportation to the riders, they are effectively extensions or agents of the can
aggregators when they operate through their platforms. A single transaction takes place between the rider and Ola/Uber,
who provides a composite service of the driver-rider matchmaking, the ride, GPS tracking, etc. and price is generated only
once. The opposite parties, by performing a centralised aggregation function that rests on algorithmic determination of
prices, have the sole control over prices. It was held therefore that in absence of any resale of services, the allegation of
resale price maintenance is not tenable.
EXEMPTIONS - SUB-SECTION (5)
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The provisions of section 3 do not apply in the following situations:
(i) Intellectual property rights:
India is a signatory to the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS).
TRIPS Agreement covers nine categories of Intellectual Property:
• Copyright and related rights,
• Trade marks including service marks,
• Geographical indications,
• Industrial designs,
• Lay-out designs of integrated circuits,
• Trade secrets,
• Patents,
• Patenting of micro-organisms and
• New plant varieties (seeds and other propagating material)
In this regard, High Level Committee on Competition Policy and law recommended as under:
5.1.7. All forms of Intellectual Property have the potential to raise competition Policy/Law problems.
Intellectual Property provides exclusive rights to the holders to perform a productive or commercial
activity, but this does not include the right to exert restrictive or monopoly power in a market or society.
Undoubtedly, it is desirable that in the interest of human creativity, which needs to be encouraged and
rewarded, Intellectual Property Rights needs to be provided. This right enables the holder (creator) to
prevent others from using his/her inventions, designs or other creations. But at the same time, there is a
need to curb and prevent anti-competition behaviour that may surface in the exercise of the Intellectual
Property Rights.
5.1.8 There is, in some cases, a dichotomy between Intellectual Property Rights and Competition
Policy/Law. The former endangers competition while the latter engenders competition. There is a need
to appreciate the distinction between the existence of a right and its exercise. During the exercise of a
right, if any anti-competitive trade practice or conduct is visible to the detriment of consumer interest or
public interest, it ought to be assailed under the Competition Policy/Law.
However, under clause (i) of sub-section (5) of this section, the intellectual property rights of any person
under the following enactments have been protected and any horizontal or vertical agreement in this
behalf will be outside the scope of section 3, namely:—
(a) the Copyright Act, 1957, which seeks to check the piracy, i.e., infringement of rights under the Act so that
fruit of the labour put in by the copy-right owner may be enjoyed by him and not by the pirates. Copyright
means the exclusive right to do as provided in section 14.
(b) the Patents Act, 1970 which seeks to protect the right of a person as to patent of an invention (and not a
discovery).
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(c) the Trade and Merchandise Marks Act, 1958 which seeks to protect the interest of proprietors of the
registered trade marks used in relation to goods.
(d) the Geographical Indication of Goods (Registration and Protection) Act, 1999 which seek to provide for the
registration and better protection of geographical indications relating to goods.
x. x x
“geographical indication”, in relation to goods, means an indication which identifies such goods as
agricultural goods, natural goods or manufactured goods as originating, or manufactured in the territory
of a country, or a region or locality in that territory, where a given quality, reputation or other
characteristic of such goods is essentially attributable to its geographical origin and in case where such
goods are manufactured goods one of the activities of either the production or of processing or
preparation of the goods concerned takes place in such territory, region or locality, as the case may be.
Explanation:—For the purposes of this clause, any name which is not the name of a country, region or
locality of that country shall also be considered as the geographical indication if it relates or a specific
geographical area and is used upon or in relation to particular goods originating from that country,
region or locality, as the case may be; [section 2(1)(e) of the Geographical Indication of Goods
(Registration and Protection) Act, 1999]
“goods” means any agricultural, natural or manufactured goods or any goods of handicraft or of industry
and includes food stuff; [section 2(1)(f) of the Geographical Indication of Goods (Registration and
Protection) Act, 1999]
“indication” includes any name, geographical or figurative representation or any combination of them
conveying or suggesting the geographical origin of goods to which it applies; [section 2(1)(g of the
Geographical Indication of Goods (Registration and Protection) Act, 1999].
(e) the Designs Act, 2000 which seeks to protect the interest of the proprietor of any new or original design.
(f) the Semi-Conductor Integrated Circuits Layout Design Act, 2000 which seeks to provide for the protection
of semi-conductor integrated circuits layout design and for matters connected therewith or incidental thereto.
“commercial exploitation”, in relation to Semiconductor Integrated Circuits Layout-Design, means to
sell, lease, offer or exhibit for sale or otherwise distribute such semiconductor integrated circuit for any
commercial purpose; [section 2(e), of the Semiconductor Integrated circuits Layout-Design Act, 2000]
“layout-design” means a layout of transistors and other circuitry elements and includes lead wires
connecting such elements and expressed in any manner in a semiconductor integrated circuit; [section
2(h), of the Semiconductor Integrated circuits Layout-Design Act, 2000]
“semi-conductor integrated circuit” means a product having transistors and other circuitry elements
which are inseparably formed on a semiconductor material or an insulating material or inside the
semiconductor material and designed to perform an electronic circuitry function; [section 2(r), of the
Semiconductor Integrated circuits Layout-Design Act, 2000]
(ii) Export of goods:
Under clause (ii) of sub-section (5) of the Competition Act, 2002, agreements exclusively relating to
production, supply or control of goods or provision of services for export fall under the exempted category.
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This provision has been made with a view to encouraging exports resulting in foreign exchange earnings by
the country.
It may be mentioned that the intellectual property laws do not have any absolute overriding effect on the
competition law. The extent of non obstante clause in section 3(5) of the Act is not absolute as is clear from
the language used therein and it exempts the right holder from the rigours of competition law only to protect
his rights from infringement. It further enables the right holder to impose reasonable conditions, as may be
necessary for protecting such rights.812
Case Law under the Competition Act, 2002
In the case of Motion Pictures Association,813 it was suggested that in order to save themselves from piracy of the film,
the provisions in the rules like hold back period and other provisions were necessary. It was also tried to be urged that
rationale behind the compulsory registration was the efficient running of industry and that it resulted in discouraging
piracy, prevented multiple sales, protected copyrights and facilitated ultimate resolution of disputes to avoid litigation. The
Commission held that there it did not dispute on the benefits that may be flowing out of the registration, however, the
compulsory registration also brought along with it the compulsions in the rules regarding the boycotting of the non-
members as also the direction, not to deal with those who breached the rules. The rules also resulted into area restriction in
as much as the member distributor could not operate outside the territory of the association. When all these rules were
considered with each other, the strong hold of the association became all the more pronounced. The argument therefore
made on the basis of section 3(5)(i) was rejected.814
In the FICCI Multiplex Association of India case,815 [ruling later approved by COMPAT in 2014],816 it was argued that
the reason for the alleged anti-competitive agreement was only for protecting the intellectual property rights of the film
producers/distributors. The arguments raised can be summed up as follows:
1. A feature film is subject matter of copyright under the Copyright Act, 1957 and section 14 thereof permits the
owner of copyright to exploit such copyright in a manner as he deems fit.
2. It is entirely up to the copyright owner as to how to communicate his film to the public. It is further argued that
no multiplex owner can demand that the film be released in a theatre let alone dictate the commercial terms on
which such film must be released.
3. It is the discretion and right of the copyright owner to decide as to how many copies of the films to communicate
to the public through theatre or multiplexes and a demand by a theatre or multiplex owner of a right to exhibit the
film cannot be sustained.
4. Reasonable conditions for protecting any of the rights under section 3(5) of the Competition Act, 2002.
It was observed by the Commission that a cumulative reading of the provisions (sections 2(f), 13(1)(b), 14, and 16 of
Copyright Act, 1957)817 makes it clear that the right granted under the provisions of the Copyright Act, 1957 is not an
absolute right. A protectable Copyright (comprising a bundle of exclusive rights mentioned in section 14(1)(c) of the Act)
comes to vest in a cinematograph film on its completion which is said to take place when the visual portion and audible
portion are synchronised. The Commission relied on the following cases to note:
23.16 In The Gramophone Co of India Ltd v Super Cassette Industries Ltd (Decided on 1 July 2010),818 the Delhi High Court
observed:
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At the outset, section 16 of the Act may be noticed. Section 16 provides that no copyright can be acquired in respect of any work
except in accordance with the provisions of the Act. Therefore, copyright is a statutory right. Only those rights which the copyright
Act creates; to the extent it creates, and; subject to the limitations that the Act imposes, vest in the owner of the copyright in the
work, whether it is a primary work such as a literary, dramatic or musical work, or a derivate work such as a sound recording or
cinematograph film. No right, which the copyright Act does not expressly create can be inferred or claimed under the said Act”
It further observed: “The rights conferred by section 14 are ‘subject to the provisions of this Act’. Therefore, section 14 has to be
read in the light of, and subject to the other provisions of the Act. It is seen that the copyright in derivative works viz.
cinematograph film and sound recordings are Ltd right when compared to the rights in primary works viz. literary, dramatic or
musical works.
23.17 In Microfibres Inc. v Girdhar & Co, RFA(OS) No. 25/2006(DB), decided on 28 May 2009, the Delhi High Court held as
follows :
[T]he legislative intent was to grant a higher protection to pure original artistic works such as paintings, sculptures etc. and lesser
protection to design activity which is commercial in nature. The legislative intent is, thus, clear that the protection accorded to a
work which is commercial in nature is lesser than and not to be equated with the protection granted to a work of pure Article
23.18 The following observations of the Supreme Court in the case of Entertainment Network (India) Ltd .v Super Cassette
Industries Ltd,819 are also apposite:
When, the owner of a copyright or the copyright society exercises monopoly in it, then the bargaining power of an owner of a
copyright and the proposed license may not be same. When an offer is made by an owner of a copyright for grant of license, the
same may not have anything to do with any term or condition which is wholly alien or foreign therefore. An unreasonable demand
if acceded to, becomes an unconstitutional contract which for all intent and purport may amount to refusal to allow communication
to the public work recorded in sound recording ... The word ‘public’ must be read to mean public of all parts of India and not only
a particular part thereof. If any other meaning is assigned, the terms ‘on terms which the complaints considers reasonable’ would
lose all significance. The very fact that refusal to allow communication on terms which the complainant considers reasonable have
been used by the Parliament indicate that unreasonable terms would amount to refusal. It is in that sense the expression ‘has
refused’ cannot be given a meaning of outright rejection or denial by the Copyright owner ... What would be reasonable for one
may not be held to be reasonable for the other. The principle can be determined in a given situation. We wish the statute would
have been clear and explicit. But only because it is not, the courts cannot fold its hands and express its helplessness. This scheme
shows that a copyright owner has complete freedom to enjoy the fruits of his labour by earning an agreed fee or royalty through the
issuance of licenses. Hence, the owner of a copyright has full freedom to enjoy the fruits of his work by earning an agreed fee or
royalty through the issue of licenses. But, this right, to repeat, is not absolute. It is subject to right of others to obtain compulsory
license as also the terms on which such license can be granted
23.19 In United States v Microsoft,820 the district court held that “copyright does not give its holder immunity from laws of
general applicability, including the antitrust laws.”
23.20 In Otter tail Power Co v the United States,821 the US Supreme Court ruled that a dominant firm that controls an
infrastructure or an asset that other companies need to make use of in order to compete has the obligation to make the facility
available on non-discriminatory terms.
23.21 The decision of the ECJ of 6 April 1995 in Magill,822 (Radio Telefilms Eireann) (RTE) and Independent Television
Publications Ltd (ITP), established an important precedent in relation to refusal to deal in the context of intellectual property rights.
The court held:
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The appellants’ refusal to provide basic information by relying on national copyright provisions thus prevented the appearance of a
new product, a comprehensive weekly guide to television programmes, which the appellants did not offer and for which there was
a potential consumer demand. Such refusal constitutes an abuse under heading (b) of the second paragraph of Article 82 of the
Treaty (para. 54).
23.22 The U.S. Supreme Court declared in Twentieth Century Music Corp. v Aiken823 that “the immediate effect of our copyright
law is to secure a fair return for an ‘author’s’ creative labor. But the ultimate aim is, by this incentive, to stimulate artistic creativity
for the general public good.”
It was argued further that any action for the benefit of multiplex owners to claim as a matter of right that the producers
should exhibit the film through them will tantamount to compulsory licensing of the film and, therefore, the Commission
would not have the jurisdiction over such issues. Also, that as a copyright owner, a film producer can, at his sole
discretion, determine the manner of communicating his film to the public and this includes commercial terms on which the
film is permitted to be communicated to the public. It was also stated that this was an internationally recognised principle
of copyright law. To support this contention reliance was placed upon the judgements of Hon’ble Delhi High Court in
Warner Bros Entertainment Inc v Santosh VG,824 decision of Hon’ble Supreme Court of India in the case of Indian
Performing Right Society Ltd v Eastern Indian Motion Pictures Association,825 wherein it was held that each feature film
is nothing but a bundle of copyrights.
However, it was observed by the Commission that in the present matter there was no question of infringement of rights of
producers/distributors conferred under the Copyright Act, 1957 arises or the question of imposing reasonable conditions to
protect such right arise. Since the producers/distributors acted in concert to determine revenue sharing ratio with multiplex
owners and to this end they also limited/controlled supply of films to multiplex owners. Such a conduct on their part was
held to squarely fell within the mischief of section 3(3)(a) and (b) of the Act and any plea based on copyright was
incorrect.826 The Commission further observed that multiplex owners were not in any manner infringing the rights of the
producers/distributors under the Copyright Act, 1957. On the contrary, the multiplex owners, by seeking to release films in
multiplexes, were only facilitating the rights of the producers/distributors under the Copyright Act, 1957. Since the
producers/distributors failed to produce any evidence to show the impugned act as a reasonable condition to protect their
right under the Copyright Act, 1957, it was held that recourse to section 3(5) of the Act could not be taken.
In the case of Financial Software and Systems Pvt Ltd,827 it was submitted that ACI was not preventing any third party
(other than the Informant) from providing customisation services. Further, the requirement of prior consent of the Opposite
Parties for third party customisation was a reasonable restraint under section 3(5)(i) of the Competition Act, 2002 and the
same was de facto applied by other switch software suppliers in India.
In the case of Shamsher Kataria v Honda Siel Cars India Ltd,828 all the opposite parties claimed IPR exemptions stating
that on account of the provisions of section 3(5)(i) of the Act, the restrictions imposed upon the Original Equipment
Suppliers (OESs) from undertaking sales, of their proprietary parts to third parties without seeking prior consent would fall
within the ambit of reasonable condition to prevent infringements of their IPRs. The Commission observed that while
determining whether an exemption under section 3(5)(i) of the Act is available or not, it is necessary to consider, inter alia,
the following:
(a) Whether the right which is put forward is correctly characterised as protecting an intellectual property; and
(b) Whether the requirements of the law granting the IPRs are in fact being satisfied.
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The omission, relying on the material placed on record with regard to the other 14 OEMs held that the exemption
enshrined under section 3(5)(i) of the Act was not available to those OEMs for the following reasons:
(a) Original Equipment Manufacturers (OEMs) had failed to submit the relevant documentary evidence to
successfully establish the grant of the applicable IPRs, in India, with respect to the various spare parts.
(b) OEMs had failed to show that their restriction amounted to imposition of reasonable conditions, as may be
necessary for protection any of their rights.
(c) None of the opposite parties owned any registered IPR on any of their spare parts as such in India.
The Commission observed that though registration of an IPR is necessary, the same does not automatically entitle a
company to seek exemption under section 3(5)(i) of the Act. The important criteria for determining whether the exemption
under section 3(5)(i) is available or not is to assess whether the condition imposed by the IPR holder can be termed as
“imposition of a reasonable conditions, as may be necessary for the protection of any of his rights”. Concept of protection
of an IPR is qualified by the word “necessary”. So the relevant question is whether, in the absence of the restrictive
condition, the IPR holder would be able to protect his IPR.
The Commission held that mere selling of the spare parts, which were manufactured end products, did not necessarily
compromise upon the IPRs held by the OEMs in such products. Therefore, the OEMs could contractually protect their
IPRs as against the OESs and still allow such OESs to sell the finished products in the open market without imposing the
restrictive conditions. Furthermore, the Commission was of the view that none of the present three OEMs were eligible to
seek exemption under section 3(5)(i) of the Act for the agreements entered between OEMs and OESs. As such, the
contravention under section 3(4)(c) and 3(4)(d) read with section 3(1) of the Act for exclusive distribution agreement and
refusal to deal was established. The Commission rejected Hyundai’s argument and held that trade secrets and confidential
knowledge were not among the listed categories of IPR laws and hence Hyundai cannot claim any exemption under section
3(5)(i) of the Act.
Can Competition Commission entertain complaints relating to abuse of patent rights?
This issue was examined by the Delhi High Court in Telefonaktiebolaget LM Ericsson (PUBL) v CCI829 and it was held
that though on the face of it, it may appear that the gravamen of the two enactments are intrinsically conflicting; however,
if viewed in the perspective that patent laws define the contours of certain rights, and the anti-trust laws are essentially to
prevent abuse of rights, the prospect of an irreconcilable conflict seems to reduce considerably. There is no irreconcilable
repugnancy or conflict between the Competition Act and the Patents Act. And, in absence of any irreconcilable conflict
between the two legislations, the jurisdiction of CCI to entertain complaints for abuse of dominance in respect of Patent
rights cannot be ousted.
Protection under Copyright law
The copyright law is there to protect not only the interests of authors or creators of original works, but also the interests of
all “chain of title” rights holders, including film distributors. The term “chain of title” refers to the documented collection
of assignments to the producer, special purpose entity (SPE), distributor or other entity that proves ownership of or
distribution rights of a film. The right of the film producers/exhibitors was therefore, held to be protected under section
3(5)(i)(a) of the Act under which it was stated that application of section 3 shall not restrict the right of any person to
impose reasonable conditions as might be necessary for protecting any of its rights conferred upon him by the Copyright
Act, 1957.830
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Exemptions – Vessel Sharing Agreements
In view of a decision taken by the Central Government, the provisions of section 3 would not apply till 1 March 2017 to
the vessel sharing agreements of shipping industry. The notification S.O. 646(E) dated 2 March 2016,831 reads as under:
The Central Government, in public interest, hereby exempts the Vessels Sharing Agreements of Liner Shipping Industry from the
provisions of section 3 of the said Act, for a period of one year from the date of publication of this notification in the Official
Gazette, in respect of carriers of all nationalities operating ships of any nationality from any Indian port provided such agreements
do not include concerted practices involving fixing of prices, limitation of capacity or sales and the allocation of markets or
customers.
During the said period of one year, the Director General, Shipping, Ministry of Shipping, Government of India shall monitor such
agreements and for which, the persons responsible for operations of such ships in India shall file copies of existing Vessels Sharing
Agreements or Vessels Sharing Agreements to be entered into with applicability during the said period alongwith other relevant
documents within thirty days of the publication of this notification in the Official Gazette or within ten days of signing of such
agreements, whichever is later, with the Director General, Shipping.
“De minimis non curat lex” — Law takes no account of trifles
In the case of Lifestyle International Pvt Ltd,832 information was filed questioning the charging of additional cost for carry
bag by contending that the same amounted to “Deficiency in service and Unfair Trade Practice” under the “Consumer
Protection Act, 1986” and by charging additional sum of Rs 5 from the customers. Lifestyle had earned more than Rs 1
crore, which amounts to wrongful gain. The Commission in light of provisions of the Plastic Waste (Management &
Handling) Rules, 2011, which was notified by the MEF vide notification dated 4 February 2011, observed that retailers
were barred from making plastic carry bags available to the customers free of cost and the facility of plastic bags was an
option and was not forced on the customers. Accordingly, the Commission held that there was no competition issue in the
matter. The Tribunal agreed with the decision of the Commission and held that charge for the plastic carry bag cannot be
characterised as abuse of dominant position within the meaning of section 4 of the Act. The Tribunal further observed that
it was a fit case to apply the Latin phrase “De minimis non curat lex” which means “law takes no account of trifles”. The
Tribunal observed:
13. The principle underlying the maxim is that nothing is a wrong which is trivial in nature and a person of ordinary sense and
temper would not complain. This maxim protects a trivial wrong though infringes legal right of other. But the maxim does not
protect a wrong doer when the wrong is not trivial in nature and a harm is caused or a legal right is infringed.
14. Herbert Broom has described this principle in his book “Legal Maxims” in the following words (9th Edition, p 102):
“Where trifling irregularities or even infractions of the strict letter of the law are brought under the notice of the court the maxim
de minimis non curat lex is of frequent practical application. It has, for instance, been applied to support a rate, in the assessment of
which there were some comparatively trifling omissions of established forms. So, with reference to proceedings for an
infringement of the revenue laws, Sir W. Scott observed that the court is not bound to strictness at once harsh and pedantic in the
application of statutes. The law permits the qualification implied in the ancient maxim, de minimis non curat lex. Where there are
irregularities of very slight consequence, it does not intend that the infliction of penalties should be inflexibly severe. If the
deviation were a mere trifle, which, it continued in practice, would weigh little or nothing on the public interest, it might properly
be overlooked.”
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15. The above noted maxim has been applied by the courts in several cases for refusing to examine legality of the judgment/order
complained of - Dhingra Mechanical Works v Commissioner of Sales Tax833; R.G. Anand v M/s Deluxe Films834; Bindeshwari
Prasad Singh v Kali Singh835 and India T.V. Independent News Service Private Ltd v Yash Raj Films Private Ltd836.
MRTP Act, 1969 vis-a-vis the Competition Act, 2002
A comparison of section 33 of the MRTP Act, 1969 with the corresponding provisions of section 3 of the Competition Act,
2002 would show that the anti-competitive agreements particularised in sub-section (3) and (4) of the Competition Act,
2002 are nothing but restrictive trade practices (RTP) specified in clauses (a) – (d), (f) – (h), (j), (ja) and (jb) of sub-section
(1) of section 33 of MRTP Act, 1969. RTP relating to differential discounts, however, does not find any place in the
Competition Act, 2002. The nomenclature of “restrictive trade practice” has now been changed to “anti-competitive
agreements” under the Competition Act, 2002.
There is material difference in the regulatory framework and scheme under the two enactments and the same is
summarised below:
(a) the emphasis under the MRTP Act, 1969 was in respect of trade practices which adversely affected competition
and they were subjected to rule of reason; but in case of Competition Act, 2002 the agreements in question have
been declared as void;
(b) under the MRTP Act, 1969 till the cease and desist order was passed by the Commission after enquiry, the trade
practice or the trade agreement was not held be to void or illegal. This is not so under the Competition Act, 2002.
(c) there was no imposition of penalty by way of fine for having indulged in any RTP under MRTP Act, 1969. The
penalty was attracted when any person violated the order passed by the Commission and that too by the
Magistrates’ Court. On the other hand, under the Competition Act, 2002 the horizontal agreements are treated as
“per se” illegal while vertical agreements are subjected to the “rule of reason” test. Both the agreements have,
however, been declared as void and are subjected to penalty being imposed by the Commission straightaway.
Anti-trust laws in USA—An Anti-trust Primer
The anti-trust laws describe unlawful practices in general terms, leaving it to the courts to decide what specific practices
are illegal based on the facts and circumstances of each case.
Section 1 of the Sherman Act, 1890 outlaws “every contract, combination ... or conspiracy, in restraint of trade,” but long
ago, the Supreme Court decided that the Sherman Act prohibits only those contracts or agreements that restrain trade
unreasonably. What kinds of agreements are unreasonable is up to the courts.
Section 2 of the Sherman Act, 1890 makes it unlawful for a company to “monopolise, or attempt to monopolise,” trade or
commerce. As that law has been interpreted, it is not necessarily illegal for a company to have a monopoly or to try to
achieve a monopoly position. The law is violated only if the company tries to maintain or acquire a monopoly position
through unreasonable methods. For the courts, a key factor in determining what is unreasonable is whether the practice has
a legitimate business justification.
Section 5 of the Federal Trade Commission Act, 1914 outlaws “unfair methods of competition” but does not define unfair.
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The Supreme Court has ruled that violations of the Sherman Act also are violations of section 5, but section 5 covers some
practices that are beyond the scope of the Sherman Act. It is the FTC’s job to enforce Section 5.
Section 7 of the Clayton Act, 1914 prohibits mergers and acquisitions where the effect “may be substantially to lessen
competition, or to tend to create a monopoly.” Determining whether a merger will have the effect requires a through
economic evaluation or market study.
Section 7A of the Clayton Act, 1914 called the Hart-Scott-Rodino Act, 1976 requires the prior notification of large
mergers to both the FTC and the Justice Department.
Some cases are easier than others. The courts decided many years ago that certain practices, such as price fixing, are so
inherently harmful to consumers that a detailed examination is not necessary to determine whether they are reasonable.
The law presumes that they are violations (antitrust lawyers call these per se violations) and condemns them almost
automatically.
Other practices demand closer security based on principles that the courts and antitrust agencies have developed. These
cases are examined under a “rule of reason” analysis. A practice is illegal if it restricts competition in some significant way
and has no overriding business justification. Practices that meet both characteristics are likely to harm consumers—by
increasing prices, reducing availability of goods or services, lowering quality or service, or significantly stifling
innovation.
The antitrust laws are further complicated by the fact that many business practices can have a reasonable business
justification even if they limit competition in some way. Consider an agreement among manufacturers to adopt
specifications that require fire-resistant materials for certain products. The set of specifications may be called a standard.
The agreement to adopt the standard is restrictive: the manufacturers have limited their own ability to use other materials,
and they have limited consumer choice. But the agreement to adopt the standard may benefit consumers in that it provides
assurances of safety.
ILLEGAL BUSINESS PRACTICES
Horizontal agreements among competitors
Agreements among parties in a competing relationship can raise anti-trust suspicions. Competitors may be agreeing to
restrict competition among themselves. Antitrust authorities must investigate the effect and purpose of an agreement to
determine its legality.
Agreements on price
Agreements about price or price-related matters such as credit terms potentially are the most serious. That’s because price
often is the principal way that firms compete. A “naked” agreement on price—where the agreement is not reasonably
related to the firms’ business operations—is illegal. Hard core—clear or blatant—price-fixing is subject to criminal
prosecution.
Are similarity of prices, simultaneous price changes or high prices, indication of price-fixing? Not always. These
conditions can result from price-fixing, but to prove the charge, antitrust authorities would need evidence of an agreement
to fix prices. Price similarities—or the appearance of simultaneous changes in price—also can result from normal
economic conditions. For example, vigorous competition can drive prices down to a common level. A general increase in
wholesale gasoline costs due to production shortages can cause gasoline stations to increase retail prices around the same
time. As for the appearance of uniformly “high” prices, collusion may not be the only basis for the situation. Prices may
increase if consumer demand for a product is particularly high and the supply is limited. Ask any shopper in search of a
particularly popular children’s toy.
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Agreements to restrict output
An agreement to restrict production or output is illegal because reducing the supply of a product or service inevitably
drives up its price.
Boycotts
A group boycott—an agreement among competitors not to deal with another person or business—violates the law if it is
used to force another party to pay higher prices. Boycotts to prevent a firm from entering a market or to disadvantage a
competitor also are illegal. Recent cases involved a group of physicians charged with using a boycott to prevent a managed
care organisation from establishing a competing health care facility in Virginia and retailers who used a boycott to force
manufacture’s to limit sales through a competing catalog vendor.
Are boycotts for other purposes illegal? It depends on their effect on competition and possible justifications. A group of
California auto dealers used a boycott to prevent a newspaper from telling consumers how to use wholesale price
information when shopping for cars. The FTC proved that the boycott affected price competition and had no reasonable
justification.
Market division
Agreements among competitors to divide sales territories or allocate customers—essentially, agreements not to compete—
are presumed to be illegal. At issue in one recent case was an agreement between cable television companies not to enter
each other’s territory.
Agreements to restrict advertising
Restrictions on price advertising can be illegal if they deprive consumers of important information. Restrictions on non-
price advertising also may be illegal if the evidence shows the restrictions have anti-competitive effects and lack
reasonable business justification. The FTC recently charged a group of auto dealers with restricting comparative and
discount advertising to the detriment of consumers.
Codes of ethics
A professional code of ethics may be unlawful if it unreasonably restricts the ways professionals may compete. Several
years ago, for example, the FTC ruled that certain provisions of the American Medical Association’s code of ethics
restricted doctors from participating in alternative forms of health care delivery, such as managed health care programs, in
violation of the antitrust laws. The case opened the door for greater competition in health care.
Restraints of other business practices
Other kinds of agreements also can restrict competition. For example:
A large group of Detroit-area auto dealers agreed to restrict their showroom hours, including closing on Saturdays. The agreement
reduced a service that dealers normally provide—convenient hours—and made it difficult for consumers to comparison shop. The
FTC challenged the agreement successfully.
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A group of dentists refused to make patients’ X-rays available to insurance companies. The FTC maintained that the agreement
restricted a service to patients, as well as information that would be relevant to reimbursements. The Supreme Court upheld the
FTC’s ruling.
Proving a violation in these kinds of cases depends largely on proving the existence of an agreement. An explicit
agreement can be demonstrated through direct evidence—a document that contains or refers to an agreement, minutes of a
meeting that record an agreement among the attendees, or testimony by a person with knowledge of an agreement. But an
agreement also can be demonstrated by inference—a combination of circumstantial evidence, including the fact that
competitors had a meeting before they implemented certain practices, records of telephone calls, and signaling
behaviour—when one company tells another that it intends to raise prices by a certain amount. This evidence must show
that a company’s conduct was more likely the result of an agreement than a unilateral action.
Vertical agreements between buyers and sellers
Certain kinds of agreements between parties in a buyer-seller relationship, such as a retailer who buys form a
manufacturer, also are illegal. Price-related agreements are presumed to be violations, but antitrust authorities view most
non-price agreements with less suspicion because many have valid business justifications.
Resale price maintenance agreements
Vertical price-fixing—an agreement between a supplier and a dealer that fixes the minimum resale price of a product—is a
clear-cut antitrust violation. It also is illegal for a manufacturer and retailer to agree on a minimum resale price.
The anti-trust laws, however, give a manufacturer, latitude to adopt a policy regarding a desired level of resale prices and
to deal only with retailers who independently decide to follow that policy. A manufacturer also is permitted to stop dealing
with a retailer who breaches the manufacturer’s resale price maintenance policy. That is, the manufacturer can adopt the
policy on a “take it or leave it” basis.
Agreements on maximum resale prices are evaluated under the “rule of reason” standard because in some situations these
agreements can benefit consumers by preventing dealers from charging a non-competitive price.
Non-price agreements between a manufacturer and a dealer. —
Manufacturer-imposed limitations on how or where a dealer may sell a product, e.g., service obligations or territorial
limitations, are generally not illegal. These agreements may result in greater sales efforts and better service in the dealer’s
assigned area, and more competition with other brands. Some non-price restraints may be anti-competitive. For example,
an exclusive dealing arrangement may prevent other manufacturers from obtaining enough access to sales outlets to be
truly competitive. Or it might be a way for manufacturers to stop competing so hard against each other. Take the case
against the two principal manufacturers of pumps for fire trucks. It involved agreements that required their customers, the
fire truck manufacturers, to buy pumps only from the manufacturer that was already supplying them. That meant that
neither pump manufacturer had to fear competition from the other.
Tie-in sales. —
The sale of one product on condition that a customer purchase a second product, which the customer may not want or can
buy elsewhere at a lower price, is a tie-in. Requirements like these are illegal if they harm competition. A recent example:
The FTC charged a pharmaceutical manufacturer with tying the sale of clozapine, an antipsychotic drug, to a blood testing
and monitoring service.
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Price Discrimination
A seller charging competing buyers different prices for the same “commodity” or discriminating in the provision of
“allowances”—compensation for advertising and other services—may be violating the Robinson-Patman Act, 1936. This
kind of price discrimination may hurt competition by giving favored customers an edge in the market that has nothing to
do with the superior efficiency of those customers. However, price discriminations generally are lawful, particularly if they
reflect the different costs of dealing with different buyers or result from a seller’s attempts to meet a competitor’s prices or
services.
Price discrimination also might be used as a predatory pricing tactic—setting prices below cost to certain customers—to
harm competition at the supplier’s level. Antitrust authorities use the same standards applied to predatory pricing claims
under the Sherman Act and the FTC Act, 1914 to evaluate allegations of price discrimination used for this purpose.
Maintaining or Creating a Monopoly
While it is not illegal to have a monopoly position in a market, the antitrust laws make it unlawful to maintain or attempt to
create a monopoly through tactics that either unreasonably exclude firms from the market or significantly impair their
ability to compete. A single firm may commit a violation through its unilateral actions, or a violation may result if a group
of firms work together to monopolise a market.
A common complaint is that some companies try to monopolise a market through “predatory” or below-cost pricing. This
can drive out smaller firms that cannot compete at those prices. But the lower prices a large retailer offers may simply
reflect efficiencies from spreading overhead costs over a larger volume of sales. Because the antitrust laws encourage
competition that leads to low prices, courts and antitrust authorities challenge predatory activities only when they will lead
to higher prices.
REGULATION OF ANTI-COMPETITIVE PRACTICES IN THE U K UNDER THE
COMPETITION ACT, 1980—AN OVERVIEW
The provisions of the Competition Act, 1980 concerning anti-competitive practices complement those in other statutes
giving competition policy functions and powers to the Director General.
Under the Fair Trading Act the Director General could refer cases to the Monopolies and Mergers Commission for
investigation if he considers that a monopoly situation exists (normally where 25% or more of the supply in the United
Kingdom of the product or service is accounted for by one company or group of inter-connected corporate bodies). The
Secretary of State has a similar power to make references.
The Commission must report whether a monopoly situation exists and then whether any steps are being taken to exploit or
maintain that situation and whether any behavior by companies, which can be attributed to the monopoly situation, is
against the public interest. The Commission’s investigation therefore extends over the whole market in question and over
all aspects of the behavior of any companies which are in a monopoly situation.
By contrast, the Competition Act, 1980 allows the investigation of particular practices of individual firms which restrict,
distort, or prevent competition. No specific anti-competitive practice is prohibited and the Act does not specify any which
are undesirable. Instead its approach is flexible, allowing each practice to be investigated individually with consideration
being given to all the circumstances that may be relevant to the particular case.
The Act adopts a two-stage approach. First, the Director General can carry out a preliminary investigation to establish
whether a particular course of conduct amounts to an anti-competitive practice. He is not concerned whether the practice is
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contrary to the public interest. If an anti-competitive practice is identified he can refer it to the Commission for further
investigation. Alternatively, he may accept an undertaking from the firm which has been investigated.
Second, if a reference is made to the Commission they must, within a limited period, establish whether an anti-competitive
practice is, or was, being pursued and, if so, whether it is against the public interest. If the Commission’s report contains an
adverse finding, the Secretary of State can ask the Director General to seek an undertaking from the firm. Alternatively, the
Secretary of State may make an order prohibiting a practice, or remedying or preventing its adverse effects. Only after the
Commission has reached an adverse finding is there any possibility of sanctions against any practice.
Definition
An anti-competitive practice is defined in the Act as a course of conduct pursued by a person in the course of business
which of itself or when taken together with a course of conduct pursued by persons associated with him, has or is intended
or is likely to have the effect of restricting, distorting or preventing competition in connection with the production, supply
or acquisition of goods in the United Kingdom or any part of it or the supply or securing of services in the United
Kingdom or any part of it
Person includes bodies corporate or unincorporate, partnerships and individuals.
Exemptions
The Competition Act, 1980 and the Anti-competitive Practices (Exclusions) Order, 1980 (as amended by the Anti-
Competitive Practices (Exclusions) (Amendment) Order, 1984) allow certain limited exemptions to the definition. A
practice cannot be investigated under the Act if:
— it arises from a relevant restrictions in an agreement and by virtue of that restriction, either alone or taken with
others, the agreement is subject to registration under the Restrictive Trade Practices Act, 1976 (relevant
restrictions are presumed to be against the public interest and are subject to the separate jurisdiction of the
Restrictive Practices Court);
— it is carried out by a firm with an annual turnover of less than £ 5 million and which has less than a 25% share of
a relevant market and which is not a member of a group with either an annual turnover of £ 5 million or more or
which has a 25% share or more of a relevant market; or
— it is carried out in certain exempted sectors such as international shipping and international civil aviation other
than for charter flights.
What counts as an anti-competitive practice?
The Director General’s concern is primarily to promote and maintain competition in markets for goods and services. When
his attention has been drawn to particular behavior or practices, the market is identified and an investigation is started to
find what effects they have on competition in that market. The practice may have other commercial and economic effects
but, in reaching a conclusion, the Director General will take into account only those effects which concern competition.
The wider question of the public interest is a matter for the Commission.
A company will adopt policies and practices with potential or actual adverse effects on competition only if it has strength
in a particular market, that is, if it has market power. Possession of market power depends on a variety of factors including
the number of direct competitors, their relative shares of the market, the reputation of their products and the ease or
difficulty with which newcomers can enter the market. One company may have a large number of competitors of varying
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size with a regular flow of firms entering and leaving the market. Another company, possibly in a highly specialised
market, may have few, if any, competitors and new entrants may be virtually unknown because of the skill, knowledge and
specialised plant needed for the product. In any market, ownership of a leading brand-name can give market power.
Because of the wide diversity of types of market the Office does not follow any rigid rules in assessing market power. The
prime test is whether a firm is able through its own actions to have a significant impact on prices or on the range and
equality of goods or services available. Firms which are insignificant in a market are unlikely to have any such influence
whatever practices they may adopt.
Competition can itself result in changes in market shares, or even a reduction in the number of firms in a market. The
purpose of the Act is to encourage and protect the process of competition. It is not meant to be used to protect a company
whose sales are falling or static or whose market share is being reduced simply because it is less efficient than its
competitors or because, for other reasons, it is less able to meet the needs of the market. But if a competitor with market
power adopts polices or practices which prevent, exclude or restrict competition from other firms, deter potential new
entrants, or distort the process of competition in some other way, the adverse effects on these firms may be evidence of
anti-competitive behavior.
It is the effect on competition rather than the form of the practice that determines whether it is judged anti-competitive. The
circumstances of each case have to be considered carefully since a practice which may reduce competition in some
circumstances may not do so in others. The Competition Act, 1980 does not list practices that are to be regarded as anti-
competitive in themselves, nor does it give guidance on the type of behaviour that the Director General can investigate.
INVESTIGATION BY THE DIRECTOR GENERAL
The main steps taken when the Director General is considering whether to investigate particular practices are:
Identifying the markets
The first step is to identify the market in which the firm in question is operating and the market in which any adverse
effects on competition are to be expected. In many cases these two markets will be the same. But this is not necessarily so.
For example the distribution policies of a firm may affect not only competition between the firm and its own
competitors—for example by making it more difficult for its competitors to expand or for new competitors to enter the
market—but also competition between distributors—for example by restricting distributors in their choice of suppliers or
in the terms and conditions of their own sales.
Identifying the position of the firm in the market
Where a firm is only one among many in the market, it is unlikely that its behaviour can have any effect on competition. If,
for example, it were to attempt to impose restrictive terms on its customers, they could switch to other suppliers; while
there would be some effect on market shares, there would be no adverse effect on competition in the market. The first step
in assessing whether a practice can have anti-competitive effects in a market is therefore to identify the extent and nature
of the market power that a firm may hold, or the effect of a firm’s practice upon its market power. The main factors that
the Director General is likely to consider are the firm’s market share, the number of competitors and their market shares,
any barriers that may exist to the entry of newcomers, and advantages the firm may enjoy over its competitors from its
scale, brand name, intellectual property rights in the form of copyright, patents, trademarks and such like. In assessing a
firm’s position in the market, account will always be taken of import penetration or of potential imports if there are no
apparent barriers to trade.
It must be emphasised that there is no minimum level of market share that is required to trigger an investigation. Firms
with less than a 25% share of the relevant market are, however, exempt from the Act, if their turnover is also less than £5
million.
Identifying likely and intended effects on competition
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When considering whether a practice is anti-competitive the Director General may take into account not only effects,
which have already occurred, but any that he thinks are likely to occur in the future. An assessment of the way a practice
impinges upon other firms in the market or on potential new entrants, is the basic part of any investigation. This
assessment will be based upon various kinds of factual information but also upon the statements and views of affected and
interested parties. A firm’s plans and motives in adopting a practice are also likely to be a relevant factor.
Illustrations of possible anti-competitive practices
An anti-competitive practice is a course of conduct which has, or is intended to have, or is likely to have the effect of
restricting, distorting or preventing competition in any market in the United Kingdom. Conduct is likely to have this effect
only if some degree of market power is present. Market power, however, can be exercised in local markets or in niches of
any market and is certainly not the preserve of large firms. The following categories of possible anti-competitive practices
can be identified:
— practices which do or could eliminate the competition a firm faces in a market in which it is engaged;
— practices which do or could prevent the emergence of new competitors or restrict competition in market in which
a firm is engaged by making it difficult for existing competitors to expand in the market;
— practices which have such an effect upon the terms and conditions of supply in some market, not necessarily a
market in which the firm itself is engaged, that they distort competition between firms engaged in that market.
It is the effect rather than the form of a practice which is relevant and this depends upon the circumstances in which it is
operated. An anti-competitive practice is one which in some way frustrates or inhibits the effective working of the
competitive process. It should be emphasised that competition may not work effectively for reasons other than that some
suppliers have market power, for example, deficiencies in the information available to consumers. But the Act’s anti-
competitive practice provisions are not intended to deal with all the reasons for market failure. Practices may be adopted
for commercial reasons which have nothing to do with their effects upon competition but are intended to increase the
firm’s efficiency. Where a practice enables a firm more efficiently to meet the needs of its customers competition may be
increased to the benefit of everyone. But where a firm has market power it may be able to use that power to the detriment
of its own customers even though its own efficiency may be increased by a practice. The Director General would take this
into account when deciding whether to exercise his discretionary powers.
Elimination of competition
There are many reasons why competitors may withdraw from a market. Predatory behaviour involves the deliberate
acceptance of losses in the short term with the intention of eliminating competition so that enhanced profits may be earned
in the long term. Diversified and vertically integrated firms may behave in a predatory fashion by subsidising loss-making
activities and by reducing the price of output at later stages in a vertically integrated production process. Predatory
behaviour is not limited to predatory pricing.
Preventing and restricting competition
Prominent in this group of practices are restrictions in the distribution or production chain which make it difficult for
competitors to attract the business of customers or suppliers. These restrictions may also make it difficult or, in the
extreme, impossible, for new competitors to enter a market. These “vertical restraints” may, however, serve to improve the
efficiency of the firm without causing harmful effects to competition. In such circumstances the restriction would not
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amount to an anti-competitive practice. Examples of vertical restraints, which may have anti-competitive effects according
to the structure and other features of the market, include:
Exclusive supply dealing arrangements
A supplier agrees to supply only one customer, usually in a certain geographical area. The customer in turn agrees not to
stock or handle products of competitors of his supplier and perhaps not to compete with other customers of his supplier in
their exclusive territories.
Exclusive purchasing contracts
A customer agrees to buy his requirements exclusively from a single supplier. Contracts which do not specify exclusivity
but require the customer to buy a specified proportion of his requirements or even a specified quantity in a period may also
have anti-competitive effects.
Long-term supply contracts
Long-term contracts which do not contain an exclusivity term can have a similar effect if the customer is faced with
onerous termination provisions.
Restrictive terms
These occur in contracts which prevent or restrict the customer from dealing with the supplier’s competitors, and in loyalty
rebates and discounts which inhibit the customer from switching business to his supplier’s competitors.
Selective distribution systems
A supplier will deal with only a certain number of distributors or only those which can satisfy criteria he lays down on
such matters as stock holding levels or pre or post-sales service. Selective distribution systems will restrict competition
between distributors, but they may enhance the efficiency with which a product is distributed and users’ needs are met.
Whether the restrictions on competition between distributors is significant will depend primarily upon the degree of
competition between the suppliers of the product (that is, on the degree of inter-brand rather than intra-brand competition).
The market power of the supplier is, therefore, again the crucial consideration.
Tie-ins
A second category of practices which can prevent or restrict competition is the tie-in. A tie-in exists when the supplier of
one product or service (the tying item) insists that the customer must buy all or part of his requirements of some other
product or service (the tied item) from the supplier or someone nominated by him. It may be convenient to customers to
buy several items from one supplier and there may be cost savings from tie-ins. But if the supplier has market power
competition may be restricted for the tied item. Sometimes the customer is required, as a condition of supply of certain
items in the range, to buy all (or more of) the items in the range. This is known as full-line forcing. This may restrict
competition between the supplier and competitors who offer a more limited number of items.
Restrictions on the supply of parts or other inputs required by competitors
A third category of practice which can prevent or restrict competition can occur if vertically integrated firms refuse to
supply items needed by competitors who are not engaged in the complete production process (that is, they are not
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vertically integrated) or may supply them only at prices which make it difficult for the competitor to sell the end product at
a competitive price.
Restrictive licensing policies
These usually arise in relation to the licensing of intellectual property rights, patents, copyright, trademarks and so on but
they can occur more generally with the licensing of technology and “know how”. Some restriction of competition is
inherent in the grant of any intellectual property right, the rationale being that invention, innovator and other creative
activity will thereby be encouraged. A refusal to license such rights, or the inclusion of restrictive terms in licences of such
rights, is therefore fully compatible with the exercise of those rights. Nevertheless the effects of the restriction of
competition may, in particular circumstances, and taking account of the market power of the firm enjoying the rights, be
such as to suggest that a firm’s licensing practices should be regarded as an anti-competitive practice. Similarly with the
licensing of technology; while it cannot be suggested that a firm must be prepared to license its technology to all-comers
there may be circumstances where a refusal to license so reinforces the market power of a firm that refusal should be
regarded as anti-competitive.
Distortion of competition
Competition may be said to be distorted if firms are not able to compete in a certain market on the same basis for reasons
other than differences in their relative efficiency. Many factors can bring out such distortions—differences in the legal,
institutional and tax regimes under which firms operate, for example. Distortions can also arise from subsidies and other
advantages enjoyed by some of the firms competing in a market.
The polices and market behaviour of firms and distort competition.—Discriminatory treatment of customers may distort
competition between those customers. Some forms of competition may themselves create distortions. For example,
competition between a small number of competing suppliers can result in discriminatory prices to customers (often after
discounts or other allowances). It is not possible to say that such behaviour should be regarded as anti-competitive because
of the effects on competition between the customers. There has to be a weighing of the competitive effects at the two
levels, between the suppliers and between their customers. Behavior which both restricts and distorts competition is more
likely to have significant anti-competitive effects than behaviour which merely distorts competition; for example a supplier
may grant discriminatory terms which, for some customers, include terms restricting their right to buy from other
suppliers.
EXPLANATION OF SALIENT TERMS REFERRED TO IN THE UK COMPETITION
ACT, 1980
Associated persons
A course of conduct pursued by a person may not, by itself, be an anti-competitive practice. In certain circumstances,
however, such a course of conduct, when taken with a course of conduct by another person, may be anti-competitive and as
such capable of being investigated under the Competition Act, 1980. Two persons will be treated as associated and have
their separate courses of conduct aggregated when:
— one is a body corporate of which the other directly or indirectly has control, either alone or with other members
of a group or interconnected bodies corporate of which he is a member; or
— both are bodies corporate, of which one and the same person or group of persons directly or indirectly has
control.
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For the purposes of the definition of “anti-competitive practice”, a person or group of persons which is able directly or
indirectly to control or materially influence the policy of a body corporate, but without having a controlling interest in it,
can be treated as having control of it.
Business
Only “persons” in business can pursue an anti-competitive practice as defined. “Business” includes the professions and
undertakings carried on for gain or reward, or in the course of which goods or services are supplied otherwise than free of
charge.
Course of conduct
A “course of conduct” includes “courses of conduct” and, thus, if one person was pursuing several courses of conduct, they
could all be investigated at the same time in the same investigation provided they were all specified in the statutory
notices.
Goods
A course of conduct pursued in connection with the production, supply or acquisition of goods can be an anti-competitive
practice. The term “goods” includes buildings and other structures, ships, aircraft and hovercraft; and “supply in relation to
goods” includes supply by way of sale, lease, hire or hire purchase and in relation to buildings, the construction of them by
a person for another person.
The Market
A course of conduct which is an anti-competitive practice must be connected with the production, supply or acquisition of
goods or the supply or securing of services “in the United Kingdom or any part of it”. Such activities outside the United
Kingdom are, therefore, excluded. The words “or any part of it” mean that a person carrying out these activities on a small
scale, or in a local market, can be investigated.
Person
In the definition of anti-competitive practice “person” includes bodies corporate or unincorporate, partnerships and
individuals.
Practice
As used in the phrase “anti-competitive practice” this means any practice, whether adopted in pursuance of an agreement
or otherwise. More than one practice carried out by one person can be investigated at the same time, as long as the
practices are all specified in the statutory procedures. A practice carried on by a class of persons (for example, all
manufacturers of beds) cannot be investigated under the Competition Act, 1980 unless all the persons involved are
individually named. A practice carried on by more than one person can be investigated in one investigation if all the
persons are individually named.
Registrable agreements
Restrictions by virtue of which an agreement is subject to registration under the Restrictive Trade Practices Act, 1976
(relevant restrictions) are presumed to be against the public interest and are subject to the separate jurisdiction of the
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Restrictive Practices Court. A course of conduct which arises from a relevant restriction is therefore excluded from the
definition of “anti-competitive practice”. A course of conduct which arises from non-relevant restrictions, in an agreement
which is subject to registration under the Restrictive Trade Practices Act, 1976 may, however, be an anti-competitive
practice as defined.
Services
A course of conduct pursued in connection with the supply or securing of services can be an anti-competitive practice.
“The supply or securing of services” does not include services provided under a contract of employment but does include:
— the undertaking and performance for gain or reward of engagements (whether professional or other) for any
matter other than the supply of goods;
— the rendering of services to order;
— the provision of services by making them available to potential users;
— the making of arrangements for a person to put or keep on land a caravan, other than arrangements by which a
person may occupy the caravan as his only or main residence; and
— the provision of car parking facilities.
Cases investigated under UK Competition Act, 1980
Some of the cases investigated under the Competition Act, 1980 are cited below:
1. TI Raleigh Industries Ltd,837—The investigation was concerned with the supply of bicycles both from the
manufacturer to the retailer and at the retailing level. The firm was operating a selective distribution policy, and
was refusing to supply some multiple retailers. It has a very strong position in the market and was the recognised
market leader. The Director General concluded that the firm’s behaviour was anti-competitive, and referred the
case to the Commission. The Commission found Raleigh’s policy to be anti-competitive and against the public
interest, but recommended that Raleigh should be able to attach certain conditions in making supplies available to
retailers,
2. Petter Refrigeration Ltd—The market concerned were the supply and servicing of refrigeration units for vehicles.
Petter had imposed a condition on its distributors and service agents that they should not act for any of Petter’s
competitors or service their machines. The Director General found the firm’s behaviour to be anti-competitive.
Petter gave an undertaking to end the practice.
3. Arthur Sanderson & Sons Ltd—The investigation was concerned with the manufacture and retailing of furnishing
fabrics. The firm was applying a selective distribution policy and had refused to supply a number of retailers but
other brands of furnishing fabrics were good substitutes. The Director General concluded that the firm was not
behaving in an anti-competitive way.
4. Sheffield Newspapers Ltd (SNL).—The investigation concerned the published and distribution of newspapers in
certain areas of South Yorkshire, North Nottinghamshire and North Derbyshire and with property advertising in
newspapers in those areas. The conditions of supply of newspapers laid down by SNL for newsagents could be
read as preventing the newsagents from handling free-sheet newspapers (among other things). In addition, in
regard to property advertising, SNL had established a discount structure for advertisers whereby discounts were
given for placing a certain proportion of an advertiser’s property advertisements in a particular (SNL) paper and
for advertising for a minimum number of weeks a year in that paper. The firm also, for a time, refused to accept
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property advertisements that were also appearing in a new competing free-sheet. The Director General found that
the firm’s behaviour was anti-competitive on all counts. The firm subsequently provided an undertaking to amend
its discount structure so as to eliminate discounts depending on the proportion of the advertiser’s business placed
with its paper. The refusal to accept certain advertisements had already ceased. The remaining issues of
distribution restrictions and discounts were referred to the Commission who found that on the distribution point
SNL was behaving anti-competitively, but that the amended discount structure was not anti-competitive. The
Commission also considered that the firm’s distribution restrictions were against the public interest and SNL
gave undertakings to give them up.
5. London Electricity Board.—The market concerned the retailing of certain domestic electrical goods. The Director
General’s investigation found that the Board was carrying on its business at a loss and that it was able to do this
because its relating activity was only a small part of its total business, allowing the Board to take a larger market
share than its efficiency justified. He concluded that the behaviour of the Board had an anti-competitive effect,
and referred the case to the Commission. The Commission confirmed the anti-competitive finding, but did not
consider that the Board was acting in a way which was against the public interest because the Board had plans to
arrange its retailing activity on a profit making basis.
6. WM Still & Sons Ltd—The investigation concerned the supply and servicing of catering equipment. The firm was
operating a selective system in regard to the supply of spare parts and the provision of servicing. Independent
service agents, who would service the equipment of a number of manufacturers, were refused supply of Still’s
spare parts. The company also provided large discounts on spare parts to its own agents. The Director General
found that the firm was behaving anti-competitively and the firm undertook to stop the practices.
7. British Railways Board (BRD): Brighton Central Railway Station.—The investigation concerned taxi services to
and from the station. BRB had made an arrangement with an association of taxi owners to provide a service from
the station, other taxi owners being prevented from plying for hire there. The Director General concluded that the
arrangement was anti-competitive in effect. BRB subsequently agreed to make appropriate changes in its
arrangements.
8. Scottish and Universal Newspapers Ltd (SUNL).—The investigation concerned newspapers in the Lanarkshire
region. They compete with a new free-sheet SUNL launched of its own. Free advertising space was provided for
a substantial period, and subsequently at a rate much below cost. The initial offer of free space was also
associated with the condition that the advertiser should not use any other free newspaper in the region. The
Director General found that the behaviour of SUNL was anti-competitive. An undertaking was subsequently
provided by the firm concerning advertising terms and conditions.
9. British Railways Board (BRB): Motorail.—The investigation concerned the carriage of commercial vehicles by
rail. BRB had made arrangements for a certain period whereby one company carrying parcels and goods was
given advance block books for regular use on Motorail between London and Edinburgh. In a subsequent period
BRB had discriminated between customers as regards the terms and conditions for booking on Motorail. Later
BRB changed the terms of use for commercial vehicles carrying parcels and goods in order to relate them to the
charges made by their own Red Star parcels service. Of these three courses of conduct the Director General
concluded that the first was not anti-competitive, and that the second and third were anti-competitive but of
insignificant effect.
10. British Railways Board (BRB): Godfrey Davis Ltd—The subject of the investigation was the provision of self-
drive car hire facilities at railway stations. BRB had given an exclusive right to Godfrey Davis to provide these
facilities. It also had a policy of restricting the car hire advertisements of other firms at stations. The Director
General concluded that the behaviour of BRB was anti-competitive but that the effect on competition in the
market was not substantial.
11. Essex County Newspapers (ECN).—The investigation concerned property advertisements in newspapers in the
Colchester District. ECN was refusing to carry advertisements from a new type of property selling agency (which
handled business on a basis different from the usual no sale—no fee basis). The Director General found that the
firm was behaving anti-competitively. An undertaking was subsequently given by the firm to the effect that the
practice would cease.
12. Thames Television Ltd—The investigation concerned the supply of advertising time on television in the London
television region. Thames pricing policy involved the tying of terms and conditions for advertising to the
proportion of total expenditure on television advertising time in London that was committed to them by an
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advertising agency. The Director General concluded that while the policy was discriminatory as between both
advertisers and agencies it was not anti-competitive.
13. British Airways Authority: Gatwick Airport.—The investigation concerned chauffeur-driven hire car services
operating from the airport. The Authority had made an exclusive arrangement with one company to provide hire
cars. The Director General concluded that the way in which the concession was granted did not sufficiently allow
for competition, and he declared the practice to be anti-competitive. The Authority subsequently provided an
undertaking to make appropriate changes in the way in which the franchise was granted.
14. Ford Motor Company Ltd—The investigation concerned certain body parts for Ford cars. Ford had copyright
over the designs for its spare parts and was operating a policy of not licensing their manufacture or sale by other
firms, although a number of firms had entered the market nevertheless. The Director General found that Ford was
behaving anti-competitively, and referred the case to the Commission. The Commission concluded that Ford’s
practice was anti-competitive, and against the public interest. By way of remedy the Commission recommended
changes in the law of copyright and registered design and hoped that Ford would agree to license the manufacture
of the parts on reasonable terms meanwhile.
15. British Telecom (BT): Yellow Pages.—The investigation concerned directory advertisements (particular Yellow
Pages) and related services to the advertiser. It was BT’s policy, carried out through two regionally-based
contractors, to make a single charge for advertising space in a Yellow Pages directory together with any
advertising services that might be provided to the advertiser. The Director General concluded that the policy did
not have the effect of distorting competition between advertising agencies and BT’s contractors and declared it to
be not anti-competitive.
16. British Broadcasting Corp (BBC) and Independent Television Publications Ltd (ITP).—The investigation
concerned television programme listings. The BBC and ITP were operating similar policies in regard to the
exploitation of the copyright they held over their respective listings. Newspapers and magazines were allowed to
publish the listings for only a short period ahead. The Director General concluded that these policies restricted the
market for the publication of programme information and declared them to be anti-competitive. He referred the
case to the Commission, who also found the policies to be anti-competitive but not against the public interest.
17. Holmes McDougall Ltd—The investigation concerned the retailing of specialist climbing, camping and walking
equipment and advertisements for these goods. The firm had adopted the policy for two of its magazines of
refusing to accept advertisements that included prices. The Director General found the practice anti-competitive,
but decided not to refer the case to the Commission because Homeles McDougall was found not be the only
publisher whose magazines had adopted the policy.
Competition Act, 1998 in UK—Salient Issues Highlighted
Competition Act, 1998—What is the law?
The Competition Act, 1998 outlaws agreements, business practices and conduct that damage competition in the United
Kingdom. This Act is modelled on European Competition Law, as set out in Article 81 and 82 of the EC Treaty under
which European Commission examines agreements, business practices and conduct which may affect trade between
members States of the European Union.
Who administers the Act?
Main responsibility for administering the Act lies with the office of Fair Trading (OFT).
More specifically, the Act prohibits:
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• anti-competitive agreements (known as the Chapter I prohibition); and
• abuse of a dominant position (the Chapter II prohibition).
Prohibiting anti-competitive agreements
The Chapter I prohibition applies to both informal and formal arrangements, whether or not they are in writing. So an
informal understanding where Companies A and B agree to match the prices of Company C will be caught in the same
way as a formal agreement between competitors to set prices.
Although many different types of agreement are caught by the prohibition, the Competition Act, 1998 lists specific
examples to which the prohibition particularly applies. These include:
• agreeing to fix purchase or selling prices or other trading conditions;
• agreeing to limit or control production, markets, technical development or investment;
• agreeing to share markets or supply sources;
• agreeing to make contracts subject to unrelated conditions;
• agreeing to apply different trading conditions to equivalent transactions, thereby placing some parties at a
competitive disadvantage.
Appreciable effect on competition
Agreements will only be caught by the Act if they have an appreciable effect on competition.
The guideline on Chapter I sets out how this will be determined. An agreement is unlikely to be considered as having an
appreciable effect where the combined market share of the parties involved does not exceed 25%. However, agreements to
fix prices impose minimum resale prices or share markets will generally be seen as capable of having an appreciable effect
even where the parties’ combined market share falls below 25%.
Exemptions
An agreement may be exempted if it satisfies certain criteria. There are three main types of exemption:
• individual exemptions which may be granted for individual agreements—and which must be applied for;
• block exemptions which apply automatically to certain categories of agreement; and
• parallel exemptions which apply where an agreement is covered by an EC individual or block exemption under
Article 81(3) of the EC Treaty, or would be covered by an EC block exemption if the agreement had an effect on
trade between member states of the European Union.
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Abuse of dominant position
Chapter II covers abuse by one or more undertakings of a dominant position in a market. There are two stages of test; first,
the undertakings must be in a dominant position, which will be determined by the extent to which they can act
independently of their competitors and customers; secondly, they must be abusing that position. An undertaking is unlikely
to be considered dominant, if it has market share of less than 40%. The examples of specific type of conduct that may be
regarded as abuse of dominant position are:
(i) Imposing unfair purchase or selling prices;
(ii) Limiting production, markets, or technical development to the prejudice of customers;
(iii) Applying different trading conditions to equivalent transactions, thereby placing certain parties at a competitive
disadvantage; and
(iv) Attaching unrelated supplementary conditions to contracts.
UK Competition Act, 1998—Cartels
Cartels are a particularly damaging form of anti-competitive behaviour—taking action against them is one of the OFT’s
priorities under the Competition Act, 1998.
If you are a member of a cartel, you could be fined up to 10% of your UK turnover for up to three years. However, if you
end your involvement and confess to the Office of Fair Trading, you could be granted immunity or a significant reduction
in any fine.
What is a cartel?
In its simplest terms, a cartel is an agreement between businesses not to compete with each other. The agreement is usually
verbal and often informal.
Typically, cartel members may agree on:
• prices,
• output levels,
• discounts,
• credit terms,
• which customers they will supply,
• which areas they will supply,
• who should win a contract (bid rigging).
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Cartels can occur in almost any industry and can involve goods or services at the manufacturing, distribution or retail level.
However, some sectors are more susceptible to cartels than others because of the structure or the way in which they
operate. For example, where:
• there are few competitors,
• the products have similar characteristics, leaving little scope for competition on quality or service,
• communication channels between competitors are already established,
• the industry is suffering from excess capacity or there is general recession.
Bid rigging
Bid rigging is a form of cartel that may arise when contracts are awarded by competitive tender. Signs of bid rigging,
generally speaking, are:
(i) certain suppliers unexpectedly declining an invitation to bid;
(ii) An obvious rotation of successful bidders;
(iii) Unusually high margin between the winning and unsuccessful bid;
(iv) All bid prices fall when a potential new bidder (not a member of the cartel) comes on the scene; and
(v) Same supplier being successful bidder on several occasions in a particular area or for a particular type of contract.
Competition Act, 1998—Leniency
Cartels are widely accepted to have the most damaging effect on consumers and the wider economy, so the OFT has a
special interest in ensuring that they are uncovered and broken up.
Members of cartels might wish to end their involvement and inform the Director General of the existence of the cartel, but
are deterred from doing so by the risk of incurring large financial penalties. To encourage members of cartels to provide
evidence of the cartel in which they are involved, the OFT’s leniency programme can give total or partial immunity from
fines to companies who come forward with such information.
Total immunity from financial penalties
Total immunity is available to the first member of the cartel to come forward with relevant information. Immunity is
automatic if the information is provided before the OFT has begun an investigation and the OFT does not already have
sufficient evidence to establish that the cartel exists. It is discretionary if the OFT has already begun an investigation but
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the Director General has not yet given written notice of his proposal to make a decision that the Chapter I prohibition has
been infringed.
In both cases, the following conditions must also be met.
The undertaking must:
• provide the OFT with all the information, documents and evidence available to it regarding the existence and
activities of the cartel;
• maintain continuous and complete cooperation throughout the investigation;
• not be the instigator or leader of the cartel and not have compelled others to join; and
• cease its involvement in the cartel from the time it comes forward with information.
Significant reductions in penalty
Reductions in penalty of up to 50% are available in two cases:
• where the undertaking is not the first to come forward with information but does so before the Director General
has given written notice of his proposal to make a decision that the Chapter I prohibition has been infringed; and
• where the undertaking would have qualified for total immunity had it not been the instigator or leader of the
cartel or compelled others to join.
In both cases, to qualify for a reduction, the undertaking must:
• provide the OFT with all the information, documents and evidence available to it regarding the existence and
activities of the cartel;
• maintain continuous and complete cooperation throughout the investigation;
• and cease its involvement in the cartel from the time it comes forward with information.
UK Competition Act, 1998—making a complaint
You may have cause to complain if you think that a competitor, supplier or customer is breaching one of the prohibitions
of the Act but you do not have to be directly involved to make a complaint—you may also contact the OFT if you suspect
that any business is involved in activities that are prohibited by the Act.
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Potential grounds for complaint
There are a number of signs that may indicate that a business is breaching the Competition Act, 1998, including:
• a major supplier has suddenly decided, for no apparent reason, to discontinue supplying you with a product,
• you have received quotes from various suppliers that are surprisingly and unusually similar,
• a major supplier is refusing to sell you the product you want unless you also buy a separate and unconnected
product,
• you approach a number of competing suppliers and find that only one is willing to supply the goods you want in
your area,
• a supplier is preventing you from selling its products at a discount,
• a number of your customers notify you at around the same time that they are prepared to pay you only a certain
price for your product and these prices are surprisingly similar,
• you have recently entered a particular market and a major competitor has responded by charging extremely low
prices that you suspect would not cover its costs.
The fact that a business is behaving in any of these ways does not necessarily mean that it has committed an infringement.
In particular, the Chapter I prohibition will be breached only where the agreement or arrangement in question has an
appreciable effect on competition, while the Chapter II prohibition can be breached only where the business engaging in
the conduct in question is in a dominant position and has abused that position.
UK Competition Act, 1998—Investigation powers
The OFT can carry out an investigation if there are reasonable grounds for suspecting that either the Chapter I or Chapter II
prohibition has been breached. Such grounds might be provided by a complaint from another business or a member of the
public, or be the result of a preliminary inquiry that the OFT has carried out on its own initiative.
The OFT has the power to:
• require the production of specified documents or specified information;
• enter premises without a warrant;
• enter and search premises with a warrant.
The OFT will either send written notice of the investigation and the information required, or visit the premises to get the
information. Visits may be made without notice.
Enforcement
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If the business has breached either prohibition, it may be ordered to terminate or amend the offending agreement or stop
the offending conduct.
Competition Act, 1998—Penalties
Businesses that infringe either prohibition may be liable to a financial penalty of up to 10% of their UK turnover for each
year of the infringement, up to a maximum of three years.
The seniority of the person or persons involved in the infringement will be taken into account. The involvement of
directors or senior management in any infringement will be viewed very seriously, and such involvement may be treated as
an aggravating factor when setting the penalty.
The actual amount of any penalty imposed will be calculated by following the steps set out in the “Director General of Fair
Trading’s Guidance on the Appropriate Amount of a Penalty”.
Businesses below certain thresholds will be immune from financial penalties unless they are involved in price fixing. The
immunity can be withdrawn in certain circumstances and does not prevent third parties from making a claim for damages.
The thresholds are:
Chapter I: the worldwide turnover of the parties to the agreement must not exceed £ 20 million in the year preceding the
one in which the infringement occurred;
Chapter II: the worldwide turnover of the person whose conduct it is must not exceed £ 50 million in the year preceding
the one in which the infringement occurred.
Leniency
Where an infringement relates to cartel activity, such as price fixing or market sharing, businesses can benefit from the
Director General’s leniency programme.
Enterprises Act, 2002 in UK
A new enactment, the Enterprises Act, 2002 which received Royal Assent on 7 November 2002, has been promulgated in
UK. Its salient features are given below:
The Act establishes the Office of Fair Trading (OFT) as a corporate body, with independent board members. This replaces
the former statutory office of the Director General of Fair Trading.
It replaces or amends legislation relating to the functions of the OFT, merger control, investigation of markets,
enforcement of consumer legislation, appeals on points of competition law, Competition Commission procedures and
handling of certain information by public authorities. The Act also introduces new provisions relating to criminalisation of
cartels, disqualification of directors for breaches of competition law and super complaints.
The provisions of the Act are largely complementary to those of the Competition Act 1998, which will remain in force with
some minor amendments.
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Structure
The Enterprise Act, 2002 is divided into 11 parts:
• Part 1 establishes the OFT, sets out its general functions, and provides for arrangements for making super-
complaints,
• Part 2 establishes the Competition Appeal Tribunal and makes provisions for proceedings to be brought before it.
• Part 3 makes provision for a new merger control regime.
• Part 4 makes provision for market investigation references to be made by the OFT.
• Part 5 deals with the Competition Commission, and provides for its rules of procedure.
• Part 6 creates a new criminal offence for individuals engaged in cartels, and provides the OFT with certain
investigatory powers,
• Part 7 deals with a number of miscellaneous competition provisions, including a new power to disqualify
company directors who engage in serious breaches of competition law.
• Part 8 deals with new procedures for enforcing certain consumer legislation and related matters.
• Part 9 provides new rules to govern the disclosure of certain types of information by public authorities.
• Part 10 changes insolvency law, and will not be addressed by the OFT.838
• Part 11 contains supplementary provisions, such as how the Act will be brought into force and in which UK
territories the Act applies.
The new OFT
The Enterprises Act, 2002 establishes the OFT on a statutory basis as a corporate body. Under the old law (FTA73) the
OFT does not exist as a legal entity, but is merely the administrative support for the Director General of Fair Trading.
Under the new law, the statutory position of Director General of Fair Trading is abolished and his functions are transferred
to the OFT.
The OFT will consist of a Chairman and no fewer than four other members, appointed by the Secretary of State (SoS).
Together, these will form the OFT board.
General functions of the OFT
The general functions of the OFT include the following:
• obtaining, compiling and keeping under review information about matters relating to the carrying on of its
functions. This function is to be carried out with a view to (amount other things) ensuring that the OFT has
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sufficient information to take informed decisions and to carry out its other functions effectively,
• making the public aware of the ways in which competition may benefit consumers and the economy and giving
information or advice in respect of its functions in this regard. This includes publishing educational materials and
carrying out educational activities.
• Providing information and advice to ministers on matters relating to any of its functions, and
• Promoting good consumer practice, including encouraging the use of consumer codes of practice and approving
such codes. Further information on consumer codes is given in Chapter 9 of this guideline.
Monitoring markets
One way in which the OFT will carry out its general functions is by investigating markets which are not working well for
consumers. The Markets and Policy Initiatives Division (MPI) will carry out these investigations.
Mergers
The Enterprise Act, 2002 amends the existing framework for control of UK mergers and acquisitions, by replacing the
mergers provisions of the FTA73. The two most significant changes are:
Decisions on merger control will in general not be taken by the Secretary of State. Most decisions will be taken by the OFT and the
CC as specialist, independent competition authorities.
and
Except in the special cases outlined in the Act, mergers will be assessed against a pure competition test, rather than the wider
public interest test which formerly applied. Generally, mergers will be prohibited, or remedies required, if they would result in a
substantial lessening of competition.
Jurisdictional tests
The OFT must investigate mergers which meet either the “turnover test” or the “share of supply test”. The turnover test is
met if the target company has a UK turnover of £ 70 million. The share of supply test is met if the merging parties will
together supply at least 25% of goods or services of a particular description, either in the UK as a whole or in a substantial
part. This test is only met if the share of supply increases as a result of the merger. If a merger meets the tests for
assessment by the European Commission, the OFT will not investigate and cannot refer the merger.
The OFT can look at outright acquisitions of businesses and at acquisitions which confer a lesser degree of control over the
conduct of a business, starting from the level at which the purchaser has “material influence” over the target business.
Duty to refer
The OFT must consider whether the merger may be expected to result in a “substantial lessening of competition”. If the
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OFT believes that this test is or may be met, then it must either refer the merger to the CC or, if appropriate, seek
undertakings in lieu of a reference from the merging parties. The general duty to refer is subject to two main exceptions.
(a) Where the OFT has discretion not to refer if the market is of insufficient importance to justify a reference; or if
there are obvious benefits to customers that outweigh the adverse effect on competition.
(b) Prior to a decision whether to refer a completed merger to the CC, the OFT can require initial undertakings or
make initial orders to prevent integration of parties.
Provisions related to Cartels in Enterprise Act, 2002
Section 188. Cartel offence
1. An individual is guilty of an offence if he [dishonestly]839 agrees with one or more other persons to make or
implement, or to cause to be made or implemented, arrangements of the following kind relating to at least two
undertakings (A and B).
2. The arrangements must be ones which, if operating as the parties to the agreement intend, would—
(a) directly or indirectly fix a price for the supply by A in the United Kingdom (otherwise than to B) of a
product or service,
(b) limit or prevent supply by A in the United Kingdom of a product or service,
(c) limit or prevent production by A in the United Kingdom of a product,
(d) divide between A and B the supply in the United Kingdom of a product or service to a customer or
customers,
(e) divide between A and B customers for the supply in the United Kingdom of a product or service, or
(f) be bid-rigging arrangements.
3. Unless sub-section (2)(d), (e) or (f) applies, the arrangements must also be ones which, if operating as the parties
to the agreement intend, would—
(a) directly or indirectly fix a price for the supply by B in the United Kingdom (otherwise than to A) of a
product or service,
(b) limit or prevent supply by B in the United Kingdom of a product or service, or
(c) limit or prevent production by B in the United Kingdom of a product.
4. In sub-sections (2)(a) to (d) and (3), references to supply or production are to supply or production in the
appropriate circumstances (for which see section 189).
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5. “Bid-rigging arrangements” are arrangements under which, in response to a request for bids for the supply of a
product or service in the United Kingdom, or for the production of a product in the United Kingdom—
(a) A but not B may make a bid, or
(b) A and B may each make a bid but, in one case or both, only a bid arrived at in accordance with the
arrangements.
6. [But arrangements are not bid-rigging arrangements if, under them, the person requesting bids would be informed
of them at or before the time when a bid is made.]840
7. “Undertaking” has the same meaning as in Part 1 of the 1998 Act.
8. [This section is subject to section 188A]841
Section 189. Cartel offence: supplementary
1. For section 188(2)(a), the appropriate circumstances are that A’s supply of the product or service would be at a
level in the supply chain at which the product or service would at the same time be supplied by B in the United
Kingdom.
2. For section 188(2)(b), the appropriate circumstances are that A’s supply of the product or service would be at a
level in the supply chain—
(a) at which the product or service would at the same time be supplied by B in the United Kingdom, or
(b) at which supply by B in the United Kingdom of the product or service would be limited or prevented by the
arrangements.
3. For section 188(2)(c), the appropriate circumstances are that A’s production of the product would be at a level in
the production chain—
(a) at which the product would at the same time be produced by B in the United Kingdom, or
(b) at which production by B in the United Kingdom of the product would be limited or prevented by the
arrangements.
4. For section 188(2)(d), the appropriate circumstances are that A’s supply of the product or service would be at the
same level in the supply chain as B’s.
5. For section 188(3)(a), the appropriate circumstances are that B’s supply of the product or service would be at a
level in the supply chain at which the product or service would at the same time be supplied by A in the United
Kingdom.
6. For section 188(3)(b), the appropriate circumstances are that B’s supply of the product or service would be at a
level in the supply chain—
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(a) at which the product or service would at the same time be supplied by A in the United Kingdom, or
(b) at which supply by A in the United Kingdom of the product or service would be limited or prevented by the
arrangements.
7. For section 188(3)(c), the appropriate circumstances are that B’s production of the product would be at a level in
the production chain—
(a) at which the product would at the same time be produced by A in the United Kingdom, or
(b) at which production by A in the United Kingdom of the product would be limited or prevented by the
arrangements.
Section 190. Cartel offence: penalty and prosecution
1. A person guilty of an offence under section 188 is liable—
(a) on conviction on indictment, to imprisonment for a term not exceeding five years or to a fine, or to both;
(b) on summary conviction, to imprisonment for a term not exceeding six months or to a fine not exceeding the
statutory maximum, or to both.
2. In England and Wales and Northern Ireland, proceedings for an offence under section 188 may be instituted
only—
(a) by the Director of the Serious Fraud Office, or
(b) by or with the consent of the OFT.
3. No proceedings may be brought for an offence under section 188 in respect of an agreement outside the United
Kingdom, unless it has been implemented in whole or in part in the United Kingdom.
4. Where, for the purpose of the investigation or prosecution of offences under section 188, the OFT gives a person
written notice under this subsection, no proceedings for an offence under section 188 that falls within a
description specified in the notice may be brought against that person in England and Wales or Northern Ireland
except in circumstances specified in the notice.
Criminalisation of cartels
The Enterprise Act, 2002 introduces a criminal offence for individuals who dishonestly engage in cartel agreements. The
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new cartel offence will operate alongside the existing regime that imposes civil sanctions on undertakings that breach the
prohibition on anti-competitive agreements.
The offence
An individual is liable to criminal prosecution if he or she dishonestly agrees with one or more other persons that
undertakings will engage in one or more of the prohibited cartel activities. These are:
• Price-fixing
• Limitation of supply for production,
• Market-sharing, and
• Bid-rigging.
The offence is committed only if the individual acts dishonestly, a concept which is well understood in criminal law. The
offence will be committed irrespective of whether the agreement reached is actually implemented by the undertakings and
irrespective of whether the individuals have the authority to act on behalf of the undertaking at the time of the agreement.
The offence only applies to agreements between undertakings at the same level in the supply chain, known as horizontal
agreements. Vertical agreements will not fall within the scope of the offence.
If the agreement is made outside the U.K., proceedings may only be brought where some step has been taken to implement
the agreement in the U.K.
The cartel offence will be triable either in a magistrate’s court (summary trial) or before a jury (trial on indictment).
Disqualification of directors
The Act amends the Company Directors Disqualification Act, 1986 (CDDA) to provide the OFT with power to apply to
court for orders disqualifying directors of companies which have committed a breach of competition law.
The court must make a Competition Disqualification Order (CDO) against a person if it is satisfied that:
(a) an undertaking which is a company of which that person is a director commits a breach of competition law, and
(b) the court considers that person’s conduct as a director makes him or her unfit to be concerned in the management
of a company. Conduct may include omissions.
Super-Complaints
The Act makes express provision for designated consumer bodies to make super-complaints, where there are market
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features that may be harming consumers to a significant extent. The super-complaint must relate to market as a whole,
rather than the specific behaviour of individual businesses.
The Competition Appeals Tribunal Appeals
11.1 The Enterprises Act, 2002 establishes the Competition Appeal Tribunal (CAT), which will replace the appeal
tribunals of the Competition Commission (known as CCAT). The CAT will be entirely independent of the CC.
11.2 The CAT will take on CCAT’s present function of hearing appeals of certain decisions taken by the OFT or sectoral
regulators, with the power, amongst other things, to confirm, set aside or vary the decision, or remit the matter of the OFT
(or regulator).
11.3 The CAT’s new functions under the Act are:
• hearing claims for damages where an infringement of competition law has been established,
• hearing representative claims for damages, brought by specified bodies on behalf of groups of named individual
consumers, in respect of established breaches of those competition laws, and
• reviewing decisions on mergers or market investigation references.
11.4 The CAT will have ordinary members, a panel of chairmen and a President. The Lord Chancellor will appoint the
President and chairmen. The SoS appoints the ordinary members. The tribunal for each proceeding must consist of a
chairman (who may be the President) and two other members.
11.5 The SoS will make Tribunal Rules for CAT proceedings, including matters such as time limits for bringing
proceedings, ability to reject proceedings, conduct of hearings, interim orders and fees for bringing proceedings.
11.6 The CAT will be funded and supported in its administration through a new body called the Competition Service.
Damages claims and representative claims
The Act enables claims for damages to be brought before the CAT where a breach of competition law has already been
established. Damages claims may be available to persons who have suffered loss or damage as a result of certain types of
competition law infringement. This is in addition to the existing right to bring damages claims in the courts.
The Department for Business Innovation and Skills (BIS) announced reforms to the UK consumer protection and
competition regimes. Under the provisions of the Enterprise and Regulatory Reform Act, 2013, the Competition and
Markets Authority (CMA) was established on 1 April 2014 combining many of the functions of the OFT and the
Competition Commission and superseding both Regulation for the consumer credit industry passed from the OFT to the
new Financial Conduct Authority (FCA) from April 2014. The CMA is responsible for:842
• investigate under the Enterprise Act, 2002 mergers that could potentially give rise to a substantial lessening of
competition, and specify measures that the merging parties must take to prevent or unwind integration between
them while the investigation takes place
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• conduct studies and investigations under the Enterprise Act, 2002 into particular markets where there are
suspected competition and/or consumer problems, or into practices that impact more than one market, and to
require market participants to take steps to address these problems
• investigate individual businesses to determine whether they have breached UK or EU prohibitions against anti-
competitive agreements and abuse of a dominant position under the Competition Act, 1998
• bring criminal proceedings against individuals who commit cartel offences under the Enterprise Act, 2002
• enforce a range of consumer protection legislation, and bring criminal proceedings under the Consumer
Protection from Unfair Trading Regulations 2008 (CPRs), and
• conduct regulatory appeals and references in relation to price controls, terms of licences or other regulatory
arrangements under sector specific legislation (gas, electricity, water, post, communications, aviation, rail and
health).
Enterprise and Regulatory Reform Act, 2013
The Enterprise and Regulatory Reforms Act, 2013 added new provisions in to Enterprise Act, 2002:
Section 188A. Circumstances in which cartel offence not committed
1. An individual does not commit an offence under section 188(1) if, under the arrangements—
(a) in a case where the arrangements would (operating as the parties intend) affect the supply in the United
Kingdom of a product or service, customers would be given relevant information about the arrangements
before they enter into agreements for the supply to them of the product or service so affected,
(b) in the case of bid-rigging arrangements, the person requesting bids would be given relevant information
about them at or before the time when a bid is made, or
(c) in any case, relevant information about the arrangements would be published, before the arrangements are
implemented, in the manner specified at the time of the making of the agreement in an order made by the
Secretary of State.
2. In sub-section (1), “relevant information” means—
(a) the names of the undertakings to which the arrangements relate,
(b) a description of the nature of the arrangements which is sufficient to show why they are or might be
arrangements of the kind to which section 188(1) applies,
(c) the products or services to which they relate, and
(d) such other information as may be specified in an order made by the Secretary of State.
3. An individual does not commit an offence under section 188(1) if the agreement is made in order to comply with
a legal requirement.
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4. In subsection (3), “legal requirement” has the same meaning as in paragraph 5 of Schedule 3 to the Competition
Act 1998.
5. A power to make an order under this section—
(a) is exercisable by statutory instrument,
(b) may be exercised so as to make different provision for different cases or different purposes, and
(c) includes power to make such incidental, supplementary, consequential, transitory, transitional or saving
provision as the Secretary of State considers appropriate.
Section 188B. Defences to commission of cartel offence
1. In a case where the arrangements would (operating as the parties intend) affect the supply in the United Kingdom
of a product or service, it is a defence for an individual charged with an offence under section 188(1) to show
that, at the time of the making of the agreement, he or she did not intend that the nature of the arrangements
would be concealed from customers at all times before they enter into agreements for the supply to them of the
product or service.
2. It is a defence for an individual charged with an offence under section 188(1) to show that, at the time of the
making of the agreement, he or she did not intend that the nature of the arrangements would be concealed from
the CMA.
3. It is a defence for an individual charged with an offence under section 188(1) to show that, before the making of
the agreement, he or she took reasonable steps to ensure that the nature of the arrangements would be disclosed to
professional legal advisers for the purposes of obtaining advice about them before their making or (as the case
may be) their implementation.
ANTI-COMPETITIVE PRACTICES IN AUSTRALIA – COMPETITION AND
CONSUMER ACT, 2010
Provisions related to Anti-competitive Agreements:
Section 45. Contracts, arrangements or understandings that restrict dealings or affect
competition843
1. If a provision of a contract made before the commencement of the Trade Practices Amendment Act 1977:
(a) is an exclusionary provision; or
(b) has the purpose, or has or is likely to have the effect, of substantially lessening competition;
that provision is unenforceable in so far as it confers rights or benefits or imposes duties or obligations
on a corporation.
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2. A corporation shall not:
(a) make a contract or arrangement, or arrive at an understanding, if:
(i) the proposed contract, arrangement or understanding contains an exclusionary provision; or
(ii) a provision of the proposed contract, arrangement or understanding has the purpose, or would have or be
likely to have the effect, of substantially lessening competition; or
(b) give effect to a provision of a contract, arrangement or understanding, whether the contract or arrangement
was made, or the understanding was arrived at, before or after the commencement of this section, if that
provision:
(i) is an exclusionary provision; or
(ii) has the purpose, or has or is likely to have the effect, of substantially lessening competition.
3. For the purposes of this section, competition, in relation to a provision of a contract, arrangement or
understanding or of a proposed contract, arrangement or understanding, means competition in any market in
which a corporation that is a party to the contract, arrangement or understanding or would be a party to the
proposed contract, arrangement or understanding, or any body corporate related to such a corporation, supplies or
acquires, or is likely to supply or acquire, goods or services or would, but for the provision, supply or acquire, or
be likely to supply or acquire, goods or services.
4. For the purposes of the application of this section in relation to a particular corporation, a provision of a contract,
arrangement or understanding or of a proposed contract, arrangement or understanding shall be deemed to have
or to be likely to have the effect of substantially lessening competition if that provision and any one or more of
the following provisions, namely:
(a) the other provisions of that contract, arrangement or understanding or proposed contract, arrangement or
understanding; and
(b) the provisions of any other contract, arrangement or understanding or proposed contract, arrangement or
understanding to which the corporation or a body corporate related to the corporation is or would be a party;
together have or are likely to have that effect.
5. This section does not apply to or in relation to:
(a) a provision of a contract where the provision constitutes a covenant to which section 45B applies or, but for
sub-section 45B(9), would apply;
(b) a provision of a proposed contract where the provision would constitute a covenant to which section 45B
would apply or, but for sub-section 45B(9), would apply; or
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(c) a provision of a contract, arrangement or understanding or of a proposed contract, arrangement or
understanding in so far as the provision relates to:
(i) conduct that contravenes section 48; or
(ii) conduct that would contravene section 48 but for the operation of sub-section 88(8A); or
(iii) conduct that would contravene section 48 if this Act defined the acts constituting the practice of resale
price maintenance by reference to the maximum price at which goods or services are to be sold or
supplied or are to be advertised, displayed or offered for sale or supply.
6. The making of a contract, arrangement or understanding does not constitute a contravention of this section by
reason that the contract, arrangement or understanding contains a provision the giving effect to which would, or
would but for the operation of sub-section 47(10) or 88(8) or section 93, constitute a contravention of section 47
and this section does not apply to or in relation to the giving effect to a provision of a contract, arrangement or
understanding by way of:
(a) engaging in conduct that contravenes, or would but for the operation of sub-section 47(10) or 88(8) or
section 93 contravene, section 47; or
(b) doing an act by reason of a breach or threatened breach of a condition referred to in sub-section 47(2), (4),
(6) or (8), being an act done by a person at a time when:
(i) an authorisation under subsection 88(8) is in force in relation to conduct engaged in by that person on
that condition; or
(ii) by reason of sub-section 93(7) conduct engaged in by that person on that condition is not to be taken to
have the effect of substantially lessening competition within the meaning of section 47; or
(iii) a notice under sub-section 93(1) is in force in relation to conduct engaged in by that person on that
condition.
6A. The following conduct:
(a) the making of a dual listed company arrangement;
(b) the giving effect to a provision of a dual listed company arrangement; does not contravene this section if the
conduct would, or would apart from sub-section 88(8B), contravene section 49.
7. This section does not apply to or in relation to a contract, arrangement or understanding in so far as the contract,
arrangement or understanding provides, or to or in relation to a proposed contract, arrangement or understanding
in so far as the proposed contract, arrangement or understanding would provide, directly or indirectly for the
acquisition of any shares in the capital of a body corporate or any assets of a person.
8. This section does not apply to or in relation to a contract, arrangement or understanding, or a proposed contract,
arrangement or understanding, the only parties to which are or would be bodies corporate that are related to each
other.
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8A. Sub-section (2) does not apply to a corporation engaging in conduct described in that subsection if:
(a) the corporation has given the Commission a collective bargaining notice under sub-section 93AB(1)
describing the conduct; and
(b) the notice is in force under section 93AD.
9. The making by a corporation of a contract that contains a provision in relation to which sub-section 88(1) applies
is not a contravention of sub-section (2) of this section if:
(a) the contract is subject to a condition that the provision will not come into force unless and until the
corporation is granted an authorisation to give effect to the provision; and
(b) the corporation applies for the grant of such an authorisation within 14 days after the contract is made;
but nothing in this subsection prevents the giving effect by a corporation to such a provision from
constituting a contravention of subsection (2).
Under the Enterprises Act, 2002, agreements, contracts, arrangements and understandings possess similar meanings.
Essentially they involve the development of a plan of action between two or more people that may not be enforceable at
law but they have every intention of following. When each of two or more parties intentionally arouses in the others an
expectation that he will act in a certain way, it seems to me that he incurs at least a moral obligation to do so. An
arrangement as so defined is therefore something whereby the parties to it accept mutual rights and obligations.844 An
understanding must involve the meeting of two or more minds. Where the minds of the parties are at one that a proposed
transaction between them proceeds on the basis of the maintenance of a particular state of affairs or the adoption of a
particular course of conduct, it would seem that there would be an understanding.845
To arrive at an understanding or to make an arrangement it is not necessary for anything to be written down. In fact, such
agreements are often not put into writing. Nothing need even be expressed—a “nod and wink” is sufficient. If necessary,
the court will infer the requisite “meeting of minds” from circumstantial evidence such as evidence of joint action, similar
pricing structures, or even from evidence of opportunities the parties had to reach an understanding. It is important to
consider both what is actually said and what each party understands to be the position.846
Section 44AD. Cartel provisions
1. For the purposes of this Act, a provision of a contract, arrangement or understanding is a cartel provision if:
(a) either of the following conditions is satisfied in relation to the provision:
(i) the purpose/effect condition set out in sub-section (2);
(ii) the purpose condition set out in sub-section (3); and
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(b) the competition condition set out in sub-section (4) is satisfied in relation to the provision.
Purpose/effect condition
2. The purpose/effect condition is satisfied if the provision has the purpose, or has or is likely to have the effect, of
directly or indirectly:
(a) fixing, controlling or maintaining; or
(b) providing for the fixing, controlling or maintaining of; the price for, or a discount, allowance, rebate or credit
in relation to:
(c) goods or services supplied, or likely to be supplied, by any or all of the parties to the contract, arrangement
or understanding; or
(d) goods or services acquired, or likely to be acquired, by any or all of the parties to the contract, arrangement
or understanding; or
(e) goods or services re-supplied, or likely to be re-supplied, by persons or classes of persons to whom those
goods or services were supplied by any or all of the parties to the contract, arrangement or understanding; or
(f) goods or services likely to be re-supplied by persons or classes of persons to whom those goods or services
are likely to be supplied by any or all of the parties to the contract, arrangement or understanding.
Purpose condition
3. The purpose condition is satisfied if the provision has the purpose of directly or indirectly:
(a) preventing, restricting or limiting:
(i) the production, or likely production, of goods by any or all of the parties to the contract, arrangement or
understanding; or
(ii) the capacity, or likely capacity, of any or all of the parties to the contract, arrangement or understanding
to supply services; or
(iii) the supply, or likely supply, of goods or services to persons or classes of persons by any or all of the
parties to the contract, arrangement or understanding; or
(b) allocating between any or all of the parties to the contract, arrangement or understanding:
(i) the persons or classes of persons who have acquired, or who are likely to acquire, goods or services from
any or all of the parties to the contract, arrangement or understanding; or
(ii) the persons or classes of persons who have supplied, or who are likely to supply, goods or services to
any or all of the parties to the contract, arrangement or understanding; or
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(iii) the geographical areas in which goods or services are supplied, or likely to be supplied, by any or all of
the parties to the contract, arrangement or understanding; or
(iv) the geographical areas in which goods or services are acquired, or likely to be acquired, by any or all of
the parties to the contract, arrangement or understanding; or
(c) ensuring that in the event of a request for bids in relation to the supply or acquisition of goods or services:
(i) one or more parties to the contract, arrangement or understanding bid, but one or more other parties do
not; or
(ii) 2 or more parties to the contract, arrangement or understanding bid, but at least 2 of them do so on the
basis that one of those bids is more likely to be successful than the others; or
(iii) 2 or more parties to the contract, arrangement or understanding bid, but not all of those parties proceed
with their bids until the suspension or finalisation of the request for bids process; or
(iv) 2 or more parties to the contract, arrangement or understanding bid and proceed with their bids, but at
least 2 of them proceed with their bids on the basis that one of those bids is more likely to be successful
than the others; or
(v) 2 or more parties to the contract, arrangement or understanding bid, but a material component of at least
one of those bids is worked out in accordance with the contract, arrangement or understanding.
Competition condition
4. The competition condition is satisfied if at least 2 of the parties to the contract, arrangement or understanding:
(a) are or are likely to be; or
(b) but for any contract, arrangement or understanding, would be or would be likely to be; in competition with
each other in relation to:
(c) if paragraph (2)(c) or (3)(b) applies in relation to a supply, or likely supply, of goods or services—the supply
of those goods or services; or
(d) if paragraph (2)(d) or (3)(b) applies in relation to an acquisition, or likely acquisition, of goods or services—
the acquisition of those goods or services; or
(e) if paragraph (2)(e) or (f) applies in relation to a re-supply, or likely re-supply, of goods or services—the
supply of those goods or services to that re-supplier; or
(f) if sub-paragraph (3)(a)(i) applies in relation to preventing, restricting or limiting the production, or likely
production, of goods—the production of those goods; or
(g) if sub-paragraph (3)(a)(ii) applies in relation to preventing, restricting or limiting the capacity, or likely
capacity, to supply services—the supply of those services; or
(h) if sub-paragraph (3)(a)(iii) applies in relation to preventing, restricting or limiting the supply, or likely
supply, of goods or services—the supply of those goods or services; or
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(i) if paragraph (3)(c) applies in relation to a supply of goods or services—the supply of those goods or services;
or
(j) if paragraph (3)(c) applies in relation to an acquisition of goods or services— the acquisition of those goods
or services.
5. It is immaterial whether the identities of the persons referred to in paragraph (2) (e) or (f) or sub-paragraph
(3)(a)(iii), (b)(i) or (ii) can be ascertained.
Recommending prices etc.
6. For the purposes of this Division, a provision of a contract, arrangement or understanding is not taken:
(a) to have the purpose mentioned in sub-section (2); or
(b) to have, or be likely to have, the effect mentioned in subsection (2);
by reason only that it recommends, or provides for the recommending of, a price, discount, allowance,
rebate or credit.
Immaterial whether particular circumstances or particular conditions
7. It is immaterial whether:
(a) for the purposes of sub-section (2), sub-paragraph (3)(a)(iii) and paragraphs (3)(b) and (c)—a supply or
acquisition happens, or a likely supply or likely acquisition is to happen, in particular circumstances or on
particular conditions; and
(b) for the purposes of sub-paragraph (3)(a)(i)—the production happens, or the likely production is to happen, in
particular circumstances or on particular conditions; and
(c) for the purposes of sub-paragraph (3)(a)(ii)—the capacity exists, or the likely capacity is to exist, in
particular circumstances or on particular conditions.
Considering related provisions—purpose/effect condition
8. For the purposes of this Division, a provision of a contract, arrangement or understanding is taken to have the
purpose, or to have or be likely to have the effect, mentioned in sub-section (2) if the provision, when considered
together with any or all of the following provisions:
(a) the other provisions of the contract, arrangement or understanding;
(b) the provisions of another contract, arrangement or understanding, if the parties to that other contract,
arrangement or understanding consist of or include at least one of the parties to the first-mentioned contract,
arrangement or understanding;
has that purpose, or has or is likely to have that effect.
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Considering related provisions—purpose condition
9. For the purposes of this Division, a provision of a contract, arrangement or understanding is taken to have the
purpose mentioned in a paragraph of sub-section (3) if the provision, when considered together with any or all of
the following provisions:
(a) the other provisions of the contract, arrangement or understanding;
(b) the provisions of another contract, arrangement or understanding, if the parties to that other contract,
arrangement or understanding consist of or include at least one of the parties to the first-mentioned contract,
arrangement or understanding;
has that purpose.
1 CCI v Co-ordination Committee of Artists and Technicians of WB Film and Television,
AIR 2017 SC 1449 : (2017) 5 SCC 17
: 2017 (2) SCJ 655 : [2017]
140 SCL 655 (SC).
2 Came into force w.e.f. 20 May 2009 vide Notification S.O. 1241(E), dated 15 May 2009.
3 Re Veeraj Brushes, RTP Enquiry No 1200/1987, Order dated 22
February 1988; Re India Cement Ltd, RTP Enquiry No 48/1985, Order dated 8 April 1986.
4 Tata Engineering & Locomotive Co Ltd, Bombay v The Registrar of
the Restrictive Trade Agreement, New Delhi, (1977) 47 Com Cas 520
(SC) : (1977) 2 SCC 55 .
5 Mahindra & Mahindra Ltd v UOI,
AIR 1979 SC 798 : (1979) 2 SCC 529
: (1979) 2 SCR 1038 :
(1979) 49 Com Cas 419 (SC) :
1979 Tax LR 2064 .
6 Voltas Ltd v UOI, Civil Appeal No 2252 of 1994, Supreme Court
Judgement dated 7 February 1995.
7 East End Dwellings Co Ltd v Finsbury Borough Council,
(1952) AC 109 (B).
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8 State of Bombay v Pandurang Vinayak,
AIR 1953 SC 244 : 1953 SCR 773
.
9 Chief Inspector of Mines v Karam Chand Thapar,
AIR 1961 SC 838 : (1962) 1
SCR 9 .
10 JK Cotton Spinning and Weaving Mills Ltd v UOI,
AIR 1988 SC 191 : (1988) 1
SCR 700 : 1987 2 Scale 903
: (1987) 32 ELT 234 .
11 M Venugopal v The Divisional Manager, Life Insurance Corp of
India, (1994) 2 SCC 323 .
12 Harish Tandon v The Addl District Magistrate,
JT (1995) 1 SC 291 .
13 Tata Engineering & Locomotive Co Ltd, Bombay v The Registrar of
the Restrictive Trade Agreement, New Delhi, AIR 1977 SC 973
: (1977) 2 SCC 55 :
[1977] 2 SCR 685 : (1977) 47 Com Cas
520 (SC).
14 Mahindra & Mahindra Ltd v UOI,
AIR 1979 SC 798 : (1979) 2 SCC 529
: 1979 2 SCR 1038 :
(1979) 49 Com Cas 419 (SC).
15 Competition Bill No. 67 of 2001.
16 CCI v Co-ordination Committee of Artists and Technicians of WB
Film and Television, AIR 2017 SC 1449 :
(2017) 5 SCC 17 : 2017 (2)
SCJ 655 : [2017] 140 SCL 655
(SC).
17 For more discussion of the definition of “enterprise”, see discussion
under section 2(h).
18 Jyoti Sawroop Arora v The CCI, III
(2016) CPJ 49 (Del), 231 (2016) DLT 396
, [2016] 136 SCL 486 (Delhi).
19 For more discussion of the definition of “agreement”, see discussion
under section 2(b).
20 US v Griffith, 334 US 100.
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21 Summit Health v Pinhas, 500 US 322.
22 Pawan Hans Ltd v UOI, (2003) 114 Comp Cases 676 (SC); State of
UP v Gir Prasad, (2004) 15 ILD 441 (SC).
23 Establishments Consten SA & Grundig – verkaufs – GmbH v
Commission, (1966) ECR 299 .
24 FICCI – Multiplex Association of India v United
Producers/Distributors Forum, Case No 1/2009, decided on 25 May 2011, 2011 Comp LR 79 (CCI).
25 Summit Health Ltd v Pinhas, 500 US 322 (1991).
26 US v Griffith, 334 US 100 (1948).
27 MP Mehrotra v Jet Airways (India) Ltd and Kingfisher Airlines Ltd,
Case No Misc 1/2010 (4/2009).
28 Establishments Consten SA & Grunding – Verkaufs – GmbH v
Commission, (1966) ECR/ 1966 CMLR 418 .
29 Standard Oil Co v US, 337 US 293 (1949).
30 Ghanshyam Dass Vij v Bajaj Corp Ltd, Case No 68 of 2013 (CCI),
decided on 12 October 2015.
31 Also see Automobiles Dealers Association, Hathras v Global
Automobiles Ltd and Pooja Expo India Pvt Ltd, 2012 Comp LR 827(CCI).
32 Volk v Vervaecke, Case 5/69,
[1969] ECR 295 .
33 Para II, para 7, on Agreements of Minor Importance OJ, [2001] C
368/13, [2002] 4 CMLR 699 . Available at:
http://www.europedia.moussis.eu/books/Book_2/5/15/03/01/?all=1 (accessed in February 2019).
34 RICHARD WHISH, Competition Law, 7th Edn, Oxford University
Press, 2012, p 142.
35 Id. at p 143.
36 Firstly, instead of specifying a list of agreements/restrictions which
fall outside the scope of the safe harbour as per the approach in the 2001 version, the new Notice provides that it does not apply to
any agreements constituting restrictions by “object” and/or which are listed as “hard core” restrictions within any current or future
block exemptions. Secondly, the new Notice states that, even aside from the Notice’s safe harbours, any restrictions by “object” are
automatically assumed to have an appreciable restriction on competition, regardless of whether there are any concrete effects on the
market.
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37 Haridas Exports v All India Float Glass Mfrs Association,
AIR 2002 SC 2728 :
(2002) 6 SCC 600 : [2002] 38 SCL 1020
(SC) : [2002] 111 Com Cas 617 (SC) :
II (2002) CPJ 11 (SC) : 99
(2002) DLT 76 (SC) : 2002 (82) ECC 683 : 2002
(105) ECR 14 (SC) : 2002 (145) ELT 241
(SC) : JT 2002 (5) SC 253 :
2002 (5) Scale 253 .
38 Id, Securities and Exchange Board of India v Pan
Asia Advisors Ltd, AIR 2015 SC 2782 : III
(2015) BC 513 (SC) : [2015] 127 CLA
306 (SC) : [2015] 191 Com Cas 410
(SC) : (2015) 3 Comp LJ 241 (SC) :
2015 (7) Scale 694 : 2015
(8) SCJ 437 .
39 Jugaldas Damodar Mody Co, RTP Enquiry No 1/1980, order dated
14 June 1983.
40 Sub Chemic India Pvt Ltd v Haldor Topsoe AS,
(2005) 62 SCL 143 (MRTPC).
41 Alkali Manufacturers Assn of India v American Natural Soda Ash
Corp, (1998) 92 Comp Cases 206 (MRTPC).
42 Ballarpur Industries Ltd v Sinarmas,
[1996] 87 Com Cas 159 (MRTPC).
43 Re Jugaldas Damodar Mody Co,
[1983] 3 Comp LJ 221 .
44 Available at:
https://theindiancompetitionlaw.files.wordpress.com/2013/02/report_of_high_level_
committee_on_competition_policy_law_svs_raghavan_committee.pdf (accessed in July 2018).
45 Agreement has been defined under section 2(b) of the Competition
Act, 2002 to mean: “agreement” includes any arrangement or understanding or action in concert,—
(i) whether or not, such arrangement, understanding or action is formal or in writing; or
(ii) whether or not such arrangement, understanding or action is intended to be enforceable by legal proceedings.
46 Re Jyoti Swaroop Arora, Case No 59 of 2011, decided on 3
February 2015, 2015 Comp LR 109 (CCI).
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[s 3] Anti-competitive agreements
47 See Dhanraj Pillay v Hockey India, 2013 Comp LR 543 (CCI).
48 Manju Tharad, Proprietress and Manoranjan Films, Kolkata v
Eastern India Motion Picture Association (EIMPA), Kolkata and The Censor Board of Film Certification, Kolkata,
[2012] 110 CLA 136 (CCI) : 2012 Comp LR 1178 (CCI) :
[2012] 114 SCL 20 (CCI).
49 Dhanraj Pillay v Hockey India, 2013 Comp LR 543 (CCI).
50 Suresh Chandra v State of WB,
AIR 1976 Cal 110 : 81 Cal LN 60 : ILR (1976) 2 Cal 165
: (1976) 38 STC 99 :
(1976) ILR 2 Cal 165.
51 CJ, 22/71, Béguelin Import Co v SAGL Import Export,
[1971] ECR 949 , at 29.
52 CJ, C-453/99 Courage Ltd v Bernard Crehan and Bernard Crehan v
Courage Ltd, 20 September 2001, [2001] ECR I-6297
at 22.
53 Case 319/82, Société de Vente de Ciments et Bétons de l Est SA v
Kerpen & Kerpen GmbH und Co KG, [1983] ECR 4173 .
54 Gerechsthof of s-Gravenhage, 24 March 2005, Marketing Displays
International v VR, KG/RK 2002-979 and 2003-1617; Rechtbank Zwolle-Lelystad, 4 April 2005, Case 106354/KG ZA 05-92
[Netherlands]; Court of appeal of Pau (Cour d’appel de Pau), 28 August 2007, SAS Prim’Co, Case n 06/00309 [France]; Spanish
Civil Supreme Court (Tribunal Supremo, Sala de lo Civil), 2 June 2000, Decision no 540/2000, D Rafael v DISA and Prodalca
España, SA, Case 2355/1995 [Spain].
55 The Body Shop, Case Vi-U (Kart) 13/06, 14 April 2007, Higher
Regional Court of Dusseldorf (Oberlandesgericht Dusseldorf); VOF and Partners v Prisma Vastgoed BV/Prisma Food Retail BV,
Case 0600049 (LJN: BB8288), 7 November 2007, Court of Appeal of Leeuwarden (Gerechtshof Leeuwarden); Pandora
Production Co Ltd v Lise Aagaard Copenhagen A/S, Case U-3-08, 29 April 2010, Danish Maritime and Commercial Court
(Domafsagt so-og Handelsretten).
56 See Pringle v Jafar Khan,
ILR (1883) 5 All 443 , 445, cited by the Supreme Court in Gherulal v Mahadeo,
(1959) 2 SCA 342 , 361–62.
57 SIR WILLIAM ANSON, Principles of the English Law of Contract,
20th Edn, (1952), p 25, cited by SUBBA RAO, J (as he then was) in Gherulal v Mahadeo,
1959 AIR 781 : 1959 SCR Supp (2) 406 supra at p 351.
58 Bhagwan Din v Emperor,
AIR 1929 All 935 : 1929 Cr C 633.
59 EC Guidelines on Horizontal co-operation notes:
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[s 3] Anti-competitive agreements
Companies that form part of the same “undertaking” within the meaning of Article 101(1) are not considered to be
competitors for the purposes of these guidelines. Article 101 only applies to agreements between independent undertakings.
When a company exercises decisive influence over another company they form a single economic entity and, hence, are part
of the same undertaking. The same is true for sister companies, that is to say, companies over which decisive influence is
exercised by the same parent company. They are consequently not considered to be competitors even if they are both active
on the same relevant product and geographic markets.
60 The position is similar to EU, where agreement between parent and
subsidiary escapes the ambit of Article 101 of the Treaty on the Functioning of the European Union (TFEU).
61 Shamsher Kataria Informant v Honda Siel Cars India Ltd, 2014
Comp LR 1 (CCI).
62 Mausegatt v Haute autorite, C-13/60.
63 Id.
64 RICHARD WHISH & DAVID BAILEY, Competition Law, 7th Edn,
Oxford University Press, 2012.
65 Id. The foundations for this presumption were laid in Stora
Koppenberg v Commission [2002], and in Michelin v Commission [2003]. It was confirmed in Akzo Nobel v Commission [2009],
para 60. This presumption has been applied to cases involving a 97%-owned subsidiary as well (Elf Aquitaine v Commission,
[2011] and Arkema France v Commission [2011]).
66 Id. In Ijsselcentrale, [1991] the Commission found that restrictive
practices between four parents to a joint venture and the joint venture itself could not escape Article 101 TFEU. The four parents
were clearly not under common control and could not be said to belong to one Single economic entity. The joint venture, which
acted as a vehicle for parents’ co-operation, was subject to joint control of the four parents and therefore, could not form an Single
economic entity “with one or more” of them.
67 Copperweld Corp v Independence Tube Corp, 467 US 752 (1984).
68 See also Consten and Grundig, Case 56,
[1966] ECR 299 , of the European Court of Justice, Case T-102/92, Viho Europe BV v
Commission, [1995] ECR II 117; Case C-73/95 P, Viho Europe BV v Commission, [1996]
ECR 1 5457; S/V v Commission, [1992] ECR II 1403; UAB Milsa and UAB Torita of the
Lithuanian Competition Council.
69 Exclusive Motors Pvt Ltd v Automobili
Lamborghini SPA, [2014] 121 CLA 230 (CAT) : 2014
Comp LR 110 (CompAT).
70 Viho v Commission, 1995 ECR.
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[s 3] Anti-competitive agreements
71 The Tribunal, in appeal observed that in both cases
almost 99% of shareholding was directly or indirectly controlled by mother company (Volkswagen AG) and therefore, it had no
hesitation in endorsing Commission’s finding that the two companies amounted to a single economic entity. The Tribunal further
held that even if it was considered that the two companies were independent decision makers, there was material on record to prove
exclusive clause or refusal to deal, and therefore, there would be no violation of section 3(4)(c) or 3(4)(d). Exclusive Motors Pvt Ltd
v Automobili Lamborghini SPA, [2014] 121 CLA 230
(CAT) : 2014 Comp LR 110 (CompAT).
72 Shamsher Kataria v Honda Siel, Case No 03/2011,
order dated 25 August 2014, 2014 Comp LR 1 (CCI).
73 Ibid, at para 20.6.5.
74 Government of Kerala v National Insurance Co
Ltd, Suo Moto Case No 02 of 2014.
75 2017 Comp LR 1 (CompAT).
76 Arshiya Rail Infrastructure Ltd v Ministry of
Railways and Container Corp of India Ltd, [2013] 112 CLA 297
.
77 Id.
78 Delhi Jal Board v Grasinz Industries Ltd, (Ref Case
No 03 and 04 of 2013), decided on 5 October 2017 (CCI).
79 Id.
80 Raghavan Committee Report, para 4.3-1.
81 Supra 1.
82 State Oil Co v Khan, 522 US 3 (1997).
83 Arizona v Maricopa County Medical Society, 457 US 332 (1982);
Voltas Ltd v UOI, AIR 1995 SC 881 :
(1995) 83 Com Cas 228 .
84 (a) directly or indirectly determines purchase or sale prices; (b)
limits or controls production, supply, markets, technical development, investment or provision of services; (c) shares the 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) directly or indirectly results in bid rigging or collusive bidding.
85 Void denoted nullity. In an agreement the clause which causes
appreciable effect on competition is void and not the entire agreement, if it can be severed from other clauses. Nullity affects the
prohibited clause in the agreement, Societe Technique Miniere v Machinene bau ulm GmbH,
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[s 3] Anti-competitive agreements
1666 ECR 235 ; Punjab province v Daulat Singh, (1946)
73 IA 59 .
86 The phrase “shall presume” has been effectively dealt with in the
case of Sodhi Transport Co v State of UP, AIR 1986 SC 1099
: (1986) 2 SCC 486 :
[1986] 1 SCR 939 : 1986
(62) STC 381 .
87 Uniglobe Mod Travels Pvt Ltd v Travel Agents Federation of India,
2011 Comp LR 400 (CCI); Santuka Associates Pvt Ltd v All India Organization of Chemists and Druggists, Organization of
Pharmaceutical Producer of India, Indian Drug Manufacturers’ Association and USV Ltd, 2013 Comp LR 223 (CCI); Varca
Druggist & Chemist v Chemists & Druggists Association, Goa, 2012 Comp LR 838 (CCI).
88 FICCI Multiplex Association of India v United
Producers/Distributors Forum, 2011 Comp LR 79 (CCI).
89 Indian Sugar Mills Association v Indian Jute Mills Association,
2014 Comp LR 225 (CCI).
90 Jyoti Sawroop Arora v The CCI, III
(2016) CPJ 49 (Del) : 231 (2016) DLT 396
: [2016] 136 SCL 486 (Delhi)
91 Sodhi Transport Co v State of UP,
AIR 1986 SC 1099 : (1986) 2 SCC 486
: 1986 (62) STC 381 :
[1986] 1 SCR 939 .
92 RS Nayak v AR Antulay, AIR
1986 SC 2045 : (1986) 2 SCC 716
: 1986 SCC (Cri) 256 :
(1984) 2 SCC 193 :
1984 SCC Cri 172 : 1986 88 Bom LR 260
: [1986] 2 SCR 621 :
1986 2 SCJ 495 : (1986)
Cr LJ 1922 .
93 CCI v Coordination Committee of Artists and Technicians of WB
Film and Television, AIR 2017 SC 1449 .
94 Id.
95 CCI v Coordination Committee of Artists and Technicians of West
Bengal Film and Television Industry, [2018] 144 CLA 403
(SC).
96 Ram Niwas Gupta v Omaxe Ltd and Shanvi Estate Management
Services Pvt Ltd, [2013] 112 CLA 8 (CCI) : 2012 Comp
LR 1132 (CCI).
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[s 3] Anti-competitive agreements
97 Dhanraj Pillay v Hockey India, 2013 Comp LR 543 (CCI).
98 Eros International Media Ltd v Central Circuit Cine Association,
Indore, Film Distributors Association, Kerala, Northern India Motion Pictures Association and Motion Pictures Association AND
Sunshine Pictures Pvt Ltd v Motion Pictures Association, 2012 Comp LR 20 (CCI).
99 Mahindra & Mahindra Ltd v UOI,
AIR 1979 SC 798 : 1979 2 SCC 529
: 1979 2 SCR 1038 : 49 Com Cas 419 :
1979 Tax LR 2064 .
100 TELCO v Registrar of Restrictive Trade Agreements,
AIR 1977 SC 973 : (1977) 2
SCC 55 : [1977] 2 SCR 685
: 1977 Tax LR 1789 :
1977 47 Com Cas 520 .
101 RICHARD WHISH, Competition Law, 7th Edn, Oxford University
Press, 2012.
102 See Guidelines on Vertical Restraints, Commission Notice,
European Commission, [SEC(2010) 2365} {SEC(2010) 413} {SEC(2010) 414}, Brussels, 2010. Available at:
http://ec.europa.eu/competition/antitrust/legislation/guidelines_vertical_en.pdf (accessed in February 2019).
103 Whether consumers actually overall benefit
from extra promotional efforts depends on whether the extra promotion informs and convinces and thus benefits many new
customers or mainly reaches customers who already know what they want to buy and for whom the extra promotion only or mainly
implies a price increase.
104 Sherman Act, section 1: Every contract, combination in the form of
trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to
be illegal.
105 US v General Motors Corp, 384 US 127.
106 Continental TV Inc v GTE Sylvania, Inc, 433 US 36 (1977).
107 US v Arnold, Schwinn & Co, 388 US 365 (1967).
108 In Continental TV Inc v GTE Sylvania, Inc, a
dispute arose when a manufacturer of televisions granted a new distributorship to another business approximately one mile from the
manufacturer’s then leading distributor. Protesting the manufacturer’s action, the leading distributor began selling the
manufacturer’s televisions from an unapproved location. Selling the television products without the manufacturer’s prior approval
of the business site was a clear violation of the location restriction contained in the distributorship agreement. The location clause
prohibited dealers from opening other outlets, especially in another dealer’s territory, without the approval of the manufacturer.
Using a per se test established under existing law, the Northern District Court of California found the location restriction to be a
vertical agreement in restraint of trade and violative of Section One of the Sherman Act, 1890. Meeting en banc, the Ninth Circuit
Court of Appeals applied the rule of reason test and reversed. According to the appellate court the application of the rule of reason
test was warranted by its finding that the manufacturer’s location clause was potentially less harmful than those restrictions
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[s 3] Anti-competitive agreements
prohibited by existing law. The Supreme Court, through Mr Justice Powell, affirmed the circuit court’s decision. Thus, Sylvania
specifically overruled the application of a per se test to vertical restraints on goods purchased by the distributor.
109 State Oil Co v Khan, 522 US 3 (1997).
110 Leegin Creative Leather Products Inc v PSKS Inc, 127 US 2705.
111 National Society of Professional Engineers v US, 435 U.S. 679
(1978), WERTHEIME, B, “Rethinking the Rule of Reason: From Professional Engineers to NCAA,” in Duke Law Journal, 1984, pp
1297–1324.
112 RICHARDT, MERIBETH (1985), Tying Arrangement Analysis: A
Continued Integration of the Rule of Reason and the Per Se Rule: Jefferson Parish Hospital District No 2 v Hyde, 104 S. Ct. 1551
(1984). Washington University Law Review 63 (2). See Jefferson Parish Hospital District No 2 v Hyde, 466 U.S. 2 (1985).
113 Article 101.
(ex Article 81 TEC)
1. The following shall be prohibited as incompatible with the internal market: all agreements between undertakings, decisions by
associations of undertakings and concerted practices which may affect trade between Member States and which have as their
object or effect the prevention, restriction or distortion of competition within the internal market, and in particular those
which:
(a) directly or indirectly fix purchase or selling prices or any other trading conditions;
(b) limit or control production, markets, technical development, or investment;
(c) share markets or sources of supply;
(d) apply dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive
disadvantage;
(e) make the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their
nature or according to commercial usage, have no connection with the subject of such contracts.
2. Any agreements or decisions prohibited pursuant to this Article shall be automatically void.
3. The provisions of para 1 may, however, be declared inapplicable in the case of:
- any agreement or category of agreements between undertakings,
- any decision or category of decisions by associations of undertakings,
- any concerted practice or category of concerted practices,
which contributes to improving the production or distribution of goods or to promoting technical or economic progress,
while allowing consumers a fair share of the resulting benefit, and which does not:
(a) impose on the undertakings concerned restrictions which are not indispensable to the attainment of these objectives;
(b) afford such undertakings the possibility of eliminating competition in respect of a substantial part of the products in question.
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[s 3] Anti-competitive agreements
114 See inter alia judgement of the Court of Justice in Joined Cases
56/64 and 58/64 Grundig-Consten v Commission, [1966] ECR 299
; Case 56/65; Technique Minière v Machinenbau Ulm, [1966] ECR 235
; and of the General Court in Case T-77/92 Parker Pen v Commission, [1994] ECR II 549.
115 See Communication from the Commission - Notice – Guidelines on
the application of Article 81(3) of the Treaty, OJ C 101, 27 April 2004, pp 97–118, for the Commission’s general methodology and
interpretation of the conditions for applying Article 101(1) (previously Article 81(1)) and in particular Article 101(3) (previously
81(3)).
116 Resale price maintenance, Territorial restrictions,
Selective distribution/supply, supply of spare parts.
117 Ghanshyam Dass Vij v Bajaj Corp Ltd, Case No. 68 of 2013,
decided on 12 October 2015.
118 Kerala Cine Exhibitors Association Film Chamber Building v Kerala
Film Exhibitors Federation Cee Pee Building, 2015 Comp LR 666 (CCI).
119 Swastik Stevedores Pvt Ltd v Dumper Owner’s Association, 2015
Comp LR 212 (CCI).
120 Varca Druggist & Chemist v Chemists & Druggists Association,
Goa, 2012 Comp LR 838 (CCI).
121 Santuka Associates Pvt Ltd v All India Organization of Chemists and
Druggists, Organization of Pharmaceutical Producer of India, Indian Drug Manufacturers’ Association and USV Ltd, 2013 Comp
LR 223 (CCI).
122 Also see Vedant Bio-Sciences v Chemists & Druggists Association of
Baroda, [2012] 111 CLA 446 (CCI).
123 Civil Appeal No 6691 of 2014 [COMPAT].
124 Karnataka Film Chamber of Commerce v Kannada Grahakara
Koota, Appeal No 13/2016 with IA No 08/2017, decided on 10 April 2017.
125 Ramakant Kini v Dr LH Hiranandani Hospital, 2014 Comp LR 263
(CCI).
126 LH Hiranandani Hospital v CCI, 2016 Comp LR 129 (CompAT).
127 PK Krishnan v Paul Madavana, 2016 Comp LR 83 (CCI).
128 Rohit Medical Store v Macleods Pharmaceutical Ltd, 2015 Comp LR
451 (CCI).
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[s 3] Anti-competitive agreements
129 Section 2 (b) “agreement” includes any arrangement or
understanding or action in concert,—(i) whether or not, such arrangement, understanding or action is formal or in writing; or (ii)
whether or not such arrangement, understanding or action is intended to be enforceable by legal proceedings.
130 MICHAEL E DEBOW, “What’s wrong with price fixing: Responding
to the new critics of antitrust”, Regulation Magazine, vol 12 No. 2, Cato Institute. Available at:
http://www.cato.org/sites/cato.org/files/serials/files/regulation/1988/5/reg12n2-debow.html (accessed in February 2019).
131 RICHARD WHISH, Competition Law, 6th Edn, Oxford University
Press, 2012.
132 GEORGE ALLEN & UNWIN ALLEN, Monopoly and Restrictive
Practices, 1968, Chapter 14, referred in RICHARD WHISH & DAVID BAILEY, Competition Law, 7th Edn, Oxford University Press,
London, 2014.
133 “Only explicit price fixing and very large horizontal mergers are
worthy of serious concern” – Posner (1979); MICHAEL E DEBOW: “What’s wrong with price fixing: Responding to the new critics
of antitrust”, Regulation Magazine, vol 12 No. 2, Cato Institute. Available at:
http://www.cato.org/sites/cato.org/files/serials/files/regulation/1988/5/reg12n2-debow.html (accessed in February 2019).
134 More v Bennett, 140 Ill. 69, 29 N. E. 888 (1892).
135 US v Trenton Potteries Co, 273 US 392, 397 (1927).
136 Para 21, Vereiniging Van Cementhandelaren v Commission, Case
8/72 ECJ, [1972] ECR 977 :
[1972] CMLR 7 .
137 Sodhi Transport Co v State of UP,
AIR 1986 SC 1099 : (1986) 2 SCC 486
: 1986 SCR (1) 939 :
1986 (62) STC 381 .
138 Model Law on Competition, UNCTAD series on issues in
Competition Law and Policy, United Nations Conference on Trade and Development, TD/RBP/CONF.5/7, 2000. Available at:
http://unctad.org/en/docs/tdrbpconf5d7.en.pdf (accessed in February 2019).
139 Id.
140 Also see section 3(3)(c) for specific discussion.
141 “Price Fixing, Bid Rigging, and Market
Allocation Schemes: What They Are and What to Look For”, An Antitrust Primer, US Department of Justice. Available at:
http://www.justice.gov/sites/default/files/atr/legacy/2007/10/24/211578.pdf (accessed in February 2019).
142 For more information, see discussion on “cartels”, under section 2
(Definitions).
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[s 3] Anti-competitive agreements
143 Para 22, BNIC v Guy Clair (Cognac) Case, 123/83 ECJ, 1985
[ECR] 391.
144 Peroxygen Product IV/30.907 European Commission, [1985] OJ
L35/1.
145 US v Socony – Vacuum Oil Co Inc, 310 US 150 (1940).
146 Para 65, Re Bengal Chemist and Druggist Association (BCDA), Suo
moto Case No. 02 of 2012, decided on 11 March 2014; Also see Santuka Associates and AIOCD, Case No. 20 of 2011, decided on
19 February 2013, 2013 Comp LR 223 (CCI); Peeveear Medical Agencies, Kerala and AIOCD, Case No. 30 of 2011, decided on 9
December 2013, 2014 Comp LR 10 (CCI); and Sandhya Drug Agency, Case No. 41 of 2011, decided on 9 December 2013, 2014
Comp LR 61 (CCI). It has to be noted here that the COMPAT by its order dated 8 December 2016 had overruled the decision of the
Commission. Tribunal concluded that in light of lack of sufficient evidence, it could not be said that the NOC was a mandatory
requirement. On the issue of trade margins, the Tribunal held that since the trade margin was fixed by the manufacturer and not by
the Chemists and Druggists Association, it could not lead to the determination of purchase or sale price of drugs in violation of
section 3(3)(a) of the Competition Act, 2002.
147 ADAM SMITH, “An Inquiry into the Nature and Causes of the
Wealth of Nations,” (1776) V, vol 1, para 178, cited by CCI in the LPG case, para 14.17. People of the same trade seldom meet
together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or some contrivance to
raise prices. It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent
with liberty and justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to
do nothing to facilitate such assemblies; much less to render them necessary.
148 Para 25, Director General (Supplies & Disposals) v Puja
Enterprises Basti, Ref. Case No. 01 of 2012, [2013] 116 CLA 126
(CCI) : 2013 Comp LR 714 (CCI).
149 Id. Para 26.
150 The COMPAT appears to have taken a slight
departure for the standard of evidence in cartel cases followed by the CCI thus far. In Appeal No. 15 of 2013 (dated 14 October
2015) the COMPAT set aside a CCI decision on the grounds that there was not sufficient evidence to show that the parties had
engaged in cartelisation. Similarly, in Appeal No. 14/2014, the COMPAT set aside a decision of the CCI for not properly
considering the evidence that was placed before it, which according to it did not make a case of cartelisation.
151 Price fixing, Competition Guidance, BC Production Guide, Federal
Trade Commission. Available at: https://www.ftc.gov/tips-advice/competition-guidance/guide-antitrust-laws/dealings-
competitors/pricefixing (accessed in February 2019).
152 Re Sheth & Co, Suo Moto Case No. 04 of 2013, decided on 10 June
2015.
153 British Sugar, OJ [1999] L 76/1 :
[1999] 4 CMLR 1316 , substantially upheld on appeal cases T-202/98,
Tate & Lyle v Commission, [2001] ECR II-2035 :
[2001] 5 CMLR 859 .
154 Id.
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[s 3] Anti-competitive agreements
155 Fennex, Commission Decision 96/438/EC, OJ
[1996] L 181/28 : [1996] 5 CMLR 332 . De Nederlandse
Organisatie voor Expeditie en Logistiek (Fenex).
156 Del Monte v Commission (Case T-587/08) and Dole
v Commission (Case T-588/08).
157 Id.
158 Case T-99/04, AC-Treuhand AG v Commission,
[2008] ECR II-1501 .
159 Case T-308/94, Cascades v Commission,
[1998] ECR II-925 .
160 RICHARD WHISH, Competition Law, 7th Edn,
Oxford University Press, London, p 525.
161 Information Exchanges between competitors under EU Competition
Law, Note by the delegation of the European Union, Directorate for financial and Enterprise affairs Competition Committee,
DAF/COMP/WD (2010) 118, 2010.
162 Spanish Competition Authority imposed a fine of 4 million on
Honda and Suzuki in 2011; UK Agricultural factory registration Exchange case of 1992; US v Container Corp of America, 393 US
333 (1969).
163 Competition Policy Applied to Information Exchanges between
Competitors in the EU, NERA Economic Consulting, December, 2014. Available at:
http://www.nera.com/content/dam/nera/publications/2014/PUB_English_Intercambios_Info_Entre_Competidores_Spain_Eng_121
4.pdf (accessed in February 2019).
164 Id.
165 Supra.
166 Fennex, Commission Decision 96/438/EC, OJ [1996] L 181/28 :
[1996] 5 CMLR 332 . De Nederlandse Organisatie voor
Expeditie en Logistiek (Fenex)
167 Commission decision of 15 October 2008.
168 Richard Whish & David Bailey, Competition Law, 7th Edn, Oxford
University Press, London.
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[s 3] Anti-competitive agreements
169 Louis L JAFFE AND MATHEW O TOBRINER, “The Legality of Price-
Fixing Agreements” in Harvard Law Review, vol 45, No. 7, May, 1932, pp 1164–1195. Available at:
https://www.jstor.org/stable/i257127. (accessed in February 2019).
170 BP Khare, Principal Chief Engineer, South Eastern Railway v Orissa
Concrete and Allied Industries Ltd, [2013] 114 CLA 280
(CCI).
171 BP Khare, Principal Chief Engineer, South Eastern Railway v Orissa
Concrete and Allied Industries Ltd, [2013] 114 CLA 280
(CCI) : [2013] 119 SCL 1 (CCI).
172 Indian Sugar Mills Association (ISMA) v Indian Jute Mills
Association (IJMA), 2014 Comp LR 225 (CCI).
173 Id. The Tribunal has, however, in its order dated 1 July 2016 set
aside the order of the Commission on the grounds of violation of principle justice.
174 Option for using competition policy/law tools in
dealing with anti-competitive practices in pharma industry in the health delivery system, WHO and Ministry of Health and Family
Welfare Report, 2006.
175 Para 64, Re Bengal Chemist and Druggist
Association (BCDA), Suo moto Case No. 02 of 2012, decided on 11 March 2014.
176 Varca Druggist & Chemist v Chemist & Druggists
Association, Goa (CDAG), MRTPC-127/2009/DGIR4/28, decided on 11 June 2012, 2012 Comp LR 838 (CCI).
177 Para 27.39, Id.
178 Santuka Associates Pvt Ltd v All India
Organization of Chemists and Druggists (AIOCD), Organization of Pharmaceutical Producers of India (OPPI), Indian Drug
Manufacturers’ Association (IDMA) and USV Ltd, 2013 Comp LR 223 (CCI).
179 Note: Even though the MOU (fixing trade margins)
was entered into between AIOCD on one hand and OPPI and IDMA on the other, the majority decision of the CCI in Santuka and
Sandhya absolved OPPI and IDMA of any anti-competitive conduct since OPPI/IDMA were not deemed to be in a
horizontal/competitive relationship with AIOCD and therefore, did not fall within the scope of section 3(3) of the Competition Act,
2002. However, in a recent case (Case No. 28/2014), the CCI has penalised a pharmaceutical manufacturing entity (Alkem) for
complying with the diktats of the Kerala Chemists and Druggists Association (by agreeing to stop supplies), using the principle in
Hiranandani Hospital case [Case No. 39 of 2012], that an anti-competitive arrangement can be prohibited under section 3(1) of the
Competition Act, 2002 even if it cannot be categorised as a horizontal or vertical agreement.
180 Sandhya Drug Agency v Assam Drug Dealers
Association, 2014 Comp LR 61 (CCI).
181 Peeveear Medical Agencies v All India
Organization of Chemists and Druggists, 2014 Comp LR 10 (CCI).
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[s 3] Anti-competitive agreements
182 All India Organisation of Chemists & Druggists
(AIOCD) v CCI, Appeal No. 21 of 2013, No. 06 of 2014, No. 07 of 2014 [COMPATJ, decided on 8 December 2016.
183 Bengal Chemist and Druggist Association (BCDA),
Suo moto Case No. 02 of 2012, decided on 11 March 2014. The finding against BCDA of contravention of sections 3(3)(a) and
3(3)(b) has been upheld by COMPAT. But the penalty imposed on the office-bearers and members of the Executive committee of
BCDA was set aside on the ground of violation of principles of natural justice and the penalty on BCDA was reduced from 10% to
1% of the average turnover for the last three preceding financial years.
184 Note: The finding recorded by the Joint Director
General that Mr Swapan Kumar was a party to the decision taken by the Executive Committee to ban discounts by the retailers,
which finding has been endorsed by the Commission was set aside as Mr Kumar had already resigned from his post and the penalty
of Rs 47,63,579 imposed by the Commission was quashed by the Tribunal. Swapan Kumar Karak v CI, 2016 Comp LR 1
(CompAT).
185 Lupin Ltd v CCI, I.A. No. 152/2016 in Appeal No.
40 of 2016 [COMPA], decided on 7 December 2016.
186 Appeal No. 09 of 2016.
187 The Belgaum District Chemists and Druggists
Association v Abbott India Ltd., C-175/09/DGIR/27/28-MRTP, decided on 2 March 2017.
188 FICCI Multiplex Association of India v United
Producers/Distributors Forum, 2011 Comp LR 79 (CCI).
189 Id.
190 Nandu Abuja v CCI, 2014 Comp LR 209
(CompAT).
191 Indian Sugar Mills Association (ISMA) v Indian
Jute Mills Association (IJMA), 2014 Comp LR 225 (CCI).
192 Para 163, Id.
193 Re Domestic Air Lines,
[2012] 107 CLA 382 (CCI) : 2012 Comp LR 154 (CCI).
194 The principles of dynamic pricing involve a set of
pricing strategies which are employed by airlines with a view to optimising profits. The dynamic pricing is meaningful in airline
industry since not only the service is a perishable commodity to be consumed at a point in time, capacity is also fixed in advance.
These two characteristics have bearings upon the pricing strategies of airlines because of possible variations in the opportunity cost
of sale.
195 Express Industry Council of India v Jet Airways
(India) Ltd, Case No. 30 of 2013 [CCI], decided on 7 March 2018.
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[s 3] Anti-competitive agreements
196 All India Tyre Dealers’ Federation, Informant v
Tyre Manufacturers, 2013 Comp LR 92 (CCI).
197 The complaint was originally filed by the All India
Tyre Dealers’ Federation (AITDF) against the Tyre manufacturers before the Ministry of Corporate Affairs and the same was
forwarded by the Ministry to the MRTPC. Consequent upon the repeal of the MRTP Act, 1969 the matter stood transferred to the
Competition Commission of India (Commission) under section 66(6) of the Competition Act, 2002.
198 Shivam Enterprises v Kiratpur Sahib Truck
Operators, Case No. 43 of 2013, decided on 4 February 2015, 2015 Comp LR 232 (CCI).
199 Indian Foundation ofTransport Research and
Training v Bal Malkait Singh, President, All India Motor Transport Congress, Case No. 61 of 2012, decided on 16 February 2015,
2015 Comp LR 377 (CCI).
200 Re Alleged cartelisation in the matter of supply of
spares to Diesel Loco Modernisation Works, Indian Railways, Patiala, Punjab, Suo Moto Case No. 03 of 2012, decided on 5
February 2014, 2014 Comp LR 170 (CCI). [Note: The COMPAT on 16 April 2016 quashed the Commission’s order which
penalised All India Motor Transport Congress (AIMTC) for indulging in alleged unfair business practices with regard to truck
freight rates. Quashing the order, the Tribunal said the findings recorded by the additional Director General (DG) in the main as
well as supplementary reports were based on pure assumption and conjectures as also misreading of the record and were not based
on any tangible evidence.]
201 Builders Association of India v Cement
Manufacturers’ Association, 2012 Comp LR 629 (CCI).
202 Associated Cement Co Ltd (ACC), Gujarat Ambuja
Cement Ltd (ACL), Grasim Cement (Grasim), Ultratech Cement Ltd, (Ultratech), Jaypee Cement (Jaypee), India Cements Ltd
(India Cements), JK Cements of Group (JK Cements), Century Cement (Century), Madras Cement Ltd (Madras Cement), Binani
Cement Ltd (Binani) and Lafarge India Ltd (Lafarge). Another cement case was received as a transfer from the office of the
erstwhile Monopolies and Restrictive Trade Practices Commission under section 66(6) of the Act. In this case, MRTPC had taken
suo moto cognisance and initiated investigations based on the press reports published regarding the increase in the cement prices.
Since the allegations and parties were similar to the BAI case, except Shree Cement Ltd, simultaneous investigations were
conducted and the report was filed on 31 May 2011. As findings and penalty for violation of sections 3(a) and section 3(b) read
with section 3(1) had been imposed in the BAI case, the Commission limited this case for Shree Cement Ltd and observed that, it
had violated the above stated provisions of the Act and consequently imposed a penalty of Rs 3 billion (USD 59 million).
203 Shree Cement Ltd v Builders’ Association of India,
2016 Comp LR 23 (CompAT) : [2016] 133 SCL 407
(CAT). [Note: The Tribunal in 2015, set aside the matter on the ground of violation of principle of natural justice, and directed the
Commission to hear the matter afresh. The Tribunal while allowing the appeals directed the CCI to hear the cement manufacturers
and pass fresh orders after following just and fair procedure. The parties were also entitled to refund of the 10% penalty deposited
during the hearing of the case and have been allowed to make all legally permissible arguments before the CCI.]
204 CCI imposed penalties of Rs1,147.59 crore on ACC
Ltd, Rs 1,163.91 crore on Ambuja Cements Ltd, Rs 167.32 crore on Binani Cement Ltd, Rs 274.02 crore on Century Cement Ltd,
Rs 397 crore on Shree Cements Ltd, Rs 187.48 crore on India Cements Ltd, Rs 128.54 crore on JK Cements Ltd, Rs 490.01 crore
on Lafarge, Rs 258.63 crore on Ramco, Rs 1,175.49 crore on UltraTech Ltd and Rs 1,323.60 crore on Jaiprakash Associates Ltd. A
penalty of Rs 73 lakh was imposed on CMA.
205 Nirmal Kumar Manshani v Ruchi Soya Industries
Ltd, Case No. 76/2012 [CCI], order dated 28 June 2016.
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[s 3] Anti-competitive agreements
206 Re Cochin Port Trust and Container Trailer
Owners Coordination Committee, Case No. 06 of 2014 [CCI], decided on 1 August 2017.
207 Samir Agrawal v ANI Technologies Pvt Ltd, Case
No. 37 of 2018 [CCI], decided on 6 November 2018.
208 Cochin Port Trust v Container Trailer Owners
Coordination Committee, Ref. Case No. 06 of 2014 [CCI], decided on 1 August 2017.
209 Cartelisation in respect of zinc carbon dry cell
batteries market in India v Eveready Industries India Ltd, Suo-Moto Case No. 02 of 2016 [CCI], decided on 19 April 2018.
210 Cartelisation in respect of zinc carbon dry cell
batteries market in India v Eveready Industries India Ltd, Suo-Moto Case No. 02 of 2016 [CCI], decided on 19 April 2018.
211 Re Anticompetitive conduct in the Dry-Cell
Batteries Market in India v Panasonic Corp, Japan, Suo Motu Case No. 02/2017, decided on 30 August 2018.
212 Para 6(i), BP Khare, Principal Chief Engineer, South Eastern
Railway v Orissa Concrete and Allied Industries Ltd, [2013] 114 CLA 280 (CCI) : [2013]
119 SCL 1 (CCI).
213 Id.
214 Re Sheth & Co, Suo Moto Case No. 04 of 2013, decided on 10 June
2015.
215 Gulf Oil Corp Ltd v CCI, [2013]
114 CLA 25 (CAT) : 2013 Comp LR 409 (CompAT).
216 Id.
217 For more discussion see discussion on single economic entity.
218 Director General (Supplies & Disposals) v Puja Enterprises Basti,
Ref. Case No. 01 of 2012, [2013] 116 CLA 126 (CCI) :
2013 Comp LR 714 (CCI).
219 Notably there was a price differential of only 1% between the rates.
The CCI also noted that the profit component/margins of the OPs also varied from 2% to 15%. In such a scenario, it necessarily
followed that the cost component of the opposite parties ought to have been different if the final rates quoted by the opposite parties
remained identical/near identical. This falsified the explanation and justification advanced by the OPs that manufacturing cost being
same, the rates quoted were identical. (Para 30).
220 UOI v Hindustan Development,
AIR 1994 SC 988 : (1993) 3 SCC 499
: JT 1993 (3) SC 15 .
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[s 3] Anti-competitive agreements
221 AR Polymers Pvt Ltd v CCI, Appeal Nos. 34–43 of 2013 and Appeal
No. 8 of 2014, decided on 12 April 2016.
222 The Jungle Boots were required to be manufactured strictly as per the
specifications prescribed by the DGS&D;
• the Jungle Boots were not readily marketable and the same were supplied to Paramilitary Forces, State Police, Railways, etc.,
on the basis of the Rate Contacts executed on annual basis and there was no independent market for the same;
• there was no substitute of the product and there were no other buyers except the Government Agencies;
• the requirement of the Jungle Boots for the years 2008/09 to 2011/12 had remained static and this was the reason why no new
manufacturer had entered the market. Rather, some of the existing manufacturers had exited the market;
• while fixing the Rate Contracts for 2011/12, no increase was allowed over the Rate Contract awarded for 2010/11; and
• there was no association of manufacturers of the Jungle Boots but the Federation of Industries of India had sent letter(s) in the
past regarding delay in conclusion of the Rate Contracts.
223 Re Sheth & Co, Suo Moto Case No. 04 of 2013, decided on 10 June
2015.
224 Containers with disc required for 81mm bomb.
225 On 10 May 2016, the Tribunal in light of the propositions laid down
in Lafarge India Ltd v CCI, Appeal No. 105 of 2012 and connected appeals decided on 11 December 2015, set aside the order of
the Commission on grounds of violation of principles of natural justice. The Tribunal held that the participation of Shri Sudhir
Mital in the decision-making process despite the fact that he had not heard the arguments of the advocates/representatives of the
appellants and other suppliers of the product has the effect of vitiating the impugned order on the ground of breach of one of the
facets of the principles of natural justice and on that ground, the impugned order is liable to be set aside.
226 Sheth & Co v CCI [COMPAT], Appeal No. 102 of 2015.
227 Escorts Ltd v CCI, Appeal Nos. 13, 15 and 20 of 2014, decided on 18
December 2015, 2016 Comp LR 446 (CompAT).
228 MDD Medical Systems India Pvt Ltd v Foundation for Common
Cause and People Awareness, 2013 Comp LR 327 (CompAT).
229 Re Cartelisation by public sector insurance companies in rigging
the bids submitted in response to the tenders floated by the Government of Kerala for selecting insurance service provider for
Rashtriya Swasthya Bima Yojna, Suo Moto Case No. 02 of 2014, decided in 2015.
230 National Insurance Co Ltd (opposite party-1), New India Assurance
Co Ltd (opposite party-2), Oriental Insurance Co Ltd (opposite party-3) and United India Insurance Co Ltd (opposite party-4)
(collectively, “OPs”/”Public Sector Insurance Companies”).
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[s 3] Anti-competitive agreements
231 National Insurance Co Ltd v CCI, Appeal No. 94/2015; M/s New
India Assurance Co Ltd v CCI, Appeal No. 95/2015; M/s United India Insurance Co Ltd v CCI, Appeal No. 96/2015; M/s Oriental
Insurance Co Ltd v CCI, Appeal No. 97/2015 [COMPAT], decided on 9 December 2016.
232 Re Suo-motu case against LPG cylinder manufacturers, 2012 Comp
LR 197 (CCI).
233 Id.
234 International Cylinder Pvt Ltd v CCI,
[2014] 122 CLA 41 (CAT) : 2014 Comp LR 184 (CompAT).
235 Rajasthan Cylinders and Containers Ltd v UOI,
[2018] 150 SCL 1 (SC).
236 Excel Crop Care Ltd v CCI, 2013 Comp LR 799
(CompAT).
237 Excel Crop Care Ltd v CCI,
II (2017) CPJ 20 (SC) :
2017 (6) Scale 241 :
[2017] 141 SCL 480 (SC).
238 Hindustan Lever Ltd and Tata Oil Mills Co Ltd, RTP Enquiry No.
4/1978, Order dated 22 July 1982.
239 RRTA v Hyderabad Asbestos Cement Products Ltd, RTP Enquiry
No. 17/1979, Order dated 20 December 1982.
240 Re Choride India Ltd, RTP Enquiry No. 46/1977, Order dated 12
May 1981.
241 Alkali and Chemical Corp of India Ltd and Bayer (India) Ltd, RTP
Enquiry No. 21/1981, Order dated 3 July 1984.
242 Hanuman Govind v State of MP,
AIR 1952 SC 343 : (1952) 2 Mad LJ 631 :
[1952] 1 SCR 1091 .
243 Re Alkali Manufacturer’s Association of India,
RTP Enquiry No. 26/1984, Order dated 29 May 1985.
244 Mahindra and Mahindra Ltd v UOI,
AIR 1979 SC 798 :
(1979) 2 SCC 529 : 49 Com Cas 419 :
1979 Tax LR 2064 :
1979 2 SCR 1038 .
Page 217 of 258
[s 3] Anti-competitive agreements
245 Re Bengal Tools Ltd, RTP Enquiry No.
120/1984, Order dated 25 April 1986.
246 Re Ghai Enterprises Pvt Ltd and Kwality Ice
Creams, RTP Enquiry No. 18/1983, Order dated 5 February 1986.
247 Re Goods Truck Operators’ Union, Faridabad,
RTP Enquiry No. 1313/1987, Order dated 13 December 1989.
248 RRTA v Incheck Tyres, RTP Enquiry No. 1/1971, Order dated 19
April 1976.
249 Re Indian Woollen Mills Federation, RTP Enquiry No. 32/1976,
Order dated 25 April 1977.
250 Jugaldas Damodar Mody Co and 18 other importers of dates, RTP
Enquiry No. 1/1980, Order dated 14 June 1983.
251 Re Swastic Laminating Industries, RTP Enquiry No. 81/1984, Order
dated 31 January 1986.
252 RRTA v Federation of Association of Maharashtra, RTP Enquiry
No. 50/1986, Order dated 20 October 1986.
253 DG (I&P) v Cement Manufacturers’ Association (CMA), 2008 CTJ
21 (MRTP).
254 UOI v Hindustan Development Corp, 1994 CTJ 270 (SC) (MRTP).
255 Delhi Development Authority v Shree Cement Ltd, 2010 CTJ 17
(COMPAT) (MRTP).
256 US v Eli Lilly & Co, DC NJ 1959.
257 US v Eli Lilly & Co, DC NJ 1959.
258 Morton Salt Co v FTC, US Sup. Ct. 1965.
259 RSE Inc v Pennsy Supply, Inc, MD Pa. 1981.
260 Volasco Products Co v Lloyd A Fry Roofing Co,
CA-6 1962.
261 US v Natl Malleable & Steel Casting Co, DC Ohio
1957.
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[s 3] Anti-competitive agreements
262 Le Baron v Rohm and Haes Co, CA-9, 1971.
263 Granddad Bread, Inc v Continental Baking Co,
CA-9, 1979.
264 US v Atlantic Co, DC Ga 1950.
265 Baush Machine Tool v Aluminium Co of America,
CCA-2 1934.
266 Sugar Institute Inc v US, Sup Ct 1936.
267 Pevely Dairy Co v US, CA-8, 1949.
268 Case 48-69 [(1972) ECR 619
. See also International Cylinder Pvt Ltd v CCI, 2014 Comp LR 184 (CompAT).
269 Re Sheth & Co, Suo Moto Case No. 04 of 2013.
270 Also see Appeal Nos. 82 to 90 of 2012. [Note: The Tribunal on 10
May 2016, in light of the propositions laid down in Lafarge India Ltd v CCI, Appeal No. 105 of 2012 and connected appeals
decided on 11 December 2015, set aside the order of the Commission on grounds of violation of principles of natural justice] [Sheth
& Co v CCI, Appeal No. 102/2015 (along with Mac Polymer v CCI, Appeal No. 90/2015; Miltech Industries Pvt Ltd, Appeal No.
91/2015; Veekay Enterprises v CCI, Appeal No. 103/2015)]. The Tribunal also noted that the commission had not taken into
account the legitimate justifications being given for the similarity in prices. Further, it was observed that the reasons put forward by
the appellants for substantial similarity in the prices quoted by them and other suppliers in response to various Tender Enquiries
were plausible.
271 Theatre Enterprises Inc v Paramount Film Distributing Corp, 346,
US 537.
272 Natl Lead Co FTC, CA-7 1955.
273 Quoted in ANDREAS G PAPANDREU, Competition
and its Regulation, p 224.
274 US v Trenton Potteries Co, (1927) 273 US 392.
275 Re American Column and Lumber Co, 257 US
377 (1921).
276 US v Container Corp of America, 393 US 333
(1969).
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[s 3] Anti-competitive agreements
277 Maple Flooring Manufacturers Association v US,
268 US 563 (1925).
278 T-Mobile Netherlands BV, IPN Mobile NV,
Orange Nederland NV and Vodafone Libertel NV v Raad van bestuur van de Nederlandse Mededingingsautoriteit, Judgement of
the Court (Third Chamber) of 4 June 2009, C-8/08.
279 Air Canada v European Commission, C- T 9/11.
280 Allianz Hungária Biztosító Zrt v Gazdasági
Versenyhivatal, Judgement of the Court (First Chamber) of 14 March 2013, C-32/11.
281 Allianz Hungária Biztosító Zrt v Gazdasági
Versenyhivatal, Judgement of the Court (First Chamber) of 14 March 2013, C-32/11.
282 LTM v MBU, C- 56/65,
[1966] ECR 337 .
283 Competition Authority v Beef Industry Development
Society and Barry Brothers, C-209/07, [2008] ECR I-8637
.
284 GlaxoSmithKline Services v Commission, C-
501/06.
285 Allianz Hungária Biztosító, C–32/11.
286 Bureau national interprofessionnel du cognac v
Guy Clair, C-123/83.
287 Harper Collins Publishers, C- 39847.
288 AUSON JONES AND BRENDA SUFRIN, EU Competition Law, 5th Edn,
Oxford University Press, 2015, p 684.
289 Para 31–31, “Model Law on Competition”, Revised chapter III,
2012, Intergovernmental Group of Experts on Competition Law and Policy, United Nations Conference on Trade and
Development, TD/B/C.I/CLP/L.4. Available at: http://unctad.org/meetings/en/SessionalDocuments/ciclpL4_en.pdf (accessed in
February 2019).
290 Vijay Gupta v Paper Merchants Association, Shashi Jain (Prop
Parasnath Associates) and Ramesh Jaina, Case No. 07/2010.
291 LORD WILBERFORCE AND ALAN CAMPBELL, The
Law of Restrictive Trade Practices and Monopolies, 2nd Edn, 1966, p 517.
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[s 3] Anti-competitive agreements
292 RICHARD WHISH, Competition Law, 7th Edn, Oxford University
Press, 2012, p 534.
293 RRTA v Hindustan Pilkington Glass Workers Ltd
and Window Glass Ltd, RTP Enquiry No. 2/1972, Order dated 14 February 1975.
294 RTP Enquiry No. 5/1973, Order dated 31
January 1976.
295 RTP Enquiry No. 80/1975, Order dated 11
October 1977.
296 JK Synthetics v RD Saxena, (1977) 47 Comp Cases 323.
297 RRTA v Bata India Ltd, RTP Enquiry No.
3/1974, Order dated 5 May 1975; (1976) 46 Com Cas 441
.
298 Re Sarabhai M Chemicals Pvt Ltd, RTP Enquiry
No. 45/1975, Order dated 6 July 1978.
299 Swastik Stevedores Pvt Ltd v Dumper Owner’s Association, 2015
Comp LR 212 (CCI).
300 Varca Druggist & Chemist v Chemists & Druggists
Association, Goa, 2012 Comp LR 838 (CCI).
301 Santuka Associates Pvt Ltd v All India
Organization of Chemists and Druggists, Organization of Pharmaceutical Producer of India, Indian Drug Manufacturers’
Association and USV Ltd, 2013 Comp LR 223 (CCI).
302 The Tribunal (All India Organization of Chemists
and Druggists v CCI), III (2015) CPJ 4 , has set aside the
order on grounds of violation of natural justice.
303 Re PK Krishnan Proprietor, Vinayaka Pharma,
2016 Comp LR 83 (CCI).
304 Peeveear Medical Agencies v All India
Organization of Chemists and Druggists, 2014 Comp LR 10 (CCI).
305 Id.
306 Rohit Medical Store v Macleods Pharmaceutical
Ltd, 2015 Comp LR 451 (CCI). The Tribunal (Himachal Pradesh Society of Chemist & Druggist Alliance v Rohit Medical Store,
2016 Comp LR 304 (CompAT) has set aside the order of the Commission for violation of principles of natural justice and asked the
Director General to conduct fresh investigations.
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[s 3] Anti-competitive agreements
307 The Tribunal (Himachal Pradesh Society of
Chemist & Druggist Alliance v Rohit Medical Store, 2016 Comp LR 304 (CompAT)), has set aside the order of the Commission for
violation of principles of natural justice and asked the Director General to conduct fresh investigations.
308 Case No. 71 of 2013, Re Maruti & Co, Bangalore
Informant and Karnataka Chemists & Druggists Association (KCDA), [CCI], decided on 28 July 2016.
309 Case No. C-127/2009/MRTPC, Varca Drugs &
Chemists v Chemists & Druggists Association Goa; Case No. 20/2011, Santuka Associates Pvt Ltd v All India Organisation of
Chemists and Druggists; Case No. 30 of 2011, Peeveear Medical Agencies, Kerala v AIOCD; Suo-moto Case No. 05 of 2013, Re
Collective boycott/refusal to deal by the Chemists & Druggists Association, Goa, Glenmark Co and Wockhardt Ltd, etc.); and Case
No. 28 of 2014, PK Krishnan v Paul Madavana.
310 Re Bengal Chemist and Druggist Association and
Chintamoni Ghosh (Dr), [2014] 121 CLA 196 (CCI) :
2014 Comp LR 221 (CCI).
311 The Belgaum District Chemists and Druggists
Association v Abbott India Ltd, C-175/09/DGIR/27/28-MRTP [CCI], decided on 2 March 2017. See also Sudeep PM v All Kerala
Chemists and Druggists Association, Case No. 54 of 2015 [CCI], decided on 31 October 2017.
312 See also Reliance Agency v Chemists and Druggists
Association of Baroda, Case No. 97 of 2013 [CCI], decided on 4 March 2018.
313 Reliance Agency v Chemists and Druggists
Association of Baroda, Case No. 97 of 2013 [CCI], decided on 4 March 2018.
314 M/sMaruti and Co v KCDA, Case No. 71 of 2013.
315 M/s Alis Medical Agency v Federation of Gujarat
State Chemists & Druggists Associations; M/s Stockwell Pharma v Federation of Gujarat State Chemists & Druggists
Associations; M/s Apna Dawa Bazar v Federation of Gujarat State Chemists & Druggists Associations; M/s Reliance Medical
Agency v The Chemists & Druggists Association of Baroda, Case Nos. 65, 71, 72 of 2014 & Case No. 68 of 2015 [CCI], decided on
12 July 2018.
316 Sudeep PM v AKCDA, Case No. 54 of 2015 [CCI],
decided on 31 October 2017; Re Reliance Agency And Chemists and Druggists Association of Baroda, Case No. 97 of 2013 [CCI],
decided on 4 January 2018.
317 Re TG Vinayakumar (also known as Vinayan)
Bharathim and Association of Malayalam Movie Artists (AMMA), Film Employees Federation of Kerala (FEFKA), Case No. 98 of
2014 [CCI], decided on 24 March 2017.
318 Re Kannada Grahakara Koota v Karnataka Films
Chamber of Commerce (KFCC), Case No. 58 of 2012, CCI order 27 July 2015.
319 Id at para 2.3.
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[s 3] Anti-competitive agreements
320 Id at para 3.17.
321 Sajjan Khaitan v Eastern India Motion Picture
Association, Case No. 16/2011 decided on 9 August 2012, 2012 Comp LR 914 (CCI).
322 Supra para 7.22.
323 Penalty of Rs 16,82,204 for KFCC, Rs 1,74,293 for
KTVA and Rs 1,68,124 for KFPA.
324 Appeal No. 13/2016 with I.A. No. 08/2017, decided
on 10 April 2017.
325 Civil Appeal No. 6691 of 2014 [COMPAT].
326 Kerala Cine Exhibitors Association Film Chamber
Building v Kerala Film Exhibitors Federation Cee Pee Building, 2015 Comp LR 666 (CCI).
327 Film Distributors Association (Kerala) v CCI, 2015
Comp LR 854 (CompAT).
328 Crown Theatre v Kerala Film Exhibitors
Federation (KFEF), Case No. 16 of 2014, Case No. 16 of 2014, decided on 8 September 2015.
329 UTV Software Communications Ltd, Mumbai v
Motion Pictures Association, Delhi, Case No. 09/2011, decided on 8 May 2012.
330 Also see Eros International Media Ltd v Central
Circuit Cine Association, 2012 Comp LR 20 (CCI).
331 PV Basheer Ahamed v Film Distributors
Association, 2015 Comp LR 179 (CCI).
332 Cinemax India Ltd v Film Distributors Association,
2015 Comp LR 81 (CCI).
333 Id.
334 Reliance Big Entertainment Pvt Ltd v Tamil Nadu
Film Exhibitors Association (now known as Tamil Nadu Theatre Owners Association), 2013 Comp LR 828 (CCI).
335 Motion Pictures Association v Reliance Big
Entertainment Pvt Ltd, [2014] 118 CLA 516 (CAT) :
2013 Comp LR 466 (CompAT).
Page 223 of 258
[s 3] Anti-competitive agreements
336 FICCI Multiplex Association of India v United
Producers/Distributors Forum, 2011 Comp LR 79 (CCI).
337 Nandu Ahuja v CCI, 2014 Comp LR 209
(CompAT).
338 G Krishnamurthy v Karnataka Film Chamber of
Commerce (KFCC), Case No. 42 of 2017, decided on 30 August 18.
339 See also Kannada Grahara Koota, Case No.
58/2012 (CCI).
340 The conduct of KFCC was found to be in
contravention of the provisions of section 3 of the Competition Act, 2002 in previous cases bearing Nos. 25, 41, 45, 47 and 48 of
2010, and a penalty was imposed on it. In Case No. 56 of 2010, Case Nos. 56 and 71 of 2011, KFCC was found to be guilty again
but the Commission decided not to impose monetary penalty upon it, in view of the penalty imposed in the earlier order mentioned
above. Moreover, in Case No. 58 of 2012 also, the conduct of OP-1 was found contravening the provisions of the Act and it was
accordingly penalised for the same.
341 Ghanshyam Dass Vij v Bajaj Corp Ltd, Case No. 68
of 2013, decided on 12 October 2015.
342 Shivam Enterprises v Kiratpur Sahib Truck
Operators Co-op Transport Society Ltd, 2015 Comp LR 232 (CCI).
343 Jyoti Swaroop Arora v Tulip Infratech Ltd, 2015
Comp LR 109 (CCI).
344 Indian Sugar Mills Association v Indian Jute Mills
Association, 2014 Comp LR 225 (CCI).
345 Indian Jute Mills Association v The Secretary,
CCI [COMPAT], decided on 1 July 2016.
346 Director General (Supplies & Disposals),
Directorate General of Supplies & Disposals, Department of Commerce, Ministry of Commerce & Industry, Government of India,
New Delhi v Puja Enterprises Basti, [2013] 116 CLA 126
(CCI) : 2013 Comp LR 714 (CCI).
347 Note: The COMPAT on 12 April 2016 set aside the
Commission’s order against 11 shoe manufacturers, who were fined Rs 6.25 crore by the regulator for alleged collusive bidding in a
Government tender. Setting aside the ruling, the Tribunal held that the Commission committed grave error by imposing penalty on
the appellants at 5% of their total turnover in respect of all the products manufactured by them. The Tribunal observed that some of
these companies were producers of multiple products and the turnover of only the product in question should have been taken into
consideration for imposing penalty. The COMPAT directed the concerned authority to refund the penalty amount within a period of
three months, failing which, the appellants (the firms) would be entitled to interest at the rate of 12% per annum.
348 Re Aluminium Phosphide Tablets Manufacturers,
Suo-motu Case No. 02/2011, 2012 Comp LR 753 (CCI).
Page 224 of 258
[s 3] Anti-competitive agreements
349 American Tobacco Co v US, 328 US781 (1946).
350 Bengal Tools Ltd, (1988) 63 Comp Cases 468.
351 Re Excel Industries Ltd, (1988) 64 Comp Cases
531.
352 The Supreme Court has also approved the finding
of the Commission with respect to collusion. See Excel Corp Care Ltd v CCI, AIR 2017 SC
2734 .
353 Gulf Oil Corp Ltd & Black Diamond Explosives v
CCI & Coal India Ltd, [2013] 114 CLA 25 (CAT) :
2013 Comp LR 409 (Comp AT).
354 Uniglobe Mod Travels Pvt Ltd v Travel Agents
Federation of India, 2011 Comp LR 400 (CCI).
355 Fashion Originators’ Guild v Federal Trade
Commission, 312 US 457 : 312 US 466 : 312 US 467 : 468. See US v Trenton Potteries Co, 273 US 392.
356 Kiefer-Steward Co v Joseph E Seagram & Sons,
340 US 211 : 340 US 213; Klor’s, Inc v Broadway-hale Stores, Inc, 359 US 207 (1959); International Salt Co v US, 332 US 392 :
332 US 396; US v Association of Retail Travel Agents (ARTA), 1995 1 Trade Cas. (CCH) 70, 957 (D.D.C. Mar. 16, 1995).
357 8/72 Vereeniging van Cementhandelaren v
Commission, (1972) ECR 977 and Visa
International-Multilateral Interchange Fee, OJ (2002) L.318/17.
358 Van Landewyck v Commission,
(1980) ECR 3125 .
359 Vinod Chopra v Film Makers Combine, Restrictive
Trade Practices Enquiry No. 112 of 1997; DGIR v Central Circuit Cine Association, II
(2002) CPJ 72 (MRTP); Johnson & Johnson Ltd v Maharashtra State Chemists & Druggists
Association, II (2002) CPJ 39 (MRTP).
360 Uniglobe Mod Travels Pvt Ltd v Travel Agents
Federation of India, 2011 Comp LR 400 (CCI).
361 Subsequent appeals were dismissed by COMPAT
in 2013 (Travel Agents Association of India v Uniglobe Mod Travels Pvt Ltd, [Appeal No. 24 of 2011]; IATA Agents Association of
India v Uniglobe Mod Travels Pvt Ltd, [Appeal No. 08 of 2012 and I.A. No. 08/2012]; IATA Agents Association of India v FCM
Travels Solution (India) Ltd. [Appeal No. 09 of 2012 and I.A. No. 06/2012], [2013] 122 SCL
181 (CAT).
362 Vipul A Shah v All India Film Employee
Confederation, Case 19 of 2014 [CCI], decided on 31 October 2017.
Page 225 of 258
[s 3] Anti-competitive agreements
363 Royal Agency v Chemists & Druggists Association, Case No. 63 of
2013, decided on 27 October 2015.
364 M/s Metalrod Ltd Ghaziabad v M/s Religare Finvest Ltd, New
Delhi, Case No. 28 of 2010, decided on 23 May 2011.
365 Yashoda Hospital and Research Centre Ltd v India Bulls Financial
Services Ltd (IFSL), 2011 Comp LR 324 (CCI).
366 All India Tyre Dealers’ Federation v Tyre Manufacturers, 2013
Comp LR 92 (CCI).
367 Prints India v Springer India Pvt Ltd,
[2012] 109 CLA 411 (CCI).
368 The Air Cargo Agents Association of India v International Air
Transport Association (IATA), 2015 Comp LR 683 (CCI).
369 The Tribunal vide order dated 15 November 2016 had set aside the
order of the Commission on ground of incomplete investigation. As per the Tribunal, Director General committed serious illegality
by not recording a finding on allegation of abuse of dominant position and consequential violation of section 4 of Competition Act,
2002 and therefore, the impugned order was liable to be set aside because Commission failed to take cognisance and decide plea
raised by Appellant in context of said illegality committed by Director General.
370 Re NK Prakash Babu HMT Cinema and South Indian Film
Chamber of Commerce, Case No. 64 of 2016 [CCI], decided on 5 December 2016.
371 Cochin Port Trust v Container Trailer Owners Coordination
Committee, Ref. Case No. 06 of 2014 [CCI], decided on 1 August 2017.
372 “Model Law on Competition (2012)”, Revised chapter III,
Intergovernmental Group of Experts on Competition Law and Policy, United Nations Conference on Trade and Development,
Available at: http://unctad.org/meetings/en/SessionalDocuments/ciclpL4_en.pdf (accessed in February 2019).
373 Richard Whish, Competition Law, 6th Edn, Oxford University Press,
2012.
374 “Model Law on Competition (2012)”, Revised chapter III,
Intergovernmental Group of Experts on Competition Law and Policy, United Nations Conference on Trade and Development,
TD/B/C.I/CLP/L.4. Available at: http://unctad.org/meetings/en/SessionalDocuments/ciclpL4_en.pdf (accessed in February 2019).
375 Supra.
376 Re Jyoti Ltd, RTP Enquiry No. 2/1988, Order dated 3 March 1988.
377 Director General (Supplies & Disposals) v M/s Puja Enterprises
Basti, [2013] 116 CLA 126 (CCI) : 2013 Comp LR 714
(CCI).
Page 226 of 258
[s 3] Anti-competitive agreements
378 Note: The COMPAT on 12 April 2016 set aside the Commission’s
order against 11 shoe manufacturers, who were fined Rs 6.25 crore by the regulator for alleged collusive bidding in a government
tender. Setting aside the ruling, the tribunal held that the commission committed grave error by imposing penalty on the appellants
at 5% of their total turnover in respect of all the products manufactured by them. The tribunal observed that some of these
companies were producers of multiple products and the turnover of only the product in question should have been taken into
consideration for imposing penalty. COMPAT directed the concerned authority to refund the penalty amount within a period of
three months, failing which the appellants (the firms) would be entitled to interest at the rate of 12% per annum.
379 Ghanshyam Dass Vij v Bajaj Corp Ltd, Case No. 68 of 2013,
decided on 12 October 2015.
380 MP Mehrotra vjet Airways (India) Ltd and Kingfisher Airlines Ltd,
Case No. Misc. 1/2010 (4/2009), decided on 9 January 2012.
381 Prints India v Springer India Pvt Ltd,
[2012] 109 CLA 411 (CCI).
382 Re Commonwealth Trust (India) Ltd, RTP Enquiry No. 24/1984,
Order dated 5 December 1984; Re Premier Irrigation Equipment Ltd, RTP Enquiry No. 25/1984, Order dated 27 August 1984; Re
Camlin Pvt Ltd, RTP Enquiry No. 122 of 1984, Order dated 8 February 1985; Re Chetinad Cement Corp, RTP Enquiry No.
53/1984, Order dated 15 February 1985; Re India Plastics Ltd, RTP Enquiry No. 1/1985, Order dated 31 December 1985; Re
National Organic Chemicals Industries Ltd, RTP Enquiry No. 17/1986, Order dated 24 April 1986.
383 RRTA v Usha Sales Pvt Ltd, RTP Enquiry No. 8/1974, Order dated
27 November 1975; DuGaR’s p 342.
384 RRTA v Tata Engineering and Locomotive Co Ltd, RTP Enquiry
No. 1/1974, Order dated 25 July 1975.
385 Telco v RRTA, AIR 1977 SC 973
: [1977] 47 Com Cas 520
(SC) : (1977) 2 SCC 55 :
[1977] 2 SCR 685 : 1977 Tax LR 1789
: 1977 47 Com Cas 520
.
386 Re Hindustan Lever Ltd, RTP Enquiry No. 11/1974, Order dated 17
March 1976.
387 Hindustan Lever Ltd v MRTP Commission,
AIR 1977 SC 1285 : [1977] 47 Com Cas
581 (SC).
388 RRTA v Mahindra and Mahindra Ltd, RTP Enquiry No. 91/1975,
Order dated 14 May 1976.
389 Mahindra and Mahindra Ltd v UOI,
AIR 1979 SC 798 : 1979 2 SCC 529
: 49 Com Cas 419 : 1979 Tax LR 2064
: 1979 2 SCR 1038 .
Page 227 of 258
[s 3] Anti-competitive agreements
390 RRTA v Spencer & Co Ltd, RTP Enquiry No. 75/1975, Order dated
31 November 1977.
391 Re Food Specialities Ltd, RTP Enquiry No. 123/1985, Order dated
13 March 1987.
392 Re Atlas Copco (India) Ltd, RTP Enquiry No. 45/1983, Order dated
21 December 1984.
393 Re Cyclone Products Ltd, RTP Enquiry No. 541/1987, Order dated
14 January 1988.
394 Re Tide Water Oil Co (India) Ltd, RTP Enquiry
No. 21/1987, Order dated 18 November 1987.
395 Re Pentax Engineering Pvt Ltd, RTP Enquiry
No. 417/1988, Order dated 26 June 1989.
396 Re Brooke Bond India Ltd, RTP Enquiry
No.129/1984, Order dated 26 March 1985.
397 Re McDowell & Co Ltd, RTP Enquiry No.
105/1984, Order dated 17 September 1986; Also see Re Bangalore Soft Drinks Pvt Ltd, RTP Enquiry No. 189/1988, Order dated 4
September 1989.
398 Northland Rubber Mills Ltd, RTP Enquiry No. 1227/1987, Order
dated 17 March 1989.
399 Re Veeraj Brushes, RTP Enquiry No. 1200/1987, Order dated 22
February 1989.
400 Re Shetty’s Pharmaceuticals & Biologicals Ltd, RTP Enquiry No.
123/1988, Order dated 26 April 1991.
401 RTP Enquiry No. 22/1976, Order dated 15 July 1988.
402 Re Vardhman Spinning & General Mills Ltd, RTP Enquiry No.
310/1988, Order dated 2 June 1989.
403 Goel Enterprises v Advani Oerilikan Ltd, 2006 CTJ 289 (MRTP).
404 White Motor Co v US, 372 US 253 (1963).
405 US v Arnold Schwinn & Co, 388 US 365 (1967).
Page 228 of 258
[s 3] Anti-competitive agreements
406 Continental TV Inc v GTE Sylvania, 433 US 36, 97 (1977).
407 US v Topco Associates Inc, 405 US 596.
408 See also US v Sealy Inc, 388 US 350.
409 US v Addyston Pipe & Steel Co, U.S. Sup. Ct. 1899.
410 Timken Roller Bearing Co v US, U.S. Sup. Ct. 1951.
411 US v Sealy, Inc, U.S. Sup. Ct. 1967.
412 General Leaseways Inc v National Truck Leasing Assn, CA-7,
1984.
413 Midwesten Waffles, Inc v Waffle House Inc, CA-11, 1984.
414 Lektro-Vend Corp v Vendo Corp, CA-7, 1981.
415 Wien v Alaskan Airways, CCA-9, 1930.
416 A Booth & Co v Davis, CCA-6, 1904.
417 Alders v AFA Corp of Florida, DC Fla. 1973.
418 Morgan v Jacobs Miss, Sup. Ct. 1967.
419 Ramsey v Mutual Supply Co Tenn, Ct. App. 1968.
420 Three Phoenix Co v Pace Industries, Ariz. Sup. Ct. 1983.
421 US v General Instrument Corp, DC N.J. 1949.
422 US v Great Lakes Towing Co, DC Ohio, 1913.
423 Suiker Unie v Commission, Joint Cases 40- 48/73 :
[1975] ECR 1663 .
424 Carglass Cartel case, COMP/39125.
Page 229 of 258
[s 3] Anti-competitive agreements
425 Animal Feed Phosphate cartel case, COMP/38866.
426 Graphite electrodes cartel case, Case COMP/E-1/36.490
(2002/271/EC).
427 “Collusion is a secret agreement for illegal purposes or a
conspiracy. It is a deceitful agreement for some evil purpose.” [Subhas Chandra v Ganga Prasad,
1967 SC 878 ; Indo Allies Industries v Punjab National Bank,
AIR 1970 All 108 ]
428 Re Suo-motu case against LPG cylinder manufacturers, 2012 Comp
LR 197 (CCI).
429 Id.
430 Excel Crop Care Ltd v CCI,
II (2017) CPJ 20 (SC) : 2017 (6) Scale 241
: [2017] 141 SCL 480 (SC). See
also - Leelabai Gajanan Pansare v Oriental Insurance Co Ltd, (2008) 9 SCC 720
: 2008 (11) Scale 391
: JT 2008 (9) SC 551 :
AIR 2009 SC 523 ; Thakorlal D Vadgama v State of Gujarat,
(1973) 2 SCC 413 ; MK Ranganathan v Government of Madras,
AIR 1955 SC 604 :
(1955) 2 SCR 374 : 1955 Mad LW 10
: 1955 Mad WN 805 : 1955 2 Mad LJ (SC) 68 : 1955 25 Com Cas
344 : 1955 SCJ 515
: 1955 SCA 841 .
431 Excel Crop Care Ltd v CCI,
II (2017) CPJ 20 (SC) : 2017 (6) Scale 241
: [2017] 141 SCL 480 (SC).
432 Id.
433 Excel Crop Care Ltd v CCI,
II (2017) CPJ 20 (SC) : 2017 (6) Scale 241
: [2017] 141 SCL 480 (SC).
434 Rawlings v General Trading Co,
(1921) 1 KB 635 , CA; Jyoti v Jhowmull, (1909) 36 Cal 134
; Hari v Naro, (1893) 18 Bom 342.
435 LORD WILBERFORCE AND ALAN CAMPBELL, The Law of Restrictive
Trade Practices and Monopolies, 2nd Edn, p 248.
436 Para42,Re European Sugar Cartel, [1973]OJL140/17; ALISON
JONES AND BRENDA SUFRIN, EUCompetition Law, 5th Edn, Oxford University Press, 2015, p 689.
Page 230 of 258
[s 3] Anti-competitive agreements
437 “Guidelines for fighting bid-rigging in public procurement”, SCF,
European Commission on Protection of Competition & UN Conference on Trade and Development. Available at:
http://unctad.org/meetings/en/Contribution/ccpb_SCF_Bid-rigging%20Guidelines_en.pdf (accessed in February 2019).
438 Re Cartelization in Tender Nos. 21 and 28 of 2013
of Pune Municipal Corp for Solid Waste Processing v Saara Traders Pvt Ltd, Suo-Motu Case No. 03 of 2016 [CCI], decided on 31
May 2018.
439 CCI-Advocacy Series 3, “Provision relating to Bid Rigging”.
Available at:: http://www.cci.gov.in/sites/default/files/advocacy_booklet_document/Bid%20Rigging.pdf (accessed in February
2019).
440 OECD Guidelines for fighting bid rigging in public procurement.
Available at:: http://www.oecd.org/competition/cartels/42851044.pdf (accessed in February 2019).
441 Suo-Moto Case No. 02 of 2014, Re Cartelisation by public sector
insurance companies in rigging the bids submitted in response to the tenders floated by the Government of Kerala for selecting
insurance service provider for Rashtriya Swasthya Bima Yojna, Suo-Moto Case No. 02 of 2014.
442 The Tribunal observed that the penalty had to be calculated with
reference to the gross premium received by UIICL as insurance provider under RSBY/CHIS scheme and penalty for each of the
Appellants would be a proportion of their share in such premium. Further, COMPAT recognised that the burden of penalty will
ultimately be transferred to the public, as the insurance companies were owned by the government, hence reduced the penalty to 1%
of the relevant turnover for the relevant period.
443 National Insurance Co Ltd v CCI, Appeal No. 94/2015; New India
Assurance Co Ltd v CCI, Appeal No. 95/2015; United India Insurance Co Ltd v CCI, Appeal No. 96/2015; Oriental Insurance Co
Ltd v CCI, Appeal No. 97/2015 [COMPAT], decided on 9 December 2016.
444 Gulshan Verma v UOI, 2012 Comp LR 812 (CCI).
445 A Foundation for Common Cause & People Awareness v PES
Installations Pvt Ltd (PES), MDD Medical Systems Pvt Ltd (MDD), Medical Products Services (MPS) and Secretary, Ministry of
Health & family Welfare, Government of India, Nirman Bhawan, New Delhi, 2012 Comp LR 588 (CCI).
446 MDD Medical Systems India Pvt Ltd v Foundation for Common
Cause and People Awareness, 2013 Comp LR 327 (CompAT).
447 COMPAT relied on Supreme Court decision of Kranti Associates
Pvt Ltd v Sh Masood Ahmed Khan, (2010) 9 SCC 496
: (2011 1 MhLJ 691 (SC) : [2010] 7 Mad LJ 1033
: JT 2010 (9) SC 362 :
2010 (9) Scale 199 : [2010] 10 SCR
1070 , to observe the necessity of giving and also noted that though initially there was a
demarcation between administrative orders and quasi-judicial orders, but with the passage of time the distinction between the two
got blurred and thinned out and virtually reached a vanishing point in the judgement in AK Kraipak v UOI,
AIR 1970 SC 150 : (1970) 1 SCR 457
: 1969 (2) SCC 262
.
448 Coal India Ltd v Gulf Oil Corp Ltd (GOCL), Hyderabad, Andhra
Pradesh, 2012 Comp LR 1 (CCI).
Page 231 of 258
[s 3] Anti-competitive agreements
449 Gulf Oil Corp Ltd v CCI, [2013]
114 CLA 25 (CAT) : 2013 Comp LR 409 (CompAT).
450 Re Aluminium Phosphide Tablets Manufacturers, 2012 Comp LR
753 (CCI).
451 American Tobacco Co v US, [328 US781 (1946).
452 Bengal Tools Ltd, (1988) 63 Comp Cases 468.
453 Re Excel Industries Ltd, (1988) 64 Comp Cases
531.
454 Excel Crop Care Ltd v CCI, 2013 Comp LR 799 (CompAT).
455 Id.
456 Para 28, Id.
457 Alleged cartelization in the matter of supply of spares to Diesel
Loco Modernization Works v Stone India Ltd, M/s Faiveley Transport Rail Technologies India Ltd and Escorts Ltd, 2014 Comp LR
170 (CCI).
458 Bio-Med Pvt Ltd v UOI, 2015 Comp LR 649 (CCI).
459 Glaxo Smith Kline Pharmaceuticals Ltd v CCI, Appeal No. 85 of
2015; Sanofi Pasteur India Pvt Ltd v CCI, Appeal No. 86 of 2015 [COMPAT], decided on 8 November 2016.
460 Suo Moto Case No. 04 of 2013, decided on 10 June 2015, 2015
Comp LR 715 (CCI).
461 Containers with disc required for 81 mm bomb.
462 The Tribunal on 10 May 2016, in light of the propositions laid
down in Lafarge India Ltd v CCI, Appeal No. 105 of 2012 and connected appeals decided on 11 December 2015, set aside the order
of the Commission on grounds of violation of principles of natural justice. The Tribunal held that the participation of Shri Sudhir
Mital in the decision-making process despite the fact that he had not heard the arguments of the advocates/representatives of the
appellants and other suppliers of the product has the effect of vitiating the impugned order on the ground of breach of one of the
facets of the principles of natural justice and on that ground, the impugned order is liable to be set aside.
463 Sheth & Co v CCI, [COMPAT], Appeal No. 102 of 2015.
464 BP Khare, Principal Chief Engineer, South Eastern Railway v
Orissa Concrete and Allied Industries Ltd, [2013] 114 CLA 280
(CCI) : [2013] 119 SCL 1 (CCI).
Page 232 of 258
[s 3] Anti-competitive agreements
465 Also see Re Reference Case No. 01 of 2012 filed under section
19(1)(b) of the Competition Act, 2002 by Director General (Supplies & Disposals), Directorate General of Supplies & Disposals,
Department of Commerce, Ministry of Commerce & Industry, Government of India, New Delhi.
466 Re suo-motu case against LPG cylinder manufacturers, 2012 Comp
LR 197 (CCI).
467 Id.
468 Rajasthan Cylinders and Containers Ltd v UOI,
[2018] 150 SCL 1 (SC).
469 Jupiter Gaming Solutions Pvt Ltd v Government of Goa,
[2012] 106 CLA 339 (CCI) : 2012 Comp LR 56 (CCI) :
[2011] 110 SCL 340 (CCI).
470 Sh Surinder Saini v Delhi Metro Rail Corp Ltd,
[2014] 124 SCL 326 (CCI).
471 Vijay Bishnoi v Responsive Industries Ltd, Reference Case No.
08/2014 [CCI], Order dated 21 September 2016.
472 Re Suntec Energy Systems and National Dairy Development Board,
Amul Dairy, Case No. 69 of 2016 [CCI], decided on 10 November 2016.
473 Cartelisation in respect of tenders floated by Indian Railways for
supply of Brushless DC Fans and other electrical items, Suo-Moto Case No. 03 of 2014 [CCI], decided on 18 January 2017.
474 Western Coalfields Ltd v SSV Coal Carriers Pvt Ltd, Case 34 of
2015 [CCI], decided on 14 September 2017.
475 Western Coalfields Ltd v SSV Coal Carriers Pvt Ltd, Case 34 of
2015 [CCI], decided on 14 September 2017.
476 Director, Supplies & Disposals, Haryana v Shree Cement Ltd, Ref.
Case No. 05 of 2013 [CCI], decided on 19 January 2017.
477 Western Coalfields Ltd v SSV Coal Carriers Pvt Ltd, Case 34 of
2015 [CCI], decided on 14 September 2017.
478 Delhi Jal Board v Grasim Industries Ltd, Ref. Case Nos. 03 and 04
of 2013 [CCI], decided on 5 October 2017.
479 Surendra Prasad v Maharashtra State Power Generation Co Ltd,
Case 61 of 2013 [CCI], decided on 10 January 2018.
Page 233 of 258
[s 3] Anti-competitive agreements
480 India Glycols Ltd v Indian Sugar Mills Association (21/2013); Ester
India Chemicals Ltd v Bajaj Hindusthan Ltd (21/2013); Jubilant Life Sciences Ltd v Bharat Petroleum Corp Ltd (36/2013); A B
Sugars Ltd v Indian Sugar Mills Association (47/2013); Wave Distilleries and Breweries Ltd v Indian Sugar Mills Association
(48/2013); Lords Distillery Ltd v Indian Sugar Mills Association (49/2013), Case Nos. 21, 29, 36, 47, 48 & 49/2013, decided on 18
September 2018 (CCI).
481 Re Cartelisation by broadcasting service providers by rigging the
bids submitted in response to the tenders floated by Sports Broadcasters v Essel Shyam Communication Ltd, Suo - Motu Case No.
02 of 2013 [CCI], decided on 11 July 2018.
482 Association of Third Party Administrators v General Insurers (Public
Sector) Association of India, Case No. 49/2010 (CCI).
483 FICCI – Multiplex Association of India, Case No. 01 of 2009.
484 United States: Joint Ventures, 34 The Antitrust Review of the
America, 2015.
485 Ibid.
486 European Commission Guidelines on the applicability of Article
101 of the Treaty on the Functioning of the European Union to horizontal co-operation agreements, p 9.
487 Ibid, p 11.
488 Supra.
489 Avebe v Commission, Case T-314/01,
[2006] ECR II-3085 , paras 138 and 139.
490 Automobiles Dealers Association, Hathras, UP v Global
Automobiles Ltd and Pooja Expo India Pvt Ltd, 2012 Comp LR 827 (CCI).
491 Consumer Online Foundation v Tata Sky Ltd, Case No.2 of 2009,
decided on 24 March 2011.
492 See Shri Praveen Kumar Sodhi v Omaxe Ltd, Case No. 83 of 2011;
Ram Prasad Gupta v Omaxe Ltd, [2013] 112 CLA 8 (CCI).
493 Re Ghanshyam Dass Vij, Case No. 68 of 2013. Also see Financial
Software and Systems Pvt Ltd, Case No. 53 of 2013; Re South City Group Housing Apartment Owners Association), Case No. 49 of
2011; Sh. Dhanraj Pillay and Hockey India, Case No. 73 of 2011.
494 JULIAN O VON KALINOWSKI, World Law of Competition—United
States (1), 1979.
Page 234 of 258
[s 3] Anti-competitive agreements
495 Re Systems Communications, Bombay, RTP Enquiry No. 9/1982,
Order dated 21 April 1983.
496 Northern Pacific Railway Co v US, 356 US (1958).
497 US v Loeuw’s Inc, 371 US 38.
498 Para 217, European Commission Notice,
“Guidelines on Vertical Restraints”, {C(2010) 2365} {SEC(2010) 413} {SEC(2010) 414}. Available at:
http://ec.europa.eu/competition/antitrust/legislation/guidelines_ vertical_en.pdf (accessed in February 2019).
499 Para 66, Sonam Sharma v Apple Inc (USA), Apple
India Pvt Ltd, [2013] 114 CLA 255 (CCI) : 2013
Comp LR 346 (CCI) : [2013] 119 SCL 107 (CCI).
500 Para 67, Id.
501 Para 68, Id.
502 Sonam Sharma v Apple Inc (USA), Apple India Pvt
Ltd, [2013] 114 CLA 255 (CCI) : 2013 Comp LR 346
(CCI) : [2013] 119 SCL 107 (CCI).
503 Re Mathrubhumi Printing & Publishing Co Ltd,
1977 Tax LR 2290 .
504 Ajay Devgn Films v Yash Raj Films, 2013 Comp LR 903
(CompAT).
505 Sharad Kumar Jhunjunwala v UOI, 2015 Comp LR 859 (CCI) :
(2015) 4 Comp LJ 457 .
506 Sonam Sharma v Apple Inc,
[2013] 114 CLA 255 (CCI) : 2013 Comp LR 346 (CCI) :
[2013] 119 SCL 107 (CCI).
507 Id.
508 Id.
509 Financial Software and Systems Pvt Ltd v ACI Worldwide Solutions
Pvt Ltd, 2015 Comp LR 253 (CCI).
510 ESYS Information Technologies Pvt Ltd v Intel Corp (Intel Inc),
2014 Comp LR 126 (CCI).
Page 235 of 258
[s 3] Anti-competitive agreements
511 Also see Flyington Freighters Pvt Ltd v Airbus SAS, Case No.
66/2010.
512 Ram Niwas Gupta v Omaxe Ltd,
[2013] 112 CLA 8 (CCI) : 2012 Comp LR 1132 (CCI).
513 Also see Jyoti Swaroop Arora v Tulip Infratech, 2015 Comp LR
109 (CCI).
514 Arshiya Rail Infrastructure Ltd (ARIL) v Ministry of Railways
(MoR) through the Chairman, Railway Board (KB) and Container Corp of India Ltd (CONCOR),
[2013] 112 CLA 297 (CCI) : 2012 Comp LR 937 (CCI) :
[2012] 116 SCL 417 (CCI).
515 Consumer Online Foundation v Tata Sky Ltd, Dish TV India Ltd,
Reliance Big TV Ltd and Sun Direct TV Pvt Ltd, Case No. 2/2009.
516 Ibid.
517 Gaurav Gupta v Chief Secretary, Govt of Haryana Civil
Secretariat, Appeal No. 2 of 2011 and Appeal No. 16 of 2011.
518 Fx Enterprise Solutions India Pvt Ltd v Hyundai Motor India Ltd,
(36/2014); St Antony’s Cars Pvt Ltd v Hyundai Motor India Ltd, (82/2014), order dated 14 June 2017.
519 Hyundai Motor India Ltd v CCI, Competition Appeal (AT) No. 06
of 2017, decided on 19 September 2018.
520 Re Anand Gas, RTP Enquiry No. 43/1983, Order dated 7 June
1984.
521 Re Hindustan Motors Ltd, RTP Enquiry No. 17/1983, Order dated
22 March 1984.
522 Re Godrej & Boyce Mfg Co Pvt Ltd, RTP Enquiry No. 16/1985,
Order dated 19 March 1986.
523 Re RP Electronics, RTP Enquiry No. 73/1986, Order dated 8 May
1989.
524 Re Systems Communications, RTP Enquiry No. 9/1982, Order dated
21 April 1983.
525 Re Northern India Refrigeration Co, RTP Enquiry No. 109/1984,
Order dated 20 February 1985.
Page 236 of 258
[s 3] Anti-competitive agreements
526 Re Sikand and Co, RTP Enquiry No. 123/1985, Order dated 12
February 1985.
527 Re MRF Ltd, RTP Enquiry No. 6/1978, Order dated 2 February
1983.
528 Re Austin Distributors Pvt Ltd, RTP Enquiry No. 74/1986, Order
dated 6 March 1987.
529 Re Anand Gas, RTP Enquiry No. 43/1983, Order dated 7 June
1984. Also see Re Satur Gas Corp, RTP Enquiry No. 64/1985, Order dated 9 October 1985; Re Tapasvi Gas Supplying Co, RTP
Enquiry No. 46/1985, Order dated 28 October 1986; Re West End Gas Service, RTP Enquiry No. 91/1986, Order dated 9 December
1987; Re Shyam Gas Co, RTP Enquiry No. 100/1984, Order dated 12 February 1985; Re Vayu Sainik Gas Agency, RTP Enquiry
No. 136/1985, Order dated 6 February 1987; Re CN Gas Agency, RTP Enquiry No. 477/1988, Order dated 10 May 1989; Panday
Gas Agency, RTP Enquiry No. 1475/1987, Order dated 18 July 1989; Gangotri Gas Agency, RTP Enquiry No. 433/1988, Order
dated 19 May 1989; Rajendra Gas Service, RTP Enquiry No. 1537/1987, Order dated 10 March 1988; Sajjan Gas Service, RTP
Enquiry No. 1533/1987, Order dated 7 September 1988; Ghotane Gas Agency, RTP Enquiry No. 308/1988, Order dated 3 February
1989; Ajit Gas Service, RTP Enquiry No. 318/1988, Order dated 17 February 1989; Re Sikka Gas Service, RTP Enquiry No.
1632/1987, Order dated 18 March 1991.
530 Re Samir Gas Agency, RTP Enquiry No. 28/1983, Order dated 12
February 1985; Re Chandra Gas Service, (1987) Tax LR 1792
(39) MRTPC.
531 Re Nikhil Gas Service, RTP Enquiry No. 190/1986, Order dated 13
March 1987.
532 Re Amravati District Central Co-op Bank Ltd, RTP Enquiry No.
36/1984, Order dated 16 May 1984.
533 Re Gajra Bevel Gears Ltd, RTP Enquiry No. 46/1989, Order dated
12 June 1989.
534 RRTA v Bharat Gears Ltd, RTP Enquiry No.
83/1975, Order dated 14 May 1976.
535 RRTA v Glaxo Laboratories (I) Ltd, RTP Enquiry
No. 33/1977, Order dated 5 December 1977, RTP in India, vol III, p 281.
536 RRTA v Chandan Metal Products Pvt Ltd, RTP
Enquiry No. 34/1974, Order dated 8 September 1975.
537 Re Khira Steel, RTP Enquiry No. 33/1974, Order
dated 4 August 1975.
538 RRTA v Godrej and Boyce, RTP Enquiry No.
17/1975, Order dated 27 October 1975.
Page 237 of 258
[s 3] Anti-competitive agreements
539 RRTA v Calcutta Chemicals Ltd, RTP Enquiry
No. 9/1975, Order dated 6 January 1976.
540 Re Rallis India Ltd, RTP Enquiry No. 15/1974,
Order dated 20 February 1976; (1980) 50 Comp Cases 185.
541 RRTA v Hindustan Lever Ltd, RTP Enquiry No.
11/1974, Order dated 17 March 1976; Dugar’s p 137.
542 RRTA v Bata India Ltd, RTP Enquiry No.
3/1974, Order dated 5 May 1975.
543 RRTA v Carona Sahu, RTP Enquiry No. 2/1974,
Order dated 21 May 1975.
544 RRTA v Singer Sewing Machine, RTP Enquiry
No. 21/1975, Order dated 26 September 1975.
545 RRTA v TT Pvt Ltd, RTP Enquiry No. 20/1975,
Order dated 5 December 1975.
546 RRTA v Amar Dye-Chem Ltd, RTP Enquiry No.
51/1975, Order dated 20 January 1976.
547 RRTA v Weston Electronics, RTP Enquiry No.
82/1975, Order dated 7 May 1976.
548 RRTA v Bush Boake Alen (India) Ltd, RTP
Enquiry No. 50/1984, Order dated 14 December 1984.
549 RRTA v Titagarh Paper Mills Co Ltd, RTP
Enquiry No. 24/1983, Order dated 2 December 1984.
550 RRTA v Lakme Ltd, RTP Enquiry No. 197/1988,
Order dated 9 January 1989.
551 RRTA v Jyoti Ltd, RTP Enquiry No. 1263/1987,
Order dated 3 March 1988.
552 RRTA v LG Balakrishnan & Bros Ltd, RTP
Enquiry No. 1343/1987, Order dated 11 April 1988.
553 RRTA v Binny Ltd, RTP Enquiry No. 669/1987,
Order dated 29 April 1988.
554 Re Mangal Deep, RTP Enquiry No. 29/1989,
Order dated 19 July 1989.
Page 238 of 258
[s 3] Anti-competitive agreements
555 RRTA v Lakme Ltd, RTP Enquiry No. 1271/1987
and No. 198/1988, Order dated 31 October 1988.
556 Re Gajra Bevel Gears Ltd, RTP Enquiry No.
46/1989, Order dated 12 June 1989. Also see Re Combined Industrial Ltd, RTP Enquiry No. 1354/87, Order dated 5 April 1988.
557 RRTA v Fibreglass Pilkington Ltd, RTP Enquiry
No. 71/87, Order dated 10 October 1987.
558 Re Sandvik Asia Ltd, RTP Enquiry No. 27/1984,
Order dated 6 March 1985.
559 Re Radhakrishnan International School, RTP
Enquiry No. 43/1992, decided on 27 October 1993.
560 Re Hindustan Vaccum Glass Ltd, RTP Enquiry
No. 1205/1987, decided on 26 February 1993.
561 RRTA v Hindustan Lever Ltd, RTP Enquiry No.
48/1983, Order dated 4 August 1987.
562 Daily Newspaper—Statesman, RTP Enquiry No.
53/1975, Order dated 2 April 1976.
563 Re Mathrubhumi Printing and Publishing Co
Ltd, RTP Enquiry No. 72/1975, Order dated 11 August 1977.
564 Re Mangalore Refinery and Petrochemicals Ltd,
RTP Enquiry, Order dated 26 May 1992.
565 Meecon Pvt Ltd v Premier Automobiles Ltd, RTP
Enquiry No. 76/1984, Order dated 20 August 1984.
566 Mahindra & Mahindra Ltd v UOI,
AIR 1979 SC 798 .
567 Shree Sivakami Computer Services Pvt Ltd v
DCM Data Products (a unit of DCM Ltd), RTP Enquiry No. 147/1984, Order dated 26 December 1984.
568 Re Machinery Manufacturers Corp Ltd, RTP
Enquiry No. 77/1985, Order dated 4 December 1986.
569 Re Orient Paper and Industries Ltd, RTP
Enquiry No. 104/1986, Order dated 26 November 1986.
Page 239 of 258
[s 3] Anti-competitive agreements
570 Re Ex-Cell-O India, RTP Enquiry No. 10/1975,
Order dated 4 August 1975.
571 RRTA v Steel Age Industries Ltd, [1976] 46
Comp Cases 607, RTP Enquiry No. 1/1975, Order dated 21 August 1975.
572 RRTA v Atlas Copco (India) Ltd, RTP Enquiry
No. 45/1983, Order dated 21 December 1984.
573 Pragati Flame, RTP Enquiry No. 133/1984, Order dated 20
December 1984. See also Re Expo Machinery Ltd and Kelvinator of India Ltd, RTP Enquiry No. 45/1985, Order dated 8 September
1989.
574 Fortner Enterprise Inc v US Steel Corp, 394 US
495 : 89 S. Ct. 1252 : 22 L. Ed. 495 (1969).
575 Standard Oil Co of California and Standard Stations v US, 337 US
293 (1949).
576 International Salt Co v US, 332 US. 392 (1947).
577 International Business Machines Corp v US, 298 US 131 (1936).
578 International Salt Co v US, 332 US 392 (1947).
579 US v Jerrold Electronics Corp, 187 F. Supp. 545 (E.D. Pa. 1960).
580 US v Jerrold Electronics Corp, 187 F. Supp. 545
(E.D. Pa. 1960).
581 Times-Picayune Publishing Co v US, 345 US 594 (1953).
582 US v Loew’s Inc, 371 US 38 (1962).
583 FTC v Brown Shoe Co, 384 US 316, 320–322 (1966).
584 Brown Shoe Co v FTC, 330 F 2d 45 (8th Cir. 1964).
585 Standard Oil Co of California v US, U.S. Sup Ct 1949; Re
Connecticut Telephone & Electric Co, (DC NJ 1926).
586 International Business Machines Corp v US, U.S. Sup Ct 1936.
587 Re Data General Corp, (DC Cal 1980).
Page 240 of 258
[s 3] Anti-competitive agreements
588 US v United Shoe Machinery Co, DC MO 1920.
589 Re Teleflex Industrial Products Inc, DC Pa 1968.
590 Miller Motors Inc v Ford Motor Co, DC NC 1957.
591 Coca Cola Bottling Co v Coca Cola Co, DC Del 1920.
592 FTC v Sinclair Refining Co, U.S. Sup Ct 1923.
593 Re Jerrold Electronics Corp, DC Pa 1960.
594 Pick Manufacturing Co v General Motors Corp, CCA-7, 1935.
595 General Talking Pictures Corp v DC Marce, Minn. Sup. Ct. 1938.
596 Re LA Draper and Sons Inc v Wheelabrator-Frye Inc, (ND Ala.
1983).
597 Associated Press v Taft Ingalls Corp, 382 US
820; Kanas City Star Co v US, 354 US 923.
598 Barger v Hudson County News Co, 321 F 2d
864.
599 Kanas City Star v US, 354 US 923.
600 Microsoft Corp v Commission, COMP/C-3/39530.
601 Delimitis v Henninger Bräu AG,
[1991] ECR I-935 .
602
Bilger v Jehle, [1970]
ECR 127 .
603 BPB Industries Plc and British Gypsum Ltd v Commission of the
European Communities, ECLI:EU:T:1993:31.
604 Langnese-Iglo GmbH v Commission of the European Communities,
ECLI:EU:C:1998:447.
Page 241 of 258
[s 3] Anti-competitive agreements
605 US Attorney-General’s National Committee Report (1955) at pp
144–146.
606 Re Delhi Cloth & General Mills Co Ltd, RTP Enquiry No. 22/1976,
Order dated 17 May 1978.
607 Standard Fashion Co v Magrane-Houston Co, 258
US 346 (1922).
608 European Commission Notice, “Guidelines on Vertical Restraints”,
{C(2010) 2365} {SEC(2010) 413} {SEC(2010) 414}. Available at:
http://ec.europa.eu/competition/antitrust/legislation/guidelines_vertical_ en.pdf (accessed in February 2019).
609 Para 194, Id.
610 Para 195, Id.
611 Para 196, Id.
612 Para 197, Id.
613 Para 198, Id.
614 Para 199, Id.
615 Pandrol Rahee Technologies Pvt Ltd v Delhi Metro Rail Corp Ltd,
2011 Comp LR 561 (CCI).
616 Nagar Nigam v Al Faheem Meat Exports Pvt Ltd, SLP (Civil) No.
10174 of 2006.
617 Sachidanand Pandey v State of WB,
AIR 1987 SC 1109 : 1987 2
SCR 223 : 1987 2 SCC 295
: 1987 1 Comp LJ 211 :
1987 1 Scale 311 : 1987 1 JT 425 : 1987 1 UJ (SC) 641.
618 Id.
“In India, public procurement by Central and State governments, corporations and other instrumentalities account for 30% of
the GDP of India. As India’s GDP is around 2 trillion dollars, the expenditure on public procurement is very high. This large
public procurement leads to competition effects. The procurement by the Government, and its instrumentalities leads to
economic development and creation of jobs. The public sector can promote competition by sourcing requirements from a
range of suppliers. It can also restrict competition by restricting participation in tenders and it can also discriminate against
Page 242 of 258
[s 3] Anti-competitive agreements
particular types of firms. The public sector can also contribute towards an improvement of competitive conditions. In fact,
public sector enjoys buyers power. Buyer power is related to the size of demand relative to total demand in a relevant market.
It also enjoys power because it is strategically important customer for its suppliers. There are differences between public
procurement and private procurement. There are legal and regulatory requirements for public procurement which do not exist
for private procurement. Transparency and non discrimination are necessary for public procurement. Decision to purchase is
different for a public section as compared to private procurement. Public Sector is more risk averse and therefore failure is
normally avoided. Public Sector purchases are not with a desire to maximise profits. There are other policy objectives which
binds a public sector such as employee welfare, govt. policies etc.
23.
When tendering process is adopted in public procurement it leads to breaking entry barriers. It results lower prices and better
quality and savings which leads to surplus for investment. It also increases competition in the market and more contracts can
be given to large number of firms/persons. Public procurement can lead to significant effects on investment and innovation. In
fact large public sector demand leads to increase in productive capacity and employment. In fact, public sector demand can
create a market. For these reason, the Supreme Court came up with the decisions as reproduced above.
28.
It will also not out of place to mention the international practice adopted by other competition agencies with respect to the
public procurement case. In the OECD document on “Public Procurement 2007”, Irish Competition authority said it uses the
advocacy tool on the complaints relating to the tendering procedures wherein allegations are levelled like eligibility criteria
for participating in the tendering process or for short listing are too restrictive “and the tender was designed with one company
in mind. According authority, it highlights in all such cases the broader policy issue to the; procurer: As a matter of policy,
tendering bodies should be mindful of proportionality in setting the minimum requirements for tendering. When minimum
requirements unnecessarily reduce competition, value for money for the contracting authority is reduced.”
619 Financial Software and Systems Pvt Ltd Informant v ACI
Worldwide Solutions Pvt Ltd, 2015 Comp LR 253 (CCI).
620 Dissenting with the majority order, CCI member S L Bunker said
that ACI had violated competition norms and accordingly a penalty of Rs 4.52 crore should be imposed on the company. He
observed: ACI’s decision to not grant consent to any third party including the informant for provision of such services along with
sub-contracting arrangement entered with the providers of these services, has allowed ACI to enter and strengthen its position in the
downstream market of provision of professional services.
621 ESYS Information Technologies Pvt Ltd v Intel Corp (Intel Inc),
Intel Semiconductor Ltd and Intel Technology India Pvt Ltd, 2014 Comp LR 126 (CCI).
622 Dhanraj Pillay v Hockey India, 2013 Comp LR 543 (CCI).
623 Cine Prakashakula Viniyoga Darula Sangham A Registered
Society, rep. by its president GL Narasimha Rao v Hindustan Coca Cola Beverages Pvt Ltd, Case No. UTPE 99/2009 & Consumer
Guidance Society v Hindustan Coca Cola Beverages Pvt Ltd and INOX Leisure Pvt Ltd, RTPE-16/2009.
Page 243 of 258
[s 3] Anti-competitive agreements
624 Explosive Manufacturers Welfare Association v Coal India Ltd and
its Officers, 2012 Comp LR 525 (CCI).
625 Ajay Devgn Films v Yash Raj Films Pvt Ltd, 2013 Comp LR 903
(CompAT).
626 Jindal Steel & Power Ltd v Steel Authority of India Ltd,
[2012] 107 CLA 278 (CCI).
627 Id.
628 Shamsher Kataria Informant v Honda Siel Cars India Ltd, 2014
Comp LR 1 (CCI). The case was originally filed in 2011 by Shamsher Kataria against Honda, Fiat and Volkswagen. The matter
was examined by the Commission and after finding a prima facie case, it was referred to the Director General for investigation. The
Director General broadened the investigation to include similar practices from 14 other brands including Ford, Hindustan Motors,
Fiat, Nissan, General Motors, Premier, Mahindra & Mahindra, Maruti Suzuki, Tata Motors, Hyundai, Skoda, Toyota and two
premium brands, Mercedes Benz and BMW within the scope. After a detailed investigation, the Director General concluded that
each of these 17 car manufacturers and original equipment manufacturers had contravened sections 3 and 4 of the Act. The
Commission then issued a detailed order dated 25 August 2014 upholding the Director General’s findings that found 14 automobile
companies guilty and imposed a penalty of 2% of the total average annual turnover of each party. Three automobile companies
[Hyundai, Reva and Premier] had moved the Madras High Court [Writ Petition (Civil) No. 31808/2012] challenging the scope of
investigation of the Director General. The case was later dismissed by the High Court leading to the Commission’s order holding
them guilty for violation of the Competition Act, 2002. Eleven automobile companies moved Delhi high court, challenging the
constitutionality of certain sections of the Competition Act, 2002 pertaining to CCI’s powers. The high court reserved its verdict in
January 2016. Ford, Nissan and Toyota preferred an appeal to COMPAT which upheld the order of the Commission on 9 December
2016. Presently, they have secured an interim relief order from the Supreme Court against the Tribunal’s December order.
629 Ramamurthy Rajagopal v Doctor’s Associates Inc, Case No. 90 of
2014, decided on 13 May 2015.
630 Amit Auto Agencies v King Kaveri Trading Co, 2013 Comp LR 892
(CCI).
631 Manoj Hirasingh Pardeshi v Gilead Sciences Inc, 2013 Comp LR
391(CCI).
632 Note: Another category of agreements are “Selective Distribution
Agreements”. A selective distribution agreement typically has no element of territorial exclusivity (or customer exclusivity) but is
characterised instead by a restriction on the resale of contract goods to third party who are not party to the selective distribution
system. The supplier in practice limits resale to a selected group of distributors who satisfy a set of objective criteria. This group is
then free to sell to all end users, wherever, they are situated. [In India, Selective distribution agreements may be covered under
section 3(4) of the Competition Act, 2002]. Selective distribution systems are often deployed by persons of branded products. The
producer establishes a system in which the products can be bought and sold only by authorised distributors and retailers. Non-
authorised dealer will not be able to obtain the product. Selective distribution agreements may reduce intra-brand competition;
foreclose access to market; soften competition or facilitate collusion between suppliers or buyers. Distinction, however, has to be
made between “Purely Qualitative” and “Quantitative” System. Purely Qualitative Selective Distribution Systems: [Metro v
Commission 1977 (Metro Doctrine)] recognised that sometimes resellers are appointed on the basis of objective criteria relating to
technical qualification of the reseller and its staff and the suitability of its trading premises and that such conditions are laid down
uniformly for all potential resellers and are not applied in discriminatory fashion. Any restriction that is imposed on appointed
distributor goes no further than is objectively required to protect the quality of the product in question.
633 Para 75, Ghanshyam Dass Vij v Bajaj Corp Ltd, Case No. 68 of
2013.
Page 244 of 258
[s 3] Anti-competitive agreements
634 European Commission Notice, “Guidelines on Vertical Restraints”,
{C(2010) 2365} {SEC(2010) 413} {SEC(2010) 414}. Available at:
http://ec.europa.eu/competition/antitrust/legislation/guidelines_vertical_ en.pdf (accessed in February 2019).
635 Para 153, Id.
636 Para 154, Id.
637 Para 155, Id.
638 Para 156, Id.
639 Para 157, Id.
640 Para 158, Id.
641 Para 159, Id.
642 Para 160, Id.
643 Exclusive Motors Pvt Ltd v Automobili Lamborghini SPA,
[2014] 121 CLA 230 (CAT) : 2014 Comp LR 110 (CompAT).
644 Ghanshyam Dass Vij v Bajaj Corp Ltd, Case No. 68 of 2013.
645 Sonam Sharma v Apple Inc,
[2013] 114 CLA 255 (CCI) : 2013 Comp LR 346 (CCI) :
[2013] 119 SCL 107 (CCI).
646 Automobiles Dealers Association, Hathras, UP v Global
Automobiles Ltd and Pooja Expo India Pvt Ltd, 2012 Comp LR 827 (CCI).
647 Id.
648 Id.
649 Shamsher Kataria Informant v Honda Siel Cars India Ltd, 2014
Comp LR 1 (CCI).
650 Fx Enterprise Solutions India Pvt Ltd v Hyundai Motor India Ltd,
(36/2014); St Antony’s Cars Pvt Ltd v Hyundai Motor India Ltd, (82/2014), Order dated 14 June 2017.
Page 245 of 258
[s 3] Anti-competitive agreements
651 The NCLAT set aside the above finding of the CCI on the ground
that the CCI did not conduct any analysis of its own amounting to an independent inquiry.
652 Re Allied Distributors (RTP Enquiry No. 6/1972); Re American
Universal Electric (RTP Enquiry No. 7/1972); Re Bharat Gears (RTP Enquiry No. 82/1975); Re Bajaj Electricals (RTP Enquiry
No. 6/1975); Re Cooper Engineering (RTP Enquiry No. 37/1976); Re Delhi Cloth & General Mills (RTP Enquiry No. 22/1976); Re
Ex-Cell-O India (RTP Enquiry No. 10/1975); Re Godrej and Boyce (RTP Enquiry No. 17/1975); Re Groz-Beckert Saboo (RTP
Enquiry No. 5/1972); Re JK Jute Mills (RTP Enquiry No. 50/1975); Re Khira Steel (RTP Enquiry No. 33/1974); Re Mahindra and
Mahindra (RTP Enquiry No. 91 & 92/1975); Re Mysore Kirlosker (RTP Enquiry No. 14A/1974); Re Shriram Pistons & Rings
(RTP Enquiry No. 41/1976); Re Tata Chemicals (RTP Enquiry No. 38/1975); Re Tata Oil Mills (RTP Enquiry No. 9/1974).
653 Telco v RRTA, AIR 1977 SC 973
: (1977) 2 SCC 55
: [1977] 2 SCR 685 :
1977 Tax LR 1789 : 1977 47 Com Cas
520 .
654 RRTA v Telco, RTP Enquiry No. 1/1974, Order dated 25 July 1975.
655 RRTA v Centron Industrial Alliance Pvt Ltd, RTP Enquiry No.
10/1974, Order dated 6 January 1976.
656 RRTA v Usha Sales Pvt Ltd, RTP Enquiry No. 8/1974, Order dated
27 November 1975.
657 RRTA v Swadeshi Mills Co Ltd, RTP Enquiry No. 19/1974, Order
dated 30 January 1976.
658 Standard Oil Co v US (Standard Stations), 337
US 293, 314 (1949).
659 FTC v Brown Shoe Co Inc, 384 US 316 (1966).
660 RRTA v Standard Mills Co Ltd, RTP Enquiry No. 5/1976, Order
dated 8 May 1978.
661 RRTA v Goetze India Ltd, RTP Enquiry No. 11/1975, Order dated
24 November 1978.
662 RRTA v Shriram Pistons & Rings Ltd, RTP Enquiry No. 41/1976,
Order dated 24 November 1978.
663 RRTA v MICO, RTP Enquiry No. 3/1976, Order dated 7 December
1978.
664 Re Usha International Ltd, RTP Enquiry No. 15/1984, Order dated
1 April 1986.
Page 246 of 258
[s 3] Anti-competitive agreements
665 Re Usha Sales Pvt Ltd, RTP Enquiry No. 8/1974, Order dated 27
November 1975.
666 Re Tea Trade Association of Cochin, RTP Enquiry No. 27/1983,
Order dated 18 December 1984.
667 Re Mohan Meakins Ltd, RTP Enquiry No. 65/1984, Order dated 11
April 1986; See also Re Bangalore Soft Drinks Pvt Ltd, RTP Enquiry No. 189/88, Order dated 4 September 1989; See also Re Mc
Dowell & Co Ltd, RTP Enquiry No. 105/1984, Order dated 17 September 1986.
668 Himtubes Ltd, RTP Enquiry No. 20 of 1986,
Order dated 2 May 1986; Re Shriram Refrigeration Industries Ltd, RTP Enquiry No. 1243/1987, Order dated 7 December 1987.
669 Re Arya Vaidya Pharmacy (Coimbatore) Ltd,
RTP Enquiry No. 88/1984, Order dated 14 May 1985.
670 PRTA v Copper Engineering Ltd,
1979 Tax LR 1607 (MRTPC).
671 Packard Motor Co v Webster Motor Car Co, 100 US App DC 161 :
R 243 F 2d 418.
672 CBS Business Equipment Corp v Underwood Corp Inc, DC NY
1964.
673 Mathews Conveyer v Palmer Bee Co, CCA-6 1943.
674 Butterick Co v FTC, CCA-2 1925.
675 Ace Tackless Corp v American Tackless Corp, NY Sup. Ct. 1957.
676 International Boxing Club v US, 358 US 242
(1959).
677 Englander Motors, Inc v Ford Motor Co, 267 F
2d 11 (6th Cir. 1959).
678 US v American Smelting and Refining Co, 182 F.
Supp. 834 (SDNY 1960).
679 Curly’s Dairy Inc v Dairy Co-op Association,
202 F. Supp. 235 (D Ore 1962).
680 Standard Fashion Co v Magrane-Houston Co,
258 US 346 (1922).
Page 247 of 258
[s 3] Anti-competitive agreements
681 FTC v Motion Picture Advertising Service Co,
344 US 392 (1953).
682 Standard Oil Co of California v US, 337 US 293
(1949).
683 US v Coalgate and Co, 250 US 300; Re Masvi Fabrics v Arvind Mills
Ltd, 1993 1 CTJ 454 [MRTPC]; Re Andhra Pradesh Paper Mills Ltd, 1995 3 CTJ 256 [MRTPC].
684 See also Restrictive Trade Practices Act, 1976 of UK.
685 Great Atlantic and Pacific Co v Cream of Wheat Co, (1915) 227 F
46.
686 Hemraj Electronics v Monika Electronics Pvt Ltd, RTP Enquiry No.
93/1985, Order dated 9 January 1986; Re Saurashtra Ballpen Pvt Ltd, RTP Enquiry No. 156/1986, Order dated 20 March 1987.
687 Re Bombay Footwear Pvt Ltd, RTP Enquiry No. 1/1984, Order dated
19 March 1985.
688 Gulshan Rai Jain & Sons v Rohtas Industries Ltd, RTP Enquiry No.
86/1984, Order dated 23 August 1984.
689 Re Colgate Palmolive (India) Ltd, RTP Enquiry 90/1986, Order
dated 16 February 1987; Re LUBI Electricals Pvt Ltd, RTP Enquiry No. 126/1984, Order dated 23 February 1985.
690 Re Usha International Ltd, RTP Enquiry No. 15/1984, Order dated 1
April 1986.
691 Re Voltas Ltd, RTP Enquiry No. 14/1987, Order dated 22 July 1987.
692 Re Tata Iron & Steel Co Ltd and Indian Tube Co Ltd, RTP Enquiry
No. 39/1984, Order dated 23 September 1987.
693 Re Jaya Shree Fibre Products Ltd, RTP Enquiry No. 1274/1987,
Order dated 29 August 1988.
694 Re Nalli Silk Traders, RTP Enquiry No. 61/1987, Order dated 25
March 1987.
695 Re Garware Plastics Polyster Ltd, RTP Enquiry No. 1272/1987,
Order dated 5 October 1987.
696 Re Jyoti Ltd, RTP Enquiry No. 1286/1987, Order dated 17 December
1987.
Page 248 of 258
[s 3] Anti-competitive agreements
697 Re Bombay Cotton Waste Merchants Association, RTP Enquiry No.
127/1984, Order dated 20 March 1986; Re Rajasthan Chemists Association, RTP Enquiry No. 9/1983, Order dated 26 July 1985;
Re All India Organisation of Chemists & Druggists and Raptakos Brett & Co Ltd, RTP Enquiry No. 14/1982, Order dated 25
September 1984; Re Travel Agents Association of India Ltd and British Airways, RTP Enquiry No. 13/1983, Order dated 9
November 1984; Re Rajasthan Fine Chemicals Stockists Association, RTP Enquiry No. 216/1988, Order dated 5 April 1989.
698 RTP Enquiry No. 37/1983, decided on 25 June 1993.
699 BP v The Commission, Case 77/77
[1978] ECR 1513 .
700 Para 6, Roundtable on Refusals to Deal, Directorate for Finance and
Enterprise Affairs, DAF/COMP/WD(2007)100. Available at: http://ec.europa.eu/competition/international/multilateral/2007_oct_
refusals_to_deal.pdf (accessed in July 2016).
701 Para 9, Id.
702 Para 17, Id.
703 Case C-418/01, IMS Health, GmbH & Co OHG v NDC Health
GmbH & Co KG, [2004] ECR I-5039 , para 49.
704 Para 18, Id.
705 PK Krishnan v Paul Madavana, Case No. 28 of 2014.
706 Also see Re Chemists & Druggists Association, 2014 Comp LR 301
(CCI), where it was observed that though Wockhardt Ltd had appointed the Informant as its institutional stockist for the company’s
Super Specialty Division (SSD) in July, 2011, mere non-dealing with the Informant for a short span of time under the coercion of
CDAG cannot be construed as an agreement between Wockhardt Ltd and their appointed stockists as per section 3(4) of the Act.
Accordingly, the Commission was of the view that the Wockhardt Ltd was not liable under the under section 3(4)(d) of the Act.
707 Id.
708 Also see Rohit Medical Store v Macleods Pharmaceutical Ltd, 2015
Comp LR 451 (CCI).
709 Shamsher Kataria (Informant) v Honda Siel Cars India Ltd, 2014
Comp LR 1 (CCI).
710 Ghanshyam Dass Vij v Bajaj Corp Ltd, Case No. 68 of 2013.
711 Financial Software and Systems Pvt Ltd v ACI Worldwide Solutions
Pvt Ltd, 2015 Comp LR 253 (CCI).
712 Magnus Graphics v Nilpeter India Pvt Ltd, 2015 Comp LR 93
(CCI).
Page 249 of 258
[s 3] Anti-competitive agreements
713 Consumers Guidance Society v Hindustan Coca Cola Beverages
Pvt Ltd and INOX Leisure Pvt Ltd, Case No. UTPE 99/2009, decided on 23 May 2011.
714 Also see Cine Prekshakula Viniyoga Darula Sangh v Hindustan
Coca Cola Beverages Pvt Ltd, Case No. RTPE 16/2009 decided on 23 May 2011.
715 Explosive Manufacturers Welfare Association v Coal India Ltd,
2012 Comp LR 525 (CCI).
716 Ajay Devgn Films v Yash Raj Films Pvt Ltd, 2013 Comp LR 903
(CompAT).
717 Eros International Media Ltd v Central Circuit Cine Association,
Indore, Film Distributors Association, Kerala, Northern India Motion Pictures Association and Motion Pictures Association and
Sunshine Pictures Pvt Ltd v Motion Pictures Association, 2012 Comp LR 20 (CCI).
718 Jindal Steel and Power Ltd (JSPL) v Steel Authority of India Ltd,
[2012] 107 CLA 278 (CCI).
719 Re Prime Mag Subscription Services Pvt Ltd v Wiley India Pvt Ltd,
Case No. 07 of 2016 [CCI], decided on 28 June 2016.
720 Re Pieco Electronics & Electricals Ltd, RTP Enquiry No. 34/1984,
order dated 5 June 1984.
721 Re Borax Morarji Ltd, RTP Enquiry No. 3/1984, order dated 5
January 1984.
722 Re Jugaldas Damodar Mody & Co, RTP Enquiry No. 42/1984,
Order dated 25 March 1985.
723 RTP Enquiry No. 1/1980, Order dated 14 June 1983.
724 Re United Breweries Ltd (UB) and Indo Lawenbrau Breweries Ltd
(ILB), RTP Enquiry No. 62/1984, Order dated 4 June 1986.
725 Re Mohan Meakin Ltd, RTP Enquiry No. 65/1984, Order dated 11
April 1986.
726 Re Sandvik Asia Ltd, RTP Enquiry No. 27/1984, Order dated 6
March 1985.
727 Re Bikaner Ice Factory, RTP Enquiry No. 34/1983, Order dated 26
December 1984.
Page 250 of 258
[s 3] Anti-competitive agreements
728 Re Rajasthan Chemists Association, RTP Enquiry No. 9/1983,
Order dated 26 July 1985.
729 Re Rohtak Public Goods Motor Union, RTP Enquiry No. 250/1983,
Order dated 25 August 1984. See also Re Bharatpur Truck Operators Union, RTP Enquiry No. 10/1982, Order dated 24 August
1984; Re Bhilwara District Truck Transport Union, RTP Enquiry No. 1/1987, Order dated 10 May 1988; Re Truck Carrier
Association, RTP Enquiry No. 108/1984, Order dated 18 May 1989.
730 Re India Truck Union, Mahwa (Rajasthan), RTP Enquiry No.
30/1983, Order dated 11 February 1989.
731 Re Bharatpur Truck Operators’ Union, RTP
Enquiry No. 10/1982, Order dated 24 August 1984.
732 Re Madras Piecegoods Merchant Association, RTP Enquiry No.
2/1983, Order dated 18 November 1983.
733 Re Bombay Piecegoods Merchants’ Mahajan (Association), RTP
Enquiry No. 23/1983, Order dated 28 March 1985.
734 Re Delhi Yarn Merchants Association (Regd), RTP Enquiry No.
30/1984, Order dated 1 April 1986.
735 Re All India Organisation of Chemists and Druggists,
(1996) 21 CLA 322 .
736 RRTA v Allied Distributors & Co, RTP Enquiry
No. 6/1972, Order dated 15 December 1975.
737 RRTA v Methodex Business Systems and West
End Trading Co, RTP Enquiry No. 82/1975, Order dated 7 May 1976.
738 RRTA v Mysore Kirloskar Ltd, [1978] 48 Comp
Cases 837, RTP Enquiry No. 14A/1974, Order dated 4 August 1975.
739 Re Rallis India Ltd, RTP Enquiry No. 15/1974,
Order dated 20 February 1976.
740 RRTA v Mahindra and Mahindra Ltd, RTP
Enquiry No. 91/1975, Order dated 14 May 1976.
741 Re Ex-Cell-O India, RTP Enquiry No. 10/1975,
Order dated 4 August 1975.
742 RRTA v Bata India Ltd, RTP Enquiry No.
3/1974, Order dated 5 May 1975; (1976) 46 Comp Cases 441.
Page 251 of 258
[s 3] Anti-competitive agreements
743 Colour-Chem, RTP Enquiry No. 18/1974, Order
dated 14 January 1975.
744 Godrej, RTP Enquiry No. 17/1975, Order dated
27 October 1975.
745 RRTA v Binny Ltd, RTP Enquiry No. 669/1987,
Order dated 29 April 1988.
746 RRTA v Ghee Merchants’ Association, RTP
Enquiry No. 23/1976, Order dated 14 February 1977.
747 RRTA v Truck Operators Union, RTP Enquiry
No. 32/1977, Order dated 20 February 1978.
748 Motor Merchants’ Association, RTP Enquiry No.
1/1979, Order dated 8 August 1979.
749 General Merchants’ Association, RTP Enquiry
No. 19/1976, Order dated 18 March 1977.
750 Association of Motion Picture Studios, RTP
Enquiry No. 17/1985, Order dated 8 April 1991.
751 Bombay Cotton Waste Merchants Association,
RTP Enquiry No. 127, 1984, Order dated 20 March 1986.
752 Retail and Dispensing Chemists Association,
Bombay, RTP Enquiry No. 10/1984. Also refer to Re All India Organisation of Chemists & Druggists, RTP Enquiry No. 14/1982,
Order dated 25 September 1984 and Re Rajasthan Chemists Association, RTP Enquiry No. 9/1983, Order dated 26 July 1985.
753 Motor Lorry Owners & Operators Union,
Pithapuram (AP) and three other Lorry Owners’ Associations, RTP Enquiry Nos. 97/1989, 98/1989, 99/1989 and 402/1988, Order
dated 3 December 1990.
754 DG (I&RJ v Keral Vyapari Vyavasayi Ekopana
Samithi, 2007 CTJ 59 (MRTPC).
755 US v Colgate & Co, 250 US 300 (1919).
756 US v Parke Davis & Co, 362 US 29 (1960).
757 Avon Products Inc v Benson, NY Sup Ct 1954.
758 Fosburgh v California & Hawaiin Sugar Refining Co, CCA-9,
1923.
Page 252 of 258
[s 3] Anti-competitive agreements
759 Richardson Start Plymouth v Chryster Motors Corp, DC Tex 1966.
760 Miller Motors v Ford Motor Co, DC NC 1957.
761 Tarr dba G&S Appliance Co v General Electric Co, DC Pa 1977.
762 Germon v Times Mirror Co, CA-9, 1975.
763 US v Mansfield Journal Co, DC Ohio 1952.
764 US v United Fruit Co, DC La 1958.
765 Lorain Journal Co v US, 342 US 143.
766 Cooper v Texaco Inc, DC Alas, 1965.
767 South End Oil Co Inc v Texaco Inc, DC I11. 1965.
768 Stokes Equipment Co v Otis Elevator Co, DC Pa
1972.
769 Newberry v Washington Post Co, DC D of C 1977.
770 US v Pittsburgh—Erie Saw Co, DC Cal 1929.
771 US v General Outdoor Advertising Co, DC I11.
1955.
772 US v Natl Linen Service Corp, DC Ga 1956.
773 US v Shubert, DC N.Y. 1956.
774 Atlantic Heel Co v Allied Heel Co, CA-1, 1960.
775 Buffalo Courier Express v Buffalo Evening News,
CA-2, 1979.
776 US v NP Benson Optical Co, DC Minn 1951.
777 Fashion Originators Guild v FTC, 312 US 457
(1941); Klor’s Broadway Hale Stores, 359 US 207 (1959).
Page 253 of 258
[s 3] Anti-competitive agreements
778 Associated Press v US, 326 US 1 (1945).
779 Fx Enterprise Solutions India Pvt Ltd v Hyundai Motor India Ltd,
(36/2014); St Antony’s Cars Pvt Ltd v Hyundai Motor India Ltd, (82/2014), Order dated 14 June 2017.
780 PWS ANDREWS AND FA FRIDAY: Fair Trade, Resale Price
Maintenance Re-examined, Macmillan, p 9.
781 Fx Enterprise Solutions India Pvt Ltd v Hyundai Motor India Ltd,
(36/2014); St Antony’s Cars Pvt Ltd v Hyundai Motor India Ltd, (82/2014), Order dated 14 June 2017.
782 Hyundai Motor India Ltd v CCI, Competition Appeal (AT) No. 06 of
2017, decided on 19 September 2018.
783 Refer to the following cases:
RRTA v Amar Dye Chem, RTP Enquiry No. 51/1975, Order dated 20 January 1976.
RRTA v Bajaj Electricals, RTP Enquiry No. 6/1975, Order dated 4 August 1975.
RRTA v Bata India, RTP Enquiry No. 3/1974, Order dated 5 May 1975.
RRTA v Bharat Gears, RTP Enquiry No. 83/1975, Order dated 14 May 1976.
RRTA v Godrej and Boyce, RTP Enquiry No. 17/1975, Order dated 27 October 1976.
RRTA v Hindusthan Lever, RTP Enquiry No. 11/1974, Order dated 27 March 1975.
RRTA v Mohindra and Mahindra, RTP Enquiry No. 91/1975, Order dated 14 May 1976.
Re NM Tripathi Pvt Ltd, RTP Enquiry No. 25/1974, Order dated 19 March 1976.
Re Tractors and Farm Equipment Ltd, RTP Enquiry No. 17/1978, Order dated 29 April 1982.
RRTA v Britannia Industries Ltd, RTP Enquiry No. 33/1979, Order dated 6 June 1983.
RRTA v Sisco Research Laboratories, RTP Enquiry No. 11/1981, Order dated 25 March 1983.
Re Nasik Dhanya Kanara Kirkal Vyapari Sangathan, (1984) 2
Comp LJ 292 (MRTPC).
Re Bengal Process Engravers Association, RTP Enquiry No. 42/1989, Order dated 13 October
1989.
Re KS Diesels Ltd, RTP Enquiry No. 174/1988, Order dated 23 October 1989.
Re Jetking Electronics Ltd, RTP Enquiry No. 1451/1987, Order dated 26 August 1987.
Re Parry and Co Ltd, RTP Enquiry No. 17/1981, Order dated 29 July 1983.
Kota Nagar Pan Vikreta Sangh v Godfrey Phillips India Ltd, RTP Enquiry No. 14/1980, Order
dated 18 November 1983.
Re Tea Trade Association of Cochin, RTP Enquiry No. 27/1983, Order dated 18 December 1984.
Bombay Goods Transport Association v Federation of Bombay Motor Transport Operators
Association, RTP Enquiry No. 7/1982, Order dated 3 September 1984.
Re Titagarh Paper Mills Co Ltd, RTP Enquiry No. 24/1983, Order dated 2 February 1984.
Re Electric Lamps Mfrs (India) Pvt Ltd, RTP Enquiry No. 12/1974, Order dated 17 September
1984.
Page 254 of 258
[s 3] Anti-competitive agreements
Re Toshiba Anand Batteries, RTP Enquiry No. 4/1984, Order dated 21 February 1985.
Re Dabur (Dr SK Burdman) Pvt Ltd, RTP Enquiry No. 80/1987 Order dated 11 April 1991.
Re Shetty’s Pharmaceuticals and Biologicals Ltd, RTP Enquiry No. 123/1988, Order dated 26
April 1991.
784 Re Meera Metal Industries, RTP Enquiry No. 19/1986, Order dated
8 May 1986.
785 RTP Enquiry No. 27/1984, Order dated 6 February 1985.
786 Re Mohan Meakins Ltd, RTP Enquiry No. 65/1984, Order dated 11
April 1986.
787 Re Infra (India) Ltd, RTP Enquiry No. 320/96, Order dated 24
August 1999.
788 Re Rallis India Ltd, (1995) 3 CTJ 151 (MRTPC).
789 Re E Merck Ltd, (1997) 62 Comp Cases 96,
790 Re Cynamida India Ltd, AIR
1987 SC 1802 : (1987) 2 SCC 720
: [1987] 2 SCR 841 :
JT 1987 (2) SC 107 .
791 Dr Miles Medical Co v John D Park, 220 US 373 (1911).
792 US v Colgate Co, 250 US 300 (1919). In that case the Supreme
Court allowed the manufacturer to unilaterally suggest the RPM for it products and refuse to deal with suppliers/distributors that do
not sell at the suggested price.
793 In 1937 and 1953, the Miller-Tydings Act, 1937 and McGuire Act,
1895 were passed, entailing state exceptions for RPM agreements.
794 The enactment of Consumer Goods Pricing Act in 1975 repealed
the legislative enactments of 1937 and 1953 (Miller-Tydings Act and McGuire Act).
795 Orson Inc v Miramax Film Corp, 79 F.3d 1358, 1368 (3d Cir.
1996).
796 Leegin Creative Leather Products, Inc v PSKS, Inc, 551 US 877.
797 Gordon v Lewiston Hospital, 423 F.3d 184 (3d Cir. 2005).
Page 255 of 258
[s 3] Anti-competitive agreements
798 Leegin Creative Leather Products, Inc, v PSKS, Inc, 127 S. Ct.
2705 (2007).
799 KENNETH G ELZINGA AND DAVID E MILLS, “Leegin and
Procompetitive Resale Price Maintenance”, (2010) 55 (2), The Antitrust Bulletin, pp 349.
800 Replaced by Resale Prices Act, 1976.
801 Pronuptia de Paris gmbh v Pronuptia de Paris Irmgard Schillgallis,
ECLI:EU:C:1986:41.
802 SA Binon & cie v SA Agence et Messageries de la presse,
ECLI:EU:C:1985:284.
803 Beguelin Import Co v Import-Export Co, ECLI:EU:C:1971:113.
804 Commission Regulation (EU) No 330/2010 of 20 April 2010 on the
application of Article 101(3) of the Treaty on the Functioning of the European Union to categories of vertical agreements and
concerted practices (OJ 2010 L 102, p 1).
805 Ghanshyam Dass Vij v Bajaj Corp Ltd, Case No. 68 of 2013,
decided on 12 October 2015.
806 M/s ESYS Information Technologies Pvt Ltd v Intel Corp (Intel Inc),
Intel Semiconductor Ltd and Intel Technology India Pvt Ltd, 2014 Comp LR 126 (CCI).
807 M/s Shubham Sanitarywares v Hindustan Sanitarywares &
Industries (HSIL) Ltd, Roca Bathroom Products Pvt Ltd and Cera Sanitary wares Ltd, 2014 Comp LR 258 (CCI).
808 Shubham Sanitarywares v CCI & HSIL Ltd, APPEAL No. 19 of
2016 [COMPAT], decided on 29 November 2016.
809 Singhania and Partners LLP v Microsoft Corp (I) Pvt Ltd and
Embee Software Pvt Ltd, 2011 Comp LR 481 (CCI).
810 Re Prime Mag Subscription Services Pvt Ltd v Wiley India Pvt Ltd,
Case No. 07 of 2016 [CCI], decided on 28 June 2016.
811 Samir Agrawal v ANI Technologies Pvt Ltd, Case No. 37 of 2018,
decided on 6 November 2018 (CCI).
812 Para 23.30, FICCI Multiplex Association of India
v United Producers/Distributors Forum, 2011 Comp LR 79 (CCI).
813 Motion Pictures Association v Reliance Big Entertainment Pvt Ltd,
[2014] 118 CLA 516 (CAT) : 2013 Comp LR 466
(CompAT).
Page 256 of 258
[s 3] Anti-competitive agreements
814 Para 39, Id.
815 FICCI Multiplex Association of India v United
Producers/Distributors Forum, 2011 Comp LR 79 (CCI).
816 Nandu Ahuja v CCI, 2014 Comp LR 209 (CompAT).
817 Para 23.13, Id.
It may be noted that section 2(f) of the Copyright Act, 1957 states that “cinematograph film”
means any work of visual recording on any medium produced through a process from which a moving image may be produced by
any means and includes a sound recording accompanying such visual recording and “cinematograph” shall be construed as
including any work produced by any process analogous to cinematography including video films. Section 13(1)(b) of the Copyright
Act, 1957 further provides that subject to the provisions of this section and the other provisions of this Act, copyright subsists in
cinematograph films. According to section 14 of the Copyright Act, 1957, “copyright” means the exclusive right subject to the
provisions of the Copyright Act, 1957 to do or authorise the doing of anything (in the case of cinematograph films) to make a copy
of the film, including a photograph of any image forming part thereof; to sell or give on hire, or offer for sale or hire, any copy of
the film, regardless of whether such copy has been sold or given on hire on earlier occasions and to communicate the film to the
public. Further section 16 of the Copyright Act, 1957 lays down that no person shall be entitled to copyright or any similar right in
any work, whether published or unpublished, otherwise than under and in accordance with the provisions of this Act or any other
law for the time being in force, but nothing in this section shall be constructed as abrogating any right or jurisdiction to restrain a
breach of trust or confidence.
818 The Gramophone Co of India Ltd v Super Cassette
Industries Ltd, ILR (2010) Supp (5) Delhi 656 : MIPR
2010 (2) 349 : 2010 (44) PTC 541 (Del).
819 Entertainment Network (India) Ltd v Super Cassette
Industries Ltd, 2008 (4) Andh LD 47 (SC).
820 US v Microsoft, [38 1998 WL 614485 (DDC Sept.
14, 1998), quoted in Hove Kamp et al., 2005, p 36].
821 Otter Tail Power Co v US, 410 US 366 (1973).
822 Radio Telefis Eireann (RTE) and Independent
Television Publications Ltd (ITP) v Commission of the European Communities, Joined cases C-241/91 P and C-242/91 P, European
Court Reports 1995 p I-00743.
823 Twentieth Century Music Corp v Aiken, 422 US
151, 156 (1975).
824 Warner Bros Entertainment Inc v Santosh VG, MIPR 2009 (2) 175.
825 Eastern Indian Motion Pictures Association,
AIR 1977 SC 1443 : (1977) 2 SCC 820
: 1977 2 SCJ 55
: 1977 Cur LJ (Tax) 350 :
1977 3 SCR 206 .
Page 257 of 258
[s 3] Anti-competitive agreements
826 Para 23.28, Id.
827 Financial Software and Systems Pvt Ltd v ACI Worldwide Solutions
Pvt Ltd, 2015 Comp LR 253 (CCI).
828 Shamsher Kataria v Honda Siel Cars India Ltd, 2014 Comp LR 1
(CCI).
829 Telefonaktiebolaget LM Ericsson (PUBL) v CCI,
W.P.(C) 464/2014 & CM Nos. 911/2014 & 915/2014, W.P.(C) 1006/2014 & CM Nos. 2037/2014 & 2040/2014.
830 Re NK Prakash Babu HMT Cinema and South
Indian Film Chamber of Commerce, Case No. 64 of 2016 [CCI], decided on 5 December 2016.
831 [2016] 131 CLA (St.) 48.
832 Kamble Sayabanna Kallappa v Lifestyle International Pvt Ltd,
Appeal No. 64/2015, decided on 7 July 2015.
833 Dhingra Mechanical Works v Commissioner of
Sales Tax, (1972) 29 STC 238 (Allahabad High
Court).
834 RG Anand v Deluxe Films,
(1978) 4 SCC 118 .
835 Bindeshwari Prasad Singh v Kali Singh,
(1977) 1 SCR 125 .
836 India TV Independent News Service Pvt Ltd v Yash
Raj Films Pvt Ltd, (2013) 53 PTC 586 (Del.).
837 Bicycles: A Report on TI Raleigh Industries Ltd,
(1981/2) HC 67.
838 Information relating to the insolvency
provisions of the Enterprise Act, 2002 may be found at www. insolvency.gov.uk/reform.htm.
839 CMA Guidance, “Towards the CMA, 15 July
2013. Available at:: https://www.gov.uk/government/organisations/competition-and-markets-authority/about (accessed in February
2019).
840 Available at:
http://www.austlii.edu.au/au/legis/cth/consol_act/caca2010265/(accessed in February 2019).
Page 258 of 258
[s 3] Anti-competitive agreements
841 TPC v Nicholas Enterprises Pty Ltd (No 2),
(1979) FLR 83 .
842 Top Performance Motors Ltd v Ira Berk (Qld) Pty
Ltd, (1975) 24 FLR 286 .
843 Anti-competitive Agreements. Available at:
https://www.accc.gov.au/business/anti-competitive-behaviour/anti-competitive-agreements (last accessed in February 2019).
844 TPC v Nicholas Enterprises Pty Ltd (No 2),
(1979) FLR 83 .
845 Top Performance Motors Ltd v Ira Berk (Qld) Pty Ltd,
(1975) 24 FLR 286 .
846 Anti-competitive Agreements. Available at:
https://www.accc.gov.au/business/anti-competitive-behaviour/anti-competitive-agreements (last accessed in February 2019).
End of Document
[s 4] Abuse of dominant position
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > CHAPTER II
PROHIBITION OF CERTAIN AGREEMENTS, ABUSE OF DOMINANT POSITION AND REGULATION
OF COMBINATIONS > Prohibition of Abuse of Dominant Position
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
CHAPTER II PROHIBITION OF CERTAIN AGREEMENTS, ABUSE OF
DOMINANT POSITION AND REGULATION OF COMBINATIONS
Prohibition of Abuse of Dominant Position
847[s 4] Abuse of dominant position
848[(1) No enterprise or group shall abuse its dominant position].
(2) There shall be an abuse of dominant position 849[under sub-section (1), if an enterprise or a group],—
(a) directly or indirectly, imposes unfair or discriminatory—
(i) condition in purchase or sale of goods or services; or
(ii) price in purchase or sale (including predatory price) of goods or service; or
Explanation.—For the purposes of this clause, the unfair or discriminatory condition in purchase or sale of
goods or services referred to in sub-section (i) and unfair or discriminatory price in purchase or sale of goods
(including predatory price) or service referred to in sub-section (ii) shall not include such discriminatory
conditions or prices which may be adopted to meet the competition; or
(b) limits or restricts—
(i) production of goods or provision of services or market therefor; or
(ii) technical or scientific development relating to goods or services to the prejudice of consumers; or
(c) indulges in practice or practices resulting in denial of market access 850[in any manner]; or
(d) makes conclusion of contracts subject to acceptance by other parties of supplementary obligations which, by
their nature or according to commercial usage, have no connection with the subject of such contracts; or
(e) uses its dominant position in one relevant market to enter into, or protect, other relevant market.
Explanation.—For the purposes of this section, the expression—
(a) “dominant position” means 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 favour;
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[s 4] Abuse of dominant position
(b) “predatory price” means the sale of goods or provision of services, at a price which is below the cost, as
may be determined by regulations, of production of the goods or provision of services, with a view to
reduce competition or eliminate the competitors.
851[(c) “group” shall have the same meaning as assigned to it in clause (b) of the Explanation to section 5].
LEGISLATIVE BACKGROUND
The provisions relating to abuse of dominant position were in the nature of Monopolistic Trade Practices (MTP) under
Monopolies and Restrictive Trade Practices Act, 1969 (MRTP Act, 1969), which originally attracted the attention of
Monopolies Inquiry Commission (1964) and later on by Sachar Committee (August, 1978). The present Competition Law
is based on the recommendation of The High Level Committee on Competition Policy and Law (May, 2000).
Monopolies and Restrictive Trade Practices Act, 1969
The two expressions, “dominant undertaking” and “monopolistic trade practice” defined in the MRTP Act, 1969, were as
follows:
[s 2] (d) “dominant undertaking” means—
[(i) * * * *]
[(ii) * * * *]
(iii) an undertaking which, by itself or along with inter-connected undertakings produces, supplies, distributes or
otherwise controls not less than one-fourth of the total goods that are produced, supplied or distributed in India or
any substantial part thereof; or
(iv) an undertaking which provides or otherwise controls not less than one-fourth of any services that are rendered in
India or any substantial part thereof:
Explanation II.—Where any goods are the subject of different forms of production, supply, distribution or control, every
reference in this Act to such goods shall be construed as reference to any of those forms of production, supply, distribution
or control, whether taken separately or together or in such groups as may be prescribed.
Explanation III.—The question as to whether any undertakings, either by itself or along with inter-connected undertakings,
produces, supplies, distributes or controls one-fourth of any goods or provides or controls one-fourth of any services may
be determined according to any of the following criteria, namely, value, cost, price, quantity or capacity of the goods or
services.
Explanation IV.—In determining, with reference to the features specified [in sub-clause (iii) or sub-clause (iv), as the case
may be, the question as to whether an undertaking is or is not a dominant undertakings, regard shall be had to—
(i) the average annual production of the goods, or the average annual value of the services provided, by the
undertaking during the relevant period; and
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[s 4] Abuse of dominant position
(ii) the figures published by such authority as the Central Government may, by notification, specify, with regard to
the total production of such goods made, or the total value of such services provided, in India or any substantial
part thereof during the relevant period.
Explanation V.—In determining the question as to whether an undertaking is or is not a dominant undertaking in relation to
any goods supplied, distributed or controlled in India, regard shall be had to the average annual quantity of such goods
supplied, distributed or controlled in India by the undertaking during the relevant period.
Explanation VI.—For the purposes of this clause, “relevant period” means the period of three calendar years immediately
preceding that calendar year which immediately precedes the calender year in which the question arises as to whether an
undertaking is or is not a dominant undertaking.
Explanation VII.—Where goods produced in India by an undertaking have been exported to a country outside India, then
the goods so exported shall not be taken into account in computing for the purposes of this clause—
(i) the total goods that are produced in India by that undertaking; or
(ii) the total goods that are produced, supplied or distributed in India or any substantial part thereof;
[s 2] (i) “monopolistic trade practice” means a trade practice which has, or is likely to have, the effect of,—
(i) maintaining the prices of goods or charges for the services at an unreasonable level by limiting, reducing or
otherwise controlling the production, supply or distribution of goods of any description or the supply of any
services or in any other manner;
(ii) unreasonably preventing or lessening competition in the production, supply or distribution of any goods or in the
supply of any services;
(iii) limiting technical development or capital investment to the common detriment or allowing the quality of any
goods produced, supplied or distributed, or any service rendered, in India to deteriorate;
(iv) increasing unreasonably,—
(a) the cost of production of any goods; or
(b) charges for the provision, or maintenance, of any services;
(v) increasing unreasonably,—
(a) the prices at which goods are, or may be, sold or resold, or the charges at which the services are, or may be,
provided; or
(b) the profits which are, or may be, derived by the production, supply or distribution (including the sale or
purchase) of any goods or by the provision of any services;
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[s 4] Abuse of dominant position
(vi) preventing or lessening competition in the production, supply or distribution of any goods or in the provision or
maintenance of any services by the adoption of unfair methods or unfair or deceptive practices;
The above definition of Monopolistic Trade Practice was based on the recommendation of Monopolies Inquiry
Commission, which observed that:
Every monopolistic practice is on the face of it a restrictive practice. Indeed, sometimes the two words are used indiscriminately.
Thus, the Report of the Committee, which was set up to study Canadian Combines Legislation, treats all combines or common
policy among several firms designed to strengthen the market position of a group of firms as monopolistic practice. In our opinion,
every practice, whether, it is by action, or understanding or agreement, formal or informal, to which persons enjoying monopoly
power resort in exercise of the same to reap the benefits of that power, and every action, understanding or agreement tending to or
calculated to preserve, increase or consolidate such power should properly be designated monopolistic practice.
Sachar Committee Report
The manner in which the monopolistic trade practices may be regulated, received the pointed attention of the Sachar
Committee. The Committee’s observations, in main, were:
Section 31 provides for investigation by the Commission into the monopolistic trade practices on a reference being made by the
Central Government which will thereafter pass an appropriate order, if the Commission makes a finding that the trade practice
operates or is likely to operate against the public interest. While section 10(b) gives power to the Commission to inquire into the
monopolistic trade practices on its own knowledge or information, there is unfortunately no provision for follow-up action in
section 31 which only postulates that the same will be inquired into by the Commission only on a reference being made by the
Central Government. The position is made more confusing by section 37(4) which provides that if the Commission finds during the
course of its inquiry into restrictive trade practices that any ‘monopolistic undertaking is indulging in restrictive trade practices’ it
will refer the matter to the Central Government “with regard to any monopolistic trade practice for such action as that Government
may take under section 31”. The reference to ‘restrictive trade practices’ is wrong as the legislative intent is to refer only
monopolistic trade practices to the Government. More important, apparently though section 10(b) empowers the Commission to
inquire on its own into any monopolistic trade practices, the procedure and machinery for follow-up action in such cases are not
spelt out in the Act. It is for this reason that objections have been raised that section 10(b) is only an enabling section and this
section can be given effect to only on the basis of a reference under section 31(1) or in pursuance of a report given by the
Commission to the Government under section 37(4). Thus, the original power of the Commission to inquire into the monopolistic
trade practices has not been practically exercised and has remained almost dormant in as much as only one inquiry into
monopolistic trade practice has so far been instituted by the Commission on its own. (As a matter of fact, since the passing of the
Act, the Government, itself has referred only three cases under section 31, viz., Colgate Palmolive (India) Pvt Ltd, Cadbury Fry
(India) Ltd and Coca Cola Export Corp to the Commission. Proceedings into these matters could not be taken because of the stay
given by the Court.) Now, an inquiry into monopolistic trade practices by the Commission is one of the major objectives of the
Act. Section 10(b) has clearly indicated the legislative intent by giving such power to the Commission. Unfortunately, follow-up of
this power has not been clearly provided in the Act. We feel that the said lacuna should be corrected. We, therefore, suggest that
section 10(b), should be amended so as to give the same independent power to the Commission to inquire and pass final orders in
the case of monopolistic trade practices as it has in the case of restrictive trade practices. This will necessarily require amendments
to be made in section 31 to provide for the exercise of the power by the Commission in the matter of passing final orders in regard
to monopolistic trade practices also. We see no reason as to why if any monopolistic trade practice is established before the
commission, it should not have the power to prohibit the same or pass any other appropriate final order with regard to it.
As we have already indicated, the Commission has powers under section 37(4) of the Act to inquire and submit its findings to the
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[s 4] Abuse of dominant position
Central Government in regard to any monopolistic trade practice being indulged in by a monopolistic undertaking which the
Commission may come across during the course of its inquiry into a restrictive trade practice. There is, however, no corresponding
power vested in the Commission in section 31 of the Act to inquire into and pass final orders on any restrictive trade practice that it
may come across during the course of its inquiry into any monopolistic trade practice. Such power is a natural corollary to the
powers vested in the Commission under section 37(4) of the Act.
In an earlier chapter, we have suggested an expanded definition of the expression ‘monopolistic trade practice’ in section 2(i) of
the Act so as to incorporate into it the provisions of section 32 which lays down the circumstances in which such a trade practice is
deemed to be prejudicial to public interest. The adoption of this revised definition, combined with our recommendation (which
follows) that all such trade practices should be prohibited will render the retention of section 32 redundant. This section should,
therefore, be deleted from the Act.
Having regard to the enlarged definition of ‘monopolistic trade practice’ proposed by us, it is our view that all monopolistic trade
practices should be prohibited and any agreement in so far as it relates to any of these practices should be made void and
unenforceable at law notwithstanding anything contained in any other law for the time being in force.
Dominance under the MRTP Act, 1969 was based on market share of not less than one-fourth of the total goods produced
or services rendered, etc.
Before the MRTP (Amendment) Act, 1984, monopolistic trade practice indulged in by an undertaking other than a
monopolistic undertaking was not treated as a monopolistic trade practice. Sachar Committee recommended that it is
possible for a non-monopolistic undertaking also to indulge in any MTP and there is no need to retain a separate concept of
monopolistic undertaking. The MRTP (Amendment) Act, 1984 omitted the definition of monopolistic undertaking and
necessary changes made in section 31.
Report of High level Committee on Competition Policy and Law (Raghavan Committee)
Provisions of section 4 of the Competition Act, 2002 are based on recommendations of the High Level Committee
(Popularly referred to as Raghavan Committee). Their recommendations as per report are as under:
Abuse of Dominance
In existing competition laws, there are two kinds of prohibitions of abuse of dominant positions:
1. The first relates to actions taken by an incumbent firm to exploit its position of dominance by charging higher
prices, restricting quantities, or, more generally, using its position to extract rents.
2. The second relates to actions by an incumbent in a dominant position to protect its position of dominance by
making it difficult for potential entrants and competitors to enter the market.
In the case of the latter, it is important to distinguish between growth due to product superiority and/or efficiency leading
to a larger market share and the wilful restriction of acquisition and maintenance of market power. Generally firms that are
in a legally acquired position of dominance are allowed to exploit this position by charging higher prices and making
extra-normal profits. So long as there are no barriers to entry, the market will generally be contestable. Thus, although
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[s 4] Abuse of dominant position
dominance is a necessary condition for establishing violation of this provision, it is by no means a sufficient condition. For
an act to be in contravention of this provision, it is imperative that abuse of a dominant position be established.
Dominance.—
The Committee recommends that “Dominance” and “Dominant Undertaking” may be appropriately defined in the
Competition Law in terms of “the position of strength enjoyed by an undertaking which enables it to operate independently
of competitive pressure in the relevant market and also to appreciably affect the relevant market, competitors and
consumers by its actions”. The definition should also be in terms of “substantial impact on the market including creating
barriers to new entrants”. This definition may perhaps appear to be somewhat ambiguous and to be capable of different
interpretations by different judicial authorities. But then, this ambiguity has a justification having regard to the fact that
even a firm with a low market share of just 20% with the remaining 80% diffusely held by a large number of competitors
may be in a position to abuse its dominance, while a firm with say 60% market share with the remaining 40% held by a
competitor may not be in a position to abuse its dominance because of the key rivalry in the market. Specifying a threshold
or an arithmetical figure for defining dominance may either allow real offenders to escape (like in the first example above)
or result in unnecessary litigation (like in the second example above). Hence, in a dynamic changing economic
environment, a static arithmetical figure to define “dominance” will be an aberration. With this suggested broad definition,
the Authorities/Tribunals concerned would have the freedom to fix errant undertakings and encourage competitive market
practices even if there is a large player around. Abuse of dominance is key for the Competition Policy/Law.
It is important that the law be designed in such a way that its provisions on this count only take effect, if dominance is
clearly established. As already stated, there is no single objective market-share criteria that can be blindly used as a test of
dominance. The law should ensure that only when dominance is clearly established, can abuse of dominance be alleged.
Any ambiguity on this count could endanger large efficient firms. The more recently legislated laws of the Central and
Eastern European countries are based on the relevant Articles of the Treaty of Rome and are more interventionist in design.
They rely exclusively on market shares to establish dominance. The U.S. law requires the additional criterion of entry
barriers.
Before assessing whether an undertaking is dominant, it is important, as in the case of horizontal agreement, to determine
what the relevant market is. There are two dimensions to this—the product market and the geographical market. On the
demand side, the relevant product market includes all such substitutes that the consumer would switch to, if the price of the
product relevant to the investigation were to increase. From the supply side, this would include all producers who could,
with their existing facilities, switch to the production of such substitute goods. The geographical boundaries of the relevant
market can be similarly defined. Geographic dimension involves identification of the geographical area within which
competition takes place. Relevant geographic markets could be local, national, international or occasionally even global,
depending upon the facts in each case. Some factors relevant to geographic dimension are consumption and shipment
patterns, transportation costs, perishability and existence of barriers to the shipment of products between adjoining
geographic areas. For example, in view of the high transportation costs in cement, the relevant geographical market may be
the region close to the manufacturing facility.
To be considered dominant, a firm must be in a position of such economic strength that it can behave, to an appreciable
extent, independently of its competitors and customers. Therefore, to assess dominance it is important to consider the
constraints that an enterprise faces on its ability to act independently. The current market share is a necessary but
insufficient pre-requisite for dominance. In spite of having a large market share a firm may be constrained by the threat of
competition from potential entrants and by the purchasing power of its own customers. Entry barriers could result from
absolute advantages such as patents (legal) and access and access to certain inputs. These could also result from strategic
first-mover advantages. High sunk cost could make markets incontestable. Exclusionary practices could increase the
strategic advantages of the first mover. Lastly, factors other than existing or potential competition need to be considered.
For example, strong purchasing power—if customers are powerful relative to the enterprise—can also constrain the
behaviour of the firm.
Abuse.—
In general, actions that are considered anti-competitive and illegal in the context of agreements are also illegal, if
Page 7 of 148
[s 4] Abuse of dominant position
undertaken by a dominant firm. These would include charging or paying unfair prices, restriction of quantities, markets
and technical development. Discriminatory behaviour and any other exercise of market power leading to the prevention,
restriction or distortion of competition would obviously be included. We probably need to clarify that there is a fine
distinction between defending one’s market position or market share, which is perfectly legal and legitimate and may
involve certain level of aggressive competitive behaviour and exclusionary and anti-competitive behaviour. An illustrative
list of these has already been provided in the previous section and is not repeated here. However, as noted above, a greater
threat to competition is from the action(s) of dominant firms that are inimical to future competition. These would include
the following:
§ Predatory Pricing/disciplining existing rivals
§ Actions that make it difficult for potential entrants to enter (exclusionary/anti-competitive behaviour)
Key questions for adjudication on abuse of dominance could include:
How will the practice harm competition?
Will it deter or prevent entry?
Will it reduce incentives of the firm and its rivals to compete aggressively?
Will it provide the dominant firm with an additional capacity to raise prices?
Will it prevent investments in research and innovation?
Do consumers benefit from lower prices and/or greater product and service availability?
Predatory pricing.—
Predatory pricing is defined as the situation where a firm with market power prices below cost so as to drive competitors
out of the market and, in this way, acquire or maintain a position of dominance. Here again there is a danger of confusing
pro-competitive pricing with predatory behaviour. In reality, predation is only established after the fact, i.e., once the rival
has left the market and the predator has acquired a monopoly position in the market. However, any law to prevent is
meaningful, only if it takes effect before the fact, i.e., before the competitor has left the market.
An important issue, therefore, is the identification of predatory pricing. According to theory, a price below marginal cost is
indicative of predatory pricing. A practical alternative is to use the average variable cost as a substitute since marginal
costs are not generally available. In some cases, as in a judgement of the US Supreme Court (UTAH PIE case), a price below
the full cost was taken to be predatory. The problem is that if this were the only criterion, any firm making losses could
potentially be accused of predation. In fact the case is only made, once the firm has recouped its first period losses and in
the second period, when it functions as a monopolist. If it does not, then there may well be a gain in social welfare through
the lower prices charged by the firm. It is in this context that an alternative two-stage test is suggested where, in the first
instance, the market structure should be analysed and it must be established that the market is one where predation can be
successful, before a comparison of price and cost is made at the second stage. Thus if it is clear ex ante that the market is
one where predation cannot be successful as a result of new entry, re-entry, foreign competition or some other factor, then
even if a firm is charging “predatory” prices in current period, it is not a cause for concern.
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In view of the difficulties, the Committee feels that the issue of predatory pricing is best left to the Competition Law
Tribunal (Competition Commission of India) itself which can draw its own regulations and also revise it from time to time
based on its own experience.
Distinguishing predatory behaviour from legitimate competition is difficult. The distinction between low prices which
result from predatory behaviour and low prices which result from legitimate competitive behaviour is often very thin and
not easily ascertainable.
Indeed, it is sometimes argued that predatory behaviour is a necessary concomitant of competition. To quote Professor
Jagdish Bhagwati from his book A Stream of Windows:
Clyde Prestowitz, former US trade negotiator and an ally of Mr. Fallows in the angst over Japan is doubly wrong when the asserts
that “Japan plays a different game” and that therefore the United States cannot have a beneficial trade with it under a rules-based
multilateral trading regime............. What then about the view, often ascribed to Chalmers Johnson professor at the University of
California at San Diego, that Japanese Companies believe in “predatory” competition?
The notion that American Companies, by contrast, compete in a benign fashion is faintly romantic and fully foolish. What the
Cambridge economist Joan Robinson used to call the “animal spirits” of capitalist entrepreneurs surely are manifest in both
countries. The successful always appear more predatory. This was exactly the stereotype of British entrepreneurs during the
nineteenth century and of the ugly American in the 1950s and 1960s. With success, one get one’s share of envy and resentment
(JAGDISH BHAGWATI, 1999).
However, a sizeable section of the members of the Committee felt that predatory pricing is a pernicious practice warranting
it being identified under the “per se illegal category”.
After considerable discussions, it was agreed that having regard to the practical difficulties involved in its categorisation
and interpretation, it is better to treat predatory pricing as an abuse, only if it is unambiguously established and indulged in
by a dominant undertaking.
Exclusionary practices.—
One class of exclusionary practices involves vertical agreements. Such arrangements are common business practices and
infringe the law only, if they reduce competition. These have been discussed in the previous section. In this section only
those vertical restraints that have the potential for foreclosing competition by hindering entry into the market are discussed.
These could result from the following types of arrangements.
§ Exclusive Dealing and Purchasing. Under such arrangements a retailer agrees to purchase or deal in the goods of
only one manufacturer making entry difficult for new manufacturers.
§ Exclusive/Selective Distribution. Under such arrangements, the manufacturer supplies one or a selected number
of retailers making entry difficult for other retailers.
§ Tie-in Sales, Full-line Forcing, Quantity Forcing and Fidelity Discounts. Tie-in sales make the purchase of one
product conditional on the sale of another (tied) product. Full-line forcing is an extreme form of the former where
the retailer must stock the full range of the manufacturer’s products. Under quantity, forcing the retailer is
required to purchase a minimum quantity of a certain product. Under fidelity discounts, the retailer receives
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discounts based on the proportion of its sales coming from the manufacturer. Such arrangements could make
entry difficult for both manufacturers and retailers.
§ Slotting Fees.—This requires the manufacturer to pay a fee to get its product stocked. Such arrangements could
make entry difficult for manufacturers.
§ Non-linear Pricing and Franchise Fees.—These involve payment of non-cost-related discounts to existing
retailers or franchise fees, thus raising the sunk cost of entry and making entry difficult for other retailers.
To attract the provision of the law, in all these cases it needs to be established whether the restraints create a barrier to new
entry or force existing competitors out of the market. They key issue is the extent to which these arrangements foreclose
the market to manufacturers (inter-brand rivalry) or retailers (intra-brand rivalry) and the extent to which these raise rivals’
costs and/or dampen existing competition. The costs of such arrangements need to be weighed against the benefits. For
example, some of these restraints help to overcome the free-rider problem and allow for the exploitation of scale
economies in retailing.
Thus, in the context of abuse of dominance, the efficacy of the law hinges on the following questions:
§ Do the provisions of the law make it too easy for a firm to be classified as dominant?
§ Does the law protect potential entrants from exclusionary behaviour by the incumbent firm(s)?
§ Does the law seek to control the prices charged by dominant firms? § Is there a suitable test for predatory
pricing?
§ Is there scope for applying the “rule of reason” to exclusionary vertical arrangements?
Competition Act, 2002
This section was enacted by the Competition Act, 2002. Notes on clauses of the Bill, stated thus:
Notes on clauses.—This clause prohibits abuse of dominant position by any enterprise. Such abuse of dominant position, inter alia,
includes imposition, either directly or indirectly, of unfair or discriminatory purchase or selling prices or conditions, including
predatory prices of goods or service, limiting production or restricting of goods or provision of service, indulging in practices
resulting in denial of market access, making the conclusion of contracts subject to acceptance by other parties of supplementary
obligations and using dominant position in one market to enter into or protect other market. [Clause 4 of the Competition Bill,
2001].
Competition (Amendment) Act, 2007
Notes on clauses.—This clause seeks to amend section 4 of the Competition Act, 2002 relating to abuse of dominant position.
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The existing provisions of section 4, applies only to an enterprise and not to the group of enterprises. Clause (c) of sub-section (2)
of section 4 states that there shall be an abuse of dominant position if an enterprise indulges in practice or practices resulting in
denial of market access.
It is proposed to amend the provisions of section 4 so as to make it applicable to group of enterprises also. It is also proposed to
amend clause (c) of sub-section (2) of said section so as to insert the words “in any manner”. This amendment is clarificatory in
nature. [Clause 3 of the Competition (Amendment) Bill, 2007].
SCOPE OF THE SECTION
No enterprise or group, as defined in Explanation (b) to section 5, shall abuse its dominant position in the situations
specified in sub-section (2). The “dominant position” means the position of strength enjoyed by an enterprise, which
enables it to operate independently of competitive pressure in the relevant market and also to appreciably affect the
relevant market, competitors and consumers by its actions. As per the Competition Bill, 2001, Explanation (a) covered the
position of strength enjoyed “in India or outside India”. However during consideration and passing of the Bill, the words
“or outside India” were deleted.
There are as many as 12 factors listed in sub-section (4) to section 19 on the touchstone of which the market position of an
enterprises is to be tested during the course of enquiry by the Commission to evaluate whether or not it constitutes
dominant position, and eventually the 13th factor leaves it to be tested “on any other factor which the Commission may
consider relevant for the inquiry.”
“ENTERPRISE”
The term “enterprise” has been defined to mean (i) a person or (ii) a department of the Government who or which is or has
been engaged in any activity relating to—
(a) production, storage, supply, distribution or acquisition or control of goods or articles, or
(b) provision of services of any kind;
(c) investment,
(d) business of acquiring, holding, underwriting or dealing with shares, debentures or other securities of any body
corporate the aforesaid activities may be carried out either directly or indirectly e.g., through one of its units or
divisions or subsidiaries, whether located at the place where enterprise located or elsewhere.
Person has been defined in a comprehensive manner in clause (l) of section 2 of the Competition Act, 2002 and includes an
individual; a Hindu undivided family; a company; a firm; an association of persons or a body of individuals, whether
incorporated or not, in India or outside India; or any corporation established by or under any Central, State or Provincial
Act or a Government company as defined in section 617 of the Companies Act, 1956 (now, section 2(45) of the Companies
Act, 2013); any body corporate incorporated by or under the laws of a country outside India; a co-operative society
registered under any law relating to cooperative societies; a local authority; and every artificial juridical person, not falling
within any of the preceding categories.
A Department of the Government is also an enterprise. However, sovereign functions of the Government including its
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activities carried on by the departments of the Central Government dealing with atomic energy, currency, defence or space
shall be outside the scope of the definition of “enterprise”.
“Any activity relating to”
The expression “relating to” is synonymous with the expressions “pertaining to” or “concerning with”. “Pertaining to”
does not mean forming part of.852 This expression does not admit of any restrictive meaning.853 The expression is of
widest import.854
“Engagement in Business”
The expression “business” connotes some real and organised course of an activity with a definite object and purpose.855 It
includes anything which occupies time, attention and labour of a person for the purpose of earning profit.856
“Activity”
In view of Explanation (a), activity covers the activities relating to any profession or occupation. Thus, the scope of
definition extends to all professions and occupations having any business activity.
Whether, an entity is an “enterprise” is the starting point for determining application of the Competition Act, 2002. This
determination is based on the functions carried out by the entity, irrespective of ownership or profit marking motive.857
For more discussion on “Enterprise”, see Notes under section 2(h)
Necessary to be “Enterprise” to be examined under section 4
It is only the conduct of an “enterprise” or a group of enterprise as defined in section 5 of the Competition Act, 2002, which
is subject matter of examination as is apparent from wordings of section 4(1). Once an association is not an “enterprise” in
terms of section 2(h), its conduct cannot be examined under section 4.858 A perusal of the definition would reveal that for
an entity to fall within the definition of the term enterprise it must be engaged in any activity which is relatable to the
economic and commercial activities specified therein. The exclusion part of the definition relates to any activity of the
Government relatable to its sovereign functions and activities carried on by the departments of the Central Government
dealing with Atomic Energy, Currency, Defence and Space.859 Therefore, unless the petitioner’s aforesaid activity can be
classified as, it cannot avoid being classified as an “enterprise” under section2(h) of the Act.860
relatable to the sovereign functions of the Government including all activities carried on by the departments of the Central
Government dealing with atomic energy, currency, defence & space
A bare reading of this provision clearly shows that Government departments which are engaged in the stated activities are
covered by the definition of enterprise. It is further seen that the definition does not cover only those institutions connected
with activities relating to goods but also covers activities relating to provision of services of “any kind” which gives a very
broad connotation to the gamut of activities that can be covered in the definition of services. As far as exclusion is
concerned, there are two possibilities. Firstly, the activities of the Government relating to sovereign functions of the
Government are excluded. Further, this is a matter of situation specific facts as to what activities can be considered as
relatable to the sovereign functions. The second exclusion is categoric, i.e. activities covered by the departments of Central
Government dealing with atomic energy, currency, defence and space.861
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In Bangalore Water Supply and Sewage Board v A Rajappa,862 a seven judge Bench of the Supreme Court while
interpreting the term “Industry” as defined in section 2(j) of the Industrial Disputes Act, 1947 exempted only sovereign
functions from the ambit of industrial law. The Court held that:
only primary, inescapable, inalienable and non-delegable functions of a Government should qualify for exemption within the
meaning of sovereign functions of the Government and welfare, commercial and economic activities are not covered within the
meaning of sovereign function.
In PWD Employees Union v State of Gujarat,863 it was observed that the welfare activities or economic adventure
undertaken by the Government or statutory bodies do not qualify for being treated as sovereign functions. In N Nagendra
Rao & Co v State of AP,864 the Supreme Court held that the State is immune only in cases where its officers perform
primary or inalienable functions such as defense of the country, administration of justice, maintenance of law and order.865
For further discussion, see Definitions, section 2(h).866
“GROUP”
Section 4 of the Competition Act, 2002 provides that no enterprise or “Group” shall abuse its dominant position. The
definition of Group is restricted to entities under the same management or control. Therefore, under the existing
framework of section 4, collection of Enterprises that do not form part of the Group will not be considered under section 4.
Collective Dominance, therefore is not recognised in India.
Section 5(b) [Explanation] - “group” means two or more enterprises which, directly or indirectly, are in a position to —(i) exercise
26% or more of the voting rights in the other enterprise; or (ii) appoint more than 50% of the members of the board of directors in
the other enterprise; or (iii) control the management or affairs of the other enterprise;
The term “group” generally implies a degree of connection, cooperation, or common interest among its members. In terms
of the provisions of the Competition Act, 2002, if an enterprise is in a position to participate, directly or indirectly, in the
management or affairs of the enterprise or exercises 26% or more voting rights in other enterprise, both the enterprises
would constitute a group. The expression “controlled directly or indirectly” is to be read as envisaging both de jure and de
facto control. The former being a legal control which means the right of control attached to ownership of such number of
shares as entities the holder to elect a majority of the board of directors. De jure control may be achieved directly, by
ownership of shares or indirectly, through ownership of shares of one or more corporations, which themselves hold shares
of the enterprise in question. Further, for the purpose of section 4, two enterprises would normally be considered part of a
group if they are operating in the same relevant market.
For instance, in Arshiya Rail Infrastructure Ltd (ARIL),867 the DG in its report concluded that the MoR and CONCOR
constituted a group (MoR Group) in the relevant market. The Commission, however, noted that MoR did not have either
de jure or de facto control over CONCOR. The Commission laid out reasons to disregard DG’s conclusion and the same
are listed below:
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1. The shares in CONCOR are owned by the Government of India and no decisional control is exercised by the
Government in day-to-day affairs of the CONCOR since it is managed by its board of directors.
2. The appointment of the board of directors of CONCOR is done by the Government only on the basis of
recommendations of the PESB, a body which works independently. Therefore, the ultimate decision in this regard
rests with the Cabinet Committee on Appointment and not with the MoR.
3. The independence of the Board of Directors of CONCOR has been preserved since the directives to the Board
can only be issued by the Government albeit on the specific approval of the minister in-charge and in practice, it
is an extremely rare occurrence.
4. The number of Board of Directors of CONCOR connected with MoR is only two which is less than 50%. The
Board has total 10 directors, as on date. Five are full time directors appointed on the recommendations of the
PESB and three are part time independent directors and only two are connected with the MoR.
RELEVANT MARKET IN INDIA
The pivotal inquiry in a case of alleged abuse of dominance is whether, the opposite party is in a dominant position in the
relevant market. As per explanation to section 4 of the Competition Act, 2002, dominant position means a position of
strength, enjoyed by an enterprise in the relevant market. Therefore, assessment of dominance is to be preceded by
delineation of the correct relevant market in which dominance of the enterprise under consideration is to be assessed.868
Dominant position has to be determined by the Commission in the relevant geographic market and relevant product market
in India on the touchstone of factors specified in sub-section (6) and (7) of section 19.
For further discussion, see Definitions, section 2(r).
ASSESSING DOMINANT POSITION
Unless an enterprise enjoys a dominant position in the relevant market, its conduct cannot be subjected to any inquiry to
ascertain abuse. The exercise by the Commission while inquiring into allegation of contravention of section 4 is sequential,
as described below:
(i) Firstly, determine as to whether the entity whose conduct is alleged to be abusive is an “enterprise” or “group” as
defined respectively in section 2(h) and Explanation (b) to section 5 of the Competition Act, 2002.
(ii) Secondly, determine the “relevant market” as defined under section 2(r) of the Act with due regard to the factors
listed in sections 19(6) and 19(7) of the Act.
(iii) Thirdly, determine whether the enterprise/group enjoys a dominant position in the relevant market based on
consideration of the factors listed in section 19(4) of the Act.
(iv) Fourthly, only if an enterprise or group is dominant, analyze its conduct to ascertain whether it has abused its
dominant position through behavior described in section 4(2) of the Act.
If an enterprise does not enjoy dominant position in the relevant market, its conduct cannot to be tested with
reference to the proscriptions listed in section 4(2) of the Act. Section 4, in fact decrees a set of standards of
conduct for dominant firms which may not be applicable for non-dominant firms. There is a rationale for such
an approach because what may be commercially justified behaviour for non-dominant firms, may become
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exploitative or exclusionary in the case of dominant firms. Consumers can desert a non-dominant enterprise,
if its practices of discriminatory prices, resale price maintenance, tie-in sales etc. are considered harmful by
them. For example, if a non-dominant enterprise selling goods indulges in exploitative conduct, consumers
have an option to go to other suppliers. A non-dominant firm cannot operate independently of competitive
forces and, therefore, the market is expected to punish such behaviour. Competition regulator does not
intervene, in commercial decisions of such enterprises, while similar practices by a dominant enterprise would
invite action under section 4 of the Act. The credible threat of availability of alternative suppliers and power
of the consumer to exercise choice, operate as forces to deter exploitation. In the case of a dominant
enterprise, the consumers cannot check exploitation, as their choices are constrained and hence the
competition law statutorily specifically prohibits abuse of dominant position.869
As per the Competition Act, 2002 [Explanation (a) to section 4(2)], dominant position means a position of strength,
enjoyed by an enterprise in the relevant market to: (a) operate independently of competitive forces or (b) affect its
competitors or consumers or the relevant market in its favour.
“a position of strength”
The Explanation (a) to section 4 very clearly defines “dominant position” as “a position of strength”. This strength should
enable the enterprise to “operate independently of competitive forces prevailing in the relevant market” or to “affect its
competitors or consumers or the relevant market in its favour.” The evaluation of this “strength” is to be done not merely
on the basis of the market share of the enterprise in the relevant market but on the basis of a host of stipulated factors such
as size and importance of competitors, economic power of the enterprise, entry barriers etc. as mentioned in section 19(4)
of the Act. This wide spectrum of factors provided in the section indicates that the Commission is required to take a very
holistic and pragmatic approach while inquiring whether an enterprise enjoys a dominant position before arriving at a
conclusion based upon such inquiry. It is conceivable that the “dominant position” may be acquired due to several factors
even outside the “relevant market” but, “for the purpose of” section 4, this “position of strength” must give the enterprise
ability to operate independently of competitive forces” in the relevant market or ability to “affect its competitors or
consumers or the relevant market in its favour”. Thus, strengths derived from even other markets, if they give an enterprise
such abilities as mentioned above, would render the enterprise as “dominant” in the relevant market.870
“operate independently of competitive forces prevailing in the relevant market”
The preamble of the Competition Act, 2002 and section 18 mandates the Commission to “protect the interest of
consumers” and it is important to ensure that consumers’ surplus is not adversely impacted. The competitive forces that a
seller may face are challenges from existing competitors, entry of newer competitors, or from newer rival products.
Healthy competition among the sellers promotes productive and allocative efficiencies and optimises consumer surplus.
However, there is cause for concern when the measures taken by a seller include conscious actions intended to create entry
barriers, drive out existing rivals, control output or price, impose restrictive and supplementary obligations on captive
consumers, impose unfair or discriminatory conditions or prices to the disadvantage of consumers or rival firms or
leverage strengths in one market to enter or protect another market. To avoid the challenges from newer, more efficient and
innovative products, sellers may also take measures to thwart technical or scientific development in a market. Such
conduct is considered anti-competitive and comes under the scanner of competition laws. Therefore, for the purpose of
Explanation (a)(i) to section 4, it is important to examine the ability of an enterprise to operate independently of
competitive forces generated by its rivals.871
“affect its competitors or consumers or the relevant market in its favour”
Another aspect of dominance given in Explanation (a)(ii) to section 4 relates to the ability of an enterprise to “affect its
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competitors or consumers or the relevant market in its favour.” For example, an enterprise may have the capability to not
only operate independently of competitive forces but may actually be in a position to influence its competitors or
consumers in the relevant market in its favour. In a sense, this is a higher degree of strength where an enterprise may be
freely able to adopt price or non-price strategy to overcome downward pressures on its profit from its competitors, or to
capture or bind consumers or to create a market environment that would deter newer competition, both in terms of
competing enterprises or rival products.
“or”
R PRASAD, in his dissenting note in Pravahan Mohanty v HDFC Bank Ltd and Card Services Division of the HDFC
Bank,872 held that the use of the word “or” in the provision implies that the provision contemplates four distinct types of
dominant position:
Type A – [Dominant position qua competitors] The position of strength enables the enterprise to completely insulate itself against
competitive forces in the relevant market;
Type B – [Dominant position qua relevant market] The position of strength enables the enterprise to affect the relevant market in
its favour;
Type C – [Dominant position qua competitors] The position of strength enables the enterprise to accept its competitors in its
favour;
Type D – [Dominant position qua consumers] The position of strength enables the enterprise to affect consumers in its favour.
Raghavan Committee Report on Dominance
The Committee recommends that “Dominance” and “Dominant Undertaking” may be appropriately defined in the
Competition Law in terms of “the position of strength enjoyed by an undertaking which enables it to operate independently
of competitive pressure in the relevant market and also to appreciably affect the relevant market, competitors and
consumers by its actions”. The definition should also be in terms of “substantial impact on the market including creating
barriers to new entrants”. This definition may perhaps appear to be somewhat ambiguous and to be capable of different
interpretations by different judicial authorities. But then, this ambiguity has a justification having regard to the fact that
even a firm with a low market share of just 20% with the remaining 80% diffusedly held by a large number of competitors
may be in a position to abuse its dominance, while a firm with say 60% market share with the remaining 40% held by a
competitor may not be in a position to abuse its dominance because of the key rivalry in the market. Specifying a threshold
or an arithmetical figure for defining dominance may either allow real offenders to escape (like in the first example above)
or result in unnecessary litigation (like in the second example above). Hence, in a dynamic changing economic
environment, a static arithmetical figure to define “dominance” will be an aberration. With this suggested broad definition,
the Authorities/Tribunals concerned would have the freedom to fix errant undertakings and encourage competitive market
practices even if there is a large player around. Abuse of dominance is key to the Competition Policy/Law. [4.4.5–
Dominance]
Principle of Dominance
The underlying principle in the definition of a dominant position is linked to the concept of market power which allows an
enterprise to act independently of competitive constraints. Such independence enables an enterprise to manipulate the
relevant market in its favour to the economic detriment of its competitors and consumers.873 Unlike in some international
jurisdictions, in India, the evaluation of the strength has to be ascertained not merely on the basis of the market share of the
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enterprise but on the basis of a host of factors such as size and importance of competitors, economic power of the
enterprise, commercial advantages over its competitors, dependence of consumers, entry barriers including barriers such as
regulatory barriers, financial risk, high capital cost of entry, marketing entry barriers, technical entry barriers, economies of
scale, high cost of substitutable goods or service for consumers; countervailing buying power; market structure and size of
market; social obligations and social costs; relative advantage, by way of contribution to the economic development, by the
enterprise enjoying a dominant position, vertical integration etc., as mentioned in section 19(4) of the Competition Act,
2002.874 Mere high market share is not an indication of dominance.875
This wide spectrum of factors provided in the section indicates that the Commission is required to take a very holistic and
pragmatic approach while inquiring whether an enterprise enjoys a dominant position. Thus, “the position of strength” is
not some objective attribute that can be measured along a prescribed mathematical index or equation. Rather, it has to be a
rational consideration of relevant facts, holistic interpretation of (at times) seemingly unconnected statistics or information
or information and application of several aspects of the Indian economy.876
What has to be seen is whether a particular player in a relevant market has clear comparative advantages in terms of financial
resources, technical capabilities, brand value, historical legacy etc. to be able to do things which would affect its competitors who,
in turn, would be unable to do or would find it extremely difficult to do so on a sustained basis. The reason is that such an
enterprise can force its competitors into taking a certain position in the market which would make the market and consumers
respond or react in a certain manner which is beneficial to the dominant enterprise but detrimental to the competitors.877
The definition of “dominant position” under section 4(2) of the Competition Act, 2002, is similar to that under Article 102
of the Treaty of the European Union (TFEU). A dominant position under Article 102, as developed by the jurisprudence of
EU Courts878 is a position
to prevent effective competition being maintained on the relevant market by affording it the power to behave to an appreciable
extent independently of its competitors, its customers and ultimately of the consumers.879
Further, to understand the meaning of what amounts to the “capacity of an enterprise to operate independently of
competitive forces”, reliance may be placed upon the E.U. Guidance on the Commission’s Enforcement Priorities in
Applying Article 82 EC Treaty (102 TFEU) to Abusive Exclusionary Conduct by Dominant Undertakings (the “Guidance”)
[(2009/C 45/02)] which provides:
This notion of independence is related to the degree of competitive constraint exerted on the undertaking in question. Dominance
entails that these competitive constraints are not sufficiently effective and hence that the undertaking in question enjoys substantial
market power over a period of time. This means that the undertaking’s decisions are largely insensitive to the actions and reactions
of competitors, customers and, ultimately, consumers.
While analysing dominance under the provisions of the Competition Act, 2002, an important factor that needs to be taken
into consideration is the time-period during which the contravention of the provisions of the Act is alleged. The
Commission therefore noted in one of the real estate cases880 that even though DLF was found to be in a dominant
position in other cases,881 it cannot be simply declared dominant for a time phase that is different from the previously
decided cases. If in the existing market dynamics it is shown that new payers have entered the market and that in such a
changed market scenario during the relevant period no individual player has the ability to influence the conditions of
competition in the relevant market, DLF cannot be held to be dominant.
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More than one dominant player in the market
There are various provisions in the Competition Act, 2002 that signify the intent of the legislature that there cannot be more
than one dominant enterprise in the relevant market at a particular point of time.882 In fact, the existence of two strong
players in the market is indicative of competition between them, unless they have agreed not to compete, which also can be
only be looked into under ection 3 of the Act, not ection 4.883
Common ownership
In the matter related to online taxi services,884 it was argued that the opposite parties, Ola and Uber, are dominant as a
group owing to common investors having substantial stakes in these companies. It was alleged that Ola and Uber have
certain common investors viz. SoftBank, Tiger Global Management LLC, Sequoia Capital and Didi Chuxing who have
control over both Ola and Uber and it is possible that they may end up serving as a platform to facilitate collusive
arrangement or exchange of sensitive information between the two competitors. The Commission did not reject the line of
argument per se and observed:
46. Such overlapping ownership interests in competing firms may imply a reduction in firms’ incentives to compete, compared to a
situation in which competing firms are controlled by separate sets of investors, and may thus give rise to antitrust risks. Two types
of theories of harm may arise due to common ownership. These include unilateral effects where common ownership may
incentivize unilateral price increases (or reductions in quality) that may be unprofitable for a firm, but beneficial for its investors if
they also hold shares in its competitor(s). The other is coordinated effects where it may create additional incentives to investors to
facilitate collusion and earn collusive profits. Though there is currently no evidence that these anti-competitive harms have played
out in the market, the Commission will not hesitate in taking appropriate action under the Act if an inquiry reveals compelling
evidence of the anticompetitive effects of common ownership by institutional investors in concentrated industries. It is currently an
unanswered empirical question whether common ownership leads to company managerial behaviour that violates fiduciary
obligations and harms competition. The empirical studies have mainly concentrated on common owners like hedge funds, mutual
funds etc. which have passive investments across competing companies. However, in the present case, Softbank has emerged to be
an “active investor” which has a significant stake in both Ola and Uber. Although it is a minority shareholder in both the firms, it
has the ability to exercise material influence over them. Softbank is known for bias towards those start-ups which have the
potential to dominate an industry. In the absence of powerful undiversified shareholders who would benefit from increased
competition, influence of minority shareholders like Softbank who have made lumpy investment in competing firms and may have
more voice in management needs to be monitored carefully.885
The Commission in light of “theoretical ambiguities” noted that the effect of common ownership has to be established
through market enquiry to determine at what level common ownership can pose a competitive risk. The Commission held
that there was no evidence furnished which could suggest that the opposite parties had any role in decision for common
investment in these two companies or that competition between them was compromised because of the common
investments. In the absence of any discernible effect, the opposite parties were not held to be influenced in their decisions
on operations by the minority number of directors of parties having common shareholding in them or that that they reached
an agreement as envisaged under section 3 of the Competition Act, 2002.
Factors to determine Dominant Position:
Section 19(4) – The Commission shall, while inquiring whether an enterprise enjoys a dominant position or not under
section 4, have due regard to all or any of the following factors, namely—
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(a) Market share of the enterprise: Market shares provide information about a firm’s past market success in relation
to its competitors. It provides useful first indications of the market structure and of the competitive importance of
various undertakings active on the market. In most markets, an enterprise’s absolute market share is an important
factor that allows for initial indications about its market power. However, market shares alone do not determine
whether an undertaking is dominant or has substantial market power. Therefore, these initial indications are put in
perspective by other factors when making an overall assessment of the market power of the firm under
investigation.886
Instance where large market shares were considered as indicative of dominance
In ESYS v Intel,887 the DG, based on data on market share, revenue, prices, volume of output, etc. reported that in “the
markets of microprocessors for desktops PCs in India”; “the market of microprocessors of mobile/portable PCs such as
laptops, notebooks, net-books, etc. in India”; and “the market of microprocessors for servers in India”; Intel enjoyed a
dominant position. It was noted that in the said three relevant markets the cumulative market share of Intel in each year
during 2009/11 was more than 80% and it was more than 85% during first three quarters of 2012. Further, based on IDC
report data it was found by the DG that the market share of Intel during 2009/2011 in India in desktop PCs segment was
around 85%, in portable PCs segment it was around 95% and in servers segment it was around 92%. Also, the combined
market share of Intel in all three segments during the same period was around 85%. The Commission also noted that Intel
was consistently enjoying very high market share in each of the three markets. The Commission held that in light of strong
entry barriers in the relevant markets on account of significant intellectual property rights of Intel combined with the
market share, Intel acquired a position of dominance.
In Atos Worldline case,888 the Commission concurred with DGs finding that M/s Verifone India Sales Pvt Ltd was in a
dominant position in relevant market of POS Terminals in India. Based on RBI data it had been reported by DG that the
market share of M/s Verifone India Sales Pvt Ltd in terms of sale of POS Terminals to banks was estimated at around 70%
vis-à-vis 30% of Ingenico. Further, it was reported that in terms of size, resources and economic power M/s Verifone India
Sales Pvt Ltd was in an advantageous position compared to Ingenico. The Commission, considering the data and the fact
that presence of M/s Verifone India Sales Pvt Ltd was across country and that its capabilities in terms of hardware and
software and number of machines presently in use made consumers dependent on it, held M/s Verifone India Sales Pvt Ltd
to be in a dominant position in the said relevant market.
High market share for a long period of time
Market shares are a useful first indication of the importance of each firm on the market in comparison to the others. The
higher the market share, and the longer the period of time over which it is held, the more likely it is to be a preliminary
indication of dominance. When assessing market share, it often may be helpful to consider market data over several past
years. Significant and frequent shifts in market shares may be indicative of healthy competition. In contrast, if a firm has
consistently maintained or increased its market share over a substantial period of time, this tends to reinforce the inference
of dominance from a high market share, for example by suggesting that entry is difficult. However, a consistently high
market share may also be the result of a firm’s ability to stay ahead of its rivals through constant innovation and
development of products that appeal to customers.889 For example, in HNG Glass v St Gobain,890 the Commission
observed that St Gobain’s market shares were reducing over time and competitors’ market shares had increased and new
entry had taken place. This was held to indicate that St Gobain did not hold a dominant position. The Commission while
inquiring whether an enterprise enjoys a dominant position or not under section 4 of the Competition Act, 2002, should
give due regard to all or any of the following factors viz. market share of the enterprise; size and importance of the
competitors; economic power of the enterprise including commercial advantages over competitors; vertical integration of
the enterprises or sale or service network of such enterprises; dependence of consumers on the enterprise; monopoly or
dominant position whether acquired as a result of any statute or by virtue of being a Government company or a public
sector undertaking or otherwise; entry barriers including barriers such as regulatory barriers, financial risk, high capital
cost of entry, marketing entry barriers, technical entry barriers, economies of scale, high cost of substitutable goods or
service for consumers; countervailing buying power.
Market share test consists of two steps: (i) calculate the market share of the alleged dominant company; (ii) compare the
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alleged dominant company’s position with competitors’ market shares. If a significant gap exists, this element is
considered as indication of the existence of a dominant position. High market shares relative to those of competitors which
are held for some time can provide a first indication of dominance. Market share has to be considered in context to
competitors in the relevant market.
For instance, in the case concerning price discrimination within the meaning of Article 102, TFEU (British Airways Plc v
Commission [ECJ),891 British Airways (BA), which was the largest British airline, was found to hold a dominant position
in the purchasing of travel agency services, with a market share of about 40% compared to the five nearest competitors,
which held shares ranging from about 3 to 7%.892 It was held that the rival airlines were not in a position to grant travel
agents the same advantages as BA, since they were not capable of attaining in the United Kingdom a level of revenue
capable of constituting a sufficiently broad financial base to allow them effectively to establish a reward scheme similar to
BA’s.
Similarly, the Competition Commission in India in HT Media Ltd,893 held T-Series to be dominant given its relatively
high market share in comparison to that of competitors. It was noted that as compared to its main competitor companies
YRF, Sony and SaReGaMa, the market share of Super Cassettes was over 50% for the last 3 years. Also, even if the
market share in terms of playout of music was considered, songs of the opposite party played on all the FM channels
across the country and varied from between 25% and 60% from one station to other, which was maintained over the last
few years.
Conversely, where an enterprise has a large market share, it may be constrained by that of its other large competitors. For
example, in Saint Gobain Glass India Ltd v Gujarat Gas Co Ltd,894 though Gujarat Gas’ market share was 47%–52%, it
was found to be constrained by the no. 2 and no. 3 players in the market. The Commission noted that in the relevant market
(the market for the supply of non-APM natural gas to industrial customers) in the geographic areas of Bharuch (excluding
Vagra Taluka) and Surat (excluding Hazira) districts of Gujarat, players such as GSPC, IOCL, GAIL, etc. were operating
and competing with the Gujarat Gas. It held that with the presence of large companies including some of the “Navratna”
public sector undertakings of the Government of India in the relevant market, Gujarat Gas, merely on the basis of
questionable higher market share (based on the volume and value of sales of gas), could not be considered to be in a
dominant position in the relevant market.
In another case, the DG in the HNG Float Glass Ltd,895 case had reported that SGGIL had the largest network of
processors and distributors chain along with a brand image with largest acceptance with the customers, which enabled it to
operate independently in the market and is also able to influence the consumers in its favour. The DG report further
highlighted that during FY 2009/12, SGGIL had produced and sold the maximum quantity of clear float glass indicating
dominance in the relevant market. The Commission did not agree with the conclusion of the DG that SGGIL enjoyed a
dominant position in the relevant market. As per the Commission, the market share of the competitors in terms of annual
production and quantity sold of the relevant product indicated a highly competitive market. Also, the fixed assets of AIS
were higher than the fixed assets of SGGIL. The Commission further noted that market shares for established players like
SGGIL, AIS eroded after entry of a new market player, Sezal which indicated the competitive constraints exercised by a
new firm on the old experienced firms. Entry of three new firms namely Gold Plus, HNG and Sezal in a very short span of
time was held to point to the ease of entry in the market.
While assessing dominance in the “the market for instant messaging services using consumer communication apps through
smartphones in India”, the Commission in the Whatsapp case896 noted that in India a number of other players such as
Apple with iMessage, BlackBerry with BBM, Samsung with ChatON, Google with Google Hangouts and Microsoft with
Skype were providing communication apps and were also active in the provisions of smartphone hardware and operating
systems. Besides, many other consumer communication apps providers such as Hike, Viber, WeChat and Snapchat were
also active in market. However, the Commission also noted that 97% of the smartphone users in India use a
communication app daily and the most popular was “WhatsApp”, which was installed on 96% of devices and had more
daily active users than any other communication app in India. It was noted, further, that 56% of the internet users in India
used “WhatsApp” which made it top the list of instant messaging apps. Also, 64% of mobile users in India used
“WhatsApp” which was the largest as compared to any other mobile messaging app usage. Based on these factual data, the
Commission was of the opinion that the opposite party was in a dominant position in the relevant market.
High market share does not imply abuse
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The fact that an enterprise had 100% market share did not imply that it had contravened the provisions of section 4 of the
Competition Act, 2002. For instance, the Commission recently gave a clean chit to TAM Media Research Pvt Ltd,897
(holding 100% share of the relevant market) in the case filed against it for abuse of dominance in relation to the procedure
adopted for measurement of Television Rating Points (TRPs) or Television Viewership Ratings (TVR) since 2011. The
DG Report considered that the market was for provision of services for audience measurement for channels and programs
on television in India and observed that audience measurement of other media platforms like print, radio, and internet were
not substitutes of audience measurement of TV. Within this market, the DG Report considered that TAM enjoyed 100%
market share (monopoly) since 2011, and thus, enjoyed a dominant position. The DG held the TAM to be abusing its
dominant position on the following counts:
(a) The exclusion of semi-urban and rural areas from the sample size resulted in imposition of unfair and
discriminatory conditions on those broadcasters who had channels and programs focused to rural market as they
were not duly compensated by the advertisers in violation of sections 4(2)(a)(i) and 4(2)(c) of the Competition
Act, 2002 (Act);
(b) The conduct of TAM in charging higher annual subscription fees from advertisers and media agencies to provide
TV viewership data amounted to imposition of discriminatory price in violation of the provisions of section
4(2)(a)(ii) of the Competition Act, 2002; (c) Since, TAM had been the only user of such measurement meters in
India, this had led to the limiting of technology and scientific development for manufacturing of such meters
amounting to infringement of section 4(2)(b)(ii) of the Act.
The Commission in agreement with the findings of DG held that TAM which held 100% market share in the
relevant market since August 2011 and the fact that the customers of TAM, broadcaster and advertisers, were
dependent on services provided enabled it to attain a dominant position in the relevant market. However, the
Commission did not find TAM to have abused its dominant position on the following grounds:
(i) As regards non-coverage of viewership in rural areas in measurement of audience viewership, TAM had
clearly disclosed to its stakeholders and had also stated on its website as well in every subscription contract
entered between TAM and the advertisers/broadcasters that its data was largely representative of viewing
preferences of the urban and semi-urban population. Hence, no unfair and discriminatory condition was
imposed on any subscriber as all the subscribers to TAM’s data were well aware of the methodology used by
the TAM and its limitations.
(ii) As regards allegation of discriminatory pricing by TAM, the Commission noted that the broadcaster and
advertising agencies/advertisers were not similarly placed subscribers of TAM. Since they were differently
situated, the allegation that charging higher subscription rate on broadcasters was discriminatory did not hold
any ground.
(b) Size and resources of the enterprise
The superior financial strength in the market coupled with superior resources as in this case is an important
indicator of dominance of an enterprise.
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In the matter of Ghaziabad Development Authority (GDA)898, the Commission found GDA as dominant in the “the
market for provision of services for development and sale of low cost residential flats under affordable housing schemes
for the economically weaker sections in the district of Ghaziabad” on the basis of high market share when compared to two
other competitors, number of flats offered by each, dependency of consumers of EWS flats in Ghaziabad on GDA,
consumers’ preference for the EWS flats launched by GDA as compared to others and statutory authority of GDA to
control, manage and develop housing societies, infrastructure etc. in Ghaziabad.
(c) Size and importance of the competitors
Importance and size of the competitors in the market being volume sold, range of products, network and
acceptance with the customers of the competitors in relation to the company concerned are other factors for
determining dominance in the market.
In the Flipkart case,899 the Commission did not hold Flipkart as dominant in the market for online market platform
services. The Commission noted the presence of other players in the market like Amazon, Paytm Mall, SnapDeal,
Shopclues etc. with Amazon being a close competitor with a valuation of around $700 billion and a global presence. The
Commission further noted the presence of low entry barriers in the market for the new entrants in the market.
(d) Economic power of the enterprise including commercial advantages over competitors
Commercial advantage may be in the form of size, capacity, technological superiority etc. The Tribunal900
in the National Stock Exchange (NSE) case901 held that NSE was rightly held to be dominant even when the
relevant market was construed narrowly to be the market only for currency derivatives. The Tribunal
considered various factors like market share (71.43% of the equity segment; 99% of the F & O segment; over
90% in the WDM segment and a market share of 47–48% as against 52–53% of MCX SX in the CD
segment), sound financial position, weak position of competitors, greater number of buyers and sellers to
NSE, benefits of network effects resulting from higher liquidity and lower transaction costs. It was noted that
MCX-SX or the other players did not have the advantage of having the complete domination over the other
segments like securities, WDM and F & O. The Tribunal rejected the argument advanced that NSE could not
affect its competitors in its favour, as BSE, MCX-SX and USE successfully entered the CD segment and
were able to sustain zero pricing for periods longer than NSE. The Tribunal held that it would be wrong to
say that MCX-SX successfully entered the market and were able to sustain themselves. It was because MCX-
SX has suffered huge losses when the transaction fees was not being charged at all by NSE and consequently
by themselves.
(e) Vertical integration of the enterprises or sale or service network of such enterprises
Vertical integration may be potentially pro-competitive and potentially anti-competitive. It may be anti-
competitive if brought about by a refusal to deal with independent distributors, or a price or supply
“squeeze” (squeezing of the margin available to an unintegrated customer who competes with the supplier).
It is supposed that, through vertical integration, a firm can create captive distribution channels. This will
foreclose the rival firms from the market, represented by the captive distribution network. This may be a
problem, if it threatens competition in general.
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For instance, in the Belaire Owners’ Association case,902 DLF’s, level of vertical integration in comparison
to its competitors was taken as a factor to attribute dominant position. It was noted that DLF had developed
more than 22 urban colonies spread across over 32 cities and had about 300 subsidiaries which constituted a
redoubtable sales network and provided incomparable services of integrated township in Gurgaon with a
wide array of commercial properties, retail space, recreation facilities etc. Again, in the MCX case. National
Stock Exchange of India’s high degree of vertical integration ranging from trading platform, front-end
information technology, data information products and index services etc. was held to contribute to
dominance of NSE.903
(f) Dependence of consumers on the enterprise
The principle of free competition lies at the heart of the Commission’s mandate under the Preamble and
section 18 of the Competition Act, 2002. The aim of the Commission is the institution of a system of
undistorted competition which is commensurate to the promotion of the interests of the consumer. A
dominant enterprise can impede free competition in the relevant market over which it enjoys a position of
strength. One such way of distorting free competition is the refusal by a dominant enterprise to meet, in full
or in part, orders placed with it by its customers who are dependent upon the products or services of the
dominant enterprise.
The ECJ in Commercial Solvents v Commission,904 held that an undertaking which has a dominant position
in the market of raw materials and which, with the object of reserving such raw material for manufacturing
its own derivatives, refuses to supply a customer, which is itself a manufacturer of these derivatives, and
therefore risks eliminating all competition on the part of this customer, is abusing its dominant position. It
was noted that a dominant enterprise, which competes in both the upstream and downstream markets and is
in effective control of a product/service in the upstream market which is required by the enterprises in the
downstream market to effectively carry out their economic activity, may exclude a competitor from such
downstream market, by refusing to supply such product/services to enterprises in the downstream market.
The Commission, similarly in the DLF case,905 took dependence of customers on DLF as an important
factor to attribute dominance. The Commission noted that due to the high level of vertical integration of
services in the integrated township of DLF in Gurgaon, there was very high dependence of consumers on
DLF in that area and a person working in one of the offices situated within the DLF township or doing
business from one of the commercial properties was bound to be heavily inclined to buying a residential
property in the DLF township and would have more than normal resistance to shifting to another area outside
township.906
The Commission in the case of Vidharbha Industries Association v MSEB Holding Co Ltd907 observed that
Maharashtra State Electricity Distribution Co Ltd had 100% market share in the relevant market (market for
the ‘provision of services for distribution of electricity in the State of Maharashtra except Mumbai’) because
it was the sole licensee to distribute electricity in the State of Maharashtra except Mumbai and as such, there
was no competitor of Maharashtra State Electricity Distribution Co Ltd in the relevant market. Thus, the
consumers were completely dependent on distribution company for electricity supply. It was also observed,
that, Maharashtra State Electricity Distribution Co Ltd was a public sector undertaking (PSU) of the
Government of Maharashtra and was a distribution licensee in terms of section 2(17) of the Electricity Act,
2003. Thus, Maharashtra State Electricity Distribution Co Ltd acquired its monopoly position in the relevant
market being a PSU and the sole licensee for distribution of electricity in the relevant geographic market.
Therefore, Maharashtra State Electricity Distribution Co Ltd was held to enjoy a position of strength
unchallenged by any competitor in the relevant market which enabled it to operate independently of
competitive forces and affect its consumers and relevant market in its favour. Thus, the Commission held
that Maharashtra State Electricity Distribution Co Ltd was in a dominant position in the relevant market.
(g) Monopoly or dominant position whether acquired as a result of any statute or by virtue of being a Government
company or a public sector undertaking or otherwise
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Raghavan Committee Report: State Monopolies Policy
State monopolies are not only a reality but are regarded by many countries as inevitable instruments of public
growth and public interest. While ideology may have played some role in spurring the growth of State
monopolies, much of this increase can be attributed to the pragmatic response to the prevailing milieu, which
is frequently an outcome of the historical past in different countries. A view shared by many is that State
monopolies and public enterprises in India have played a vital role in its developing process, have engineered
growth in critical core areas and have performed social obligations. Nonetheless, there is also a recognition,
consequent on the adverse financial results and the resultant pumping of budgetary oxygen from the
Government treasury to those enterprises, that there is not only scope for their reformation but also for
structural and operational improvements. This recognition has led to the trend towards privatising some of
them. This is also a part of the general process of liberalisation and deregulation. Privatisation involves not
only divestiture and sale of Government assets but also a gradual decline in the interventionist role played by
them.
State monopolies may lead to certain harmful effects, anti-thetical to the scheme of a modern Competition
Policy. They are: (A) The dominant power enjoyed by State monopolies may be abused because of
Government patronage and support. (B) Because of the said patronage, State monopolies may adopt policies
which tantamount to restrictive trade practices. For example, preference to public sector units in tenders and
bids, insistence on using public sector services for reimbursement from Government (travelling allowance for
Government officials). (C) State monopolies suffer from the schemes of administered prices, contrary to the
spirit of Competition Policy.
It is well accepted that competition is a key to improving the performance of State monopolies and public
enterprises. The oft-noted inefficiency of Government enterprises stems from their isolation from effective
competition (Aharoni, Yair, 1986). In the interest of the consumers, State monopolies and public enterprises
need to be competitive in the production and service delivery. While Government should reserve the right to
grant statutory monopoly status to select public enterprises in the broad national interest, it is desirable for the
Government to always keep in mind that de-regulation of statutory monopolies and privatisation are likely to
engender competition that would be healthy for the market and consumers.908
Instances of cases against State-owned Enterprises:
In Coal India and Mahanadi Coalfields Ltd (MCL),909 the Commission concluded that opposite parties resorted to unfair
and discriminatory conduct by inserting different clauses in FSAs with PSU power producers vis-a-vis new private
producers in contravention of the provisions of section 4(2)(a)(i) of the Competition Act, 2002 for imposing
unfair/discriminatory conditions and indulging in unfair/discriminatory conduct in the matter of supply of non-coking coal
to power producers. Cease and desist order was passed. FSA clauses found to be in contravention were ordered to be
modified.910
In Arshiya Rail Infrastructure Ltd (ARIL),911 Kribhco Rail Infrastructure Ltd (KRIL), a co-operative undertaking, and
Arshiya Rail Infrastructure Ltd (ARIL), a logistics infrastructure company, had moved the Commission alleging that the
Indian Railways (IR) and CONCOR worked as a group entity and indulged in exclusionary price discrimination and unfair
trade practices. This, they alleged, amounted to an abuse of their dominant position. Informant operators alleged that by
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Concession Agreement, PCTOs were obligated to get maintenance of private railway rakes only from MoR on payment
basis which amounted to a supplementary obligation restricting competition in the derivative aftermarket. The Commission
defined the “relevant market” in the present case as “the transportation of containers within the boundaries of the country”
and consequently the Commission concluded that road and rail were substitutable for container freight operations. The
Commission on the basis of data held that since, container freight was largely carried on roads, railways was not dominant
in container freight. The Commission also rejected the argument on mandatory maintenance clause on grounds of safety
concerns and observed that even if maintenance was a different market, the maintenance of rakes by railways was dictated
by considerations of safety and security which was entirely the responsibility of the railways.
State tenders and contracts
The Tribunal in the Rajat Verma case912 was faced with the question as to whether State Public Works Department tender
allocation activity would come under the purview of the Competition Act, 2002. The Tribunal was of the view that the
department would come under the definition of “enterprise”. The Tribunal noted that roads and bridges etc. constructed by
the Haryana Public Works Department or HSRDC either by themselves or through private agencies are used by the general
public in more than one ways including travelling and carriage of goods. Therefore, the Public Works Department was a
provider of service to the public and from that perspective the Tribunal held that it would fall within the ambit of term
“enterprise”. The Public Works Department by inviting tenders for award of contract for construction of roads, bridges etc.
was held to be interfacing with the wide market of road and bridge construction services in the State. The Tribunal, thus,
delineated the relevant market as the “market for procurement of services for construction of roads and bridges etc. through
tendering”. With respect to the dominance of State Department, it was evident from the observations of COMPAT that the
position of State PWD and CPWD was unique in the field of construction of roads, bridges etc. and no public or private
enterprise can compete with them in terms of scope and scale of the activities. Therefore, even though the services of
laboratories such as that offered by the Informant can be procured by the contractors, at the behest of their customers or by
themselves, for checking the quality of construction materials used for construction works from other projects than those
tendered by MPPWD or CPWD, the volume of procurement by MPPWD and CPWD would remain unmatched. Thus,
MPPWD and CPWD were held to be dominant in their respective relevant market merely by virtue of their unique
position.
(h) Entry barriers including barriers such as regulatory barriers, financial risk, high capital cost of entry,
marketing entry barriers, technical entry barriers, economies of scale, high cost of substitutable goods or
service for consumers
For example, in TAM Media Research Pvt Ltd,913 it was observed that for television audience measurement
there were certain technical expertise requirements to handle the complexities involved in capturing the
viewership and also it required high cost as “People Meters” needed to be installed across the country. These
two factors therefore, acted as entry barrier for new entrants in the market.914
Similarly, in Sunil Bansal v Jaiprakash Associates Ltd,915 it was noted that a large number of options were
available to the consumers who could actually choose from a wide range of projects launched/developed by
several builders and developers in the geographic region. Further, rapid growth of real estate sector together
with the presence of several big, small and medium sized companies in the market was demonstrative of the
absence of entry barriers/foreclosure of competition.
(i) Countervailing buying power
Competitive constraints may be exerted not only by actual or potential competitors but also by customers.
Even an undertaking with a high market share may not be able to act to an appreciable extent independently
of customers with sufficient bargaining strength. The expression “countervailing buying power” means that
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an undertaking even with a high market share, is not able to act the way it wants because the customers have
sufficient bargaining strength: the customer can switch to competing suppliers or promote new entry or
vertically integrate into the upstream market, and thus deter an enterprise with significant market share from
specifying exploitive conditions.916 Such countervailing buying power may result from the customers size or
their commercial significance for the dominant undertaking, and their ability to switch quickly to competing
suppliers, to promote new entry or to vertically integrate, and to credibly threaten to do so. If countervailing
power is of a sufficient magnitude, it may deter or defeat an attempt by the undertaking to profitably increase
prices. Buyer power may not, however, be considered a sufficiently effective constraint if it only ensures that
a particular or limited segment of customers is shielded from the market power of the dominant
undertaking.917
For instance in the MCX case,918 it was noted that the users of the stock exchange services were individually
too small to countervail buying power.
In the Schott Glass case,919 the Commission found that in downstream relevant market, leaving aside the JV
Schott Kaisha, the other Converters lacked the requisite size or financial strength to exercise countervailing
buying power of the Appellant. It was observed that all the Converters were dependent upon the Appellant
for their supplies and could not exert disciplinary force on Appellant. On this basis, the Commission held the
Appellant to be a dominant player in the upstream relevant market, while it held JV Schott Kaisha to be
dominant in the downstream relevant market.
In the GKB Hi Tech Lenses,920 case, GKB was noted to have 50% share in the downstream market of Plastic
Photochromic Lenses. Moreover, GKB through its distribution network and retail shops had direct access to
eyeglass wearers which gave it the ability to influence consumers’ choice. It was thus concluded there was a
substantial countervailing buying power in the downstream market.921
In the Radio taxi services case,922 it was alleged that the opposite party (ANI Technologies Pvt Ltd – “Ola”)
abused its dominant position in the relevant market by offering heavy discounts to the passengers and
incentives to the cab drivers associated with them amounting to predatory pricing under section 4(2)(a)(ii) of
the Competition Act, 2002. It was contended that this affected other competitors in the market who cannot
offer similar discounts/incentives to commuters/drivers. The Commission, based on the high market share of
opposite party, was prima facie of the view that Ola held a dominant position in the market for “Radio Taxi
services in the city of Bengaluru” and that it was abusing its dominant position and directed the DG to
conduct joint investigation into the matter. The Commission, however, based on collective consideration of
the facts that the competitive process in the relevant market was unfolding, market was growing rapidly,
effective entry had taken place thereby leading to gradual decline in opposite party’s market share, entry
barriers were not insurmountable, there existed countervailing market forces that constrained the behavior of
opposite party and the nature of competition in dynamic, innovation-driven markets, the Commission was of
the opposite party’s dominance in the relevant market remained unsubstantiated. The Commission took into
consideration the following factors to reach this specific conclusion:
• empirical studies showed that the new additions to the market, i.e. the new taxis and the new riders, mainly
opted for opposite party instead of the incumbents. Thus, the erosion in their market shares was more
attributable to the expansion of consumer base in the market than them being deprived of the demand which
they were serving before.
• Opposite party did not have an edge over all its competitors in terms of the size and resources.
• In a two/multi-sided market, network effects had a role to play in determining the competition dynamics and
relative position of strength held by market players. However, the Commission noted that despite having the
largest network, the network effect of opposite party was not strong enough to deter entry and rapid
expansion of Uber.
• The relevant market was growing rapidly and effective entry had taken place, leading to gradual decline in
opposite party’s market share and therefore, entry barriers were not impossible.
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(j) Market structure and size of market
Nature of the market is an important factor to consider dominance.
(k) Social obligations and social costs
(l) Relative advantage, by way of the contribution to the economic development, by the enterprise enjoying a
dominant position having or likely to have an appreciable adverse effect on competition
(m) Any other factor which the Commission may consider relevant for the inquiry
Section 19(4)(m) talks of any other factor which the Commission may consider relevant for the inquiry.
Therefore, while determining abuse of dominance the Commission is entitled to consider any other factor
which shows that the enterprise is in a dominant position to affect its competitors or consumers or the
relevant market in its favour.
Buyers’ power and definition of market
Generally, as per the scheme laid down by the Competition Act, 2002, the dominant player (or enterprise) is the seller of
goods/services who/which adversely affects the buying side i.e. the consumer. In some cases, the allegation is made with
respect to the buyer who is dominant and which affects the competition on selling side of the market by excluding some of
the players. In the case of buyer power, it is the procurement markets, not the supply markets, which have to be defined.
The demand-side oriented market concept is applied inversely in this context. From the suppliers point of view the market
definition is thus based on their ability to switch to alternative sales opportunities. The definition focuses on the products
the supplier is offering or would be able to offer without any significant problems.923
CASES UNDER COMPETITION ACT, 2002
In the case of Atos Worldline India Pvt Ltd,924 Verifone was regarded as the dominant player in the market for POS
Terminals (relevant product market). It was observed that there were mainly two players in the relevant market at that time
with Verifone India Sales Pvt Ltd having a market share of approx. 70% and Ingenico having a market share of 43% in
terms of the number sale of POS Terminals. It was noted that Verifone was in advantageous position compared to its
competitors in the relevant market in terms of size, resources and economic strength and due to its presence across the
country, capabilities in terms of hardware and software and the number of machines presently in use made the consumers
dependent on it. Also, the existence of entry barriers in the relevant market and vertical integration of upstream POS
Terminal market with the downstream service provider market enabled Verifone to act independent of its competitors. The
Commission relied on RBI data to note that during the period of investigation banks procured about 5.8 lakhs of POS
Terminals which belong to the Verifone or its acquired companies and procured only 50,000 POS Terminals from
Ingenico.925
Dominance of Google 926 was established in the relevant market on the
following grounds:
a. Google continues to have a substantial market share despite the presence of other long-standing competitors like
Yahoo! and Microsoft Bing or new players like Ask.
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b. While high technology services demand continuous innovation, given barriers to entry and Google’s scale
advantage, it is unlikely that a large number of users would switch to a competing search engine in the short or
medium term.
c. Google has an insurmountable scale advantage and given that only market participants in the online general web
search market can compete in the search advertising market, the barriers in the online general web search market
also effectively restrict entry into the search advertising market.
d. vertical integration and critical position of Google as a platform for users, publishers and advertisers.
e. Due to dependence of its customers, as well as the disparity in size and resources between the average user and
advertiser in comparison to Google, none of them has countervailing buyer power.
f. Consistent high market share suggests that it has got other advantages, besides technical advantages, which
insulate its market position.
Statutory Monopoly
In GHCL Ltd v Coal India Ltd (CIL),927 CIL was held to be a natural monopoly in the relevant market for the
production and supply of non-coking coal to thermal power producers including captive power plants in India.
The Commission noted that following the enactment of the Nationalisation Acts, the coal industry was reorganised into
two major public sector companies viz. CIL which owned and managed all the old Government-owned mines of National
Coal Development Corporation (NCDC) and the nationalised private mines and SCCL which was in existence under the
ownership and management of Andhra Pradesh State Government at the time of the nationalisation. Thus, in view of the
provisions of the Coal Mines (Nationalisation) Act, 1973, production and distribution of coal was in the hands of the
Central Government. As a result, CIL and its subsidiary companies had been vested with monopolistic power for
production and distribution of coal in India. In view of the statutory and NCDP scheme, the coal companies had acquired a
dominant position in relation to production and supply of coal. The dominant position of CIL was acquired as a result of
the policy of Government of India by creating a public sector undertaking in the name of CIL and vesting the ownership of
the private mines in it. Thus, CIL and its subsidiaries faced no competitive pressure in the market and there was no
challenge at the horizontal level against the market power of the Opposite Parties.928
In the IRCTC case,929 it was noted that Ministry of Railways (MoR) through the Railway Board administered Indian
Railways, which owns and operates India’s rail network/transport. The Railway Board exercises all the powers of
Government of India in relation to railways. The market is solely catered by passenger segment of Indian Railways within
the geographic territory of India thereby placing the Indian Railways in dominant position enabling it to operate
independently of competitive forces and affect its consumers and relevant market in its favour.
Due to the statutory and regulatory framework, the dominance of Indian Railways in this market was held to be undisputable.930
The DG, while assessing the dominance, examined the various factors enumerated in section 19(4) of the Act and found IR
and IRCTC, as a “group”, to be in a dominant position. The Commission noted that Indian Railways being the main entity
undertaking railway transportation of passengers in the country commanded the largest market share and thereby had a
monopoly over railway operations in India with no competitors present in the relevant market despite there being no legal
barriers to entry of competitors and only subject to policy decision being taken by the government in this regard. IRCTC,
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incorporated as an extended arm of IR is a wholly owned subsidiary of MoR. The Commission, therefore in light of
undisputed facts was in agreement with the DG and held that MoR (IR) and IRCTC formed “group” for the purposes of the
Competition Act, 2002 and also dominant in the relevant market.
Absence of Competition may lead to finding of dominance
In the case of Shivam Enterprises,931 in the relevant market of
provision of services of goods transportation by trucks in and around Kiratpur area in Punjab,
it was noted that Kiratpur Sahib Truck Operators Co-operative Transport Society Ltd was the only enterprise that operated
within the Kiratpur region and there were no other competitors. The consumers were totally dependent on the Society for
transportation of goods from Kiratpur area as other non-members truck owners were not allowed to operate within the area
thereby enabling the Society to operate independently of competitive forces prevailing in the relevant market and affect its
competitors/consumers/the relevant market in its favour. Accordingly, Kiratpur Sahib Truck Operators Co-operative
Transport Society Ltd was held to be dominant in the relevant market.
Technical Specificity and product differentiation may contribute to dominance
In the case of Shamsher Kataria v Honda Siel Cars India Ltd932 the Commission defined the relevant product market
consisting of two separate relevant markets; the primary market one for manufacture and sale of cars and the other for the
sale of spare parts and repair services. The Commission made the following observations in the relevant market:
1. Each Original Equipment Manufacturer (OEM) controlled almost the entire production and supply of spare parts
which can be used in repairing and maintaining the various brands of cars manufactured by each OEM.
2. Due to the technical specificity of the cars manufactured by each OEM, the spare parts of a particular brand of an
automobile could not be used to repair and maintain cars manufactured by another OEM. Due to the high degree
of technical specificity even intra-brand substitutability of spare parts was greatly diminished.
3. The OEMs, by denying the independent repairers and multi brand service providers, access to required spare
parts and tools/manuals to complete such repair work, had ensured that the independent repairers were not able to
effectively compete with the authorised dealers of the OEMs in the secondary market for repairs and services.
4. Each OEM has entered into a network of contracts, pursuant to which, they had become the sole supplier of their
own brand of spare parts and diagnostic tools in the aftermarket.
Each OEM through a network of contracts had restricted the supply of genuine spare parts of models of
automobiles manufactured by the OEMs to the aftermarket.
5. Each OEM was a monopolist player and owned a 100% share of the market share of the spare parts and repair
services aftermarket for their own brand of cars. The customers of the automobiles manufactured by each OEM
had to use the spare parts compatible to such brand of automobile and could not substitute such spare parts with
those supplied by other OEMs in the Indian automobile aftermarket. Therefore, the OEMs faced no constraints
from the existing supplies from actual competitors.
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6. Given the limited interchangeability of spare parts between the automobiles manufactured by various OEMs,
each consumer of an OEM was completely dependent upon such enterprise.
7. Each OEM had created barriers in the entry of independent repairers to the aftermarket of the repairs and
maintenance of its brand of cars. The independent repairers required the spare parts and diagnostic tools to
effectively compete with the authorised dealers in the aftermarket of repairs and maintenance for each brand of
cars manufactured by the OEMs.
In light of the above factors, the Commission was of the view that each OEM was a 100% dominant entity in the
aftermarket for its genuine spare parts and diagnostic tools and correspondingly in the aftermarket for the repair services its
brand of automobiles.
In the DLF case,933 relevant product market was defined in three different ways. In Pankaj Aggarwal v DLF Gurgaon
Home Developers Pvt Ltd,934; Sachin Aggarwal v DLF Gurgaon Home Developers Pvt Ltd,935 the DG delineated the
relevant product market as the market for
services provided by the developers/builders for construction of high end buildings” which was narrowed down in the
Supplementary DG report for “services provided by developers/builders in respect of residential building apartments ranging
between 40 to 60 lakhs to the customers.
In Anil Kumar v DLF Gurgaon Home Developers Pvt Ltd,936 the DG found the relevant product market to be the market
for provision of services for development of residential apartments’. DG however, held DLF to be dominant in all three
sub-segmented relevant product markets within the geographic region of Gurgaon.937 The Commission noted that the
strength which DLF possessed in residential real estate segment in the geographic region of Gurgaon was incomparable.
Further, the conclusions of the DG based on CMIE database in respect of about 118 real estate companies across India
whereby it was found that the DLF group had about 69% of gross fixed assets and 45% of capital employed was taken on
board. Further, the land bank of DLF (10,225 acres out of which 49% was located in Gurgaon alone), the size and
resources, the economic strength of the enterprise including commercial advantage over competitors, regulatory barriers in
real estate segment, dependence of consumers on the DLF etc. also indicated that DLF held a dominant position in the
relevant market.
Regulatory powers are a potential source for dominance
In an information filed against BCCI938 for abuse of dominant position in the conduct of Indian Premier League (IPL), DG
delineated the relevant market as
underlying economic activities which are ancillary for organising the IPL Twenty 20 Cricket Tournament.
The DG, considering the status of BCCI, as the national governing body for all types of cricket activities in India with the
authority to select and control players, umpires and officials, held it to control the game of cricket in India. The
Commission while identifying the relevant product market relied on the publically available TRP and TAM Ratings. The
Commission made a distinction between First Class/International events and Private Professional League Cricket event and
accordingly, defined the relevant market as the “Organisation of Private Professional Cricket Leagues/Events in India.”
The Commission noted that with the advent of the “private professional league”, BCCI extended its monopoly to the new
genre of cricket in the establishment of Indian Premier League, IPL. Also, BCCI assumed the right to sanction/approve
cricket events in India as per of section 32.4 of ICC Bye Laws making the approval of BCCI critical to the organisation
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and success of any competing league and is a very important source of dominance for BCCI. Therefore, owing to its
regulatory role, monopoly status, control over infrastructure (cricket stadiums), control over players (organiser of First
Class/International Cricket events), ability to control entry of other leagues, historical evidences (failure of ICL due to lack
of infrastructural facilities), BCCI was held to be in a dominant position in the market for organising private professional
league cricket events in India.939
In Dhanraj Pillay v Hockey India(HI),940 there were two issues at broader level, the first related to alleged practices of
FIH/HI to foreclose the market for rival leagues by bringing in regulations related to sanctioned and unsanctioned events;
the second related to restrictive conditions imposed by HI on players through the CoC agreement. In order to properly
evaluate the competition concerns, the Commission considered the relevant markets for the two allegations separately. The
Commission opined that the concerns of abuse of dominance by an entity vis-a-vis its rivals can best be examined in the
market for final product which was the event and whose consumer is the ultimate viewer of the sport. The second issue of
restrictive conditions on the Hockey players however needed to be examined in context of the market for services of
Hockey players where Hockey India was the consumer and Hockey players, the service providers.941
Assessment of Dominance in the market for organisation of private professional hockey activities in India: It was noted
that the most significant source of dominance was the regulatory powers of HI. HI was a national association for hockey in
India within the pyramid and in this capacity was vested with certain rights by FIH, prime among them was the right of HI
to sanction/approve hockey events in India. It was further noted, that the right to approve leagues had significant impact on
any private professional league which might be proposed to be organised. Also, the HI’s regulatory role empowered it,
along with FIH to create entry barriers for other leagues in the form of requiring rival leagues to obtain sanctions for their
tournament and requiring players to obtain NOCs from HI to participate in rival tournaments. Further, dominance also
stemmed from the role of HI as an organiser of International hockey events and with this role, HI controlled a pool of
players that signed the CoC agreement for playing in such events. The Commission, having due regard to the factors
mentioned above and the decision in case of BCCI and of Grand Chamber of ECJ in ELPA case,942 concluded that HI was
in a dominant position in the market for organising private professional hockey leagues in India.
Assessment of Dominance in Market for services of hockey players: Having emphasised on the complementarity of the
consumer and the provider of services for delivering a final product, the Commission considered it appropriate to define
the relevant market as that of services of hockey players. The commission held that the assessment of dominance could be
made in terms of weight of the parties and the countervailing power asserted on each other. Interestingly, the fact that both
required each other for fulfilment of economic objectives made them indispensable to each other. The Commission held
that the CoC agreement was a testimony of the monopoly power and dominance of HI vis-à-vis hockey players which gave
it a position to restrict the freedom of movement of players.
Similarly, All India Chess Federation (AICF) has been held to be dominant in the “market for organization of professional
chess tournaments/events in India and market for services of chess players.”943
Other Cases
In the case of Om Datt Sharma,944 it was alleged that M/s Adidas AG, M/s Reebok International Ltd and M/s Reebok
India Co, as a group infringed section 4(2)(a)(i) and 4(2)(a)(ii) of the Competition Act, 2002 with respect to sale of
premium sports goods. It was stated that M/s Reebok International Ltd, through its wholly owned subsidiary Reebok
(Mauritius) Co Ltd, owned 93.15% equity in the M/s Reebok India Co and M/s Adidas AG acquired 100% equity in the
M/s Reebok International Ltd in 2005. Thus, since 2005, all the Opposite Parties belonged to a group headed by M/s
Adidas AG (the Adidas AG Group). Mr Dutt contended that the terms of the Agreement which it entered into with the
Reebok India to run a franchise store at Noida were unfair and discriminatory vis-a-vis the agreement Reebok India entered
into with another franchise namely, M/s Neelkanth Traders. Informant placed reliance on the ICRIER study report (June,
2010) on “Sports Retailing in India” which stated that Reebok held 50% of the market and Adidas held between 20%–25%
in the premium branded sportswear market in India. It was also stated that though Nike and Puma seemed to operate in the
same market, the majority of the market was catered by the Adidas AG Group which ran thousands of stores across India.
The Commission held that based on the all India market share figure submitted by the Informant, it seemed that the same
set of players operated in the market for sale of premium sports-goods across India and the market share distribution of the
Adidas AG Group and its competitors in Noida was likely to follow the similar pattern. Considering the nature of
distribution of relevant product market in India, the Commission felt that market share of the players in Noida would not
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be substantially different from their market shares in India. Accordingly, the Commission, in consonance with the
Informant’s contention, was of the view that the Adidas AG Group could be in a dominant position in the relevant market
as defined above.945
In the case of HT Media Ltd,946 the Commission considered various factors, listed below, to conclude that Super Cassettes
was a dominant enterprise, having the strength to operate independently of competitive forces and affect its competitors
and customers in its favour.
(a) Market share: As compared to its main competitor companies YRF, Sony and SaReGaMa, the market share of
Super Cassettes was over 50% for the last three years and even if the market share in terms of playout of music
was considered, songs of the opposite party played on all the FM channels across the country had varied from
between 25% and 60% from one station to other, which was maintained over the last few years.
(b) Size, resources and economic power of the enterprise: As compared to Super Cassettes, with turnover of
approximately 400 crores, incomes of competitors like Sony, SaRaGaMa and TIPS were almost one-fourth or
less than the Super Cassettes’ turnover. Also, Super Cassettes managed to purchase the rights of almost four
times the number of films of its closest competitors and that too of bankable Bollywood stars.
(c) Size and importance of competitors: In terms of revenue, acquisition of movies, ownership of popular content,
Super Cassettes was in a superior position as its revenue was four to five times of its nearest competitors.
(d) Dependence of consumers on the enterprise: Super Cassettes owned majority of the music labels and it had 58%
share of the top 100 songs played on private FM channels. Super Cassettes’ repertoire comprised of Bollywood
music that was extremely popular with the listener and resultantly popular with the advertisers and that due to
such popular content, Super Cassettes commanded a position of strength.
(e) Due to the ownership of popular content, the Super Cassettes customers were heavily dependent on the content of
the opposite party, as is also evident from the evidence collected from the radio operators.
(f) Barriers to entry: In order to be successful in the business of licensing of music, particularly Bollywood music, a
company needs to buy the music rights of Bollywood movies, which according to the evidence can go upto 10
crores. Even after the purchase of music rights, vast investment is required in the promotion of music as well in a
distribution network. Further, a music company needs to be able to build a repertoire of music that takes time and
more investments.
(g) Other factors contributing to dominance: Super Cassettes royalty rates were set on a needle per hour basis
whereas most other competitors provided licenses at a rate either determined by or equivalent to the Second
Order of the Copyright Board. Super Cassettes unlike any other competitor, imposed MCC ranging from 30%–
50% of playout which radio stations were required to pay irrespective of whether they play that amount of music.
In Indian Exhibition Industry Association,947 it was noted that there were no competitors of Industry and Indian Trade
Promotion Organisation (ITPO) in the relevant market which could match it in terms of size and importance. It was also
observed that even outside Delhi, ITPO as a venue provider stood way above other venue providers in terms of various
parameters such as area of operation, space, location, resources, infrastructure etc. Furthermore, multiple roles were
performed by ITPO at different levels involved in the holding of events i.e. as a regulator it issued necessary permissions
and no objection certificate, as an organiser of international events in India and abroad, it formulated policies and
guidelines for holding such events, grants approvals for third party exhibitions held at Pragati Maidan and other
international events at other venues. Additionally, it also organised trade fairs and exhibitions at Pragati Maidan. These
plural functions and powers conferred on ITPO only strengthened its position of dominance in the relevant market.
Further, since Government had envisaged ITPO to play a significant role in various facets of organising national and
international events, the consumers were heavily dependent upon ITPO for holding events at Pragati Maidan. There were
entry barriers in terms of availability of adequate space, appropriate location, state of art infrastructure and visibility on
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global map, approvals for being in the relevant market of providing venue for holding international and national events in
Delhi. In the absence of alternate venues, most of the third party organisers were dependent on ITPO for venue for
conducting international and national events in Delhi. Hence, ITPO was held to be dominant in the relevant market for
“provision of venue for organising international and national exhibitions, trade fairs (events) in Delhi”. The COMPAT,
however, had set aside the order of the Commission. As per the Tribunal948 the Commission committed a grave error in
delineating “Delhi” as the relevant geographic market. As per the Tribunal, had the DG made a comparative study of
various amenities and facilities available at Delhi and different places with reference to specific parameters, then alone
Delhi could not have been described as relevant geographic market. Taking note of the venues available in various parts of
the country, it was held that India alone can be treated as relevant geographic market for organisation of fairs and
exhibitions.
In the case of North Delhi Power Ltd,949 it was alleged that the electricity Distribution Companies in Delhi (North Delhi
Power Co (NDPL); BSES Rajdhani Power Ltd; BSES Yamuna Power Ltd) were abusing their dominant position and were
behaving like a cartel in the supply of electricity in their area of supply. The Commission noted a few features of the
market to establish dominance. Accordingly, it noted that Electricity was a non-storable product and in terms of
characteristics and intended use does not have any substitute making it a specialised product of its own class, having its
own unique physical characteristics with no alternative available to the consumers, other than to get electricity from the
three DISCOMS of Delhi under the prevalent conditions.950 It was noted that The Government of Delhi issued licenses for
the distribution and supply of electricity to three private companies and to two deemed licensees (BSES Rajdhani Power
Ltd (BRPL), BSES Yamuna Power Ltd (BYPL) and North Delhi Power Ltd (NDPL) and they were engaged in the
distribution and supply of electricity to the end consumers in the territory of Delhi. In the areas of operations of the three
DISCOMS, conditions for supply of goods or provision of services were distinctly homogeneous and could be
distinguished from the conditions prevailing in the adjoining areas. In the absence of parallel licenses no other company
could operate in the areas of operation of these DISCOMS. The Commission therefore held that as there were no other
suppliers in the areas of operations of these DISCOMS and there was no viable alternative product which could serve as
substitute to electricity, the appropriate relevant market in the instant case would be relevant product market comprising of
distribution and supply of electricity and relevant geographic market comprising of the areas of operations of the three
licensee companies-BRPL, BYPL and NDPL as assigned in their respective licenses.
Further, it was noted that the three DISCOMS, NDPL, BRPL, BYPL had been assigned specific areas of NCT (Delhi) for
distribution and supply of electricity. As per the prevailing licensing conditions and given the present stage of regulatory
reforms, the retail supply, of electricity was restricted to the DISCOMS and in the present case the DISCOMS were the
only licensees for distribution of electricity in their respective areas with open access option available only to consumer of
1 MW and above. Therefore, DISCOMS were the only source of electricity available to the consumers in any particular
licensed area for supply of electricity enabling them to assume a position of dominance in their respective areas of
operation to the relevant market of supply of electricity to the consumers.
In MCX Stock Exchange case,951 the Tribunal considered as to whether the NSE was rightly held to be dominant in the
judgment of the Commission, even when the relevant market was construed narrowly to be the market only for currency
derivatives. In order to assess dominance, the Tribunal considered various factors like market share (71.43% of the equity
segment; 99% of the F&O segment; over 90% in the WDM segment and a market share of 47–48% as against 52–53% of
MCX SX in the CD segment), sound financial position, weak position of competitors, greater number of buyers and sellers
to NSE, benefits of network effects resulting from higher liquidity and lower transaction costs, were considered. Further,
high capital cost of entry, financial risk, marketing and technical entry barriers further strengthened the already dominant
position of NSE. The Commission had earlier concluded that NSE had the position of strength and therefore, enjoyed
dominant position in the relevant market based on various factors:
1. It was noted that NSE could sustain zero pricing policy in the relevant market long enough to outlive effective
competition.
2. There were indications that NSE was aware of its capability. It was noted that NSE had not followed Accounts
Standard 17 (AS17), which stipulated the segment reporting. The Commission held that the complacence can
only point to awareness of its own strength and the realisation that sooner or later, it would be possible to start
generating profits from the business, once the competition is sufficiently reduced.
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3. The Commission further noted that in the absence of these strengths, NSE would not have been able to continue
with zero pricing indefinitely.
The Tribunal952 modified the relevant market to include the entire stock exchange service market in India. After such
extension, it was again held that NSE was the dominant player. The Tribunal rejected the argument advanced that NSE
could not affect its competitors in its favour, as BSE, MCX-SX and USE successfully entered the CD segment and were
able to sustain zero pricing for periods longer than NSE. Tribunal noted that in its opinion, analysis by majority order of
Commission was correct and analysis by minority order, more particularly about market share and so called reduction
thereof was not satisfactory. Most relevant question was as to whether Appellant/NSE could continue with its no
transaction fee policy, as compared to its competitor Respondent/MCX-SX. The Tribunal held that it was clear that while
NSE could continue because of its relative strength in other segments, MCX-SX could not have continued with that policy
and per force it had to adopt same policy of no transaction fees, as otherwise it could not have even entered market, forget
about its sustenance in that market. The Tribunal also held that it would be wrong to say that MCX-SX successfully
entered the market and were able to sustain themselves. It was because MCX-SX had suffered huge losses when the
transaction fees was not being charged at all by NSE and consequently by themselves. Therefore, it was concluded that
NSE was in a dominant position.
In the JCB case,953 the Commission took note of the following points to hold JCB dominant in the relevant market for
manufacture and sale of backhoe loaders in India:
(a) High market share of JCB [75%] in the relevant market.
(b) Vast financial resources enabling it operate independent of competitive forces and giving it a position to curtail or
curb competition in the relevant market
(c) Vertical integration: JCB could make its own transmission systems, hydraulic cylinders and cabs in the plant. It
had a network of 54 dedicated dealers and over 450 sale and service outlets throughout the country, more than
3,000 trained service engineers, and more than 56 mobile service vans.
(d) High growth rate in the relevant market.
(e) Dependence of consumers on JCB
(f) High entry barriers owing to substantial sunk costs related to complex and costly infrastructure,
distribution/dealership network and other systems to run the business, expenditure on research and development,
quality improvements and advertising
Cases where no dominance was held
In the case of AK Jain (OP) v The Dwarkadhis Projects Pvt Ltd,954 it was alleged that in the relevant market (provision of
services of real estate in the Revenue Estate of Dharuhera in the State of Haryana), Dwarkadhis Projects Pvt Ltd (OP) was
abusing its dominant position through the buyer’s agreement related to (a) obtaining pre-consent of the allottee in favour of
OP to subsequently change the lay-out/building plan at any time without consent from the allottee; (b) obtaining an
unconditional undertaking from the allottee that the title deeds, plans and other documents were in order; (c) acquiring
waiver of time-limit of completion of construction of the project and giving possession on account of undisclosed events of
force majeure; (d) calculating super area at the sole discretion of OP; (e) acquiring the right to cancel the dwelling unit and
sell it to some other party in case the possession was not taken by the allottee even after having paid the full amount; (f)
authorising OP to create all types of mortgages on the land and buildings under the project and; (g) appointment of sole
arbitrator at OP’s discretion.
As per the Commission the product market of “the provision of services of real estate” was too broad and would include all
types of real estate properties i.e. residential plots/flats, commercial and industrial properties which cannot be regarded as
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interchangeable or substitutable for the simple reason of different characteristics of the products, their price and intended
use. The Commission therefore held that “provision of services of development and sale of residential units in Dharuhera
in the State of Haryana” would be appropriate relevant market in this case. However, the Commission found no evidence
to hold the company as a dominant enterprise in the relevant market. Information available in public domain showed that
many building projects were in progress in the above area providing the services of development and sale of residential
units in Dharuhera in the State of Haryana.
In the case of Sunil Bansal v Jaiprakash Associates Ltd (JAL),955 it was alleged that JAL along with its group company i.e.
JIL abused its dominant position by imposing highly arbitrary, unfair and unreasonable conditions in the agreements for
allotment of residential apartments which blatantly violated the principles of free and fair competition and thereby
contravened sections 4(2)(a) and 4(2)(e) of the Competition Act, 2002. The Commission held the relevant market in the
present case as the market for “provision of services for development and sale of residential apartments in Noida and
Greater Noida regions”. The Commission, inorder to establish dominance looked at the factors provided under section
19(4) of the Act.
(a) The Commission noted that there were other major players like Amrapali (with 27.32% market shares),
Supertech Ltd (with 16.18% market shares), 3C Co (with 8.33% market shares); Unitech (with 6.82% market
shares), etc. which clearly demonstrated that the residential segment of the realty sector was highly fragmented
with the presence of a large number of players.
(b) In terms of financial resources (comprising of cash reserves and surplus), Jaypee Group was behind Unitech.
(c) The use of the land reserve available with Jaypee Group was of varying nature and as such the same was not
comparable with the land allotted/leased out to other builders/developers by the statutory authorities so as to give
any commercial advantage to Jaypee Group over its competitors.
(d) A large number of options were available to the consumers who could actually choose from a wide range of
projects launched/developed by several builders and developers in the geographic region.
(e) Rapid growth of real estate sector together with the presence of several big, small and medium sized companies
in the market was demonstrative of the absence of entry barriers/foreclosure of competition.
In light of the above factors, JAL/JIL was held not be in the dominant position in the relevant market.
In the case of Arshiya Rail Infrastructure Ltd (ARIL),956 the
relevant market considered was transportation of containers within the boundaries of the country
and consequently the Commission concluded that road and rail were substitutable for container freight operations. The
Commission noted that in the said relevant market two relevant modes were road and rail and it was axiomatic to state that
rail network is the monopoly of Indian Railways while in the case of major highways it is the State that owns the roads. On
rail network, after the new policy of private container operators, there were 16 eligible players who had obtained licence to
run container trains. The road network had a large number of operators including some of the rail CTOs. Many of the
operators on roads were small operators (77 %) owning less than five trucks.957 Further, the Commission relied on the
RITES Report (2005) to observe that in 2004/05, while the major ports handled a combined volume of over four million
TEUs, less than one million of this volume was carried over the rail network. It also noted that the average annual growth
rate of container traffic was between 12 and 24% during 1995 to 2005. Despite substantial growth in container traffic rail
share remained low. The RITES Report also mentioned that for export market the dominance was of freight forwarders
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operating on roads. The CAG Report No. 8 of 2010/11 (Railways) covering its performance for the period 2004/05 to
2008/09 mentioned
over the years the railways share of the total transport sector has come down from 53% in 1972/1977 to 37% in 1997/2002 due to
inadequate investment in infrastructure and competitive weakness vis-à-vis other modes of transport.958
The above data, as per the Commission clearly established that container freight was largely carried on roads and railway
was not dominant in container freight.959 MoR/IR, was therefore, not found to be dominant in the relevant market. Also,
since none of the opposite parties IR or CONCOR were found to be dominant in the relevant market, any allegation of
abuse of dominant position was held to be unsustainable.
In the case of Magnus Graphics,960 information was filed against M/s Nilpeter India Pvt Ltd (subsidiaries/sister concern of
Nilpeter, a Denmark based company engaged in manufacturing of premium quality label printing machines under the
brand name “Nilpeter” and considered as a world leader in manufacturing of the said machines) and others for alleged
refusal in extending service, spares and equipment sales in respect of Nilpeter Machine after expiry of the warranty period.
On the basis of non-substitutability of provision for servicing of Nilpeter FB 3300 Servo Flexo machine, the DG concluded
that the relevant product market would be “servicing of Nilpeter FB 3300 Servo Flexo Printing Machine”. However, the
Commission observed that in the presence of competitors, it was difficult to confine the market in terms of a particular
model of the product. Therefore, in light of substitutability of the product with the machines manufactured by competitors
by virtue of physical characteristics (narrow web printing machines that use flexography technology, price and intended
usage (to print self-adhesive labels), the relevant product in the market in the present case was held to be not limited to
servicing of Nilpeter FB 3300 Servo Flexo Printing Machines alone. It was observed by the Commission that the machines
could be easily serviced by any freelance engineer/ISPs and the spare parts of the machine were freely available in the
local market, reflecting healthy competition in the aftermarket for servicing label printing machines and ISPs effectively
countervail any anti-competitive behaviour. Therefore, the Commission did not find Magnus Graphics to be dominant in
the relevant market.
In another case, it was alleged that Shri Ram Transport Finance Co Ltd,961 an NBFC, engaged in the business of
providing finance for purchase of used and new commercial vehicles in India was abusing its dominant position under
section 4(2)(a) of the Competition Act, 2002 by charging higher rate of interest on the re-scheduled loan amount and
arbitrarily imposing unrealistic and unfair terms and conditions in the loan agreement. It was argued that Shri Ram
Transport Finance Co Ltd was in dominant position in the commercial vehicle finance market in South India as it had a
market share of around 32–35%, substantial as compared to its competitors operating in that area. The Commission
considering the fact that there were a large number of players in organised and unorganised sector in the form of banking
institutions, NBFCs and private financers in India, who provided finance for both heavy as well as light commercial
vehicles and also for pre-owned vehicles as well as for new trucks, disagreed with the DG’s conclusion in holding “market
of provision of services for financing pre-owned heavy commercial vehicle by NBFCs in India” as the relevant market and
held the market “provision of services for financing commercial vehicles in India” as the correct relevant market. The
commission also observed that even though Shri Ram Transport Finance Co Ltd had a market share of about 25% in pre-
owned vehicle finance and 8% in the case of new trucks finance, there were still a number of entities both in public and
private sector providing finances for the commercial vehicles throughout the country and therefore it cannot be held to be
dominant in the relevant market. Therefore, there was no question of analysis under section 4(2)(a).
In Cine Prakashakula Viniyoga Darula Sangham,962 it was alleged that the opposite parties, Hindustan Coca Cola
Beverages Pvt Ltd (HCCBPL) and the INOX Leisure Private Ltd (ILPL) entered into an agreement and in pursuance of
that agreement HCCBPL had been supplying its products which, inter-alia, included the packaged drinking water and soft
drinks at an inflated and exorbitant price which was in sharp variance with normal price of same products in open market.
Thus, it was alleged that the HCCBPL and ILPL were indulging into discriminatory pricing policy by selling products with
same quality, quantity, standard and package at different prices to different buyers’ i.e. higher prices from the buyers at
ILPL complex and lower prices from the buyers in open market. It was further alleged that the trade practices adopted by
HCCBPL imposed unjustified cost on the consumers and at the same time it also stifled competition as ILPL was selling
the product of HCCBPL only. Thus, the consumers’ right to have access to a variety of goods at a competitive price was
infringed by the vertical restrictive trade agreement entered into between HCCBPL and ILPL. The commission noted that
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the “exclusive supply agreement” entered between HCCBPL and ILPL was entered between HCCBPL and ILPL on 1
September 2010 and it expired on 31 December 2010 unless renewed by both the parties. The agreement stipulated that
during the currency of agreement, HCCBPL would act as “preferred beverage provider” for supply of non-alcoholic
beverages to ILPL owned multiplex cinema theatres located in various cities in India. Further, under the agreement both
HCCBPL and ILPL had been given right to terminate it in the event of breach of any terms and conditions by other party.
Further, it was noted that there was intense competition between suppliers of non-alcoholic beverages to compete for
obtaining such contract with multiplexes and many multiplex owners like Adlabs/Big Cinemas, Cinemax and Waves
Cinema had been switching over their suppliers periodically. HCCBPL submitted that it had been able to enter into such
agreements with multiplexes having only 214 screens in India whereas its competitor PEPSICO had entered into similar
agreements with a large number of multiplexes having about 600 screens. Also, ILPL submitted that there were around
10,000 screens in India out of which 9,100 were single screen theatres and ILPL owns/operates 38 multiplexes in India. In
light of these facts, the Commission did not agree with the DG’s report that HCCBPL and ILPL enjoyed dominant
positions in their respective relevant markets or that they had abused their dominant position.
In the case of Exclusive Motors Pvt Ltd,963 the Commission noted that there were no entry barriers for competitors of
Respondent No. 1. Considering, that the size of the market in India of the Super Sports Cars was miniscule [in five years
only 93 cars of all the manufacturers had been sold]964 and that the other competitors’ cars in the market, namely-Aston
Martin, Maserati, Bugatti and Gumpert Apolo stood at the same footing with none of them having commercial advantage
over the other, the Commission came to the conclusion that there was no dominant player in the market. The Tribunal
confirmed the finding of the Commission that the market was miniscule and nobody was dominant in that market and
therefore there was no question of the breach of section 4(2)(a)(i) and (ii). Further, the Commission held that even if the
alleged action was considered, it could not be said to be an abuse. The Commission observed:
Merely because under the old agreement the appellant had a right to import the cars and sale them to the customers, it did not mean
that the appellant had a unhindered right to import the cars to the exclusion of others. There was nothing wrong, if the Respondent
No. 1 introduced another importer ... The CCI was undoubtedly right in holding that the right of an enterprise to appoint its own
Group Company as an importer, was unquestionable. The Respondent No. 1 had every right to open its office in any country and
directly import cars through that office. It had also the right to constitute a subsidiary company for importing its cars in the other
country. The CCI rightly held that there was neither abuse involved nor any competition issue.965
In Pravahan Mohanty v HDFC Bank Ltd and Card Services Division of the HDFC Bank,966 information was filed against
the HDFC Bank Ltd (and the Card Services Division of the HDFC Bank Ltd, CEEBROS) for its alleged abuse of dominant
position in the market of provision of credit card services in India. It was alleged the terms and conditions of “Card
member Agreement” listed below were unfair, onerous, unconscionable and legally unsustainable:
(a) Charging of non-refundable entrance fee, annual membership fee which are unilaterally determined and charged
on customers.
(b) Charging of unstipulated financial charges on daily basis which has not been explained in the agreement.
(c) Charging of interest even after termination of contract.
(d) Charging of rate of interest over 30% per annum unilaterally in case of a single default contrary to the provisions
of “Usurious Loan Act, 1913” and RBI circulars.
(e) There is no definition of term “current daily percentage rate of interest” which is charged on total outstanding
amount.
(f) The clause on lien and right of set-off of money in the bank account against outstanding dues of the card holders
is unilateral and is exercised without giving notice to customers.
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(g) The appointment of third party representatives to collect the amount payable causes harassment to the card
holders. This is also against the Contract Act and Law of Torts.
(h) Right to unilaterally change any of the terms and conditions of the “Card-member Agreement” is against the
doctrine of mutuality in the Law of Contract.
Therefore, it was contended that HDFC was abusing its dominant position by imposing unfair and one-sided terms and
conditions while issuing credit card i.e. sale of service which was in violation of section 4(2)(a) of the Competition Act,
2002. Further, it was alleged that denying the card members their rights to access the open market of credit cards was in
violation of section 4(2)(c) of the Act and using their dominant positions in the relevant market of banking services to enter
into relevant market of the credit card services in violation of section 4(2)(e) of the Act. The Commission held that HDFC
could not be said to be dominant in the relevant market of credit card services in India. It was noted that there were 30
players in the relevant market and the market share of the HDFC Bank in revenue terms was 17% in 2009/10. In terms of
number of credit card holders also the HDFC Bank was second in rank, closely followed by SBI and other banks and also
lagged behind in terms of capital, reserves & surpluses and deposits. Further, there was ample choice to the consumer in
the market in selection of credit card service provider and they were not bound to avail the said service from the HDFC.
Also, the terms and conditions as well as charges levied by all the players were more or less similar. The Commission
held:
Levying impugned charges and imposing alleged terms and conditions may be termed as ‘unfair trade practices’ but elements of
abuse of dominant position definitely stood on a higher platform and in absence of establishment of dominant position such
conduct of Opposite Party will not be covered under the provisions of section 4 of the Act.
Taking cue from the JCB case,967 the Commission in the case of Southwest India Machine Trading Pvt Ltd968 denied the
claim of dominance against the opposite party in the relevant market for manufacture and sale of Backhoe Loaders in
India. Further, the Commission noting the presence of other players like JCB, Volvo, Escorts, Dynapac, Greaves, etc. in
the soil compactors business in India, indicating availability of choice to consumers, held that the opposite party was not
dominant in the relevant market for manufacture and sale of vibratory soil compactors in India. In the absence of opposite
party being dominant in any of the relevant markets as delineated, the Commission did not see a case of contravention
under section 4 of the Competition Act, 2002.
The Commission in the magicbricks.com case969 refused to consider online real estate portals as a separate relevant
market. Considering the fact that the services provided by the traditional brokers and the web portal were similar, the
Commission delineated the relevant market as “the services of real estate brokers/agents in India”. The Commission
observed that in the said market, there were large number of players operating, both through online and off-line channels.
The Commission noted that the absence of license of registration system for real estate brokerage services had led to huge
rise in the number of listing sites and traditional brokers in the said relevant market which pose competitive restraint on
each other and hence no specific player can act independently of the market forces and affect the consumers or other
players in its favour. The Commission, therefore, held that the opposite party was not dominant in the relevant market.
No unfair condition imposed
In the Benett Coleman matter,970 it was alleged that in the combo offer, the newspaper vendors in Mumbai were selling
“The Times of India” only with “Mumbai Mirror” and refused to sell “The Times of India” along with “The Economic
Times” or “Maharashtra Times”. If a buyer demanded “The Times of India” along with “The Economic Times” or
“Maharashtra Times”, the vendors offered only “Mumbai Mirror” in the combo offer and charged separately for “The
Economic Times” or “Maharashtra Times”. Further, it was stated that this system was as per the supply made by the
opposite party. The Commission, however, observed that all the newspapers available in the combo offer including “The
Times of India”, “Mumbai Mirror”, “The Economic Times” and “Maharashtra Times” were also available separately at
their respective selling prices in Mumbai. Hence, the consumers had the choice either to purchase the newspapers in the
combo offer or to purchase each newspaper separately. The commission, therefore, held that the opposite party did not
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impose any restriction or unfair condition on the consumers through the said offer as it was not compelling the consumers
to buy the newspapers only in the combo offer. The Commission also observed that if some vendors were not providing
“The Economic Times” or “Maharashtra Times” along with “The Times of India” in the combo offer, then it cannot be
said that the opposite party was responsible for the said conduct of such vendors.
Lack of high entry barriers
The Commission in the case of Indian Paint & Coating Association,971 observed that the significant market of imports
proved lack of barriers to entry in the relevant market. The Commission noted that though anti-dumping duties on Penta
had been levied since the year 2002, the market share of imports had in fact increased between the years 2006/12, which
showed that the anti-dumping duties had not created significant hindrance to the supply of Penta in the Indian market.
Thus, imports without high entry barriers provided competitive constraint to domestic manufacturers. Thus, the
Commission concluded that the contention of the Informant that opposite party had market power in the relevant market
was untenable.
Presence of other competitors
Presence of such players indicates that the buyers have option to choose from other players in the relevant market.
Presence of other competitors has been taken as a strong counter to any claim of dominance in the relevant market. Some
cases where the Commission denied the claim of dominance on the basis of presence of other competitors have been listed
out below:
• In the case Ambika Trading,972 the Commission held that the opposite party was not in the dominant position in
the market for provision of services for development and sale of residential units in Nainital because of the
presence of many other competitors such as Shree Keshav Buildtech Pvt Ltd, Shikhar Group, Mridul Buildtech
Pvt Ltd, Shubham Group, Central Himalayan Land Development Co etc. operating and providing similar
products to the consumers.973
• In the Vodafone case,974 the Commission noted that besides opposite party, Airtel, Idea, Reliance, Tata, Aircel
and MTNL were also providing wirless telecommunication services in Mumbai. Since, all these players were
comparable with each other in terms of size, resources and expertise, the relevant market was held to be
competitive where customers had choices. The Commission, thus, held that Vodafone was not dominant in the
relevant market.
• In the case of Prateek Realtors India Pvt Ltd,975 the Commission observed that in the relevant market delineated
as “the provision of services for the development and sale of residential unit in Noida and Greater Noida”, there
were many other major developers like Amrapali, Supertech, Unitech, 3C Co, Lotus Greens, Saha Infratech, ATS
Greens, Jaypee Infratech, Eldeco etc. which were competing with Opposite party in the relevant market with
projects of varying magnitudes and having comparable sizes and resources.976
• In a matter related to distribution of bottled water, the Commission observed that apart from Bisleri, there were
several other brands of bottled water including Coca Cola (Kinley), PepsiCo (Aquafina), Manikchand (Oxyrich),
Parle Agro (Bailley), all of which had their respective distribution channel which competed in the relevant
market. The Commission held that the presence of different brands of bottled water and large number of
distributors suggested that the relevant market was competitive and the consumers had adequate choice.
Therefore, the opposite party was held to be not dominant in the market for distribution of bottled water in
Mumbai.977
• In the Indian Paint & Coating Association case,978 the Commission observed that there were firms other than
opposite party in the relevant market (the market for sale of Penta979 in India) who were supplying Penta in
India.
• In the case of Clues Network,980 the Commission observed that even though there had been an exponential
growth in the e-commerce/online market, it only represents a miniscule proportion of India’s total retail market.
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Therefore, apart from online websites, the consumers have options to buy from the huge offline market. Further,
it was noted that there were number of e-commerce websites offering similar goods and services, such as, Clues
Network Pvt Ltd, Ebay India Pvt Ltd, Xerion Retail Pvt Ltd, Growthways Trading Pvt Ltd, One 97
Communications Ltd, Amazon Seller Service Pvt Ltd, Accelyst Solutions Pvt Ltd, Jasper Infotech Pvt Ltd,
Flipkart etc. Therefore, no consumer was dependent on a single e-commerce player, as a consumer can easily
switch to another e-commerce player without incurring significant cost in terms of money, time, convenience,
etc. Thus, if one e-commerce player tries to dictate unfair terms and conditions, the consumers can move to other
e-commerce player or offline retailers without much difficulty.981 Therefore, no e-commerce company was held
to be dominant in the relevant market.
• The Commission recently analysed the competitive landscape in the radio taxi services market in Delhi982
wherein the conduct of the Opposite Party and another radio taxi operator, Uber, respectively, was under scrutiny.
The Commission took into account the data and material placed on record, including the research reports
containing the market size and data pertaining to various players in the radio taxi service industry, including the
Opposite Party. Vide its orders dated 9 February 2016 and 10 February 2016, passed under section 26(2) of the
Act,983 the Commission concluded that there exists stiff competition, at least between Ola and Uber, with regard
to the radio taxi service industry in Delhi. Further, it was noted that, apart from them, various other players were
also operating in the relevant market. The Commission held that the market was competitive and none of the
players can be said to be dominant in the market for radio taxi services in Delhi at present.984
• The Commission in a matter related to offering of animation courses985 was faced to determine whether the
opposite party was dominant in the “Market of providing animation related education services in India”. The
Commission noted that apart from the opposite party, there were many other institutions providing online and
offline trainings in animation courses such as Arena Animation, Maya Academy of Advanced Cinematic
(MAAC), Zee Institute of Creative Arts (ZICA), Global School of Animation, Whistling Woods International
Institute, Tekno Point Multimedia, Apeejay Institute of Design, Toonz Webel Academy (TWA) and Massco
Media. Thus, the Commission concluded that the market was competitive enough and the opposite party was held
to be not dominant in the relevant market.
• In the IOCL matter,986 the allegation related to the services relating to distribution/supply of LPG. While
assessing dominance of IOCL in the “market for the provision of services for distribution of LPG cylinders in
Badaun district of Uttar Pradesh”, the Commission held that IOCL did not enjoy dominance because in the
relevant market, apart from IOCL two other major players namely, Hindustan Petroleum Corporation Ltd
(HPCL) and Bharat Petroleum Corporation Ltd (BPCL) with comparable size and resources were operating and
they posed competitive constraints upon IOCL in the relevant market.
• While assessing dominance in the “market for the provision of Chartered Accountancy/Company Secretary
coaching services in India”, the Commission observed that in the relevant market, other than opposite party,
many other CA/CS coaching centers such as Sanjay Saraf Education Institute Pvt Ltd (SSEI); J.K. Shah Classes;
Institute of Grooming Professional (IGP) and CA Club India were operating and providing coaching services in
both online and offline format, implying that the students had an option to choose CA/CS Coaching services from
several competitors of opposite party. Therefore, in light of the presence of other players in the relevant market,
opposite party was held to be not dominant as it could not operate independently of market forces prevailing in
the relevant market.987
• In a case988 related to allegation of abusive conduct in the market for manufacture and sale of luxury passenger
cars, the Commission noted that there were multiple brands of luxury passenger cars available in India including
Mercedes Benz, Ferrari, BMW, Audi, Porsche, Volvo, Mitsubishi, Aston Martin, Maserati etc. with a variety of
models. The Commission, further, noted that the presence of more than one dealer indicated that consumers had
the option to purchase the same car from any of the dealers of opposite party. Similarly, there were multiple
dealers for other brands in the relevant market. The Commission held that this proved that there existed sufficient
intra-brand as well as inter-brand competition in the relevant market. In addition, the absence of significant
barriers for other players to enter the relevant market proved that the opposite party did not hold a position of
strength in the relevant market.
• In Bharti Airtel Case,989 it was alleged that reliance (jio) was guilty of predatory pricing in contravention of the
provisions of section 4(2)(a)(ii) of the Competition Act, 2002 as it was offering free services since its inception.
Further, Reliance Industries Ltd (RIL) was alleged to be in contravention of section 4(2)(e) of the Act as it had
used its financial strength in other markets to enter into the telecom market through reliance Jio Infocomm Ltd.
While assessing the dominance of the opposite party in the market for “provision of wireless telecommunication
services to end users in each of the 22 circles in India”, the Commission noted that the market had presence of
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multiple players comparable in terms of economic resources, technical capabilities and access to capital and led
by the informant itself with a market share of 23.5%, resulting in sufficient choice to consumers who can shift
from one service provider to another and that too with ease. Further, in none of the 22 telecommunication circles,
the Opposite Party had a market share higher than 7%. The Commission noted that financial strength was
relevant but not the sole factor to determine dominant position of an enterprise. However, considering
comparable investments and financial strengths of competitors, the success of Relianc Jio in managing large scale
investments was held to not suggest dominant position being enjoyed by it. The Commission, further, noted that
providing free services cannot by itself raise competition concerns unless the same was offered by a dominant
enterprise and shown to be tainted with an anti-competitive objective of excluding competition/competitors.
Since, the relevant market in the instant case was characterised by the presence of entrenched players with
sustained business presence and financial strength, opposite party was held to be not dominant in the relevant
market.
• While assessing the claim of dominance in the market for provision of banking services for corporate entities in
India, the Commission in the Kotak Mahindra Bank Ltd case990 noted that the opposite party had a very small
market share and the market was permeated with other competitors like State Bank of India, Bank of Baroda,
Punjab National Bank, Bank of India etc. other factors like small asset portfolio, net sales, net profit and market
capitalisation in comparison with other players were taken in to consideration to hold that Kotak Mahindra Bank
was dominant in the relevant market.
• Other instances where presence of other players in market was given as a reason by the Commission to reject
claim of dominance.991
COLLECTIVE DOMINANCE IS OUTSIDE THE PURVIEW OF SECTION 4
The concept of collective dominance envisages extending abuse of dominance provisions to encompass those situations
where independent companies, in acting together, create situations of dominance. Thereby, when several independent
companies maintain economic ties of such a nature that they are able to adopt similar practices in a market which render
them immune to the competitive forces therein, even if they would be unable to do so individually, they are considered
jointly dominant in that market.
Indian law does not recognise collective abuse of dominance.992 The word “group” referred to in section 4 of the
Competition Act, 2002 does not refer to group of different and completely independent corporate entities or enterprises. It
refers to different enterprises belonging to the same group in terms of control of management or equity. It is noteworthy
that the Competition Act, 2002 uses the article “an” and not “any” before the word “enterprise” in sub-section (2) of section
4. For a plural interpretation of “an” the combined entity should be an identifiable artificial juridical person such as
association of persons (AOP) or body of individuals (BOI) mentioned in sub-section (1) of section 2 of the Act. That is
why the Act includes the term “group” separately because a “group” of firms with joint management control can have
collective decision making and can exercise joint dominance.993
In the case of Manappuram Jewellers Pvt Ltd,994 information was filed against Kerala Gold & Silver Dealers Association
for abusing its dominant position for imposing directly or indirectly unfair or discriminatory conditions in purchase or sale
of gold ornaments in the relevant market which affected the business of the complainant. The Commission noted that from
the DG’s report that there were approximately 650 jewellers in the Thrissur district out of which only 242 jewellers were
the members of KGSDA constituting only 37% of the total jewellers in the district. The market share of the members of
KGSDA was only 10–12%. The Commission held that since none of the individual members of KGSDA was in a
dominant position in the relevant market of “purchase and sale of gold and silver jewellery in the state of Kerala”, the
question of abuse of dominant position did not arise. Also, the argument around collective dominance under section 4 of
the Competition Act, 2002 was held to be not tenable.
“ABUSE”
The concept of abuse is an objective concept relating to the behaviour of an undertaking in a dominant position which is such as to
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influence the structure of a market where, as a result of the very presence of the undertaking in question, the degree of competition
is weakened and which, through recourse to methods different from those which condition normal competition in products or
services on the basis of the transactions or commercial operators, has the effect, of hindering the maintenance of the degree of
competition still existing in the market or the growth of the competition.995
Conduct may be abusive when, through the effects of conduct on the competitive process, it adversely affects consumers
directly (for example, through the prices charged) or indirectly (for example, conduct which reduces the intensity of
existing competition or potential competition). A dominant undertaking is under a special responsibility not to allow its
conduct to impair undistorted competition.996
Dominant Position is not bad – Abuse of Dominance is
Courts and Tribunals have stressed all along that dominance per se is not bad. However, dominant undertakings do have a
“special responsibility” towards competitive process to not allow its behaviour impair genuine, undistorted competition on
the internal market.997
A finding that an undertaking has a dominant position is not by itself a recrimination but simply means that, irrespective of the
reasons for which it has such dominant position, the undertaking concerned has a special responsibility not to allow its conduct to
impair genuine undistorted competition on the common market.998
For example, in TAM Media Research Pvt Ltd,999 even though TAM had 100% market share, no abuse was made out.
“Abuse of Dominance”
Abuse of a dominant position occurs when a dominant firm in a market, or a dominant group of firms, engages in conduct
that is intended to eliminate or discipline a competitor or to deter future entry by new competitors, with the result that
competition is prevented or lessened substantially.1000 Section 4 of the Competition Act, 2002 establish the bounds of
legitimate competitive behaviour and provide for corrective action when firms engage in anti-competitive activities that
damage or eliminate competitors and that maintain, entrench or enhance their market power.1001 Maintaining a dominant
position, in the absence of any anti-competitive behaviour, may not necessarily amount to an abuse. It would be natural for
an enterprise having large market power to seek to retain it. A firm’s ability to raise its prices is usually constrained by
competitors and the possibility that its customers can switch to alternative sources of supply. When these constraints are
weak, a firm is said to have market power and if the market power is great enough, to be in a position of dominance or
monopoly (the precise terminology differs according to each jurisdiction). While mere possession of monopoly power does
not in itself constitute violation of competition laws, the abuse of such power – particularly if it is used to weaken
competition further by excluding rivals – calls for intervention from competition authorities.1002
The tests applied under section 4 have two elements: whether an undertaking is dominant in a relevant market; and, if so,
whether it is abusing that dominant position. The prohibition is on the abuse of the dominant position, not the holding of
the position. Finding of an undertaking’s behaviour as an abuse will only be done after detailed examination of the market
concerned and the effects of the undertaking’s conduct has been done. Conduct which amounts to the abuse of a dominant
position is prohibited and the undertaking or undertakings involved may be subject to a financial penalty and/or to
directions appropriate to bring the infringement to an end. Also, section 28 of the Competition Act, 2002 gives power to the
Commission to order division of an enterprise enjoying dominant position to ensure that such enterprise does not abuse its
dominant position. The Act under section 4(2), gives an exhaustive list of practices that shall constitute abuse of dominant
position and, therefore, are prohibited. Such practices shall constitute abuse only when adopted by an enterprise enjoying
dominant position in the relevant market in India. Abuse of dominance is judged in terms of the specified types of acts
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committed by a dominant enterprise. Such acts are prohibited under the law. Any abuse of the type specified under section
4(2) of the Act by a dominant firm shall stand prohibited under the provisions of section 4(1).1003
In cases involving abuse of dominance or monopolisation, it is essential to ensure that application of the law does not
inadvertently curb efficient business practices. It is important to recognise that firms may legitimately achieve a dominant
position in a market (for example through innovation, superior production or distribution methods, or greater
entrepreneurial efforts). Moreover, many practices that appear anticompetitive (such as tying or exclusive dealing
requirements) can serve legitimate procompetitive purposes in some circumstances.1004 Allegations of abuse of dominant
position may sometimes relate to industries that are natural monopolies – those in which single firm can supply the market
at lower costs than two or more independent firms can, usually because of large economies of scale or because of being
state-owned enterprises. Such industries may include electricity transmission, railways, natural gas distribution,
telecommunication, transportation etc. in such industries there may be a need to regulate prices. Such regulation might
either be undertaken by a specialised agency set up to oversee conduct in the particular industry or by the competition
agency, itself. But, even when there are effective regulatory controls, there may still be a role of competition policy in
maximising the scope of market forces to work and ensuring that regulated firms do not engage in anti-competitive
practices.1005
Types of Abuse - EU
The European Commission broadly classifies abuse as two forms of behaviour by the dominant undertaking:
1. Exploitative Abuse
2. Exclusionary Abuse
Exploitative Abuse
Exploitative abuse is conduct whereby the dominant undertaking takes advantage of its market power to exploit its trading
partners (customers) [e.g., Excessive pricing or unfair terms and conditions]. The dominant player is in a position to reduce
output and increase the prices of its products above the competitive level, thereby exploiting customers.1006 These
practices are generally seen in markets with high entry barriers which means that competitive entry is difficult and the
dominant undertaking can reap the benefits of exploitative pricing for longer duration of time.
Exclusionary Abuse
The aim of the Commission’s enforcement activity in relation to exclusionary conduct is to ensure that dominant
undertakings do not impair effective competition by foreclosing their competitors in an anti-competitive way, thus having
an adverse impact on consumer welfare, whether in the form of higher price levels than would have otherwise prevailed or
in some other form such as limiting quality or reducing consumer choice. Factors which are considered relevant for such
an assessment are:1007
• Position of the dominant undertaking: in general, the stronger the dominant position, the higher the likelihood
that conduct protecting that position leads to anti-competitive foreclosure.
• Conditions on the relevant market: this includes the conditions of entry and expansion, such as the existence of
economies of scale and/or scope and network effects. Economies of scale mean that competitors are less likely to
enter or stay in the market if the dominant undertaking forecloses a significant part of the relevant market.
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Similarly, the conduct may allow the dominant undertaking to “tip” a market characterised by network effects in
its favour or to further entrench its position on such a market. Likewise, if entry barriers in the upstream and/or
downstream market are significant, this means that it may be costly for competitors to overcome possible
foreclosure through vertical integration.1008
• Position of the dominant undertaking’s competitors: this includes the importance of competitors for the
maintenance of effective competition. A specific competitor may play a significant competitive role even if it
only holds a small market share compared to other competitors. It may, for example, be the closest competitor to
the dominant undertaking, be a particularly innovative competitor, or have the reputation of systematically
cutting prices. In its assessment, the Commission may also consider in appropriate cases, on the basis of
information available, whether there are realistic, effective and timely counterstrategies that competitors would
be likely to deploy.
• Position of the customers or input suppliers: this may include consideration of the possible selectivity of the
conduct in question. The dominant undertaking may apply the practice only to selected customers or input
suppliers who may be of particular importance for the entry or expansion of competitors, thereby enhancing the
likelihood of anti-competitive foreclosure. In the case of customers, they may, for example, be the ones most
likely to respond to offers from alternative suppliers, they may represent a particular means of distributing the
product that would be suitable for a new entrant, they may be situated in a geographic area well suited to new
entry or they may be likely to influence the behaviour of other customers. In the case of input suppliers, those
with whom the dominant undertaking has concluded exclusive supply arrangements may be the ones most likely
to respond to requests by customers who are competitors of the dominant undertaking in a downstream market, or
may produce a grade of the product — or produce at a location — particularly suitable for a new entrant. Any
strategies at the disposal of the customers or input suppliers which could help to counter the conduct of the
dominant undertaking will also be considered.1009
• The extent of the allegedly abusive conduct: in general, the higher the percentage of total sales in the relevant
market affected by the conduct, the longer its duration, and the more regularly it has been applied, the greater is
the likely foreclosure effect.1010
• Possible evidence of actual foreclosure: if the conduct has been in place for a sufficient period of time, the market
performance of the dominant undertaking and its competitors may provide direct evidence of anti-competitive
foreclosure. For reasons attributable to the allegedly abusive conduct, the market share of the dominant
undertaking may have risen or a decline in market share may have been slowed. For similar reasons, actual
competitors may have been marginalised or may have exited, or potential competitors may have tried to enter and
failed.1011
• Direct evidence of any exclusionary strategy: this includes internal documents which contain direct evidence of a
strategy to exclude competitors, such as a detailed plan to engage in certain conduct in order to exclude a
competitor, to prevent entry or to pre-empt the emergence of a market, or evidence of concrete threats of
exclusionary action. Such direct evidence may be helpful in interpreting the dominant undertaking’s conduct.1012
Objective necessity and efficiencies1013
The Commission will also examine claims put forward by a dominant undertaking that its conduct is justified. A dominant
undertaking may do so either by demonstrating that its conduct is objectively necessary or by demonstrating that its
conduct produces substantial efficiencies which outweigh any anti-competitive effects on consumers. In this context, the
Commission will assess whether the conduct in question is indispensable and proportionate to the goal allegedly pursued
by the dominant undertaking.
The question of whether, conduct is objectively necessary and proportionate must be determined on the basis of factors
external to the dominant undertaking. Exclusionary conduct may, for example, be considered objectively necessary for
health or safety reasons related to the nature of the product in question. However, proof of whether conduct of this kind is
objectively necessary must take into account that it is normally the task of public authorities to set and enforce public
health and safety standards. It is not the task of a dominant undertaking to take steps on its own initiative to exclude
products which it regards, rightly or wrongly, as dangerous or inferior to its own product. For example, objective
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justification of safety was disregarded in Hilti v Commission.1014 Section 4 of the Competition Act, 2002 provides that
there “shall” be an abuse of dominance – some practitioners are therefore of the opinion that section 4 sets out a per se rule
for abuse and that the CCI is unlikely to accept any objective justifications.
Similarly, in India, in the TAM case,1015 the Commission accepted the contention that the broadcasters, advertising
agencies and advertisers were inherently differently situated enterprises operating in different markets with distinct
functions and therefore TAM was objectively justified in adopting a differentiated pricing mechanism. Similarly, in Schott
Glass case,1016 the Commission accepted the justification on refusal to supply to the informant (M/s Kapoor Glass) on the
ground that the informant on previous occasions attempted to infringe Schott’s trademarks and to fraudulently pass off
borosilicate glass tubes manufactured by Kapoor Glass as Borosilicate Glass tubes manufactured by Schott India.
The Commission in the Intel case,1017 considered the question was whether Intel was charging different price to different
customers i.e. the OEMs and the distributors for the sale of similar products with the same marginal costs. It was noted that
the cost of packaging of microprocessor for the distributors was different from the cost of packaging microprocessor for
OEMs, being higher for the former and lower for the latter. Thus, Intel was held to be justified in charging different prices
because of cost difference as the prices were aligned to the costs. Further, it was held that giving better discount to the bulk
purchase cannot be itself anti-competitive unless it impedes the ability of the reseller to compete any competition concern
may not probably arise.
The Commission considers that a dominant undertaking may also justify conduct leading to foreclosure of competitors on
the ground of efficiencies that are sufficient to guarantee that no net harm to consumers is likely to arise. In this context,
the dominant undertaking will generally be expected to demonstrate, with a sufficient degree of probability, and on the
basis of verifiable evidence, that the following cumulative conditions are fulfilled:
• the efficiencies have been, or are likely to be, realised as a result of the conduct. They may, for example, include
technical improvements in the quality of goods, or a reduction in the cost of production or distribution,
• the conduct is indispensable to the realisation of those efficiencies: there must be no less anti-competitive
alternatives to the conduct that are capable of producing the same efficiencies,
• the likely efficiencies brought about by the conduct outweigh any likely negative effects on competition and
consumer welfare in the affected markets,
• the conduct does not eliminate effective competition, by removing all or most existing sources of actual or
potential competition. Rivalry between undertakings is an essential driver of economic efficiency, including
dynamic efficiencies in the form of innovation. In its absence the dominant undertaking will lack adequate
incentives to continue to create and pass on efficiency gains. Where there is no residual competition and no
foreseeable threat of entry, the protection of rivalry and the competitive process outweighs possible efficiency
gains. In the Commission’s view, exclusionary conduct which maintains, creates or strengthens a market position
approaching that of a monopoly can normally not be justified on the grounds that it also creates efficiency gains.
It is incumbent upon the dominant undertaking to provide all the evidence necessary to demonstrate that the conduct
concerned is objectively justified. It then falls to the Commission to make the ultimate assessment of whether the conduct
concerned is not objectively necessary and, based on a weighing-up of any apparent anti-competitive effects against any
advanced and substantiated efficiencies, is likely to result in consumer harm.
Abuse of Dominance – Unfair or Discriminatory Price or Condition in purchase or sale of
Goods or Services [Section 4(2)(a)]
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(a) directly or indirectly, imposes unfair or discriminatory—
(i) condition in purchase or sale of goods or service; or
(ii) price in purchase or sale (including predatory price) of goods or service.
Explanation—For the purposes of this clause, the unfair or discriminatory condition in purchase or sale of goods or service
referred to in sub-clause (i) and unfair or discriminatory price in purchase or sale of goods (including predatory price) or
service referred to in sub-clause (ii) shall not include such discriminatory condition or price which may be adopted to meet
the competition;
Unfair condition: Section 4(2)(a)(i)
As per section 4(2)(a)(i) of the Competition Act, 2002, there shall be an abuse of dominant position if, an enterprise inter
alia, imposes unfair condition in purchase or sale of goods or services. The Act does not define the term “unfair” and
whether a particular condition is unfair would be determined on the basis of the facts and circumstances of each case. The
courts have also interpreted this term differently in different cases. In a matter relating to an unfair trade practice in the
context of the Monopolies and Restrictive Trade Practices Act, 1969, the Hon’ble Supreme Court in the case of HMM Ltd
v Director General, Monopolies and Restrictive Trade Practices Commission,1018 observed that for holding a trade
practice to be unfair, it must be found that it causes loss or injury to the consumer.
The Supreme Austrian Federal Court while deciding the matter of R v Re A Loyalty Bonus Scheme,1019 involving loyalty
bonuses and exclusive supply requirements imposed on its customers by an undertaking which dominates a market,
observed: Usual methods of competition are permitted and will only become unfair if there are particular circumstances
which make competition to provide services obstructive. This is the case if a particular action which may be accounted
competition to provide services becomes an obstructive measure directly aimed against the competitor and hindering (if
not actually preventing) in offering its services in an appropriate manner in the market, thereby ruling out genuine
comparison of services in the future. The Supreme Austrian Federal Court in this case also observed that practices that are
not the result of commercial performance, but aim to prevent or hinder the purchaser’s choosing between several sources
of supply, and to deny other manufacturers access to the market cannot be reconciled with the aim of fair competition in
the Common Market.
Cases under Competition Act, 2002
In HT Media Ltd v Super Cassettes Industries Ltd,1020 DG’s investigation revealed that Super Cassettes required
Minimum Commitment Charges (MCC) to be paid by the informant irrespective of the actual number of needle hours of
broadcast of Super Cassettes music. Further, it was noted that except Super Cassettes, no other music company was
imposing MCC and since Super Cassettes had a position of strength in the relevant market the radio operators had no
choice but to accept the conditions imposed by Super Cassettes. DG found that the minimum committed needle hours for
playoff of the songs of Super Cassettes imposed by it, were as high as 50%. While taking the broadcasting rights, the
private FM radio stations had to accept MCC as it was an essential precondition before grant of broadcasting rights by
Super Cassettes to the radio stations. DG’s report indicated that the obvious purpose behind imposing the condition of
MCC was to protect its dominance in the relevant market and to maximise its profit. The Commission noted that MCC,
irrespective of whether it was 30% or 50%, was exploitative and exclusionary in nature as it forced the customers to pay
for music that it may not play. The Commission further held that the imposition of MCC by Super Cassettes had an anti-
competitive effect on the market as it foreclosed other competitors from a substantial share of the market. Since the private
radio station was contractually bound to pay the Super Cassettes a minimum guarantee, they were likely to broadcast the
amount of music that they have already paid for. Therefore, a certain amount of music playout on private FM radio stations
was already fixed for Super Cassettes. This resulted in Super Cassettes’ competitors not being able to compete for and
being foreclosed from broadcasting their music on this prefixed playout of 30–50% reserved for Super Cassettes. The
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Commission rejected the justification of MCC on the grounds that it reduced the uncertainty that content owners faced,
particularly since it was the only player in the market that was charging MCC. The Commission concluded that it was
unacceptable for a dominant enterprise to impose such unfair/discriminatory conditions in licensing of their content and the
held that the imposition of MCC on private FM radio stations was an unfair condition amounting to abuse by the opposite
party under section 4(2)(a)(i) of the Competition Act, 2002. Super Cassettes was therefore, directed to cease and desist
from formulating and imposing the unfair condition of MCC in its agreements with private FM radio stations in India and
was directed to suitably modify the unfair condition of MCC imposed on private FM stations in India in its existing
agreements within three months of the date of receipt of the order.
In Atos Worldline India Pvt Ltd,1021 it was alleged that M/s Verifone India Sales Pvt Ltd (Verifone) was abusing its
dominant position to force the Software development Kits (SDK) agreement with restrictive clauses on the informant. As
per facts, Verifone was in the business of supplying POS Terminals along with core POS Terminal applications (i.e.,
Operating System and Kernels) and Software Development Kits (SDKs’) to enable the basic functionality of the POS
Terminals. POS Terminals along with its core applications were either sold directly to the customers like banks and retail
outlets or to the third party processor (TPPs) such as Atos who acted on behalf of acquiring banks and also rendered Value
Added Service (VAS) to develop and integrate applications into POS Terminals. It was complained that Verifone was
abusing its dominant position to force the SDK agreement with restrictive clauses on the informant. It was emphasised that
for the provision of VAS, it was extremely important for Atos to have access to the core POS Terminal applications and
their crucial enhancements/updates along with SDKs and withholding of such enhancements/updates and SDKs by the
POS Terminal manufacturers would negatively impact the growth of the TPP and VAS markets. The Commission noted
that the license restriction clause relating to disclosure mentioned in the SDK license agreement imposed three different
disclosure requirements namely; a) disclose to licensor from time to time the activities relating to licensed software; b)
what value added software it has created; and c) what licensee intends to create using the licensed software. Further, it was
noted that the Verifone was a POS terminal manufacturer and was also engaged in the development of VAS applications
and by way of this restriction, it was trying to get access to confidential commercial information from the VAS providers
and to exploit the lucrative VAS market.
The Commission observed that:
(i) the requirement of prior disclosure to the Opposite Party about the VAS developed by the Informant amounted to
imposition of unfair condition on the Informant as well as limited the provision of VAS service;
(ii) Seeking information on the VAS services which the Informant intended to develop was likely to prejudice the
business activities of the Informant as Verifone was developing into a major competitor for the Informant in the
VAS/TPP market in India. Such restriction restricted technical or scientific development relating to VAS services
for POS terminals in India.
(iii) The restriction placed on the Informant not to use the licensed software to develop any payment software that
directly or indirectly interacts with any acquiring bank was unfair as it limited/controlled the provision of VAS
services and limited/restricted the technical and scientific development of VAS services used in POS Terminals
in India. [Suggest this structure as it makes the unfair conditions easier to comprehend]
The Commission also noted that the Informant being the lawful owner of the proprietary rights in the VAS was neither
allowed to exploit it for its own purpose nor for its customers and the restrictive clause acted as a disincentive for the
Informant to continue investing in development and innovation of VAS services as its business would be adversely
affected by such restrictive clauses. Therefore, the Commission was of the opinion that through the SDK agreement
Verifone had imposed unfair conditions on VAS/TPP service providers which was in contravention of section 4(2)(a)(i) of
the Competition Act, 2002; restricted the provision of VAS services as well as limited/restricted the technical and scientific
development of VAS services used in POS Terminals market in India which was in contravention of sections 4(2)(b)(i) and
(ii) of the Act.1022
Belaire Housing (DLF case) – “The Belaire”1023 was a housing complex which was being built by DLF at DLF City,
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Gurgaon, Haryana. The construction was conveyed to be completed within 36 months. In place of 19 floors, it constructed
29 floors, which led to reduction in the allotment of land to various facilities as announced in the advertisement. Further, it
got delayed due to which it could not be handed over to the parties in the stipulated time. Apartment Buyer’s Agreements
were signed with the allottees, months after the substantial amount had been paid. Also, the terms of the same were not
negotiated with the allottees, which did not leave them with an option to withdraw from the same. They were forced to
accept the term as enlisted therein. Some of these terms were:
(a) Absolute right with DLF to reject or refuse to execute ABA, without assigning any reason.
(b) Sole Discretion with DLF to change the number of zones, use of property from residential to commercial.
(c) Unilateral power with DLF to reduce the land for multi storey apartments.
(d) Allottees could not carry out any investigation or raise objections to the competency of DLF.
(e) Allottees had to pay sale price for the Super Area of the apartment in addition to their undivided share in the land
underneath, on which the building has been erected.
(f) No clause in the ABA to impose liability on DLF in case of a breach of its obligations.
(g) In case of a change in the super area of the apartment, it was provided that the price shall be recalculated without
a refund of additional amount. The additional amount would be adjusted towards last instalment. No interest on
the same would be provided.
(h) Time was made an essence of the contract w.r.t. allottees obligations. However, the same was not applicable to
DLF’s obligations under the contract.
(i) Right to alter/delete/modify the building plan was retained by DLF without any right to the allottees to object or
withdraw from the same.
(j) In case of default by allottes, rate of interest was as 18%.
The terms of the same were questioned. Additionally, even at the time of allotment, DLF did not obtain requisite
regulatory clearances. Allotment was made without preparation of building plans or lay out plans of the project. The terms
of the agreement were held to be in violation of section 4(2)(a).The Commission imposed a penalty of Rs 630 crores ($140
million), at the rate of 7% of the average turnover of DLF and issued a cease and desist order against DLF from imposing
unfair conditions in the Apartment Buyer’s Agreement (ABA) executed between DLF and allottees. The Commission also
directed DLF to suitably modify the terms of the ABA. The Tribunal in appeal1024 noted that ABA authorised DLF to
increase the number of floors by constructing additional floor. However, this imposition of additional construction without
intimation & consent from allottees and without prior approval from the Government Authority was held to amount to
abuse of dominant position by DLF. The DLF offer to the original allottees regarding moving to a higher floor was held to
be discriminatory vis-à-vis other allottees. Further, it laid that unilateral increase in the super area and holding charges by
DLF was in breach of the ABA and amounted to abuse as DLF was it was well aware that allottees had no other choice,
but to accept the same and the only option left with the allottees was to exit the scheme, which was unimaginably costly.
COMPAT refused to bring down the penalty and confirmed the order of Commission. However on the point of imposing
similar penalty in other two cases of Park Place and Magnolia as well, the COMPAT refused as all the three ABAs were
practically identical therefore penalty was not imposed again.
In the case of Pankaj Aggarwal v DLF Gurgaon Home Developers Pvt Ltd,1025 the complainants had booked apartments
in the new project of DLF (DLF New Town Heights). Separate complaints (Case nos. 13, 21 of 2010 and Case no. 55 of
2010) were filed against DLF Gurgaon Home Developers Pvt Ltd for abuse of its dominant position through imposition of
onerous conditions in sale of apartment, adopting practices like allotment of back to back parking on compulsory payment
of additional Rs 1.5 lakhs, non-transparent calculation of advance payment rebate, additional payments towards External
Development Charges (EDC)/Infrastructure Development Charges (IDC) on the increased area etc. The Commission held
that the precise definition of relevant product market was not required and the relevant product market was delineated as
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the market for “the provision of services for development/sale of residential apartments”. The Commission also agreed
with the DG’s conclusion and held the relevant geographic market to be “geographic region of Gurgaon”. DLF was
concluded to be in the dominant position.1026 The allegations pertained to imposition of one-sided terms and conditions in
the Buyer’s Agreement and unfair conduct of DLF while executing such one-sided agreements.
To a great extent the terms and conditions of the Buyer’s Agreement which were the subject matter in the present cases had
been raised in respect of other projects which were developed by the DLF in earlier orders e.g. Belaire (Case No. 19 of
2010), Park Place (18 and others of 2010), Magnolia (Case No. 67 of 2010). In those earlier orders, the Commission held
that the Buyers’ Agreement was heavily loaded in favour of DLF and against the buyer. The Commission had held that
under normal market scenario, a seller would be wary of including such one-sided and biased clauses in its agreements
with consumers. The Commission had noted the impunity with which these clauses have been imposed, the total disregard
to consumer right that had been displayed in its action of cancelling allotments and forfeiting deposits and the deliberate
strategy of obfuscating the terms and keeping buyers in the dark about the eventual shape, size, location etc. of the
apartment and held them to be unfair. Same views were echoed in the COMPAT’s order which upheld the Commission’s
finding on abuse. While rejecting the justification of DLF for raising the number of floors in the appeal against the
Commission’s order in Belaire case, the COMPAT’s order1027 held:
... We are not here on the legality or validity of the construction, as we are on the impact that it made on the allottees, who did not
have even a ghost of idea, as to how many persons they would have to share lifts with or their common area, or for that matter their
swimming pool and gymnasium. The unfairness lies in the sinister silence on the part of the appellant. The allottees should not
have been kept on the suspended animation on the spacious and broad plea that the Appellant could add additional construction.
May be the non-disclosure part thereof, does not strictly come within the mischief of section 4 of the Act, but when the Appellant
had to take an action particularly after the advent of section 4 of the Act, the Appellant had a duty to disclose that it proposed to
increase the exact number of floors and apartments to the extent that it did. The allottees could have taken valid objections,
displaying their woes to share the amenities with hoards of other people. After all the allottees had been allured by the promise of
the Appellant of all those luxurious facilities, in the absence of which, these apartments could not be termed as luxury apartments.
Therefore, there was a duty on the part of the Appellant to let the allottees know about proposed increase and obtain their views
about the same. If the Appellant had a duty not to be unfair, the allottees certainly had a right to expect fair behaviour from the
Appellant. It is in this sense that we are viewing this unfair action on the part of Appellant, in first not disclosing the number of
floors, at least after section 4 of the Act came on the legal scene and then in proceeding with the construction of additional floors,
increasing the number of apartments by 53% in case of Belaire, Park Place and Magnolia.(Para 104)
Issues decided in the DLF case:
(a) Increase in the number of Floors: It was held that the way DLF changed its construction plans without giving any
option to the apartment buyers was itself abusive. The Commission in light of the COMPAT’s decision in the
Belaire case, rejected the defence of DLF to appreciate empowering provision to change the number of floors
(Clause No. 33 of the Buyers’ Agreement) and emphasised on the importance of transparency. When
consumers/buyers invest in a particular project, they ought to know with some certainty, the final structure of the
apartment. Moreover, at the time of booking when the application money was paid by the apartment
buyer/allottee, there was no mention of such one-sided/oppressive clauses and by the time the applicants got the
Buyer’s Agreement, they had no option to withdraw. Therefore, it was held that the conduct of DLF in making
additions to the number of floors beyond the number intimated to the apartment allottee amounts to abuse of
dominant position.
(b) Unfair Cancellation Policy and Forfeiture of Booking Amount: It was noted that as per clause 9 and 10, no right
had been provided to buyers to raise any objection towards alterations/modifications. This was held to be unfair
and abusive. Further, cancellation of the allotment of certain buyers and forfeiting their booking amount post
rising of objections also amounted to abuse.
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(c) Unfair Additional Demands on account of Increase in Super Area: The COMPAT’s order held that the conduct
of DLF of relying on clauses in the Buyers’ Agreement to impose unfair demands or to increase the number of
floors on the apartment allotted to be allottee amounted to imposition of fresh conditions.
(d) Unfair Financial Pressure on the Apartment Buyers: It was held that burdening the apartment buyers with unfair
financial pressure on account of additional EDC/IDC because of readjustment of the super area amounted to
imposition of unfair condition on the buyers and therefore, in contravention of section 4(2)(a)(i) of the
Competition Act, 2002.
(e) Unfairness of the Buyers’ Agreement: The Commission in the Belaire case had held the clauses to be draconian
and one-sided and abusive under section 4(2)(a)(i) of the Competition Act, 2002. Clauses which gave sole
discretion and advantage to DLF in respect of change of zoning plans, usage patterns, carpet area, alteration of
structure, discretion to determine PLC in case of change in location of the apartment, difficult exit clause,
compensation in event of delay in delivering possession to the buyers etc., depicted how heavily the buyers’
agreement was loaded in favour of DLF and against the buyer. Commission held that the clauses and conduct of
the Opposite Party as recorded in the order passed under Belaire’s case were blatantly unfair and exploitative
within the meaning of section 4(2)(a) (i) of the Act. Accordingly, a cease and desist order was passed against
DLF.1028
GHCL Ltd v Coal India Ltd:1029 GHCL Ltd was engaged in the business of manufacture and sale of soda ash (a basic
industrial raw material used predominantly in manufacture of glass (flat/container), detergent, chemicals, silicates and host
of other basic chemicals) and used coal for running its captive power plant. GHCL filed a complaint against Coal India for
abuse of its dominant position on various grounds:
• imposing one-sided onerous conditions upon the buyers without seeking or considering the inputs of the power
producers through Letter of Assurance (LoA), Fuel Supply Agreement (FSA), MoU and the Addendum to FSA.
• Undue leverage to Coal India, to evade and avoid its liability for short supply, through the Deemed Delivered
Quantity (DDQ) clause in FSA.
• LoA, FSA and MoU did not address all aspects of supply like quality control, grade failure, short supply, joint
sampling etc.
• Diversion of coal mandated to be supplied under FSA/NCDP to online buyers at a premium at the cost of the
Informant and other consumers who were allotted coal under LoA/FSA based on NCDP.
• Inferior quality of the coal supplied by Western Coal Fields Ltd forcing GHCL to purchase quality coal from
alternate sources.
• Diversion of the coal agreed to be sold through LoA/FSA route to the e-auction purchasers
The Commission, in agreement with the DG, held that the lack of balancing provisions in the agreement, unfair terms and
conditions in LoA, act of unilaterally reducing the ACQ of coal agreed to be supplied by them by forcing the buyers to
execute the MoU alongwith FSA, unfair and discriminatory conditions relating to quality, sampling & analysis, stones and
oversized coal, clauses pertaining to Deemed Delivered Quantity (DDQ) to safeguard its position and to further dilute the
contractual obligations assumed by the parties under FSA and direction seeking extension of validity period of
Commitment Guarantee (CG) and Security Deposit (SD) with the threat of encashment thereof in case of non-compliance
even though the failure to sign FSA was not attributable to the Informant as contravening the provisions of section
4(2)(a)(i) of the Competition Act, 2002. Accordingly, a cease and desist order was passed.
In a complaint filed against Coal India and Mahanadi Coalfields Ltd (MCL),1030 it was alleged that MCL, instead of
signing/executing coal supply agreements/fuel supply agreements as required under the Coal Distribution Policy, 2007,
executed/signed MoUs which did not cover all aspects of supply and issues such as quality control, grade failure, short
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[s 4] Abuse of dominant position
supply, joint sampling, etc. Further, a model Coal Supply Agreement (CSA) was supplied to MCL which was proposed to
be executed between MAHAGENCO and MCL. The conditions laid down therein were alleged to be not in line with the
new Coal Distribution Policy 2007 (NCDP) and contained clauses which were burdensome and capable of causing
implementation issues imposing additional cost on MAHAGENCO leading to higher cost of electricity which would be
eventually passed on to consumers.
Another complaint was filed [Case No. 11 of 2012] against M/s Western Coalfields Ltd (WCL) and CIL by Gujarat State
Electricity Corporation Ltd (GSECL) alleging that the Fuel Supply Agreement entered into between MAHAGENCO and
WCL was lop-sided (failure on the part of WCL to entertain objections raised by MAHAGENCO before execution of
FSA; failure to formulate the joint sampling protocol in FSA as also failure to provide joint sampling at both loading and
unloading points thereby further limiting generation of coal; making provisions in FSA whereby MAHAGENCO was
deprived of its right to participate in joint sampling of coal or the sampling procedure which could lead to supply of lumpy,
wet and sticky coals and also stones/coal of large size which could not be used and failure on part of WCL to crush and
wash coal which was an integral process of dressing coal before supply. In Case No. 59 of 2012, it was alleged by the
informant, a power generating utility purchasing coal, that the terms of FSA were not in accordance with NCDP 2007 and
were abusive in nature in contravention of the provisions of section 4(2)(a)(i) read with section 4(1) of the Competition
Act, 2002.1031
The Commission rejected the argument that the relevant market should be global as the “dominant position” defined in the
Competition Act, 2002 taken in to account position in India and therefore, the plea advanced by the opposite parties
contending the relevant market to be global was held to be ex facie contrary to the express provisions of the Act and was
rejected. Considering the physical characteristics of non-coking coal and its use in power plants, it was found by the DG
that there was no substitute available of the non-coking coal for the thermal power plants in India (demand side
substitutability). Hence, the relevant product market in this case was marked as non-coking coal, used primarily as a raw
material for generation of electricity by the thermal power plants. Also, since, the condition for supply of coal in the entire
country was uniform and homogenous, the relevant geographic market was of entire India. The Commission in light of the
Coal Mines (Nationalisation) Act, 1973, noted that CIL and its subsidiary companies had been vested with monopolistic
power for production and distribution of coal in India and therefore dominant in the delineated relevant market.
DG on analysis of the terms and conditions of FSA, concluded that CIL had violated the provisions of section 4(2)(a)(i) of
the Competition Act, 2002 by imposing unfair or discriminatory conditions in the relevant market. The unfair and
discriminatory provisions in the FSA related to:
(a) Sampling procedure for existing PSUs and other power producers were different, without any reason for such
discrimination.
(b) Under Deemed Delivery Quantity (DDQ) clause coal had to be accepted and paid for by the supplier regardless
of the quality of coal supplied.
(c) Charging the transportation and other expenses from the buyers on supply of ungraded coal was found to be
unfair.
(d) Putting a cap on compensation for stones for new power producers.
(e) The provisions relating to review and termination of the agreement were found to be unfair and discriminatory.
(f) Incorporating conditions in force majeure clause which are not normally treated as force majeure for new power
producers.
The Commission observed that FSAs were essentially drafted and amended by CIL on its own and without any meaningful
consultation with other stakeholders. The “unfairness” emanated from the fact that CIL was in a position to influence the
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terms and conditions of the contract and has inclined them in its favour, with an attempt to formulate the contract with
unequal non-benign effect on the buyer. The Commission further held the following provision to be discriminatory:
(a) Grade slippage: Omission of provision of re-declaration in the model FSA for new power producers was held to
be ex facie discriminatory as CIL or its subsidiaries had not been able to justify the reason on any intelligible
differentia for such discrimination.
(b) Provisions for sampling of coal between PSU and private producers: FSA did not impose a strict liability upon
the CIL to supply only the agreed grades but only mentioned about making adequate arrangements to assess the
quality and for providing monitoring mechanism to prevent loading of ungraded coal. However, if the ungraded
coal was loaded and transported, there was no provision for compensation and the buyer had to bear all the
expenses on transportation, royalty and taxes etc.
(c) The capping of compensation to 0.75% of the total quantity of coal supplied for oversized coal/stones was not
based on actual quantity or any other reasonable basis besides being discriminatory between new and existing
power producers.
(d) The provisions of force majeure events listed in the FSA were so widely worded that the only inference which
could be drawn therefrom was that the same were put by a dominant party to the agreement to dilute its
commitment for supply of coal.
The Commission, in light of all factors concluded that opposite parties resorted to unfair and discriminatory conduct by
inserting different clauses in FSAs with PSU power producers vis-a-vis new private producers in contravention of the
provisions of section 4(2)(a)(i) and also imposing unfair/discriminatory conditions and indulging in unfair/discriminatory
conduct in the matter of supply of non-coking coal to power producers. Cease and desist order was passed. FSA clauses
found to be in contravention were ordered to be modified. The commission also imposed a penalty of 3% of the average
turnover of the last three years of CIL, amounting to Rs 1773.05 crores.
[Note: COMPAT, initially imposed a status quo on the Commission’s order directing the state-owned miner Coal India to
pay Rs 1,773 crore penalty for alleged abuse of monopoly position. The Tribunal said an unconditional status quo has to be
maintained in the case and the miner need not enter into negotiations with its consumers for a review of provisions related
to coal supply under Fuel Supply Agreements (FSAs), said a senior official close to the development. The Tribunal on 17
May 2016 set aside the Commission’s 2013 order which imposed a Rs 1,773 crore fine on Coal India Ltd (CIL) and three
of its subsidiaries for misusing their monopoly to supply poor quality coal and fixing prices, on grounds of violation of
principles of natural justice. The tribunal’s decision was on a preliminary finding that not all the members of the
Commission who signed off on the ruling were present during the hearings.1032] The Commission in a fresh order in
March 2017 had cut the penalty imposed on coal India Ltd to Rs 591 crores for abuse of its dominant position. However,
now the National Company Law Appellate Tribunal (NCLAT) has stayed the ruling by the Commission.
In Coal India Ltd (CIL),1033 the Commission was dealing with multiple allegations filed against CIL.1034 On analysis of
the terms and conditions of FSA, the DG concluded that CIL and its subsidiaries had violated the provisions of section
4(2)(a)(i) of the Competition Act, 2002 by imposing unfair or discriminatory conditions in the relevant market. The
following terms and conditions were found by the DG to be unfair or discriminatory:
1. Review of declared grade: There was no provision for non-power sector for review of grade and the terms and
conditions in this regard were discriminatory in nature.
2. Procedure for sampling and analysis of quality of coal in FSA on one side did not obligate the seller to provide
for the best and fair sampling methods and on the other side it also diluted the consequences of poor quality
supply.
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3. The provisions in FSA relating to oversized coal and stones were found to be unfair as the opposite parties were
not obligated to ensure the quality of coal supplied to its buyer. Further in the event of supply of oversized coal or
stones the provisions relating to compensation are also found to be unfair and discriminatory.
4. The terms and conditions of MoU, meant for the new consumers were found to be tilted in favour of the coal
companies and indicating exploitative conduct of the opposite parties.
5. The clauses relating to compensation for short supply and performance incentive were found to be unfair to the
extent that while calculating the Delivered Quantity (DQ).
DG, considering the physical characteristics and the use of non-coking coal, found that there was no substitute of the non-
coking coal available for the thermal power plants and sponge iron manufacturers in India. Therefore, the relevant product
market for the purpose of investigation in this case was delineated as
supply of non-coking coal to the consumers including the thermal power producers and sponge iron manufacturers.
Also, since the condition for supply of coal in the entire country was uniform and homogenous since there are no barriers
within the territory of India in terms of geographic location for the consumers, the relevant geographic market was taken as
the whole of India. The DG also found the opposite parties to be in a dominant position as per the provisions of the
Competition Act, 2002 as there were no competitive forces against the opposite parties and CIL and its subsidiaries were
absolutely in a position to affect consumers/the relevant market in their favour. The Commission, however, in light of the
order passed by the Commission in Maharashtra State Power Generation Co Ltd v Mahanadi Coalfields Ltd1035 held that
in respect of Case Nos. 05, 07 and 37 of 2013 where the consumers of non-coking coal were thermal power producers,
“supply of non-coking coal to the thermal power producers in India” was the relevant market. Accordingly, in respect of
Case No. 44 of 2013 where the consumers (members of the association) of non-coking coal were sponge iron
manufacturers, “supply of non-coking coal to the sponge iron manufacturers in India” was the relevant market. The
Commission noted that in view of the provisions of the Coal Mines (Nationalisation) Act, 1973, production and
distribution of coal was in the hands of the Central Government. As a result, CIL and its subsidiary companies had been
vested with monopolistic power for production and distribution of coal in India giving, the coal companies a dominant
position in relation to production and supply of coal. Therefore, CIL and its subsidiaries were held to enjoy undisputed
dominance in the relevant markets. The Commission agreeing to the DG’s conclusion held the opposite parties to be in
contravention of the provisions of section 4(2) (a)(i) of the Act for imposing unfair/discriminatory conditions and
indulging in unfair/discriminatory conduct in the matter of supply of non-coking coal.1036 (see note above)
In another directive against Coal India for abusing its dominant position in the case of [Bijay Poddar v Coal India Ltd;1037
Sai Wardha Power Co Ltd v Western Coalfields Ltd1038], the Commission via two separate orders asked the state-owned
miner to cease and desist from unfair business practices. The final orders were passed on 27 October 2014 in Case Nos. 59
& 88 of 2013 on information filed by Shri Bijay Poddar and M/s Sai Wardha Power Co Ltd respectively. The Commission
noted that there did not exist any substitute for non-coking coal which was made available to the bidders under the spot e-
auction and, as such, the relevant market was “sale of non-coking coal to the bidders under Spot e-Auction in India”.
Further, the Commission noted that by virtue of the provisions of the Coal Mines (Nationalisation) Act, 1973, production
and distribution of coal was in the hands of the Central Government. As a result, CIL and its subsidiary companies had
been vested with monopolistic power for production and distribution of coal in India. In view of the statutory and policy
scheme, the coal companies had acquired a dominant position in relation to production and supply of coal. The dominant
position of CIL was acquired as a result of the policy of Government of India by creating a public sector undertaking in the
name of CIL and vesting the ownership of the private mines in it. The provision in the scheme (clause 9.2 of Spot e-
Auction Scheme 2007) whereby a buyer was liable for penalty for non-lifting of coal after successful participation in the e-
auction without any corresponding liability upon the miner and its subsidiaries for failure to deliver the dry fuel in respect
of accepted bids was held to be in violation of competition norms and was noted to be a result of market power exercised
by CIL and its subsidiaries. The Commission, however, decided not to penalise the company since fine was already
slapped in an earlier case. (see note above)
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The Tribunal1039 in appeal observed that the clause in the Scheme disturbed the normal contractual equilibrium, and the
uneven obligations were a result of market power exercised by Coal India. Further, Coal India was held to be unable to
rebut the allegation that failure to supply coal by the dominant Appellant to successful bidder, affected such bidders
financially in the following manner:
(i) Buyers/bidder lost interest for the money kept by Coal companies for more than 112 days which worked out to be
Rs 225 to 300 per tonne. (60 days was period of lifting time + 7 days approximately from coal value deposit + 30
to 60 days after expiry of Delivery order) and Coal India Ltd and its subsidiaries enjoyed this credit free of cost.
(ii) Bidder/buyers did not get any compensation from Coal India Ltd and its subsidiaries.
(iii) Bidder/buyers suffered on account of buying coal from open market at higher prices.
(iv) Bidder/buyers got into financial difficulties as they had to make double investment.
The Tribunal observed that the bidders agreed to the unequal terms, despite the adverse financial effect, because, there was
no competitive pressure on Coal India. For instance, forfeiture provision which arose from a condition prescribed in the e-
Auction Scheme and acted as a financial consequence of failure of the bidders to lift coal but failure to supply coal had no
financial consequence for the Appellant. Such discriminatory treatment was held to be unfair and was also held to
constitute abuse by Coal India of its dominant position in terms of section 4(2)(a)(i) of the Competition Act, 2002.
In Faridabad Industries Association (FIA) v Adani Gas Ltd (AGL),1040 FIA, registered as a society, with 500 members
primarily involved in a variety of industries including steel, textile, chemicals alloys, medical devices etc., submitted an
information against AGL, involved in the business of distribution of natural gas to a variety of customers including at least
90 members of the Informant based on a Gas Sales Agreement (GSA), alleging abuse of dominance. It was alleged that
that the terms of GSA were biased and one-sided, without any scope or flexibility to the members, who were solely
dependent on the AGL for the supply of natural gas. Commission held the relevant product market as “the market of
supply and distribution of natural gas to industrial consumers” on the following grounds:
• Classification of consumer: Based on the difference in end use of natural gas between industrial consumers [who
use it to meet the energy requirements in their plants for heating etc., with domestic consumers who use it for
cooking, for self-consumption or commercial consumers such as restaurants, malls, hospitals etc. who use it for
commercial purposes] and the difference in the price at which natural gas is supplied to these different consumer
segments necessitated a distinction to be made between consumers under the above categories.1041
• The Commission was also in agreement with the DG on natural gas being distinct and distinguishable from other
sources of energy in as much as natural gas in terms of its characteristics is a flammable gaseous mixture
composed mainly of methane which is made available to consumers through a network of pipelines. It was noted
by the DG that unlike other liquid hydrocarbons such as Furnace oil, Light Diesel Oil etc. which could be
considered as substitutes, natural gas being a product in gaseous state does not require any storage facilities at the
end of these consumers. Further, being almost free from sulphur compounds, natural gas is cleaner, smoke-free
and soot-free environmentally clean fuel as compared to liquid hydrocarbons. Being available on tap, natural gas
ensures an uninterrupted supply of fuel unlike liquid fuels which need to be periodically transported and stored
by consumers at their premises. Further, natural gas by burning more completely than other liquid fuels, also
results in better efficiencies.
It was further, noted that the Government of Haryana had authorised only one service provider (AGL) to build and operate
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a CGD network in district Faridabad which made district Faridabad the relevant geographic market in the instant case. The
Commission, while considering the factors involved in the determination of dominant position, held that AGL had 100%
market share in the relevant market, being the only entity allowed to supply natural gas by the state government. Also, the
distribution of natural gas was regulated, as per the provisions of Petroleum and Natural Gas Regulatory Board Act, 2006
and regulations thereunder. The Regulations specifically provided for three years marketing exclusivity from the date of
authorisation to an existing CGD networks and five years from the date of authorisation to a new CGD network from the
purview of common or contract carrier, consolidating the dominant position of the AGL.1042 The following clauses were
held to be in contravention of the provisions of section 4(2)(a)(i) of the Competition Act, 2002:
• Sub-clause 13.7 of GSA: The Commission noted that the terms and conditions provided that an excess payment
by the buyer to the seller due to erroneous billing/invoicing on the part of the seller gave rise to no liability
whatsoever on the part of the seller including interest, whereas a delayed payment by the buyer rendered him
liable to pay interest on “such rates as may be decided by the seller in future.” Further, in the event of any dispute
regarding amount payable, if any amount eventually became payable or reimbursable by the AGL to consumers,
there was no obligation on the part of AGL to pay interest on the said amount in terms of sub-clause
• Sub-clause 13.5: Despite specifying rate of interest to be levied in the event of delayed payment, the sub-clause
provided that the interest rate may be any such rates as may be communicated by the Seller in future. The
Commission held that this amounted to imposition of unfair conditions in contravention of section 4(2)(a)(i) of
the Act.
• Clause 17 (Expiry and Termination): The Commission endorsed the view of the DG which held that termination
of contract by AGL on account of failure to off-take 50% or more of the cumulative DCQ by the buyer during a
period of 45 consecutive days as against the longer period available to the AGL from GAIL, amounted to
imposition of unfair conditions in contravention of section 4(2)(a)(i) of the Act.
• Sub-clause 16.3: the Commission, in agreement with the analysis of the DG, observed that sub-clause 16.3 of
GSA to the extent the opposite party had reserved the right at its sole discretion to accept or reject request of
customers for force majeure amounted to imposition of unfair conditions in contravention of section 4(2)(a)(i) of
the Act.
• Sub-clause 11.2.1 of GSA: The Commission held that to the extent that the buyer was obliged to meet its MGO
payment obligation even in the event of emergency shutdown calling for complete or partial off-take of gas,
amounted to imposition of unfair conditions in contravention of section 4(2)(a)(i) of the Act.
The Commission, therefore, ordered AGL to cease and desist from indulging in the conduct, which had been found to be in
contravention of the provisions of the Competition Act, 2002 and asked the GSA to be modified in light of the observations
and findings recorded. The Commission decided to impose penalty on AGL at the rate of 4% of the average turnover of the
last three years which amounted to Rs 256 million.1043
The Schott Glass case1044 concerned with the glass tubes, manufactured by Schott Glass Ltd, and then sold to the
manufacturers of glass ampoules, vials, cartridges and syringes etc., which were in turn sold to pharmaceutical companies
for storing drugs. The market of borosilicate glass tubes, thus was the upstream market whereas the market of ampoules,
vials, cartridges, syringes etc. were in the downstream market. In May 2008, Schott group through Schott Pharmaceutical
Packaging GmbH (Schott Packaging) a subsidiary of Schott Germany entered into a Joint Venture Agreement (JV) with a
downstream ampoule manufacturer Kaisha Manufacturers Pvt Ltd to form Schott Kaisha Private Ltd (Schott Kaisha)
(Kaisha) to integrate the operations of Schott in India vertically and with downstream glass containers manufacturing
business. It was alleged that Schott Glass was engaged in unfair and discriminatory pricing in as much as it sold its product
at predatory prices which were lesser than its cost of production as well as prevailing prices in the international market in
order to drive out the existing competitors in the upstream market. further, it was alleged Schott Glass was charging unfair
prices and was also granting loyalty rebates and discounts in order to prevent the shift of ampoules manufacturers to
imports and to ensure that ampoules use glass tubes of the Appellant alone. The Commission categorised the relevant
market broadly into two upstream relevant product markets, namely (a) Market for “Neutral Clear USP-I borosilicate Glass
Tubes” (NGC) and (b) Market for “Neutral Amber USP-I Borosilicate Glass Tubes” (NGA) and downstream market to be
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the market for (a) containers that is ampoules, vials, dental cartridges and syringes made out of NGC in India, and (b)
market for containers that is ampoules, vials, dental cartridges and syringes made out of NGA. Relevant geographic market
was the whole of India.
The Commission noted that as far as the “market share” was concerned, Schott Glass’ market share both in “sale quantity”
and “sale value” was the highest in comparison to its competitors Nipro/Triveni, as also the material imported. The
Commission found that the market share of Schott Glass in the upstream relevant market exceeded its nearest competitors
and remained significantly high for a period of three years and this was indicative of its position and strength. The
Commission also noted that it had a downstream market in Schott Kaisha. Schott Kaisha was the leading player in the
market of ampoules and therefore, it was held that the Schott Glass together with JV Schott Kaisha, a related group
concern, enjoyed a position of strength in the upstream as well in the downstream relevant market. The Commission
observed that sale and size of Nipro, the only competitor in the Indian market, vertical integration in the downstream
market, dependence of the consumers, presence of entry barriers like heavy capital requirement, huge running cost, high
gestation period, economies of scale in the production of the upstream relevant products along with the size and economic
power of the Group gave it a huge commercial advantage over any of the competitors and contributed to its position of
dominance in the relevant market. In terms of countervailing buying power, the Commission found that in downstream
relevant market, leaving aside the JV Schott Kaisha, the other Converters lacked the requisite size or financial strength to
exercise countervailing buying power. In light of these factors, the Commission held Schott Glass to be the dominant
player in the upstream relevant market, while it held JV Schott Kaisha to be dominant in the downstream relevant market.
Discriminatory conditions and pricing contravening section 4(2)(a)(i) & (ii) of the Act: The Commission noted that the
increase in the quantity supplied may result in lower overall cost for a dominant supplier which can be passed on to the
consumers in the form of a more favourable discount. Also, Schott Glass was giving favourable conditions to its JV which
established the fact that cost was not the key consideration for the Schott Glass as price was fixed as per the long term
supply agreement of the JV. Further, target discounts coupled with loyalty rebates as a counterpart of a commitment from
the purchaser to place all or most of its requirements to the seller may act as a potent horizontal exclusionary device aimed
at fore-closing competition. The Commission, therefore found that Schott Glass violating section 4(2)(a)(i) and (ii).
Minority Opinion in the case however, held that for a discount policy to be discriminatory, it must be different rates for
equivalent transactions. To establish this, two conditions should be met: (i) dissimilar treatment to equivalent transactions;
and (ii) harm to competition or is likely harm to competition. Regarding the effect on competition, it was found that the
Converters manufactured and supplied containers to pharmaceutical companies based on their requisitions. The
pharmaceutical companies usually dealt with two-three Converters. Further, the prices of the containers were negotiated
between the Converters and pharmaceutical companies on a one-to-one basis. Therefore, the cost differential in inputs
caused by the discount scheme of Schott Glass did not affect the end price of the final products. Discounts scheme of
Schott Glass did not harm the competitive ability of the customers and competition in the downstream relevant markets.
The COMPAT relied on the observations of the Commission’s minority order which alluded to the EU and American
jurisprudence. The COMPAT ruled out the contravention of section 4(2)(a)(i) and (ii) of the Competition Act, 2002 and it
set aside the main order of the CCI. The Tribunal noted:
58. Being big is not bad. Being big and abusive is bad insofar as the competition culture is concerned. In our opinion, the
comparison of Schott Kaisha along with other Converters was also unnecessary. We have definite evidence that the sales and
business of almost all the Converter companies was on increase right from 2007 onwards. Similarly, the deductions reached in para
9.74 and the comparison of profits earned by JV with other Converters was also unnecessary unless it could be shown that the
downstream market was affected because of the profits earned by JV Schott Kaisha. After having quoted from Robinson Patman
Act, Article 82(c) of the EC Treaty and after correctly mentioning that for attracting the vice of discrimination in pricing, the two
principles; (i) dissimilar treatment to equivalent transaction and (ii) fulfillment of the conditions that the competition is harmed or
likely to be harmed, the CCI has unfortunately ignored the second principle. In short, we find the approach of the CCI to be
erroneous and we prefer to rely on the minority judgment of the learned Member Smt. Geeta Gouri. In view of our findings, it will
not be necessary for us to refer to the case law. However, insofar as the judgment of EU Commission in Portuguese Republic v
Commission of the European Communities (Case C-163/99) and also the judgment in Hoffman-La Roche & Co AG v Commission
(Case 85/76) are concerned, it will not be necessary for us to consider those judgments in view of the clear facts which have been
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brought out in our earlier discussion. We therefore set aside the finding of the CCI that the Appellant was guilty of section
4(2)(a)(i) and (ii) of the Act.
In Indian Exhibition Industry Association,1045 Indian Trade Promotion Organisation (ITPO) was held to impose unfair and
discriminatory conditions upon the third party organisers by taking long time in confirming the allotment dates; by not
deciding applications on first-come-first-basis; coupled with altering of time gap restriction guidelines to its advantage;
giving preferential treatment to its own fairs over competing fairs in contravention of the provisions of section 4(2)(a)(i) of
the Competition Act, 2002. The Tribunal1046, however, noted that both the DG and the Commission committed grave
illegality by refusing to appreciate the rationale of the time gap policy framed by the Government of India from 1999 and
its amendments from time to time, the licensing policy framed by the appellant in July 2006, which also contained time
gap clause, which was amended on multiple occasions and lastly on 20 May 2013. It was noted that both the DG and the
Commission completely lost sight of the fact that on 20 May 2013, the appellant had drastically amended the time gap
policy and reduced the time gap to three days between its own event and that of the private party of same product profile.
The only restriction maintained was that such trade fairs/exhibitions with the same profile cannot be organised at the same
time and there was ample justification for doing that.
In the matter of Ghaziabad Development Authority (GDA),1047 the Commission found GDA as dominant in the “the
market for provision of services for development and sale of low cost residential flats under affordable housing schemes
for the economically weaker sections in the district of Ghaziabad” and held that compelling the consumers to pay a far
higher price after a gap of more than seven years of launching the Scheme especially when they belonged to EWS with
limited capacity to pay was unfair and abusive under the Competition Act, 2002. The decision to raise the price of the flats
under the Scheme substantially viz. 3.5 time that of the original price without any justifiable reason, showed, as per the
Commission that the GDA had the ability to operate in the market without any constraint. The Commission therefore held
that inordinate delay and increase of flats without any justification amounts to unilateral modification of the terms of the
allotment of the flat as well as imposition of unfair condition in the sale of services provided by the OP in the relevant
market in contravention of the provisions of section 4(2)(a)(i) and not section 4(2)(a)(ii) of the Act. Imposition of penal
interest in case of delay of payment of the quarterly instalment by the allottees with no corresponding provision for GDA
for delay in giving possession of the flats was also held to be abusive, one sided and unfair and in violation of section
4(2)(a)(i) of the Act.
The Commission in its majority decision (2:1) found Easote having patent rights over the technology of G-Scan machines
and 100% market share to be dominant in the market for dedicated standing/tilting MRI Machines in India. The
Commission noted that the opposite party not only supplied G-Scan machines to the Informant which were not performing
to the level as assured, but also misled the Informant that new machines were being supplied to it whereas the Informant
was thrust upon with machines which were more than a year old. Such a conduct was held to be in contravention of section
4(2)(a)(i) of the Competition Act, 2002 being an unfair business practice. Further, refusal to supply “See through
Perforated RF Cage” despite the same being part of the project and charging for the supply of lesser priced opaque cage
perforated cage was held to be in violation of section 4(2)(a)(i) & (ii) of the Act. Refusal to provide Head Coils with the
machines was also held to be in contravention of section 4(2)(a)(i).1048
The Commission in the Google1049 case found Google to be in dominant position in “online general web search and web
search advertising services markets in India”. The Commission held Google to have abused its dominant position on the
following three counts: (a) Ranking of Universal Results prior to 2010 which was not strictly determined by relevance.
Rather the rankings were pre-determined to trigger at the 1st, 4th or 10 th position on the SERP. Such practice of Google
was unfair to the users and was in contravention of the provisions of section 4(2)(a)(i) of the Competition Act, 2002. (b)
Prominent display and placement of Commercial Flight Unit with link to Google’s specialised search options/services
(Flight) amounts to an unfair imposition upon users of search services as it deprives them of additional choices and thereby
such conduct is in contravention of the provisions of section 4(2)(a)(i) of the Act. (c) The prohibitions imposed under the
negotiated search intermediation agreements upon the publishers are unfair as they restrict the choice of these partners and
prevent them from using the search services provided by competing search engines. Imposing of unfair conditions on such
publishers by Google was held to amount to violation of the provisions of section 4(2) (a)(i) of the Act. Google was held to
have been using its dominance in the market for online general web search to strengthen its position in the market for
online syndicate search services. This was held to be in violation of the provisions of section 4(2)(e) of the Act. Further, as
competitors were denied access to the online search syndication services market, contravention of section 4(2)(c) of the
Act was also made out.
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Cases where no Abuse of Dominance under section 4(2)(a) was held
In the case of Adidas AG & others,1050 it was alleged that M/s Adidas AG, M/s Reebok International Ltd and M/s Reebok
India Co, as a group infringed section 4(2)(a)(i) and 4(2)(a)(ii) of the Competition Act, 2002 with respect to sale of
premium sports goods to it. It was stated that M/s Reebok International Ltd, through its wholly owned subsidiary Reebok
(Mauritius) Co Ltd, owned 93.15% equity in the M/s Reebok India Co and M/s Adidas AG acquired 100% equity in the
M/s Reebok International Ltd in 2005. Thus, since 2005, all the Opposite Parties belonged to a group headed by M/s
Adidas AG (the Adidas AG Group). Mr. Dutt contended that the terms of the Agreement which it entered into with the
Reebok India to run a franchise store at Noida were unfair and discriminatory vis-a-vis the agreement Reebok India entered
into with another franchise namely, M/s Neelkanth Traders. Some of such conditions were: difference in the rate of
commission assured to the Informant and M/s Neelkanth Traders, assurance of a minimum guaranteed payment for
operating the retail outlet to M/s Neelkanth Traders whereas Informant was not offered such term, M/s Neelkanth Traders
was promised a monthly rent to be paid to the property owner of the retail outlet whereas Informant was not offered such
term, unilateral power to terminate the Agreement.
On the basis of different intended end-usage, relevant market considered was the market of premium sports goods in
Noida. Also, based on the all India market share figure submitted by the informant, the Commission was of a view that
same set of players operate in the market for sale of premium sports-goods across India and the market share distribution
of the Adidas AG Group and its competitors in Noida was likely to follow the similar pattern. Commission was therefore
of a prima facie opinion that Adidas AG Group was dominant in the relevant market.
However, the Commission did not conclude any violation of section 4(2)(a)(i) and 4(2) (a)(ii) of the Competition Act, 2002
because, firstly, the Agreement was entered into in 2003 when the alleged dominant group had not even come into
existence. Secondly, the conduct of the Adidas AG Group vis-a-vis the Informant remained same even after 2005 (same
terms and conditions in the Agreement). The Commission observed:
Although, there were certain differences between the two franchisee agreements as stated above, the differences cannot be termed
as abusive unless they are discriminatory within the meaning of section 4(2)(a)(i) and 4(2)(a)(ii) of the Act .... It may also be
pertinent to note that a manufacturer is not be obligated to follow a single template agreement throughout its existence. With
passage of time and operations, the commercial arrangements may undergo a change .... The Agreement was renewable/terminable
after 3 years by mutual consent of the parties. Moreover, the difference of margins is not substantial which can be termed as
abusive within the meaning of Section 4 of the Act.1051
In the case of AK Jain v The Dwarkadhis Projects Pvt Ltd,1052 it was alleged that in the relevant market (provision of
services of real estate in the Revenue Estate of Dharuhera in the State of Haryana), Dwarkadhis Projects (P) Ltd was
abusing its dominant position through the buyer’s agreement related to (a) obtaining pre-consent of the allottee in favour of
OP to subsequently change the lay-out/building plan at any time without consent from the allottee; (b) obtaining an
unconditional undertaking from the allottee that the title deeds, plans and other documents were in order; (c) acquiring
waiver of time-limit of completion of construction of the project and giving possession on account of undisclosed events of
force majeure; (d) calculating super area at the sole discretion of OP; (e) acquiring the right to cancel the dwelling unit and
sell it to some other party in case the possession was not taken by the allottee even after having paid the full amount; (f)
authoriing OP to create all types of mortgages on the land and buildings under the project and; (g) appointment of sole
arbitrator at OP’s discretion.
As per the Commission the product market of “the provision of services of real estate” was too broad and would include all
types of real estate properties i.e. residential plots/flats, commercial and industrial properties which cannot be regarded as
interchangeable or substitutable for the simple reason of different characteristics of the products, their price and intended
use. The Commission therefore held that
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provision of services of development and sale of residential units in Dharuhera in the State of Haryana
would be appropriate relevant market in this case. However, the Commission found no evidence to hold the company as a
dominant enterprise in the relevant market. Information available in public domain showed that many building projects
were in progress in the above area providing the services of development and sale of residential units in Dharuhera in the
State of Haryana.1053 In the IRCTC case,1054 complaint was filed against Ministry of Railways (MoR) and Indian
Railway Catering and Tourism Corporation Ltd (IRCTC) alleging inter alia contravention of the provisions of sections 4
of the Competition Act, 2002. Relevant market was delineated by the Commission as
transportation of passengers through railways across India including the ancillary segments like ticketing, catering on board,
platform facilities etc. provided by Indian Railways.
It was noted that MoR through the Railway Board administered Indian Railways, which owned and operated India’s rail
network/transport. The Railway Board exercised all the powers of Government of India in relation to railways. As such,
the market was solely catered by passenger segment of Indian Railways within the geographic territory of India thereby
placing the Indian Railways in dominant position enabling it to operate independently of competitive forces and affect its
consumers and relevant market in its favour. The DG identified the following issues for the purposes of investigation:
• Unfair/discriminatory conditions in Passenger Reservation System: The various alleged unfair and
discriminatory conditions imposed by the Opposite Parties through its Passenger Reservation System (PRS) was
examined under the following heads:
Services charges imposed on e-tickets by IRCTC on tickets booked online through the PRS system: The
Commission noted that IRCTC provided only the facility for transacting with Indian Railways’ PRS System
through internet; and e-ticket prices were fixed by MoR in consultation with the Railways Board and IRCTC.
Further, it was optional for the customers to book tickets either through the internet or at the manual PRS
counters of the Indian Railways. Existence of a large number of manual PRS counters across India was
demonstrative of the availability of alternatives to the prospective customers of Indian Railways. Further, e-
ticketing facility was an additional value added service offered by IRCTC and as a condition precedent to
using its services, IRCTC required prospective customers to agree to certain terms and conditions in its user
agreement which contained information about service charges. Thus, the customer had a choice of avoiding
the service charges by booking through manual PRS counters. Moreover, considering various expenses like
administrative cost; maintenance cost of IT hardware and software; technical manpower costs of service
providers; recurring expenditure like rent, electricity charges, internet bandwidth charges; cost of offices and
zonal level co-ordination with railways; cost of investments in capacity enhancement and also replacement of
obsolete IT equipment; and Credit cost (amount paid by IRCTC in advance to IR), service charges were not
held to be unfair.
Additional charges if e-tickets booked through IRCTC agents: It was alleged by the Informant that apart from
service charges levied by IRCTC, an additional agent service charge is levied upon the passengers who are
unable to use IRCTC website and instead use the services of IRCTC authorised agents. It was alleged that
such levy from the poor passengers was unfair, discriminatory and arbitrary besides adversely affecting the
passengers of rural areas. The DG did not find any contravention on this count.
Payment of gateway transaction charges: It was alleged levy of payment gateway charges on online
payments for e-tickets amounted to imposition of unfair and discriminatory conditions. The Commission
noted that the payment gateway charges were fixed and levied by banks in accordance with RBI circulars and
guidelines; and IRCTC had no role to play insofar as payment charges are concerned and therefore held that
the allegation was unfounded.
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E-Wallet Scheme: It was alleged that the e-Wallet scheme, launched to address the problem of failed
transactions, was based on unfair pricing and conditions in contravention of Competition Law. The
Commission noted that the scheme was voluntary and was introduced to reduce the time taken in the process
of effecting online payment through other normal payment gateways provided by the banks, which some
times fail, due to technical reasons. Further, the E-wallet scheme was a closed system pre-payment
instrument. Being a closed system payment, the amount credited to e-wallet could be used only for services
available at IRCTC website and not for any other purpose. No contravention was therefore noted.
M.S. Sahoo, Member,1055 however, held that the opposite parties adopted a practice that charged more
for electronic service and less for brick-mortar service which distorted choice of customers in favour of
brick-mortar service and thereby penalised the use of technology which conserves resources for the OPs
as well as the economy and therefore, unfair to the OPs, the economy and also the customers.
Tatkal quota/premium Tatkal/VIP quotas; food charges: It was alleged that Tatkal Quota scheme was unfair
and arbitrary as it was being sold at an unfair price in the name of Tatkal quota which could be booked only
one day in advance resulting in chaos and confusion. It was however, noted that the power of earmarking of
Tatkal accommodation in different classes had been delegated to Zonal Railways who take a decision in this
regard keeping in view the utilisation pattern in that class during the previous financial year as well as
availability of accommodation. The accommodation so earmarked, however, in no case exceeds the
maximum Tatkal accommodation permissible. Further, it was pointed that the Tatkal Scheme as well as
Tatkal charges had been part of railway budget duly approved by the Parliament. Apart from meeting the
objective of last minute travel planning arising due to unforeseen events in family, business, students
travelling for examinations/interviews etc. no fault can be found in levying Tatkal charges against these
earmarked seats, especially considering huge losses faced by railways year after year.
Similarly, imposing cancellation/clerkage charges was not held to be unfair and discriminatory.
It was further noted that inclusion of food charges within the ticket fare for trains like
Rajdhani/Shatabdi/Duranto was not unfair and discriminatory. The Commission noted that
Rajdhani/Shatabdi/Duranto trains were designed as premium products of railways which gave fast, assured
and comfortable journey to the passengers. There were 1,200 odd trains in the Indian Railways in which
catering services were provided either through mobile catering or through static catering available at en route
stations. There were only 61 trains (Rajdhani-20, Shatabdi-22 and Duranto-19) in which compulsory catering
was provided comprising of just 5% of the total trains in which catering was not compulsory. The
compulsory catering was provided in these premium trains because they had very limited stoppages and for
short duration where it was not possible to provide quality catering from outside. Further, option if given to
passengers to carry their own food will make the business of quality catering services in these premium trains
financially unviable and in case of late running of these trains/disruption of traffic those passengers who carry
their limited food will not get food items in such trains. The situation may lead to public complaints against
the railways. Allowing food from outside may lead to security, safety and hygiene problem in these premium
trains.
Therefore, the Commission held that, the allegations of abuse of dominance was unjustified. It was held that allegation of
Market barrier for IRCTC agents, monopoly of food courts at the large railway stations had no merit.
In the Intel case, complaint was filed by M/s ESYS Information Technologies Pvt Ltd (engaged in sale/distribution of IT
components and other related products manufactured by companies such as Intel, Western Digital Components, Samsung
Electronics Ltd, Hynix, Acer, Xerox, Fuji, etc. in India) against Intel Corporation, Intel Semiconductor Ltd and its
subsidiary in India, M/s Intel Technology India Pvt Ltd1056 alleging abuse of dominant position through: (i) Imposing
unfair and discriminatory conditions such as prohibition on dealing with its competitors, reducing the credit period for the
Informant when it dealt with the products of AMD, etc. in violation of provisions of section 4(2)(a) (i) of the Competition
Act, 2002. (ii) Indulging in unfair pricing by discriminating price between the distributors and Original Equipment
Manufacturers (OEMs) in violation of provisions of section 4(2)(a)(ii) of the Act. (iii) Restricting and limiting the
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production by foreclosing the distribution network to its competitors in violation of provisions of section 4(2)(b)(i) of the
Act. (iv) Denying access to the market of microprocessor to its competitors by not allowing its distributors to deal with
their products and denying access to the market of personal computer and laptop to the Informant in violation of provisions
of section 4(2)(c) of the Act. (v) Imposing supplementary conditions whereby distributors are obliged to notify Intel when
they intend to deal with products of its competitors and tying high demand products with low demand products in violation
of provisions of section 4(2)(d) of the Act. (vi) Leveraging its dominant position in the market for its high demand
products for low demand products by compelling the distributor to sale its high demand product along with the low
demand products in violation of provisions of section 4(2)(e) of the Act.
As per the DG, microprocessor used in desktops PCs, mobile/portable PCs, servers and tablets are different in many
respect such as capacity, design, price, etc. and therefore, they are not substitutable with each other. On the basis of the
form in which microprocessor is used by its ultimate consumer, DG delineated four relevant product markets i.e. “the
markets of microprocessors for desktops PCs”, “the market for microprocessors of mobile/portable PCs such as laptops,
notebooks, net-books, etc.”; “the market of microprocessors for servers”; and “the market of microprocessors for tablets”.
Territory of India was taken to be the relevant geographic market. Also, based on market share and other factors, Intel was
thus held to be in dominant Position in the relevant market.1057
It was found by the DG during investigation that the Agreement did not prohibit and rather provided for distributors to deal
in competing products subject to intimation to Intel. It was also found during investigation that Intel’s distributors were
also distributing the products of Intel’s competing companies in India. Also, several OEMs business partners of India were
also procuring and using microprocessors of both Intel and AMD. Benefits offered by Intel to the distributors were not
linked to their dealing with the competing brand of microprocessors. Therefore, there was no question of foreclosure of
market for the competitors of Intel. It was seen that the scheme of incentives and targets were not unfair or discriminatory.
The Commission held in the light of evidences that no clause in the Agreement was found to be unfair or discriminatory as
alleged by the Informant. Further, it was not found that Intel was involved in activities which could be said to be unfair or
discriminatory as per the provisions of section 4(2)(a)(i) of the Competition Act, 2002. Thus, the Commission came to the
conclusion that the allegations of contravention of provisions of section 4(2)(a)(i) of the Act against Intel had not been
established. Also, it was noted after the analysis of the price data submitted by Intel, that there was hardly any price
difference between boxed microprocessors (purchased by the distributors) and tray microprocessors (purchased by OEMs),
though there existed cost difference between the two types of microprocessor. It was observed that OEMs were the
business partners of Intel whereas, the distributors were not. Any lower price given to OEMs on account of volume
discount or nature of their relationship was a reasonable business practice which could not be said to be unfair and
discriminatory.
Further, the issue for the consideration of the Commission was whether Intel was charging different price to different
customers i.e. the OEMs and the distributors for the sale of similar products with the same marginal costs. It was evident
from the facts on record that the cost of packaging of microprocessor for the distributors was different from the cost of
packaging microprocessor for OEMs, being higher for the former and lower for the latter. Thus, Intel had been charging
different prices because of cost difference and the prices appeared to be aligned to the costs. Further, from the DG findings,
it was observed by the Commission that OEMs were the business partner of Intel and were bulk purchasers. To give better
discount to the bulk purchase was noted as a common business practice and unless it impeded the ability of the reseller to
compete any competition concern would not arise. Further, the Informant had not been able to supply any cogent evidence
or reason to support its allegations. The Commission, agreeing with the DG, concluded that the alleged pricing policy of
Intel did not amount to secondary line price discrimination and had not resulted in foreclosure of any of its downstream
customers. Thus, the allegation of the Informant regarding charging of unfair and discriminatory prices by Intel in abuse of
dominance in violation of section 4(2)(a)(ii) did not stand established.
In the case of North Delhi Power Ltd1058 it was alleged that the electricity Distribution Companies in Delhi (North Delhi
Power Co (NDPL); BSES Rajdhani power Ltd; BSES Yamuna Power Ltd) were abusing their dominant position and were
behaving like a cartel in the supply of electricity in their area of supply. The Commission noted that the DISCOMS were
the only source of electricity available to the consumers in any particular licensed area for supply of electricity enabling
them to assume a position of dominance in their respective areas of operation to the relevant market of supply of electricity
to the consumers.
The DG found the DISCOMS abusing their dominant position basing its analysis on the data of test results of meters
conducted by Central Power Research Institute (CPRI), Bangalore, under the aegis of Public Grievance Cell constituted by
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Government of NCT of Delhi. The DG noted that 91.7% of the meters tested showed positive errors. Further, out of 2014
meters tested till 30 November 2009 a total of 96 meters (4.76%) showed positive error of more than 2.5%, exceeding the
maximum permissible error limit prescribed for Class-1 meters.1059 The DG, therefore, concluded that fast running of
meters resulted in inflated bills for the consumers which meant imposing unfair conditions in sale of electricity in violation
section 4(2)(a) of the Competition Act, 2002. The Commission though observed that fast running of meters resulted in
inflated bills for consumers that results in DISCOMS earning more revenue for less amount of electricity supplied,
amounting to unfair practice, the Commission felt that there was not enough evidence to prove that unfair practice
amounted to an abuse of dominant position by DISCOMS. The Commission noted that out of total consumer base of
approximately 42 lakhs, only 2014 non-random meters were tested in a span of around two and a half years constituting a
very small sample size (less than 0.1% of consumers) and was therefore, not a representative sample. Also, only 96 meters
(0.76%) were found to be erring on positive side beyond permissible limit of + 2.5% specified by BIS for Class 1 meters.
The absence of information as regards consumer choice cannot be categorized as abuse of dominance: The Commission
noted that regulation 35, permitted consumers to procure meters from any manufacturers as long as they conformed to the
BIS approved standards. The actual purchase pattern of meters in the three relevant geographic markets in Delhi, as
revealed by the investigation conducted by the DG, showed that in each of these areas only a miniscule share of the
consumers purchased their own meters, and these purchases. Further, the survey indicated that consumers were not aware
of the possibility of buying the meters directly from the market. The DG report concluded that this was the result of
inadequate efforts made by the DISCOMS for educating the consumers regarding the existing regulations. The prevalent
information asymmetry in the market led to the widely held presumption among the consumers that meters and electricity
were bundled products and the DISCOMS were the sole providers of it.
The Commission, however, examined whether given a choice, the consumers would have opted for purchasing their own
meters. It noted that Consumer decisions are guided by several considerations, which inter-alia include, price, preference,
convenience, specifications, quality and reliability, after-sales service etc. the following factors were considered by the
Commission:
• The Commission noted that a consumer buys or has the incentive to buy the meters from the market if there is a
price or quality differential between the two sources, i.e., DISCOMS and other vendors/manufacturers and only if
the differential is wide enough to cover for any transaction cost that a consumer will need to incur from buying
from the market rather than the supplier of electricity and nothing of that sort existed in the present market.
• if the consumer purchases the meter on his own, he does not get any rebate in the fixed monthly charges or
upfront deduction in the first bill for cost of meter as per the information available in the public domain. It is
again difficult to conclusively state that consumer’s choice in meters will be an effective choice due to cost
differential.
• Convenience and Maintenance: Installation facility, testing and sealing, Replacement facility added to the
consumer’s preference towards DISCOMS.
The Commission, therefore, concluded that the consumers would not have gained by purchasing on their own.
In the case of Saurabh Tripathy v Great Eastern Energy Corp Ltd (GEECL)1060, it was alleged that GEECL which was in
a dominant position in the relevant market of supply and distribution of CBM gas in Asansol-Raniganj-Durgapur belt,
imposed unconscionable terms and conditions in the Gas Sale and Purchase Agreement (GSPA) executed between GEECL
and the buyers of CBM gas. It was contended that the provisions of the contract as listed out below were unfair and
abusive:
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• the GSPA allowed the GEECL to unilaterally amend and terminate the contract and the same was not given to
buyer;
• that interest was payable by buyer but no interest was payable by seller in case of overcharged amount;
• the contract indemnified the seller against various risks, but no such indemnity was given to the buyer;
• the seller increased the price of gas despite the fact that cost of production was going down,
• the force majeure clause considered action by labour as a force majeure for the seller but the same was not
considered for the buyer;
The Commission found all the above clauses to not be abusive, unfair or discriminatory. The rational of the Commission in
its holding was that academic equivalence cannot be sought in contractual terms. Regard had to be paid to commercial
basis for equilibrium, logic and the numerous other factors that affect different contracts. On the issue of discriminatory
prices, it held uniform pricing might not be applicable due to different types of customers. It noted that
a lack of uniformity cannot in itself be a ground to hold discrimination, unless the same was demonstrably shown to be a result of
abuse, treating similar sets of customers differently.
The Commission also reasoned its findings by stating that the buyer (SRMB) negotiated for these terms and had not
objected to them yet; therefore, it upheld the commercially viable contract and found the opposite party to not had
contravened any of the provisions of section 4 of the Competition Act, 2002.
Competition Act, 2002 v Electricity Act, 2003: Abuse of dominance
It was alleged that Dakshin Haryana Bijli Vitran Nigam (DHBVN),1061 being the sole supplier of electricity in a certain
area, was abusing its dominant position by imposing an unfair and discriminatory price upon consumers by charging Fuel
and Power Purchase Cost Surcharge Adjustment (FSA) and cross subsidising the FSA cost by charging higher FSA from
consumers having higher consumption, admittedly with the approval of Haryana Electricity Regulatory Commission
(HERC). The Commission, while agreeing with the Appellant about dominance of DHBVN in the relevant market (market
for distribution of electricity in the licensed area of DHBVN in the State of Haryana), did not agree that differential pricing
in this case constituted abuse of dominance in terms of section 4 of the Competition Act, 2002. The Commission was of the
view that, classification of consumers and corresponding FSA charged followed a rationale whereby, domestic consumers
was charged less than the non-domestic consumers and different FSA was levied for different categories of consumers
depending upon the socio-economic conditions of the respective class of consumers. The conclusion of the Commission
was that, the classification appeared to have economic justification based on market segmentation and did not amount to
discriminatory conduct. The Commission, further, held that, the case essentially related to the functions discharged by the
Electricity Distribution Company and the State Electricity Regulatory Commission in respect of fixation of FSA and no
competition issue was discernible from the facts presented in the information. The Commission was of the view that, FSA
was computed and levied as per the Regulations framed by HERC and any issue regarding violation of the Regulations
was, therefore, to be dealt with by HERC and anyone aggrieved by the decision of HERC could go in appeal to the
Appellate Authority under the Electricity Act, 2003. The Commission accordingly closed the matter in terms of section
26(2) of the Act.
The COMPAT also noted that section 62 of the Electricity Act, 2003 allows segmentation of consumers for determining
tariff, which includes FSA, according to the consumer’s load factor, power factor, voltage, total consumption of electricity
during any specified period or the time at which the supply is required or the geographical position of any area, the nature
of supply and the purpose for which the supply is required. Thus, the differential levy of tariff had a statutory sanction. It
was further, noted that fixation of tariff is legislative in character and protective discrimination through differential tariff is
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permissible. COMPAT also held that Electricity Act, 2003 has its own system of addressing the issues of abuse of
dominance and other grievances of its consumers. In terms of section 60 of the Electricity Act, 2003, HERC was authorised
to issue such directions as it considered appropriate to a licensee, if it abused its dominant position or entered into a
combination which was likely to cause or caused an adverse effect on competition in the electricity industry and
contravention of directions of HERC was liable for punishment under section 146 of the Electricity Act, 2003. Therefore,
HERC can address the issue of abuse of dominance. It was also held that in case of a conflict between provisions of the
Electricity Act, 2003 and the Competition Act, 2002, the former will override. The Electricity Act, 2003 is admittedly a
later special statute and in the event of irreconcilable inconsistency between the Electricity Act, 2003 and the Competition
Act, 2002 the former would override even though the Competition Act, 2002 contains the non obstante clause in section 60.
In its order, COMPAT observed that, there is an implied immunity from Competition law in matters of electricity tariff
approved by the Appropriate Commission in terms of the Electricity Act, 2003 and therefore, the Appellant cannot seek
any relief under the Competition Act, 2002. It was also held that the Commission lacks jurisdiction in this case; hence, the
issue, whether the Appellant was able to establish a prima facie case of contravention under section 4, was only academic
in nature. Assuming that the Commission had jurisdiction, COMPAT agreed to its finding that the Appellant had failed to
establish a prima facie case of contravention of section 4 and dismissed the appeal.
Pricing Abuse – Section 4(2)(a)(ii)
Pricing abuses may come under the purview of competition law as an abuse of dominance. Pricing abuses may be
“exclusionary” i.e. pricing strategies adopted by dominant firms to foreclose competitors. Such strategies include a wide
variety of measures, such as predatory pricing, price squeezes, loyalty rebates. Pricing abuses may also be “exploitative”
i.e. which cover instances where a dominant firm is accused of exploiting its customers by setting excessive prices. The
prohibitions on both “exclusionary” and “exploitative” price are set out in section 4(2)(a)(ii) of the Competition Act, 2002.
Imposition of unfair price has been explicitly stated as an abusive act under section 4(2)(a)(ii) which states that there shall
be an abuse of dominant position, if an enterprise or a group directly or indirectly imposes unfair or discriminatory price in
purchase or sale (including predatory price) of goods or services. Evidently, a dominant firm, under the Act, abuses its
dominance if it charges “unfair prices” to its customers, which may include both an unfairly high or excessive price and
unfairly low or predatory price. Thus, excessive price forms a subset of “unfair price” in the Indian context.
Unfair Pricing – Excessive Pricing
Section 4(2)(a)(ii) is similar to the prohibition in Article 102 (a) of the TFEU, which provides that an abuse by a dominant
undertaking shall include directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions
For instance, in AAMS v Commission,1062 the terms of the distribution agreements which the dominant wholesale
distributor of cigarettes in Italy imposed on foreign producers were held to be unfair. They were also objectionable in that
they limited the foreign producers’ access to the Italian market, contrary to the imperative of the single market. In another
example, in its 1999 decision in the 1998 Football World Cup case,1063 the European Commission held that discrimination
on basis of nationality by dominant firm selling tickets (those who gave residential address in France were given
preference vis-à-vis those who were residing outside France), does not fall outside the scope of Article 82.
The Commission in the case of Shamsher Kataria v Honda Siel Cars India Ltd,1064 looked into the seminal cases
establishing the legal test for excessive pricing under Article 82 of the EC Treaty (now Article 102 of TFEU). In United
Brands Co and United Brands Continental BV v Commission,1065 the ECJ held that “charging a price which is excessive
because it has no reasonable relation to the economic value of the product supplied” could constitute abuse of a dominant
position. The ECJ in United Brands proposed a cost-based test to assess the relationship for the purposes of Article 82
between the economic value of the product/service and the price charged for it by a dominant undertaking. It was
accordingly held that the questions to be determined are whether the difference between the costs actually incurred and the
price actually charged is excessive, and, if the answer to this question is in the affirmative, whether a price has been
imposed which is either unfair in itself or when compared to competing products.
Thus, as per the test set by the ECJ in United Brands case the first stage of the analysis aims to identify the profit margin of
the dominant enterprise and then to use that information to demonstrate whether the price is “excessive”. If it is, then the
second stage considers whether the excessive price is unfairly high and consequently abusive. This considers whether the
price imposed by the dominant enterprise is unfair in itself or when compared to other prices of competitors. The first stage
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of the test for exploitative pricing involves calculating the difference between the production cost and the price of the
product/service in order to identify the profit earned by the dominant enterprise.
Cases under Competition Act, 2002
In the case of HT Media Ltd v Super Cassettes Industries Ltd,1066 it was alleged that Super Cassettes Industries Ltd1067
owning/controlling 70% of the latest Bollywood music, abused its dominant position by (i) charging excessive amount as
license fees/royalty from the informant for grant of rights for the broadcast of the opposite party’s music content on Fever
104 radio station; (ii) imposing minimum commitment charges (MCC) to be paid to the opposite party per month
irrespective of actual needle hour (a needle hour is an aggregate of 60 minutes of actual broadcast of sound recordings by
FM radio station excluding commercials, advertisements, voice over, anchor time etc.) of broadcast of the opposite party’s
music content by the informant and (iii) making conclusion of licensing arrangements with the opposite party subject to the
acceptance of license fees and MCC imposed by them. The informant further, alleged that such imposition of exorbitant
license fees and MCC by the opposite party was an unfair condition imposed by it for granting license to broadcast its
music content on radio under the Competition Act, 2002, which limited and restricted the right of the informant to
broadcast its music content of other music companies/composers thereby limiting the choice of music for the end
consumers to only the opposite party’s music content and resulting in denial of market access for other music companies
(publishers, copyright societies etc.) with less market share and bargaining power. The Commission considered the
relevant product market as “market for licensing of Bollywood music to private FM radio stations for broadcast.”1068 The
Commission considered various factors1069 to hold that Super Cassettes was dominant in the relevant market. It was
argued that the prices charged by Super Cassettes were much higher than the industry norms or the prices charged by its
competitors in violation of section 4(2)(a)(i) of the Act. The Commission while noting that determining whether a price is
excessive is an uncertain and difficult task, held that charging more than industry norms cannot be in itself held to be
excessive. It was thereby observed:
198. ...The opposite party has submitted that cost analysis for setting the license fee is not possible as the cost of a sound recording
is reflected in the acquisition price paid as ‘royalty’ to the owners, whereas if the sound recording is developed in-house, the cost is
categorised as ‘recording expenses’. As against the said direct costs, the opposite party has various avenues for commercially
exploiting the same and it is very difficult to apportion the cost of acquisition of sound recording to different revenue streams.
Moreover, certain sound recording may be expensive to acquire but the music may turn out to be a flop, the reverse may also be
true. Therefore, the value of a particular sound recording would depend upon its popularity and not its cost.
199. The Commission notes that in the absence of the cost data it will be difficult, neigh impossible, to term the price charged by
the opposite party at 661 INR per needle hour as unfair being excessive solely on the basis that it is higher than the price charged
by the competitors of the opposite party. In view of all factors discussed in the preceding paragraphs above, the Commission holds
that a case of excessive pricing has not been made out against the opposite party.1070
In the case of Shivam Enterprises,1071 information was filed against Kiratpur Sahib Truck Operators Co-op Transport
Society Ltd (KSTOCL)1072 and its members to have abused its dominant position in fixing freight charges, allowing only
the trucks owned by its members to engage in freight transport of goods from Kiratpur region and obstructing non-
members to operate in the area. The relevant market taken was “provision of services of goods transportation by trucks in
and around Kiratpur area in Punjab” and on the basis of absence of any competitor and complete dependence of the
consumers in the relevant market KSTOCL was held to be in the dominant position. It was proved that M/s Jaiprakash
Associates Ltd which had a willing transporter to execute its job at Rs 1.50 per MT/KM was forced to enter into a contract
with KSTOCL at much higher rate i.e. at Rs 2.56 per MT/KM. It was also concluded that KSTOCL’s strong-arm tactics
not only ousted a potential competitor offering services but also compelled the customer to avail of its services at a price
which was much higher than what was otherwise available to such customer. The Commission therefore concluded that the
KSTOCL imposed unfair prices for transportation services in contravention of the provisions of section 4(2)(a)(ii) of the
Competition Act, 2002.
In the case of Shamsher Kataria v Honda Siel Cars India Ltd,1073 the Commission defined the relevant product market
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consisting of two separate relevant markets; the primary market one for manufacture and sale of cars and the other for the
sale of spare parts and repair services. In light of the factors like technical specificity, market share of OEMs of the spare
parts and repair services aftermarket for their own brand of cars, dependence of consumers on the enterprise, entry barriers
created for independent repairers, the Commission was of the view that each OEM was a 100% dominant entity in the
aftermarket for its genuine spare parts and diagnostic tools and correspondingly in the aftermarket for the repair services its
brand of automobiles. The Commission analysed the alleged abusive practices of the OEMs within the parameters of
section 4(2) of the Competition Act, 2002 with two main considerations:
(a) Ability of the consumers to freely choose between an independent repairer and an authorised dealers without
being faced by any adverse financial consequences; and
(b) Ability of independent repairers to access the aftermarket and provide services in a competitive manner.
It was noted that the OEMs sourced their components/spare parts to be used for the assembly line requirements as well as
aftermarket requirements primarily from the local original equipment suppliers (OESs). Several components assembled in
the car were also imported from overseas suppliers. Therefore, the cost of production of a spare part for an OEM is the
price at which the spare part was sourced from the OESs or the overseas suppliers. Based on the DG’s findings, the
Commission noted that there had been a substantial markup in the prices of spare parts from the point at which such spare
parts were sourced from the OESs and other overseas suppliers and the price at which they are available to the consumers
across all OEMs1074 ranging 100% to 5000%. The Commission in light of the ECJ ruling in United Brands Case1075
observed that in the absence of the any submissions of the OEMs indicating a break-up of the productions costs, it was
prudent to adopt the procurement costs as an approximate estimation of the production costs of the OEMs with respect to
the spare parts procured from OESs and other suppliers for its assembly line and aftermarket requirements. The
Commission further noted:
20.5.94 The concept of unfairness of a price is related to the notion that such price is unrelated to the ‘economic value’ of the
product and that such price are being charged by the enterprise because of its capacity to use its market power or position of
strength in that relevant market to affect its competitors or consumers in its favour. As evident from the DG’s investigation, the
OEMs are charging a substantially high price for its top 50 spare parts, without which the respective owners of the various models
of the automobiles manufactured by the OEMs cannot get their automobiles repaired, serviced or maintained in the aftermarket.
The actual cost of procuring the spare part is much lower than the price at which they are being sold to the ultimate consumer;
however, the value of such spare parts to the consumer is great, because without such spare parts the owner will not be able to
effectively repair his automobile. Even if the OEM has substantially marked up the price of its spare parts; the locked-in consumer
would be forced to purchase such spare parts in order to effectively render the much expensive primary market equipment, i.e., the
automobile itself, in a workable condition. If the aftermarket was open to competition; i.e., the OEMs were not the only source of
the genuine spare parts and diagnostic tools in the aftermarket; the OEMs would not have been able to maintain such high markups
without facing necessary competitive restraints.
20.5.95 In British Horseracing Board v Victor Chandler International,1076 it was held that “in determining whether a price is
unfair it is necessary to consider the impact on the end consumer and all of the market conditions. In a case where unfair pricing is
alleged, assessment of the value of the asset both to the vendor and the purchaser must be a crucial part of the assessment.” As
discussed above, the value of a spare part for the OEM is the cost at which the spare part is procured from its supplier; while the
value of the spare part for the consumer is disproportionally higher. This is because the value of the spare part for the consumer has
to be understood in relation to the use of the spare part to effectively repair and render his automobile in a workable condition.
Therefore the willingness of the locked-in consumer to pay a particular price for a spare part has to be understood in the context
that he perceives the spare part as a necessary secondary consumable product for the effective working of his primary product. The
OEMs necessarily exploit such a position of the consumer by charging higher marked-up prices in the secondary market.
20.5.96 In analysing the unfairness of the prices charged by the OEMs, it is necessary to ascertain whether the dominant enterprise
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has made use of the opportunities arising out of its dominant position in such a way as to reap trading benefits which it would not
have reaped if there had been normal and sufficiently effective competition.
The Commission further relied on the ECJ judgment in General Motors Continental NV v Commission1077 to emphasise
on the fact that the OEMs were the only source of supplying spare parts for its brand of automobiles in the aftermarkets
which allowed such OEMs to use the opportunities arising out of its dominant position to reap trading benefits which it
would not have reaped if there had been normal and sufficiently effective competition. The analysis of the cost-price data
proved the ability of the OEM to price the spare parts without being subject to any constraints since there is no competition
in the spare parts market. Given the complete dependence of the users on the OEM for their spare parts requirements, the
interest of consumers were not safeguarded in form of competitive prices of spare parts in the present scheme of things.
The aftermarket contributed a modest 24% in revenues to OEMs, however, a sizable 55% of profit was derived from this
segment (Sale of spare parts) [CII-Mckinsey Report]. The Commission was of the opinion that such sizeable revenues
from the sale of spare parts was possible because of the fact that the OEMs were able to mark-up the price of spare parts
without any competitive constraints. The Commission therefore held that the OEMs had insulated themselves from all
possible competition in the aftermarket, (a) through then network of restrictive contracts and (b) pursuant to the fact that
spare parts of various models of automobiles were not interchangeable with other brands, had ensured that they were the
only source of supplying spare parts for its brand of automobiles in the aftermarkets, thereby significantly enhancing such
enterprise’s degree of exploitative pricing. In deciding the remedies in this case, the Commission’s primary objective was
to correct the distortions in the aftermarket, to provide corrective measures to make the market more competitive, to
eradicate practices having foreclosure effects and to put an end to the present anti-competitive conduct of the parties.1078
In the case of Vidharbha Industries Association v MSEB Holding Co Ltd & Others,1079 it was alleged that the opposite
parties as a group abused their dominant position in the relevant market (market for the “provision of services for
distribution of electricity in the State of Maharashtra except Mumbai”) by deliberately generating and distributing
electricity in an extremely inefficient manner and denying market access to other efficient power generating companies for
generating and distributing electricity in the State of Maharashtra. It was averred that irrespective of the price charged by
Maharashtra State Power Generation Co Ltd (opposite party-2), Maharashtra State Electricity Distribution Co Ltd
(opposite party-4) purchased all the electricity/power generated by opposite party-2.
It was alleged that inefficiency of power generation by opposite party-2 was reflected in its high cost which in turn was
reflected in the high cost structure and revenue forecast submitted by opposite party-4 to MERC. As a result, higher tariffs
were decided by the MERC and the in the end consumers in the relevant geographical market were paying the highest
electricity tariff compared to all other states in India. The Commission observed that the purchase price of electricity of
opposite party-4 from power generating companies was determined by the Central/State Electricity Regulatory
Commission for each year in accordance with the statutory power vested in it under the Electricity Act, 2003 and relevant
regulations thereunder. The Commission noted that determination of tariff between opposite party-2 and opposite party-4
by MERC was in line with the established rules and regulations and within the purview of the regulatory architecture under
the Electricity Act, 2003. Thus, there no contravention of section 4(2)(a)(ii) of the Competition Act, 2002 on part of the
opposite party was held.
FOREIGN CASE LAW
Cases from US
Spectrum Sports v Shirley McQuillan:1080 Defendants held the patent to a polymer used in athletic goods. Plaintiff
distributor refused to sell its right to develop goods made from the material, so that it could retain its rights to manufacture
equestrian products. Defendants, therefore, appointed another distributor. Plaintiff brought suit, claiming violations of the
Sherman Act and Clayton Act, 15 U.S.C.S. §§ 2 and 3, the Racketeer Influenced and Corrupt Organizations Act, 18
U.S.C.S. § 1962, and state unfair practices law. The trial court found defendants liable for attempted monopolisation and
denied their motions for judgment notwithstanding the verdict and for a new trial. The Ninth Circuit affirmed the decision.
Supreme Court of the United States rejected the assertion that attempted monopolisation may be proven merely by
demonstration of unfair or predatory conduct. Instead, conduct of a single firm could be held to be unlawful attempted
monopolisation only when it actually monopolised or dangerously threatened to do so. Thus, the Court rejected the
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conclusion that injury to competition could be presumed to follow from certain conduct. The causal link must be
demonstrated.
In USA v Grinnell Corp,1081 it was held that the offence of monopoly under section 2 requires two elements: (1) the
possession of monopoly power in the relevant market and (2) the willful acquisition or maintenance of that power as
distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident.
In Harrison Aire,1082 a hot air balloon ride operator, alleged antitrust violations by Raven Industries and its balloon-
manufacturing subsidiary, Aerostar International. It was held that to support an inference of monopoly power, a plaintiff
typically must plead and prove that a firm has a dominant share in a relevant market, and that significant “entry barriers”
protect that market. Barriers to entry are factors, such as regulatory requirements, high capital costs, or technological
obstacles, that prevent new competition from entering a market in response to a monopolist’s supra competitive prices.
(“Without barriers to entry it would presumably be impossible to maintain supra-competitive prices for an extended time.”)
In USA v Microsoft Corp,1083 Microsoft Corporation was accused of becoming a monopoly and engaging in abusive
practices. The plaintiffs alleged that Microsoft abused monopoly power on Intel-based personal computers in its handling
of operating system and web browser sales. It was held that to be condemned as exclusionary, a monopolist’s conduct must
have an anticompetitive effect—it must harm the competitive process and thereby harm consumers.
In Conwood Co v US Tobacco Co,1084 there was an allegation pertaining to denial of market access by a manufacturer to
exclude competitors from the market. The Court of Appeals, held that the manufacturer liable on account of fulfillment of
the following pre-requisites:
(1) willful maintenance of monopoly power; (2) plaintiff’s injury flowed from defendant’s anti-competitive activity; (3) district
court did not abuse its discretion in determining that plaintiff’s expert’s methodology was sufficiently reliable or relevant; and (4)
there was sufficient evidence to support jury’s award of damages.
In Aspen Skiing Co v Aspen Highland Skiing Co,1085 The Supreme Court, held that the evidences were sufficient to
support conclusion that owner of three of four major ski areas in Aspen, Colorado, had no valid business reason for
discontinuing its participation in a jointly-offered interchangeable six-day “all-Aspen” lift ticket, which provided
convenience to skiers who visited the resort; thus, refusal of owner of the three areas to cooperate with its smaller
competitor violated § 2 of the Sherman Act, 1890 prohibiting monopolisation or attempts to monopolise.
In Otter Tail Power Co v USA,1086 it was held that Otter Tail used its monopoly power in the towns in its service area to
foreclose competition or gain a competitive advantage, or to destory a competitor, all in violation of the antitrust laws. The
District Court determined that Otter Tail has “a strategic dominance in the transmission of power in most of its service
area” and that it used this dominance to foreclose potential entrants into the retail area from obtaining electric power from
outside sources of supply. Use of monopoly power “to destroy threatened competition” is a violation of the “attempt to
monopolise” clause of § 2 of the Sherman Act, 1890.
In Associated Press v USA,1087 A cooperative news association had bylaws that permitted member newspapers to bar
competitors from joining the association. It was held to be in violation of the Sherman Act, 1890, even though the
transgressor “had not yet achieved a complete monopoly.”
Cases from European Union
Article 102 of the Treaty on the Functioning of the European Union prohibits an enterprise dominant in the relevant market
from abusing its dominant position. The following cases elucidate on the reasoning of the courts in various cases brought
before it:
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The United Brands v Commission1088 relates to alleged abuses of dominant position by United Brands Co, the importer of the
Chiquita brand of Latin American bananas. United Brands supplied these bananas unripe and in bulk to distributor/ripeners
operating in various EC countries. The distributors would buy them while still green, ripen them using their own facilities and
distribute them to retailers across their national markets. The European Commission found in 1975 that United Brands had
infringed Article 82 (then known as Article 86). The first abuse identified by the Commission was United Brands’ restriction on its
distributors from reselling its bananas while still green. Since ripe bananas have short shelf lives, the effect of this restriction was
to prevent distributors from selling in other countries. It was held that unjustified restriction tending to partition the common
market was abusive, irrespective of whether it had any exclusionary effect
In British Airways PLC v Commission (Virgin Atlantic Airways Ltd intervening),1089 the Commission found that the performance
reward schemes implemented by British Airways in order to calculate travel agents’ commissions constituted an abuse of the
dominant position held by British Airways on the United Kingdom market for air travel agency services. Although their exact
functioning changed over time (British Airways modified its bonuses policy in 1998), the commission schemes put in place by
British Airways had one notable feature in common: in each case, meeting the targets for sales growth led to an increase in the
commission paid on all British Airways tickets sold by the agent, not just on the tickets sold after the target is reached. Such
commissions were considered to be equivalent to a “loyalty discount” i.e. a discount based not on cost savings but simply on
customers’ loyalty, thereby able to exclude the dominant firm’s competitors from the market. Indeed, the effect of such
performance reward schemes was to encourage United Kingdom travel agents to maintain or increase their sales of British Airways
tickets, to the detriment of sales of tickets of rival airlines. These schemes therefore created illegal barriers to airlines that wished
to compete against British Airways on the UK markets for air transport. The case began following a complaint lodged by such a
competitor, Virgin Atlantic Airways.
In Tetra Pak International SA v Commission,1090 it was held that, “prices below average total costs but above average variable
costs are only to be considered abusive if an intention to eliminate can be shown.” The Commission found Tetra Pack to have
abused its dominant position by among other things, tying the sale of machinery for packaging with the sales of cartons and for
engaging in predatory pricing. The General Court, in appeal carried out the examination of predation in line with the Akzo
judgment. Accordingly, the General Court considered the prices of non-aseptic cartons in Italy between 1976 and 1981and found
that that these were considerably lower than average variable costs.
In Alsatel v SA Novasam,1091 CJEU considered the unilateral conduct of the dominant undertaking to determine the prices of the
supplements to the contract as well as the automatic renewal of the contract for another 15 years when certain conditions are
fulfilled to amount to unfair trading conditions it was held that contractual practices, even abusive ones, on the part of an
undertaking supplying telephone installations which has a large share of a regional market in a Member State do not fall within the
prohibition in Article 86 of the EEC Treaty where that undertaking does not occupy a dominant position on the domestic market in
telephone installations. “Only that market may be taken into consideration in that sector since it is only at that level that the
conditions of competition are sufficiently homogeneous, in view of the existence of a telecommunications monopoly which means
that telephone installations can be supplied only by the postal and telecommunications authorities or by private installers to whom
those authorities delegate in part the exercise of the monopoly, by means of authorisations valid throughout the country. While the
fact that an undertaking holds a very large market share may be important evidence of the existence of a dominant position, that
factor, taken separately, is not necessarily decisive but must be taken into consideration together with other factors.”
In Tetra Pak II,1092 dominance in the aseptic markets, which, combined with its position of leader in the non-aseptic markets,
made Tetra Pak the inevitable supplier for a majority of users. Tetra Pak managed to impose on those users certain contractual
obligations aimed essentially at binding them to the group and preventing any trade in its products. Using these contractual
obligations to limit as far as possible any possibilities of inter-brand competition, and avoiding any intra-brand competition
whatsoever by means of these contractual obligations and by its completely autonomous production and distribution policy, the
group succeeded in imposing a compartmentalisation of national markets for its products within the Community which allowed it
to practice a differentiated and discriminatory pricing policy for both cartons and machines.
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PREDATORY PRICE
It must be kept in mind that the Competition Act is not an equaliser Act neither it is meant to bring different competitors to equal
level in respect of their assets, liabilities or performance. It is but natural that a new entrant in the market would have to face an
existing entrant who is already established in the market. A new entrant cannot claim that all advantages which existing entrant has
in the business must be given to him under Competition Act. Neither, section 3 nor section 4 envisages a situation where
Competition Commission can direct the existing entity to divest itself of its properties or of the advantages it was having so that the
new entrant can compete with it. The Competition Law is not of law of equalisation of the competitors, it’s a law to ensure that
different entities who were supposed to compete in the market, instead of competing do not collude with each other so as to
deprive the ultimate consumer of the benefits of a healthy competition. It is also to ensure that a dominant player, in order to
prevent entry of new player into the markets, does not resort to predatory pricing or looking at the fact that it was not going to be
affected by other competitors raise the price of service or product to exploit the consumers. The Competition Law is to protect
competition and not the competitors in the market. Say in the area of Connaught Place, a company hired a premises in early 1950s
for business and was paying a rent of few hundred rupees per month and a new company who intends to do business in Connaught
Place, hires similar premises for a few lakh rupees per month, the new entrant cannot come to Competition Commission and pray
that the existing competitors should be asked to part with a part of its premises so that new entrant can do business at the same rate
of rent, nor can it ask that the Competition Commission to tell the landlord of a new entrant to charge the same rent as the landlord
of old enterprise was charging. Similarly, where a steel plant is having captive mine and having various advantages due to captive
mines, a new enterprise who wants to establish a steel plant or has established a steel plant cannot come to Competition
Commission with a prayer that the Govt. should be asked to allot a captive mine to it also or existing entity be divested of the
captive mine so that it was on an equal footing for competition with the existing enterprise. The Competition Act does not envisage
the role of Competition Commission as an equaliser of competing entities. It is not to curb the competitors but to curb anti-
competitive practices.1093
Raghavan Committee Report on Predatory Pricing
Predatory Pricing is defined as the situation where, a firm with market power, prices below cost, so as to drive competitors
out of the market and, in this way, acquires or maintain a position of dominance. Here again there is a danger of confusing
pro-competitive pricing with predatory behaviour. In reality, predation is only established after the fact i.e. once the rival
has left the market and the predator has acquired a monopoly position in the market. However, any law to prevent is
meaningful, only if it takes effect before the fact i.e., before the competitor has left the market.
An important issue, therefore, is the identification of predatory pricing. According to theory, a price below marginal cost is
indicative of predatory pricing. A practical alternative is to use the average variable cost as a substitute since marginal
costs are not generally available. In some cases, as in a judgement of the US Supreme Court (UTAH PIE case), a price
below the full cost was taken to be predatory. The problem is that if this were the only criterion, any firm making losses
could potentially be accused of predation. In fact the case is only made, once the firm has recouped its first period losses
and in the second period, when it functions as a monopolist. If it does not, then there may well be a gain in social welfare
through the lower prices charged by the firm. It is in this context that an alternative two-stage test is suggested where, in
the first instance, the market structure should be analysed and it must be established that the market is one where predation
can be successful, before a comparison of price and cost is made at the second stage. Thus if it is clear ex ante that the
market is one where predation cannot be successful as a result of new entry, re-entry, foreign competition or some other
factor, then even if a firm is charging “predatory” prices in current period, it is not a cause for concern.
In view of the difficulties, the Committee feels that the issue of predatory pricing is best left to the Competition Law
Tribunal (Competition Commission of India) itself which can draw its own regulations and also revise it from time to time
based on its own experience.
Distinguishing predatory behaviour from legitimate competition is difficult. The distinction between low prices which
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result from predatory behaviour and low prices which result from legitimate competitive behaviour is often very thin and
not easily ascertainable.
Indeed, it is sometimes argued that predatory behaviour is a necessary concomitant of competition. To quote Professor
Jagdish Bhagwati from his book A Stream of Windows:
Clyde Prestowitz, former US trade negotiator and an ally of Mr. Fallows in the angst over Japan is doubly wrong when he asserts
that “Japan plays a different game” and that therefore the United States cannot have a beneficial trade with it under a rulesbased
multilateral trading regime ... What then about the view, often ascribed to Chalmers Johnson professor at the University of
California at San Diego, that Japanese Companies believe in “predatory” competition? The notion that American Companies, by
contrast, compete in a benign fashion is faintly romantic and fully foolish. What the Cambridge economist Joan Robinson used to
call the “animal spirits” of capitalist entrepreneurs surely are manifest in both countries. The successful always appear more
predatory. This was exactly the stereotype of British entrepreneurs during the nineteenth century and of the ugly American in the
1950s and 1960s. With success, one get one’s share of envy and resentment (JAGDISH BHAGWATI, 1999).
However, a sizeable section of the members of the Committee felt that predatory pricing is a pernicious practice warranting
it being identified under the “per se illegal category”.
After considerable discussions, it was agreed that having regard to the practical difficulties involved in its categorisation
and interpretation, it is better to treat predatory pricing as an abuse, only if it is unambiguously established and indulged in
by a dominant undertaking.
Principle
As per Explanation (b) of section 4, “predatory price” means the sale of goods or provision of services at a price below
cost with the subject to reduce competition or eliminate the competitors. A plain reading of the relevant provisions of the
Competition Act, 2002 reveals that under the Competition Act, 2002, a special and onerous responsibility has been cast on
the dominant player in the relevant market. For finding contravention of section 4, it is sufficient if it can be shown that an
enterprise is holding a dominant position in the relevant market and it has indulged into the prohibited conduct enumerated
in section 4 for which it cannot provide any objective economic justification. Only in case of predatory pricing the intent to
oust competitors or to reduce the competition is required to be seen. Further, in case of imposition of discriminatory or
unfair conditions in sale or purchase of goods or services or in price the only defence open to the contravening enterprise is
to show that conduct was adopted with a view to meet the competition. The essence of predatory pricing is pricing below
one’s cost with a view to eliminate a trade rival.1094 Predatory pricing may also mean selling at a lower price than
customary profit-maximising consideration would dictate, for the purpose of driving a competitor out of business or
crippling his competitive power.
It may be noted that the term “with a view to reduce or eliminate the competitors” appears in Explanation (b) to section 4
of the Act defining “predatory pricing” and not in Explanation (a) to section 4 of the Act defining “dominant
position”.1095
“with a view to reduce competition or eliminate the competitors”
Direct or indirect imposition of unfair price including predatory price by a dominant enterprise is prohibited under section
4(2)(a)(ii) of the Act. According to the Explanation (b) to section 4 of the Act, “predatory price” means the sale of goods
or provision of services, at a price which is below the cost, as may be determined by regulations, of production of the
goods or provision of services, with a view to reduce competition or eliminate the competitors. Thus, a dominant enterprise
will be judged as guilty of predatory pricing if it is found to be charging its customers below-cost price. The phrase “with a
view to” implies that exclusionary intent has also to be demonstrated.1096
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The Competition Commission of India (Determination of Cost of Production) Regulations, 2009 defines cost.1097 There is
no unique form of below cost pricing given. Also, there is no unique concept of “cost” under the Act, read with the
Regulations. “Below cost pricing” could broadly be divided into “below average total cost pricing” and “below average
variable cost pricing”. In case pricing is above average variable cost but below average total cost it is possible that the
pricing behaviour of the enterprise could make some business sense and therefore, “intent” in the sense of mala fide has to
be positively established.
Selling below average variable cost does not make any business sense for an enterprise except in very limited special
circumstances like low market demand for the product or service concerned or recession like conditions in the market or as
promotional measure at the time of entry into the market by the enterprise concerned, or to face competition, for a limited
period of time. A dominant player does not have any need or compulsion to price below average variable cost, except that
it intends to drive out competitors or reduce competition in the relevant market.
Reasons for Predatory Pricing
Predatory pricing is a pricing strategy to drive out the existing competition in the market that would not be able to sustain
such low pricing or create barriers of entry for potential new entrants. Predatory pricing done by a dominant enterprise is
considered to be an abuse of dominance. Predatory pricing is considered illegal in most of the jurisdiction though it is
difficult to distinguish the low pricing as a legitimate market response or an abuse to drive competitors out of market.
Proving that a business is involved in predatory pricing can be difficult because the initial signs of predatory pricing can
appear pro-competitive and there is often no clear evidence of an anti-competitive purpose that the Commission can use to
uphold an allegation.
Economics of Predatory Pricing
The economics of predatory pricing is straight forward. The Predator, already a dominant firm, sets its prices so low for a
sufficient period of time that its competitors leave the market and others are deterred from entering. Assuming that the
predator and its competitors are equally efficient firms, this implies that the predator as well as its victims has suffered
losses and that these losses are significant. For the predation to be rational, there must be some expectation that these
present losses (or foregone profits), like any investment, will be made up by future gains. Thus, in turn implies that the
firm has some reasonable expectation of gaining exploitable market power following the predatory episode, and the profits
of this later period will be sufficiently great to warrant incurring present losses or foregoing present profits. This theory
also implies that some method exits for the predator to outlast its victims, whether through greater cash reserves, better
financing or cross-subsidisation from other markets or other products.1098
This traditional view was later supplemented by an argument that the potential benefits to the predator were not limited to
future gains in the market where it predated. The predatory campaign could be, seen as an investment in reputation which
could pay dividends in other geographic or product markets by deterring entry or disciplining rivals.1099 These spillover
effects thus would multiply the gains from the initial predatory episode. Scherer refers to it as:
... the demonstration effect that sharp price cutting in one market can have on the behaviour of actual or would be rivals in other
markets. If rivals come to fear from a multimarket seller’s actions in Market A that entry or expansion in Markets B and C will be
met by sharp price cuts or other rapacious responses, they may be deterred from taking aggressive actions there. Then the
conglomerate’s expected benefit from predation in Market A will be supplemented by the discounted present value of the
competition-inhibiting effects its example has in Markets B and C.1100
It has also been argued that the threat to predate could be made even more credible if the dominant firm increased its
investment, e.g. in plant capacity, before entry. By increasing its non-recoverable or “sunk” costs, the predator
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demonstrates its commitment to fight. Further, if the minimum efficient scale is large relative to the overall market, the
predator’s “strategic” investment could ensure that an additional minimum efficient scale plant would cause sufficient
excess capacity to drive prices down to an un-remunerative level.
Non-price predation
Non-Price predation generally refers to a conduct which increases cost of the competitors, in contrast with predatory
pricing, which lowers their incomes. If a predator can successfully impose cost increases on its rivals, it can profit
immediately even if the rivals remain in business, as its margins will increase disproportionately, if the general price level
rises. Conversely, if prices remain constant the predator should gain market share as its rivals restrict output. Thus, there is
no notion of the predator suffering losses or foregone profits in the present in the hope of significantly greater gains in the
future. Note also that, while the theories of reputation-based predatory pricing are largely built on pay-offs in other
markets, there is no prior requirement that a predator be a multi-market or multi-product firm to find it worthwhile to seek
to raise its rivals’ costs. All firms, even local ones, would benefit if their rivals’ costs go up disproportionately to their
own. Further, some types of non-price predation such as sham litigation or other misuse of government authority do not
require the predator to be a dominant firm. Before competition would be affected, however, two conditions must be
present. The exclusionary conduct must significantly raise competitors’ costs and the output market must be such that there
are barriers to entry and expansion in the output market.1101 Finally, while it may be more likely that a dominant firm will
find it more beneficial to engage in non-price predation than will a smaller one, as any costs it incurs in predating can be
spread out over a larger output, it is not necessary that the firm be dominant, particularly where, as will be discussed
below, the predator can engage others, e.g. government, in actions against rival firms.1102 Even where these conditions
exist, a very cautious approach to claims of non-price predation is appropriate. When a firm undertakes capital investment,
research and development, advertising, or vertical integration, it may raise its rivals’ costs, but such efforts are likely to
enhance efficiency. Therefore, increased attention by competition authorities to allegations of non-price predation may
deter pro competitive activity.
The Commission noted in the JCB case that predation through abuse of judicial processes presents an increasing threat to
competition, particularly due to its relatively low anti-trust visibility. For instance, in Bull Machines Pvt Ltd v JCB India
Ltd,1103 the entire case of abuse as laid and made by the Informant was predicated upon the alleged bad faith litigation
filed by JCB before the Hon’ble High Court of Delhi. It was the case of the Informant that the bad faith litigation initiated
by JCB against it alleging infringement of its design rights was totally false and that the said legal proceedings before the
Hon’ble High Court of Delhi were only initiated to harass it and prevent the launch of “Bull Smart”, which in effect would
have competed with backhoe loaders of JCB in the relevant market. Furthermore, it was the case of the Informant that the
injunction was obtained on the basis that the Informant had allegedly infringed the registered designs and copyrights of
JCB while manufacturing “Bull Smart”, which designs/copyrights themselves were obtained fraudulently. In view of the
allegations projected in the information the Commission was of the prima facie opinion that JCB by abusing their
dominant position in the relevant market sought to stifle competition in the relevant market by denying market access and
foreclosing entry of “Bull Smart” in contravention of the provisions of section 4 of the Act. Accordingly, the Commission
directed the DG to cause an investigation into the matter and to complete the investigation within a period of 60 days from
receipt of this order.
Assessing Predatory Pricing
It is difficult to develop standards to detect and prevent predatory pricing because of two reasons. Firstly, predation causes
the prices to fall benefitting the consumers so it has to be made sure whether the price cut is beneficial and pro-competitive
or is part of larger scheme of predation in the market. Various tests have been developed to check whether the prices are
too low to potentially have anti-competitive effect in the long run. Second, rules and enforcement standards that attempt
carefully to distinguish between pro-competitive and anti-competitive low prices can be complex, vague, and challenging
for agencies and for companies and their counsel to apply, which can result in problems of administrability for courts and
agencies, and leave firms uncertain as to whether their contemplated conduct complies with the law.1104
No Rule
Bork, McGee and Easterbrook1105 argue that predatory pricing is so rare that it should not be a matter of concern for
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competition policy officials. If predation is rare, practically any rule runs the risk of generating false positive errors, and
those errors would multiply with the restrictiveness of the rule. An important point in this argument is that because
predation is unlikely to be successful, it is self-deterring and therefore government intervention is unneeded. Self-
deterrence arises because if a firm (foolishly) attempts to predate, it inflicts losses on itself but ultimately gains no market
power, as the victim calls its bluff and weathers the predatory campaign. At some point the predation ceases and the
predator, having punished itself, refrains from further attempts. Other firms, foreseeing this result, simply refrain ab initio
from predating.
Short-run cost-based rules [Areeda-Turner Test]
Areeda and Turner suggested that a price should be deemed predatory where it was below a dominant firm’s Average
Variable Cost (AVC) calculated by dividing all its variable cost by its output. The test relies solely on a cost-price analysis.
Some commentators think that the test should be less strict and predation should be condemned only where it can also be
demonstrated that predator will be able to recoup any losses it has made through the exercise of its market power in the
future.
Areeda and Turner focus on short-run rather than long-run efficiency, even though they recognise that “strategic” long-run
considerations may be important to the predators, because they find evaluating long-run efficiency too speculative.1106
Further, their concern is with designing a rule which protects only firms which are at least as efficient as the alleged
predator; they are explicit that maximum allocative efficiency is a goal of their rule.1107 They recognise that, at least in
theory, their rule would permit limit pricing and the exclusion of some firms which could (again at least in theory) increase
competition further, but find that those benefits are speculative against the concrete present benefits of the monopolist’s
lower price and higher output. They further argue that the administrative difficulties of reviewing the monopolist’s pricing
would be great.1108
Areeda and Turner presuppose that the firm has monopoly power in the target market-without monopoly power there
would be no ability to extract future profits. They would also define as per se legal all prices which are profit maximising
or loss minimising for the firm.1109 Per se legality would also apply to prices above full average cost, even though not
profit maximising in the short run. That is, they would not be concerned about limit pricing, arguing that such pricing
results in lower prices and higher output than the profit maximising price and that only less efficient potential entrants are
kept out in any event.
With respect to prices below average cost, Areeda and Turner would find predatory only those prices which were also
below marginal cost. That is, prices above marginal costs but below average cost would be legal. Areeda and Turner then
transpose this group of rules to an average variable cost test and, in the 1975 version of their rule, argue that prices at or
above reasonably anticipated average variable costs should be per se legal and prices below that level per se illegal. In
addition to these basic rules, Areeda and Turner would bar the dominant firm from “meeting competition” if it meant
bringing its price below average variable cost and would likewise bar promotional spending, especially promotions
designed to meet a competitor’s promotion or new entry, if those additional expenses brought average variable cost above
price. The meeting competition defence was elaborated in the later supplements. Areeda and Hovencamp, for example,
argue that it should be available even to a monopolist if the plaintiff’s price itself was unlawful, but not if the plaintiff’s
price was lawful, e.g. a promotional price by a small firm. On the other hand, the meeting competition defence should not
be available to justify an unlawful price by an oligopolist responding to another oligopolist’s prices, as such prices could
inadvertently destroy fringe firms.1110 Areeda and Turner later modified their per se rules in important aspects. In
particular, for prices above average variable costs they replace the standard of per se legality with a presumption of
legality.1111 In the 1982 and 1986 supplements to the 1978 text, pricing below average variable cost would likewise carry
only a presumption of illegality.1112 In any event, prices above full cost remain per se legal.1113 What would rebut these
presumptions of legality and illegality? Areeda and Turner are not completely clear on this but some points can be drawn
from their texts. First is the fact that the cost measure is defined as reasonably anticipated average variable costs.1114 Thus,
an alleged predator could show that changed cost or demand conditions caused price to fall below average variable cost.
Another rebuttal (here to the presumption of legality) would arise when pricing was at or above average variable cost but
“significantly” below marginal cost.1115 Further exceptions are the defences of meeting competition and promotional
pricing. Areeda and Turner would permit a dominant multi-market or multi-product firm to apply these defences if the firm
could show that in the particular market in question it was not dominant.’1116
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Long-term cost-based rules
Posner has argued that long-run marginal costs are a better test of predation than short-run costs because the predator, by
pricing at short-run marginal cost, could eliminate an equally or more efficient competitor (more efficient in having lower
long-run marginal costs) but who lacked the ability or will to sustain losses in the short run.1117 Because marginal costs
are hard to determine, he would substitute average costs from the firm’s balance sheet, resulting in a test which would look
to full average cost based on the company’s books.1118 To this test he would add certain prerequisites, an intent element
and a defence. As prerequisites he would require the plaintiff to make an initial showing that the market was predisposed
to effective predatory pricing. Among the indicia he lists are that the predator operates in multiple markets, the prey
operates in fewer markets than the predator, the markets are concentrated, entry is slow, fringe firms are few, buyers are
numerous and the product is homogeneous.1119 He would further require that the predator have intent to exclude, but how
that would be shown is unclear, as Posner himself finds that an intent requirement can lead to an unevenly applied rule -
sophisticated predators will create no damning documents but unsophisticated and aggressive firms (or their zealous
employees) could be expected to do just that.1120 Posner further would permit a firm to defend on the basis of changes in
supply or demand, thus in light of excess capacity (e.g. a shift in demand) the defendant firm could price at short run
marginal cost and the exit from the market which would follow would be socially desirable.1121
“Two-tier” rules of Joskow and Klevorick,1122 which seeks to limit the focus of anti-predation law enforcement to those
markets where predation is a serious threat, and then to subject pricing conduct in that narrowed target to more searching
inquiry. The essence of their approach is that market structure determines whether predation is a workable strategy. When
predation is alleged, the market structure question thus should be disposed of first, in a bifurcated procedure, before
opening up an inquiry into the defendant’s conduct. This “two-tier” approach would lead to the more speedy elimination of
harassment suits by competitors, limiting their ability to use the competition laws for protectionist purposes. For
enforcement officials such an approach would reduce the frequency of “false positive” errors, that is, wrongly identifying
hard competition as predation.1123 The initial screening they propose would consist of three components-short-run
monopoly power, conditions of entry and something called the “dynamic effects of competitors and entrants”. Short run
monopoly power would be measured by the predator’s market share and the elasticity of demand for its product.
“Conditions of entry” refers to the speed with which potential competition can become actual competition in the event of
supracompetitive pricing. Among the factors to be considered here are capital requirements, consumer loyalties, learning
curves, the sequence of entry (market-by-market or across the board) and the quality of information about the risks of
entry. The final component looks at the dynamics of the market. Markets characterised by rapid growth or by decline are
said to pose less concern than markets more in equilibrium. Predation should also be of less concern where innovation and
technological progress tends to come from the dominant firm than from fringe firms. Finally, the presence of price swings
in response to changes in supply or demand are said to signify a market where predation is less of a risk.1124 If the analysis
of first-tier factors reveals a market where predation should not arise, Joskow and Klevorick would permit any and all price
cuts; no pricing rule would apply.
The second tier of the Joskow-Kievorik rule would include a broad inquiry into pricing, essentially a rule-of-reason
approach, in which intent would be a relevant though not necessary factor and would incorporate a number of cost-based
tests. Prices below average variable costs would be deemed predatory absent special factors which would make a
temporary shut-down even more costly than sales at loss-making prices. Prices between average variable costs and average
costs would be presumed to be predatory; the firm could defend by proof that the industry was declining or that the scale of
new entry depressed prices. However, if the excess capacity was created pre-entry by defendant, then the excess capacity
defence would not be available. Prices which remained above total costs would be presumed legal unless a price cut in
response to entry was reversed within two years without a cost-or demand based reason.
Pre-conditions for Predatory Pricing
1. Dominance in the relevant market
2. Certain level of entry barrier to prevent competitors to re-enter the market.
3. Deep pockets of the Predator
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4. Excess capacity
Predatory Pricing in US
Predatory pricing is considered as an antitrust offense within the proscription of monopolisation or attempts to monopolise
in section 2 of the Sherman Act, 1890.1125
Predatory Pricing in EU
Predatory pricing was first considered in the Akzo case.1126 The case arose following a complaint by Engineering and
Chemical Supplies (Epsom and Gloucester) Ltd (ECS) that it was the victim of a predatory pricing campaign by AKZO
Chemie BV which infringed Article 86 of the Treaty. ECS was a small United Kingdom producer of an organic peroxide
(benzoyl peroxide) which it sold primarily as a flour additive in the United Kingdom and Ireland, the only states in the EC
where such use is permitted. The major use of benzoyl peroxide, however, was in the plastics industry and beginning in
1979 ECS began selling the product to continental European plastics producers. Its major competitor in both the UK flour
additives market and in the larger plastics market was AKZO Chemie which is the specially chemical subsidiary of the
large Dutch multinational chemical and fibres group AKZO NV. AKZO held over 50% of the UK flour additives market
against ECS’s 35%, and a similar share of the overall European organic peroxides market. ECS’ troubles with AKZO
started in 1979, when it began its expansion into the plastics market. In meetings with ECS officials, AKZO demanded that
ECS withdraw from the plastics market and threatened below cost pricing in the UK flour market if ECS did not comply.
ECS then obtained an Ex parte injunction against such acts from the High Court in London on the basis that such
retaliation would amount to an abuse of dominant position under Article 86 of the Treaty of Rome. This injunction led to a
settlement which ran for two and a half years but contained difficult-to-enforce provisions. In 1982, ECS complained to the
EC Commission that the practices were continuing leading to the seizure of AKZO documents and, in 1983, an interim
order requiring AKZO to return to earlier profit levels but permitting it to meet competing offers. After the interim
measures, AKZO maintained the customers it had won earlier and gained new ones by matching the low bids of Diaflex,
the third and smallest firm in the UK flour additives market.
The Commission found Akzo to be dominant in the organic peroxide market as a whole and had infringed Article 102 by
pursuing a course of predation against ECS designed to drive it from the plastic sector. A fine of 10 million was imposed
on Akzo. The Commission decision finding predation focused on Akzo’s threat and its intent. The decision did not adopt
the Areeda-Turner Test or lay down specific rules about the point at which low prices become predatory and suggested that
prices above average total cost can also be predatory.1127 The Court of Justice confirmed the Commission’s definition of
the market and finding of dominance. It did accept Akzo’s argument that some costs that the Commission regarded as
variable were, fixed. However, the Court of Justice found Akzo guilty of predation. The Court laid down:
Prices below average variable costs (that is to say, those which vary depending on the quantities produced) by means of which a
dominant undertaking seeks to eliminate a competitor must be regarded as abusive. A dominant undertaking has no interest in
applying such prices except that of eliminating competitors so as to enable it subsequently to raise its prices by taking advantage of
its monopolistic position, since each sale generates a loss, namely the total amount of the fixed costs (that is to say, those which
remain constant regardless of the quantities produced) and, at least, part of the variable costs relating to the unit produced.
Moreover, prices below average total costs, that is to say, fixed costs plus variable costs, but above average variable costs, must be
regarded as abusive if they are determined as part of a plan for eliminating a competitor. Such prices can drive from the market
undertakings which are perhaps as efficient as the dominant undertaking but which, because of their smaller financial resources,
are incapable of withstanding the competition waged against them. An undertaking in a dominant position cannot justify sales at a
price below its production costs by invoking the need to align its prices on those of another supplier, where it is shown that it has
maintained close contacts with that supplier regarding the policy to be pursued in the matter of prices.1128
The Akzo test differs significantly from the Areeda-Turner Test. The Akzo test sets out a presumption that cost below
AVC is abusive. Further, unlike Areeda-Turner test, Akzo test holds that prices above AVC but below ATC can also be
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abusive if they are a part of the plan to eliminate competition. The Akzo test was re-affirmed in the case of Tetra Pak
II1129 and France Telecom1130 and further developed in the Post Danmark case.1131/1132
Post Danmark case,1133 was a ruling in a preliminary reference from a Danish Court hearing an appeal from a decision of
the Competition Authority in respect of the pricing practices of Post Danmark (PD) on the liberalised market of
unaddressed mail in Denmark. PD had a statutory monopoly and USO in respect of normal addressed mail under a certain
weight. A competitor in the unaddressed mail market claimed that PD was enticing away its three biggest customers
through selective price reductions. The complainant prevailed before the Danish Competition Council on the count of (first
line) price discrimination but not on that of predatory pricing. The Danish Competition Appeals Tribunal upheld the
infringement decision and the case eventually ended up before the Danish Supreme Court, which sought guidance from the
ECJ. In essence, the request for preliminary ruling dealt with the circumstances that might support the abusive character of
Post Danmark’s pricing practices inasmuch as they resulted in quoting prices below average total costs but above average
incremental costs (at least to one of the three customers in question). The Court of Justice held that pricing below ATC but
above AVC is not per se anti-competitive and the point to be considered is to whether the pricing policy, without objective
justification, produces an actual or likely exclusionary effect, to the detriment of competition and, thereby, of consumers’
interests (paras 37 and 44). The Court found in the case that the complainant. The Court not only validated the reliance on
average incremental costs as the relevant benchmark in cases involving a commonality of costs with a regulated
service/public policy obligation, which testifies of an economically sensitive analysis, but it effectively held that above that
benchmark (i.e., in most pricing cases) anticompetitive effects have to be established and that evidence of lack of effects
certainly has to be taken into account.
Predatory Pricing in India
Case law on predatory pricing under Monopolies and Restrictive Trade Practices Act, 1969
Under section 33(1)(j) of MRTP Act, 1969 predatory pricing was considered to be a restrictive trade practice.
For establishing predatory pricing it should be necessary to look for an element of mala fide, i.e., of eliminating
competition by creating transitory phase of low pricing which a competition may not be able to withstand. Price reduction,
which may have to be resorted to survive in the competition market, or to meet the predatory pricing policy pursued by
other competitors, would not be a restrictive trade practice liable to be struck down. Likewise, when products are sold to
the Government at prices lower than the market rates, e.g., on DGS & D rate contract, as a part of widely accepted practice
in the trade, it would not be questionable. Such an issue cropped up Re Johnson and Johnson Ltd,1134 which has been
engaged in the manufacture of large varieties/sizes of sutures, using modern technology under the technical guidance of the
world famous “Ethicons”. The complainant, M/s SMB, a small scale unit, manufacturing only non-absorbable sutures with
100% indigenous technology and with a nominal share in the market, alleged predatory pricing by the respondent, Johnson
and Johnson Ltd, in regard to the quotations of its products to the Director-General, Armed Forces Medical Services Depot
at New Delhi Cantt. It was alleged that the quotations were made by the respondent to eliminate competition from small
manufacturers like the complainant. On analysis made, it was found that none of the quotations were at a price below cost
price. The MRTP Commission held that to sell a small portion of its products, in public interest, to the Government at
prices lower than the prices normally charged from dealers, did not amount to predatory pricing, and particularly, when the
rates quoted were always above cost of sales.
Re Modern Food Industries (India) Ltd,1135 the MRTP Commission, while dismissing the complaint of the Director
General, observed that the essence of predatory pricing is below one’s cost with a view to eliminating a trade rival. But a
mere offer of a price lower than the cost of production could not lead automatically to an indictment of predatory pricing.
By evidence, it had to be established that in fixing lower prices than the cost of production, there was a mala fide intent on
the part of the charged party to drive its competitors out of business or to eliminate competition.
An interesting case where predatory pricing was alleged before the MRTP Commission is that of UP Twiga Fibre Glass
Ltd.1136 UP Twiga complained that Deccan Fibre Glass Ltd was selling fibre glass produced by it at unreasonable prices,
i.e., at prices not related to its cost of production of fibre glass, even at below the cost of inputs merely with a view to
undercut the complainant and to drive it out of the market. The result was that the complainant was forced to suspend its
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operations. Investigation revealed that Fibre Glass Pilkington Ltd, UP Twiga Ltd, and Deccan Fibre Glass Ltd (Glass
Fibre Division of CEAT tyres with which it had been merged) are the only three producers of fibre glass in the country and
all of them have been resorting to the said trade practice of selling the product below their cost of production; the reasons
being that effective demand is lower than the potential demand, that they have to compete with the low prices of inputs and
other substitutes available in the market and that they are faced with the alternative of enhancing indigenous demand vis-a-
vis the imported products. The MRTP Commission held that the low pricing was inevitable in the circumstances and the
enquiry was closed.
The case of Rallis India Ltd1137 is a classic one in the area of predatory pricing. This company is engaged in the
manufacture and sale of Dimethoate Technical (DT), which is a basic raw material for an insecticide formulation. It is also
formulating the insecticides and selling the formulations in the market under its own brand name. Other non-associated
formulators purchase the raw material from Rallis, and formulate the insecticide for sale on their own. During the calendar
years 1979 and 1980, Rallis was the only producer of basic raw material for insecticide formulation. The charge against
Rallis was that it quoted lesser rates than its cost of production to the State Governments of Punjab, Haryana, Uttar Pradesh
and Tamil Nadu, with the intention of eliminating the other producers from competition. On behalf of Rallies, quoting of
rates lower than cost of sales was sought to be justified on the following grounds:
(1) The respondent wanted to reduce the inventory carrying costs (interest);
(2) Sales to State Governments at the lowest possible rates are in public interest;
(3) Imports were allowed during the period in question and the cost of imported raw material was much lower than
the cost of the indigenously manufactured raw material;
(4) In the year 1980, there was severe drought due to failure of monsoon and the pesticide in question was not in
great demand.
The MRTP Commission, inter alia, observed as under:
Section 2(o) of the Monopolies and Restrictive Trade Practices Act provides that any trade practice which, has or may have, the
effect of preventing, distorting or restricting competition in any manner is a restrictive trade practice. The section further
particularises two categories of restrictive trade practices under clauses (i) and (ii). The category of restrictive trade practices
envisaged in clause (i) are such trade practices as would tend to obstruct the flow of capital or resources into the stream of
production. It may not be necessary to consider in the instant case the second category particularised in clause (ii). Selling any
product at a rate lower than its cost of sale or cost of production is known in the commercial circles as “predatory pricing”, which
is one of the pernicious trade practices that may be conveniently resorted to by the monopolists in the market of that product and
even by the other producers of the product if such producers are also the manufacturers of the raw material required for the
production of the goods. Sometimes, market conditions may require predatory pricing as when the goods are not in demand and
they are sought to be disposed of to minimise loss.
In a generality of cases, however, predatory pricing is indulged in an endeavour to eliminate existing rivals and prevent entrants. In
the instant case, the respondent stated in its reply that it had to resort to predatory pricing as there was severe drought in the year
1980 due to failure of monsoon and that the pesticide in question was not in great demand. We do not find any evidence in support
of this submission. There is no proof of drought in the year 1980 and at any rate the statements of sales submitted by the
respondent clearly indicated that the sales of the pesticide were continuously on the increase and there was no such setback in the
sales to support the respondent’s submission of slackness in demand.
If an undertaking resorts to predatory pricing when there is considerable market for its goods, there can be little doubt that it is
endeavouring to destroy its rivals and/or deter new entrants. An attempt to drive out or to exclude rivals by severe price cuts to the
extent of the prices being below cost price or cost of sale clearly constitutes anti-competitive conduct obstructing the free play of
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competitive forces. Viewed from the angle of healthy competition in trade there can be little doubt that the predatory pricing by the
respondent tended to exclude its rivals from selling their goods to the Governments before whom the rivals also had submitted
tenders. Viewing the conduct of the respondent even from the angle contemplated in clause (i) of section 2(o) there can be little
doubt that the action of the respondent tends to deter new entrants into the stream of production. The predatory pricing in the
instant case is fraught with two mischievous consequences of destruction of rival competitors in the trade and obstruction of the
flow of capital into the stream of production. Under the circumstances, therefore, we have no hesitation in holding that the
predatory pricing indulged in by the respondent in its sales to the State Governments is a restrictive trade practice within the
meaning of section 2(o) of the Monopolies and Restrictive Trade Practices Act.
The Commission, however, allowed the restrictive trade practice adopted by Rallis to pass through the gateway in clause
(h) of section 38 in view of the following circumstances:
(i) Rallis is indulging in the practice of predatory pricing only with regard to the four State Governments, viz.
Punjab, Haryana, U.P. and Tamil Nadu.
(ii) The quantity in respect of which predatory rates have been quoted is comparatively small (5.5%, 7.5% and 16.6%
during the years 1978/79, 1979/80 and 1980/81), when considered with its total sales; thus, Rallis is selling a
considerably large portion of its production in the open market, in regard to which there is no grievance of any of
its competitors as regards the rates at which the sales had been effected.
(iii) When strictly viewed, the trade practice complained against is more in the nature of discriminatory pricing, rather
than predatory pricing, though the element of predation is not totally non-existent. While discriminatory pricing
is, as well, a restrictive trade practice, it does not affect the competition to any material degree.
(iv) Rallis’ explanation for the low quotation to the State Governments cannot be dismissed as unmeritorious. Sale to
the Governments at rates lower than the market rates is not an unusual trade practice and it is usually in public
interest and also in the interest of the particular manufacturer who derives the advantage of advertisement and
publicity through the State Governments. In fact, the small quantities purchased by the State Governments are for
distribution to the needy farmers for free supply or on subsidised prices.
In a charge of predatory pricing, the mala fide intention on the part of the charged party to drive its competitor out of
business or to eliminate competition has to be established. When the evidence and facts on record show that the
competitor’s business were closed down soon after the drastic reduction in prices by respondent, the price reduction was
not attributable to drying up of orders, and moreover, when the respondent hiked up the prices after the ouster of its
competitor, the allegation of indulging RTP by resorting to predatory pricing is proved.1138
Dumping and predatory pricing
“Dumping” as explained by the GATT Anti-dumping Code means introduction of the goods of one country into the
commerce of another country at less than the normal value prevailing in the importer country. Dumping, accompanied by
predatory pricing, causes material injury to the industry established in the territory of the contracting (importing) party and
it materially retards the establishment and growth of the domestic industry. Dumping is established if a product is priced at
less than its normal value, i.e. (a) less than the cost of production of the product in the country of origin plus reasonable
mark-up for selling cost and profit, or (b) less than the comparable price for the like product when marketed in the
exporting country, or (c) less than the highest comparable price for the like product exported to any third country in the
ordinary course of trade.
Inquiries ordered under the Monopolies and Restrictive Trade Practices Act, 1969 prior to
Monopolies and Restrictive Trade Practices (Amendment) Act, 1984
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Three references, as mentioned below, were made by the Central Government to the MRTP Commission for inquiry into
monopolistic trade practices:
(i) Messrs Coca-Cola Export Corporation, New Delhi (Reference made on 28 July 1973).
(ii) Messrs Cadbury Fry (India) Ltd, (Reference made on 22 March 1974).
(iii) Messrs Colgate Palmolive (India) Private Ltd, (Reference made on 26 March 1974).
These references were, however, challenged by the concerned companies through writ petitions filed in the Delhi High
Court, inter alia, raising the following issues:
(i) Whether it is obligatory on the part of the Central Government to give a hearing to the affected party, before
making the reference to the Commission;
(ii) Whether a finding by the Central Government on the existence of monopolistic undertaking as defined in section
2(j) and its indulgence in monopolistic trade practice as defined in section 2(i) are conditions precedent to the
reference to the Commission for inquiry under section 31; and
(iii) Whether, the two issues at (i) and (ii) above are outside the purview of the Commission, and whether, the inquiry
by the Commission, on the reference made by the Central Government, is restricted to determining whether or
not the alleged trade practice(s) operate, or is likely to operate against public interest.
The writ petitions were dismissed on 13 December 1979.1139 It was held by the Court that:
The question of giving notice and a hearing can only arise if, when the facts assumed by the Central Government to exist would not
be allowed to be raised before the Commission. In that case, unless the statute says so specifically, the requirement of giving notice
and hearing to the petitioners before referring the matter to the Commission may have to be read into the section. Section 31(1)
postulates that after the Government has referred the matter to the Commission, the Commission shall, after hearing as it thinks fit
and after enquiry, report to the Central Government, its finding thereon. This shows that the legislature has indicated the stage at
which and by whom an opportunity of hearing is to be given to the parties concerned and also that it is by Commission and not by
Central Government. The various provisions of the Act also show that any hearing before the Central Government could not be
contemplated, because, in fact, the real authority that has been constituted by the Act to determine and investigate various factual
matters calling for detailed enquiry is only the Commission. An inquiry into monopolistic trade practices by the Commission is one
of the objectives of the Act. That such legislative intent is indicated by section 10(b) of the Act which empowers the Commission
to enquire into any monopolistic trade practice, upon a reference made to it by the Central Government or upon its own knowledge
or information. When the Commission, on its own, can inquire into any monopolistic trade practices it necessarily means that it can
inquire into both aspects, namely, whether there is monopolistic undertaking1140 and whether it is indulging in monopolistic trade
practice. Under section 10(b), the Commission can inquire into any monopolistic trade practice, either by a monopolistic
undertaking or by any other undertaking. The power of the Commission under section 10(b) is wider than the power of the Central
Government because it can make a reference under section 31(1) only if the monopolistic trade practices are being indulged in by a
non-monopolistic undertaking. There is, thus, nothing wrong in both the Central Government and the Commission having such
concurrent powers in the matter of a monopolistic undertaking, because it is possible that information may be available with the
Central Government which may not be available with the Commission and hence, unless the Central Government possess such a
power to refer the matter to the Commission, the monopolistic trade practice cannot be scrutinised, with the result that there would
be damage to the national economy. But the determination of the existence of a monopolistic undertaking and whether it is
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indulging in monopolistic trade practice requires collection of detailed information and knowledge into various aspects of business,
and it is for that reason that a high powered Commission is constituted. To accept the contention of the petitioners that the finding
can be given only by the Central Government would go against the very object of the Act which is to constitute an impartial and
independent Commission free from the political and other pulls the Government of the day which is necessarily subjected to such
influence. If the Commission is not to give any notice or hearing under section 10(b) of the Act, there is no logic in the argument
that if the decision to inquire into by the Commission is not of its own motion but on reference by the Central Government, the
Central Government should give a hearing. Hence, the requirement of natural justice do not require any hearing to be given to the
undertaking before making a reference under section 31(1). The Regulations framed by the Commission for procedure for
enquiring into the reference under section 31 provide detailed hearing and opportunity to the undertakings concerned, including
holding discussions with the parties and visiting places. Since matters of high policy which concerned the economy and the well-
being of the country are to be looked into, it is only proper, that full discussion and full presentation of the material be available to
the Commission in order to assist it to come to the right conclusion. The scope of the inquiry before the Commission is not limited
and encompasses all the pleas of fact and public interest mentioned in sub-section (1) and (2) of section 31.
There are no fixed rules of natural justice. Whenever a complaint is made before a Court that principles of natural justice had been
contravened, the Court has to decide whether the observance of that rule was necessary for a just decision on the facts of the case.
The question in each case is whether fairness in action demands reading into the provision for the requirement of a hearing.
The order of reference does not cause any prejudice to the petitioner because it decides nothing. It only sets the investigative
machinery of the Commission into motion. Notwithstanding the reference of the matter under section 31(1) to the Commission, the
Central Government cannot pass any order under section 31(3) unless it receives an unfavourable report against the undertaking
from the Commission. The investigation of facts and other matters is to be done by the Commission. Where an authority is to act, if
in its opinion a certain situation appears to exist, the formation of the opinion is subjective and permits only a limited scrutiny by
the Court on the ground that such opinion was not formed on relevant material. If every time the Central Government wants to
make a reference, it must give a prior hearing and determine the facts even when the same matter will have to be inquired into by
the Commission, the exercise would be futile and time consuming.
The contention that the Central Government must hold some sort of inquiry even if not an elaborate one, is also without substance.
If an inquiry has to be made and opportunity given, it must be a reasonable one and not a mere show. Therefore, an opportunity
would mean an opportunity to place all the material relevant to the inquiry before the Central Government, but that would be
duplication. Moreover, the Central Government does not have the necessary expertise on its administrative side to go into all the
details. It would defeat the object of the Act of creating the high powered body like the Commission for detailed inquiries, if the
Central Government is still expected to decide complex question of fact. Hence, there is no requirement of law or justice which
demands the giving of any hearing before the Central Government makes a reference to the Commission under section 31(1), and
therefore, there is no question of violation of natural justice.
The argument that the unreasonableness of price and profit has no relevancy to a monopolistic trade practice is unacceptable,
because it is contrary to the well-settled definition of monopolisation. Monopolistic trade practices being indulged in by the
undertaking is an aspect of monopolisation, the effective control of which is a first priority of any economic legislation.
Monopolistic trade practice is defined as a trade practice which has been or is likely to have the effect of maintaining the prices at
an unreasonable level by limiting, reducing or otherwise controlling the production or supply or in any other manner. If
unreasonable prices are maintained or a high rate of profit is made by an undertaking, it would be a prima facie conclusion that the
undertaking was indulging in monopolistic trade practice.
The concerned companies went in appeal to Supreme Court which granted stay and the matter is still sub judice.1141
Changes made in the Monopolies and Restrictive Trade Practices Act, 1969 by Monopolies and
Restrictive Trade Practices (Amendment) Act, 1991
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As result of the amendment in the proviso to sub-section (1) of section 31 by the Amending Act of 1991, the Director-
General could also move the Commission for an inquiry into monopolistic trade practice. Section 10(b) was also
simultaneously amended on similar lines.
Section 31 provided for a reference to be made by the Central Government or an application made by Director General to
the MRTP Commission for inquiry into monopolistic trade practice(s), if it is of the opinion (i) that one or more
undertakings are indulging in any monopolistic trade practice, or (ii) that monopolistic trade practice, prevails in respect of
any goods or services. Such an enquiry can be initiated by the Commission also, on its own motion, on the basis of any
information with it. On receipt of the report of the MRTP Commission, the Central Government is empowered to pass final
order relating to monopolistic trade practice indulged in by an undertaking or such practice prevailing in respect of any
goods or services by requiring the owner of the concerned undertaking, or the owners of any class of undertakings
generally, to desist from continuing to indulge in such monopolistic trade practice. The order, which is passed by the
Central Government, may provide for an order regulating the production, storage, supply, distribution or control of goods;
prohibiting the undertaking from resorting to any practice which lessens competitions; fixing standards for goods used or
produced; declaring unlawful and determining any agreement; regulating the profits and quality of goods or services. The
Central Government cannot take any action under section 31 directly without reference for enquiry to, and report by, the
Commission. If the Commission reports that the alleged practice is not a monopolistic trade practice and/or the owner of
the undertaking is not indulging in any such practice and/or the alleged trade practice does not prevail in respect of any
goods or services, the Central Government has to accept such finding of the Commission and is precluded from acting
against it. Where, however, the finding is otherwise, i.e., to say that monopolistic trade practice, as alleged, does prevail,
the Central Government may or may not act upon it, and pass such order as it may deem fit.
Proviso to sub-section (1) introduced by the Amendment Act, 1984 empowered the Commission to enquire into an alleged
monopolistic trade practices, even though no reference has been made to it by the Central Government. Re Indian Metals
and Ferro Alloys Ltd,1142 investigation was ordered by the Commission on 29 March 1985 against the respondent
company for indulging in monopolistic trade practice of unreasonably increasing the prices of silicon metal during 25
February 1982 to 16 August 1984. The allegation in the notice of enquiry was with regard to the price increase purportedly
effected by the respondent on 26 April 1984. At the time of the alleged price increase, section 2(i) of the Monopolies and
Restrictive Trade Practices Act, 1969 defining a monopolistic restrictive trade practice did not include within its scope a
trade practice of increasing unreasonably the prices of goods. The amendment to section 2(i) of the Act came into force
with effect from 1 August 1984 making an unreasonable increase in prices a monopolistic trade practice. The respondent
submitted that a retrospective application of the definition of monopolistic trade practice will mean imposing on the
respondent company a liability or disability which did not exist when the prices were increased. It was held by MRTP
Commission that “the unreasonable increase on 26 April 1984 was a fait-accompli and unless the maintenance of prices of
goods or charges for services due to unreasonable increase were a monopolistic trade practice after amendment of the Act,
the antecedent increase cannot be taken to be a part of the requisite for action on the footing of its now being a
monopolistic trade practice. Maintaining the prices of goods or charges for services at an unreasonable level simpliciter is
not a monopolistic trade practice even now after the amendment. If this were so, then certainly even though the
unreasonable price increase took place prior to the coming into operation of the Amendment Act it would have formed a
part of the requisite for action. In that event, it would have been no defence that the increase in prices took place in the
past. Strangely enough, maintenance of prices of goods at unreasonable level simpliciter is not a monopolistic trade
practice. Needless to say that “maintenance” of unreasonable level of pricing could not be without an increase in price
earlier, but as it is not included in the definition of a monopolistic trade practice, increase which became a fait-accompli
before the enactment of the Amendment Act cannot be the subject of enquiry now under the amended provisions. Situation
will be entirely different if the effect of a past act constitutes some wrong which can be taken cognizance of under the new
Act. But the preliminary investigation report which is a part of the Notice of enquiry clearly shows that on 17 August 1984
also the prices were increased. The increase on 17 August 1984 is certainly subsequent to the enforcement of the MRTP
(Amendment) Act, 1984, when unreasonable increase of prices became monopolistic trade practice. So, while holding that
the increase of prices on 26 April 1984 cannot be the subject of enquiry as a monopolistic trade practice, such increase on
17 August 1984 being covered by the definition of monopolistic trade practice has to be enquired into”.
Competition Act, 1998 in U.K.—Abuse of dominance
The main aim of the Competition Act, 1998 is to ensure that UK markets remain competitive, to the benefit of both
business and consumers, and compliance with the Act will ensure that this aim is achieved.
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Abuse of a dominant position—What does it mean?
The Chapter II prohibition covers the abuse by one or more businesses of a dominant position in a market.
The Competition Act, 2002 Act gives examples of specific types of conduct that are particularly likely to be considered as
abuse of a dominant position. These include:
• imposing unfair purchase or selling prices;
• limiting a production, markets or technical development to the prejudice of consumers;
• applying different trading conditions to equivalent transactions, thereby placing certain parties at a competitive
disadvantage; and
• attaching unrelated supplementary conditions to contracts.
In determining whether or not an undertaking is in a dominant position, the OFT will look first at its market share.
Generally, an undertaking is unlikely to be considered dominant if it has a market share of less than 40%. But this does not
exclude the possibility that an undertaking with a lower market share may be considered dominant if, for example, the
structure of the market enables it to act independently of its competitors. In looking at market structure the OFT will
consider the number and size of existing competitors as well as the potential for new competitors to enter the market.
A dominant position essentially means that the business is able to behave independently of competitive pressures, such as
other competitors, on that market.
The OFT will look at a range of factors in determining dominance, including:
• its market share-generally, a business is unlikely to be considered dominant if it has less than 40%;
• the number and size of competitors and the potential for new competitors to enter the market.
On 1 October 2013, the Competition and Markets Authority (CMA) came into existence as a result of the Enterprise and
Regulatory Reform Act, 2013 (ERRA). From 1 April 2014, the CMA replaced the OFT and the Competition Commission
as the new, single competition authority. The CMA will have the power to carry out all merger reviews and market
investigations. It will also be the principal enforcement body of competition laws. The ERRA gives the CMA new powers
to summon individuals for interviews during competition investigations and to impose civil fines for non-compliance with
its investigations.
Cases under Competition Act, 2002
Dominance in the relevant market is necessary to predatory pricing: No dominance – No abuse
In the case of HNG Float Glass Ltd,1143 information was given against M/s Saint Gobain Glass India Ltd (SGGIL) for
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alleged abuse of dominant position in clear float glass market in India. It was alleged that SGGIL was charging
unreasonably low prices in the clear float glass segment and was forcing dealers to buy clear glass from SGGIL if they also
wanted to buy value added glass and therefore foreclosed competition. The Commission, keeping in mind the information
in the case and in view of use, distinct features and substitutability, considered the relevant product as production and sale
of clear float glass. As the condition relating to production and sales of the clear float glass was similar in whole of India,
the relevant geographic market was considered as the whole of Indian domestic market. The Commission however, did not
agree with the conclusion of the DG that SGGIL enjoyed a dominant position in the relevant market. As per the
Commission, the market share of the competitors in terms of annual production and quantity sold of the relevant product
indicated a highly competitive market. Also, the fixed assets of AIS were higher than the fixed assets of SGGIL. The
Commission further noted that market shares for established players like SGGIL, AIS eroded after entry of a new market
player, Sezal which indicates the competitive constraints exercised by a new firm on the old experienced firms. Entry of
three new firms namely Gold Plus, HNG and Sezal in a very short span of time points to the ease of entry in the market.
The Commission, however, to satisfy itself about any possibility of any anti-competitive conduct, considered the
allegations relating to abuse of dominant position.
Predatory Pricing/Unfair Pricing: The Commission found that the prices of SGGIL were not abnormal to show any
independent movement in the market. The allegation relating to predation before the acquisition of Sezal or excessive
pricing after the acquisition also was not found to be substantiated. The prices of SGGIL were normally at the highest level
during the period of April 2010 to October 2011. There was no evidence found to show that the prices of the opposite party
were the lowest or that the downward trends of prices were triggered by it. The investigation found that the pricing of
relevant products was similar in the case of established players, whereas the prices of new entrants were mostly less than
the established players. Further, on the allegation that the alleged predatory prices of the opposite party led to elimination
of Sezal or other competitors from the market, it was observed that it was not the conduct of the opposite party which led
to selling out the manufacturing unit of float glass within one year of the commencement of operations but its own
operational and financial conditions led to such decision.
Leveraging: On the allegation that the market power of the opposite party in the architecture glass (reflective) was abused
in the other market, it was concluded by the DG that there was no denial that the market power of the opposite party in
architectural glass was much more than other players. The other big player ASI also produced the reflective glasses but had
main focus on automotive glass segments. Thus, it was noted that there was little competition on the opposite party in the
reflective segment. It was further noted that the opposite party had been running various sales promotion programs,
conducting seminar and providing technical training and guidance to architects and consumers. The amount of money
spent by it on such programs was much higher than its competitors. However, such conduct was found not to attract the
provisions of section 4(2) as this was noted to be one of the sales strategies for selling products. No abuse regarding
pricing or pressurising the consumers to buy its other product while selling architecture glasses was found to be imposed
by the opposite party in the market. The Commission, in agreement with the findings of the DG, concluded that there was
no evidence to show that the opposite party or other glass manufacturers was/were using their market power to eliminate
the processors from the market. As none of the processors alleged so during investigation, the allegation that the opposite
party was indulging in exclusionary practice or refused to deal with them was not made out.
Note: DR. GEETA GOURI, Member, however, did not agree with the approach taken by the majority to analyse the conduct of
a party when it was already proved that the party in question was not dominant in the relevant market.1144 She noted:
69. The reading of section 4(1) implies that dominance is a pre-condition for finding any contravention of section 4 of the Act.
Thus, it follows that a non-dominant firm’s conduct cannot be found abusive; the corollary also holds true that no firm can engage
in an abusive conduct unless it is dominant. Only an enterprise which is dominant can be in a position to impede effective
competition and causing harm to competition, while no such conclusion can be ascribed to the behaviour of a non-dominant firm
and hence there is no point in analysis of conduct for the purpose of establishing abuse in such cases.
70. The theory of competition harm is logically consistent with the abusive conduct of a dominant firm. Without this pre-condition
to inquire into abuse of a non-dominant may at best lead to speculative competition concerns sans enforcement action.
72. There may be cases, where conduct of the parties may be indicative of their ability to impede effective competition. In such
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cases, analysis of conduct can assist the Commission in concluding dominance. For example, the possession of economic strength
and the ability to exclude may be inferred from the conduct, but the abuse of dominance analysis would require establishing of
actual exclusionary conduct. If the ability exists and the firm is indeed dominant, it is only then that the effect of the conduct has to
be analysed extending the effects based approach to competition law. In this case, it is very clear that the opposite party is not
dominant in the relevant market and not in a position to impede effective competition. The exercise therefor of analysing abuse in
the wake of the Commission concluding that the opposite party is not dominant is unwarranted and infructuous to the extent that
Commission would not be able to take enforcement measures in the present case.
Similarly, in the Radio taxi services case,1145 Commission inorder to provide a comprehensive order did look into
question of pricing even though it had concluded that the opposite party did not enjoy dominance in the relevant market.
Commission did not fully disagree with the Informants that the low prices of opposite party was not because of cost
efficiency, but because of the funding it had received from the private equity funds. However, the Commission held that
there was no evidence to suggest that the access to such funding was inequitable and that the market for financing was not
competitive and had aberrations. The Commission though was also hesitant to interfere in a market, which is yet to fully
evolve.
Predatory pricing to be checked on actual figures and not projected figures
In the case of Transparent Energy Systems Pvt Ltd v TECPRO Systems Ltd,1146 the Commission noted that predatory
pricing cannot be assessed on the basis of estimated cost projected in the information given by the informant. The
Commission noted that even though the informant had executed similar kind of projects for more than five years, it did not
disclose actual cost of a project executed by it and the projected costs on which it got the contracts so as to give to the
Commission the actual data about the variance between the bid price and the actual price and the extent of profit
margins.1147 Further, the Commission observed that in order to find out whether the opposite party resorted to the
predatory pricing, the Commission has to give a finding that the prices of the goods or services of the Opposite party were
at a very low level with the object of driving out competitors from the market, who due to low pricing would be unable to
compete at that price. Moreover, in predatory pricing, there is always a significant planning to recover the losses if any
after the market rises again and the competitors have already been forced out. It is considered that only a dominant
company in such a market may have inclination and resources to finance such a strategy.1148 The Commission further laid
out that the definition of predatory pricing made it clear that the predatory pricing is based on actual figures and not
projected figures. The Commission noted:
May be the informant was not having access to its competitors actual costs but definitely the informant was in possession of its
own actual pricing figures for already executed projects which the informant did not think it proper to share with the Commission.
Had the applicant supported its plea with actual costs in respect of completed projects of its own, the Competition Commission
would have had a fair view of what were the costs involved, what was the level of profit and what would have been the cost of a
WHRPP project.
Further, it was held that quotations given by another bidder cannot be held predatory simply because the bidder
continuously got contracts for five projects. The Commission also noted that the projects were long time projects were also
not like fast moving consumer goods that the Opposite party would be able to recover the losses made today from the
future goods. Thus, in predatory pricing cases, it would be pertinent to account for the nature of the market/sector.
Divergence in Bid quote cannot in itself be declared predatory
A party bidding for the provision of a service takes into account cost of his equipment, the life of equipment, the
maintenance requirements of equipment, the operational cost and some reasonable returns on the capital invested. A party
will bid at a price which is equal to the minimum of it’s average variable cost to exploit scale economies. It will be not
prudent for abiding firm to keep its capacity idle and bid at a price higher than its minimum average variable cost. Hence,
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the aspect of predatory pricing has to be looked from an appropriate cost benchmark. It is the essence of the competition
that firms/companies should compete and vie with each other for grabbing contracts by reducing prices. Giving rebates and
adopting similar practices are an essential component of competitive process and law cannot condemn such practices. In
the case of HLS Asia Ltd, New Delhi,1149 it was alleged that the Schlumberger Asia Services Ltd (SASL) indulged in
predatory pricing in respect of wireline logging and perforation services required for Oil & Natural Gas exploration. It was
contended that SASL quoted unreasonably low rates for the standard services which were to be the basis for evaluation of
tender (covering entire off-shore and on-shore areas of operation for a period of three years involving standard services,
optional services and highly technical services) while considering the financial bid of the parties by ONGC. It was
submitted that the tender was only to be evaluated on the basis of standard services and thus by quoting unreasonably low
prices, SASL succeeded in ousting the informant from the contract with ONGC. It was stated that the prices quoted by
SASL were approximately 40% lower than the internal estimates of ONGC and 50% lower than the previous running
contract rates. The Commission noted that in order to make out a case for predatory pricing, it was necessary for a party to
show as to what was the cost of providing services to the party, who resorted to predatory pricing and how the cost at
which service was being provided to the customer was lower than the cost to the party. Further, cost estimates given by a
party seeking bids cannot be considered as the price of the party supplying the service. There will always be a divergence
in the estimates owing to asymmetric information between the bid inviting party and the bidder. The Commission noted
that SASL had lowered its prices from the previous tender prices and the prices quoted by it were below the cost estimate
of ONGC. However, as per the Commission, such divergence cannot be held to be declared as predatory.
Is Zero Pricing Predatory?
In the MCX Stock Exchange case,1150 it was alleged that National Stock Exchange (NSE) had introduced predatory
pricing by waiving transaction fee, admission fee for membership, annual subscription charges and advance minimum
transaction charges in the newly established Currency Derivatives Segment (CD Segment). The Commission earlier,
through a 4-2 majority, outlined “stock exchange services in respect of currency derivatives (CD) segment in India’ as the
relevant market. The Commission had noted that the stock exchange services provided for CD segment were similar to
those provided for other segments – such as “over the counter” segment but they were not “interchangeable or
substitutable”, the test provided under the Competition Act, 2002. COMPAT, however, held that the entire stock exchange
services were the relevant market. In order to establish NSE’s dominant position Commission had relied upon factors like
NSE’s market share of 48% in the CD segment; NSE’s incorporation in 1994 (against MCX’s incorporation in 2008);
reserves and surplus of Rs 18.64 million; deposits of Rs 9.17 billion; Profit before tax of Rs 6.89 billion as on 31 March
2009 (against MCX’s net loss of Rs 298.7 million); presence in 1486 cities and town across India (against MCX’s presence
through 450 centres in CD segment); High degree of vertical integration in trading platform. The Commission had also
noted NSE’s market share in other segments such as the equity segment (71% in 2008/09); F&O (almost 100%); WDM
(more than 90% since past 6-7 years); aggregate of F&O, Wholesale Debt Market (WDM) and CD segment (92% as of
2008/09). The Commission also noted that as of October 2010, the relevant market of CD segment was a triopoly (34%
with MCX, 30% with NSE and 36% with the latest entrant the United Stock Exchange).
The Tribunal noted that for arriving at the “average variable cost”, first, one would have to arrive at a “total variable cost”
which in the present case was the “total cost” as defined in regulation 2(1)(c)(i) minus the fixed cost and share of fixed
overheads, if any, during the referred period. The Tribunal opined that the average variable cost could be zero only if total
variable cost was zero and which again was not possible considering the evidences. The Tribunal then went on to check
whether the policy of zero transaction fee was an outcome of the genuine concern on the part of NSE to collect liquidity
and also whether the NSE had taken notice of the advent of section 4 of the Competition Act, 2002. The Tribunal noted that
MCX-SX could not have effectively competed with NSE on the basis of zero pricing conduct. The data clearly suggested
that the prices charged by NSE had the potential to foreclose MCX-SX, which was the only competitor in the field then, or
for that matter any other competitor, who did not have the strengths of NSE. It was a well known fact that MCX-SX did
not have any other segments to deal. The Tribunal referred to the DG’s Report where it was noted that NSE did not have
the historical philosophy of waiving fee to develop a nascent market for which he based his findings on the transaction fees
levied on WDM segment and the other segments. The report held that NSE introduced waivers/reductions in this sub
segment from March, 2010 with the obvious view of maintaining its superiority in the market. Further, the it was noted
that NSE was charging admission fee for all other segments, however, in the CD segment there was no admission fee or
deposit level waivers or requirement of making any deposit.
Predatory Pricing
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It was argued by the NSE that it was not incurring any “variable cost” for running the CD segment and therefore, the zero
pricing could not amount to predatory pricing. DG, however, held that if NSE was not having any other segment to support
income, it would not have survived with the zero pricing policy. Further, DG rejected the argument that the zero pricing
was in the nature of introductory/penetration pricing and held that even in such a scenario, there had to be an element of
pricing. The DG observed that the NSE could run operations in the CD segment only due to substantial fixed cost, which it
has already incurred for all the segments. If the pricing of any segment is to be linked only to the variable cost, NSE would
have zero pricing for all the segments, because none of them would have any variable costs. Further, the DG referred to the
report of the RBI-SEBI and noted that additional expenditure was incurred for machinery, manpower, IT support, disaster
recovery etc. in respect of the CD segment system and came to the conclusion that these costs constituted variable costs.
The DG relied on the observation of the European Commission namely Wanadoo Interactive SA (WIN) which states:
If the price are below average total costs but above average variable costs, those prices must be regarded as all abuses are
determined as a part of the plan for eliminating a competitor.
In respect of refusal by the NSE to provide segmented costs, the DG considered the details of overall capital costs,
expenses, segment-wise long run incremental cost (LAIC) and established the effect on the costs subsequent to the start of
CD segment. The DG also examined the pattern of clearing and settlement charges incurred by NSE. These activities were
executed by the NSE through NSCCL, which is wholly-owned subsidiary of NSE. It was found that for other segments
like F&O and equity, the NSCCL was charging NSE at 15% of the transaction charges in equity charges. The DG
therefore, held that transaction charges amounted to a variable cost linked to the volume of transaction. The DG concluded
that the waiver of transaction charges, data feed charges, admission fees and the reduction of deposit levels by NSE
amounted to the actions violating section 4(2) (a)(ii) of the Competition Act, 2002. DG’s view was later approved by the
Tribunal.
Theory of nascent Market: The Commission held that market could be nascent for the first few months but certainly not for
ever or for indefinite period. According to the Commission, the waiver policy was a strategy and not a bona fide step for
preserving or developing an otherwise nascent market.
Historical philosophy of waiving fee: The Commission considered the historical background of waivers in case of equity
segment and F&O segment and upheld the observation of the DG that NSE only after outstripping BSE, re-imposed
transaction charges after it had surpassed BSE. Similarly, Commission also confirmed the DG’s findings about WDM
segment where after commencing the trading on 30 June 1994, it levied transaction charges for a full year till June, 1995.
The conduct of NSE contradicted the claim of consistent policy of fee waivers to develop nascent market. The
Commission observed:
There is practically no justifiable reason for NSE to continue offering its services free of charge for such a long duration when it is
paying for manpower and other resources for running the business. It is also a fact that no enterprise would have the intention to
engage in a profit-less venture for eternity.
The Commission then referred to the fact that MCX-SX had only CD segment and that was a major constraint and
therefore, the zero price policy of NSE was unfair.
The Tribunal held that the financial power of MCX, the promoter of MCX-SX was irrelevant and pointed out that there
was no justification to continue with zero pricing policy after 20 May 2009 indicating to the deliberate nature of action to
curb competition in the market. The Tribunal also differentiated the case of Ontario Supreme Court in R v Hoffman La
Roche Ltd1151 with the existing facts and noted:
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while Hoffman La Roche engaged in zero pricing in response to a new entrant, unlike in the CD Segment where NSE imposed a
zero price when it was the only player for pro-competitive and profit maximising motives”. We fail to see any rationale behind this
argument. Question was not on the date of imposition. The relevant question is of ‘continuation of such policy indefinitely’. It is
further argued that there was no foreclosure from the market as was in the case of Hoffman La Roche. We do not have to wait for
the actual foreclosure to happen, even if there is any possibility of the competition being affected that is sufficient for the purpose
of section 4(2). 1152
In the WhatsApp case,1153 it was alleged that by not charging any subscription fee since January 2016 from its users, the
opposite party was indulging in predatory pricing. The Commission, however, observed that there were several other
applications available in the relevant market which did not charge any fee from the users for availing their services. The
Commission, thus, held communication apps not charging any fee from the users as standard practice in the
industry/business that all consumer communication apps were not charging any fee from the users. The Commission,
further, observed that “WhatsApp” was previously charging subscription fee from its users which were subsequently
scrapped which might be due to the presence of many other service providers who were offering the services for free of
cost. The Commission also observed, that there were no significant costs preventing the users to switch from one consumer
communication apps to another due to multiple reasons like : (i) all consumer communication apps were offered for free of
cost or at a very low price (mostly free), (ii) all consumer communication apps were easily downloadable on smartphones
and can co-exist on the same handset (also called “multi homing”) without taking much capacity along with other apps,
(iii) once consumer communication apps were installed on a device, users can pass on from one app to its competitor apps
in no-time, (iv) consumer communication apps were normally characterised by simple user interfaces so that costs of
switching to a new app are minimal for consumers, and (v) information about new apps was easily accessible given the
ever increasing number of reviews of consumer communication apps on apps store like google play store etc. The
Commission, also, noted that the exponential expansion of the competitor of the opposite party proved that there were no
significant barriers to entry and consumers appeared to be price sensitive. Based on the above, the Commission was of the
view that even though “WhatsApp” appeared to be dominant in the relevant market, the allegations of predatory pricing
had no substance.
Abuse of Dominance – Limiting or Restricting Production or Technical Development
Section 4(2)(b): limits or restricts—
(i) production of goods or provision of services or market there for or
(ii) technical or scientific development relating to goods or services to the prejudice of consumers; or
Limiting or restricting production of goods or provision of services or market thereof, technical or scientific development
relating to goods or services to the prejudice of customers, shall be treated as abuse of dominance.
Cases under Competition Act, 2002
In the case of Atos Worldline India Pvt Ltd,1154 it was alleged that M/s Verifone India Sales Pvt Ltd was abusing its
dominant position to force the Software Development Kits(SDK) agreement with restrictive clauses on the informant. It
was emphasised that for the provision of VAS, it was extremely important for Atos to have access to the core POS
Terminal applications and their crucial enhancements/updates along with SDKs and withholding of such
enhancements/updates and SDKs by the POS Terminal manufacturers would negatively impact the growth of the TPP and
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VAS markets. It was therefore alleged that Verifone by imposing severely restrictive terms and conditions on the usage of
SDKs for provision of service has sought to limit and restrict provision of services and technical development in the
market which is in contravention of section 4(2)(b)(i) & (ii) of the Competition Act, 2002. The Commission noted that
Verifone, a POS terminal manufacturer was also engaged in the development of VAS applications and by way of this
restriction, it was trying to get access to confidential commercial information from the VAS providers and to exploit the
lucrative VAS market. The Commission observed that the requirement of prior disclosure to the Opposite Party about the
VAS developed by the Informant amounted to imposition of unfair condition on the Informant as well as limited the
provision of VAS service. Seeking information on the VAS services which the Informant intended to develop was likely to
prejudice the business activities of the Informant as Verifone was developing into a major competitor for the Informant in
the VAS/TPP market in India. Such restriction restricted technical or scientific development relating to VAS services for
POS terminals in India. Further, the restriction placed on the Informant not to use the licensed software to develop any
payment software that directly or indirectly interacts with any acquiring bank was unfair as it limited/controlled the
provision of VAS services and limited/restricted the technical and scientific development of VAS services used in POS
Terminals in India. The Commission also noted that the Informant being the lawful owner of the proprietary rights in the
VAS was neither allowed to exploit it for its own purpose nor for its customers and the restrictive clause acted as a
disincentive for the Informant to continue investing in development and innovation of VAS services as its business would
be adversely affected by such restrictive clauses. Therefore, the Commission was of the opinion that through the SDK
agreement Verifone had restricted the provision of VAS services as well as limited/restricted the technical and scientific
development of VAS services used in POS Terminals market in India which was in contravention of section 4(2)(b)(i) and
(ii) of the Act.
In the case of Shivam Enterprises,1155 it was also found that the Society had limited and restricted provision of services
for freight transport in Kirtarpur area in contravention of the provisions of section 4(2)(b) of the Competition Act, 2002.
Kiratpur Sahib Truck Operators Co-operative Transport Society by adopting illegal means imposed unfair and
discriminatory prices and also caused various obstructions and denied access to other truck operators from conducting
business in the relevant market and hence limited and restricted the freight transport services in the relevant market in
contravention of the provisions of section 4(2)(a)(ii) and 4(2)(b)(i) of the Act. Further, it was concluded that these practices
and conduct of OP 1 of misusing its dominant position has resulted into denial of market access to other competitors in the
relevant market which is a violation of the provisions of section 4(2)(c) of the Act.1156
In the case of Indian Exhibition Industry Association,1157 the allegation related to the policies and procedures stipulated by
Ministry of Commerce & Industry and Industry and Indian Trade Promotion Organisation (ITPO) with respect to licensing
of venues to exhibitors for conducting fairs and exhibitions. The Commission held that the venues regularly used for
organising national and international exhibitions and trade fairs can be distinguished from venues for other kind of events
in terms of parameters such as physical characteristics, consumer preferences. Hence, the relevant product market taken
was market for “provision of venue for organising national and international exhibitions and trade fairs”. Also, since, Delhi
had been hosting exhibitions at Pragati Maidan since 1977 and it had a rich historical background as a venue for holding
international and national exhibitions and trade fairs, it was taken as the relevant geographic market. Factors like better
public transport system, connectivity to airports, railway stations and inter-state bus terminals, centralised location nearby
hotels, substantially large exhibition and open display space at its venue Pragati Maidan, location of Central and State
Ministries etc. also distinguished and created preference for exhibitors as well as visitors for Delhi over other places in the
country made Delhi un-substitutable with other venues in NCR or other cities in the country. Therefore, the relevant
market in the present case was “provision of venue for organising international and national trade fairs/exhibitions in
Delhi”. Hence, ITPO was held to be dominant in the relevant market for “provision of venue for organizing international
and national exhibitions, trade fairs (events) in Delhi”.1158
The Commission noted that by stipulating favourable time gap restrictions for its own events as compared to third party
organised events, ITPO imposed unfair and discriminatory conditions on the third party event organisers at Pragati
Maidan. The findings showed that the time gap restriction between two “third party events” was 15 days before and after
the event whereas in case of ITPO own organised events/exhibitions, the time gap restriction was 90 days before and 45
days after the event in case of ITPO events (which was amended to 90 days before and after the event in 2011). Such a
conduct was held to be in contravention of the provisions of section 4(2)(a)(i) of the Competition Act, 2002. Besides, it
also limited/restricted the provision of services and market thereof in contravention of the provisions of section 4(2)(b)(i)
of the Act. The Tribunal1159, however, noted that both the DG and the Commission committed grave illegality by refusing
to appreciate the rationale of the time gap policy framed by the Government of India from 1999 and its amendments from
time to time, the licensing policy framed by the appellant in July 2006, which also contained time gap clause, which was
amended on multiple occasions and lastly on 20 May 2013. Both the DG and the Commission completely lost sight of the
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fact that on 20 May 2013, the appellant had drastically amended the time gap policy and reduced the time gap to three days
between its own event and that of the private party of same product profile. The only restriction maintained was that such
trade fairs/exhibitions with the same profile cannot be organised at the same time and there was ample justification for
doing that.
In the Schott Glass case,1160 the Commission, in order to check any violation of section 4(2)(b)(i), read all the agreements
(Trade Mark License Agreement, Sale Purchase Agreement, Supply Agreement and Market Support Agreement)
conjunctively along with the discount policies of Schott Glass and found it guilty. It was of the opinion that this was an
attempt to bind the Converters to procure the glass tubes only from it. Further, the Commission relied on the statements of
the Converters given before the DG, wherein, it was claimed restrictions were put on them to not purchase tubes from any
other sources. For allegations under section 4(2)(c), the Commission took note of two things. The reprehensible behaviour
on the part of the Informant in printing fake labels of Schott Glass and passing them as well as the fact that the incident had
taken place before the charging sections became operational and therefore such refusal could not be taken into
consideration. The Commission, therefore, exonerated Schott Glass from these charges.
Geeta Gouri, Member, in her minority opinion held that there were no express or partial or full exclusivity clauses present
in the contracts, in the absence of which, it cannot be treated as imposition of unfair conditions – restricting choice, access
to competing suppliers and freedom from trade. Regarding TMLA, Schott Glass had a valid reason to enforce it to protect
its brand and reputation and prevent brand infringement through measures which are consistent with the provisions of the
Competition Act, 2002. On allegations of denial of market access, the pharma companies stated that switching or shifting
to a new supplier was not a significant constraint. The ability of the Informant to survive in market therefore was not
determined by the availability of Schott Tubes as its input. Therefore, conduct of Schott Glass had not contravened the
above provisions of the Act.
The COMPAT however, held that the agreements did not suggest any clause of exclusive dealing with the Appellant nor
did it spell out any loyalty clause. Schott glass pleaded that the only purpose of TMLA requirement was to attach the logo
of Schott to the package of container made out of Schott tubes which the converter delivers to the pharmaceutical
companies. In this instance too, the COMPAT agreed with the minority order and found no infringement of the provisions
of section 4(2)(b)(i) and 4(2)(c) of the Competition Act, 2002.
In another case, the Commission in its majority decision (2:1) found Easote having patent rights over the technology of G-
Scan machines and 100% market share to be dominant in the market for dedicated standing/tilting MRI Machines in India.
The Commission after going through the Distribution Agreement between Easote SPA and its subsidiary noted that
exclusive rights were given to the subsidiary for supply of spare parts and for providing after sales services to the
consumers of the G-Scan MRI machines in India. Such exclusivity was held to be limiting the provision of services in after
sale market and denying access to third party service providers. Such conduct was thus held to be in contravention of
sections 4(2)(b) & (c) of the Competition Act, 2002.1161
In the chess federation case, it was alleged by the chess players that they were prohibited to participate in any
tournament/championship not authorised by All India Chess Federation (AICF). Further, it was alleged that AICF banned
players from participating in the National Chess Championships and other events if any player participates in any
tournament not authorised by AICF unless an unconditional apology was tendered to AICF along with 50% of the prize
money.1162The Commission noted that the rules governing the players and the organisation of sport events/tournaments
may create a restrictive environment for the economic activities that are incidental to sport. Unlike other abuse cases, these
could be justified if it is demonstrated that the restraint on competition is a necessary requirement to serve the development
of sport or preserve its integrity. However, if restrictions impede competition without having any plausible justification,
the same would fall foul of competition law. In Dhanraj Pillay v Hockey India,1163 the Commission had noted:
The Commission ... is of the opinion that intent/rationale behind introduction of the guidelines as submitted by FIH relating to
sanctioned and unsanctioned events needs to be appreciated before arriving at any conclusions. Factors such as ensuring primacy
of national representative competition, deter free riding on the investments by national associations, maintaining the calendar of
activities in a cohesive manner not cutting across the interests of participating members, preserving the integrity of the sport, etc.
are inherent to the orderly development of the sport, which is the prime objective of the sports associations. Moving further, on the
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proportionality aspect, the Commission opines that proportionality of the regulations can only be decided by considering the
manner in which regulations are applied.
The Commission held that the rules of AICF had the effect of restricting the movement of professional players and deter
them from participating in any event not authorised by AICF. Further, in the absence of participation by chess players it
would not be feasible for any entity to organise any chess tournament thereby restricting competition in the market of
organisation of professional chess tournaments. Also, the Commission noted that AICF was unable to demonstrate how
such a blanket ban was necessary to preserve the integrity of sport and towards promoting the game. The Commission
therefore held that the impugned restrictions were in contravention of the provisions of section 4(2)(b) (i) and section
4(2)(c) of the Competition Act, 2002. The Commission observed:
59. Being the de-facto regulator of the game of chess, it is understandable that AICF would have to put in place certain restrictions
or some regulatory mechanism that are indispensable to preserve the interest of the game. Such stipulations however have to be
proportionate and inherent to preserving the integrity of the sport. Due regard needs to be given to the specificity of the sport while
stipulating any conditions. It is important that restrictions imposed by sports federations serve the interest of the sport and at the
same time maintain a fine balance between the extent of regulation and its implication on the competition in the economic
activities incidental to the sport. Some of the relevant factors to be considered in this regard are nature of sport, limited
professional life and level of opportunities for professional players.
Cases where no abuse of Dominance was held
In the BEST Undertaking case,1164 complaint was filed against Brihan Mumbai Electric Supply & Transport Undertaking
(BEST) alleging violation of section 4 of the Act. Ms Anila Gupta, a consumer of electricity of BEST made an application
to Tata Power Co (TPCL) for supply of electricity which would entail migration from the current supplier, BEST. TPCL
rejected the application on the ground that rules for changeover from one supplier to another were not applicable to BEST,
BEST being a local government body. Ms. Gupta subsequently filed a Case No. 86 of 2009 before the Maharashtra
Electricity Regulatory Commission (MERC) against TPCL praying for an order for commencement of supply by TPCL.
BEST opposed the request by claiming that it had exclusive territorial jurisdiction to supply electricity in its area and
therefore, TPCL could not supply electricity within BEST’S area of supply. TPCL, on the other hand, expressed
willingness to supply electricity to the informant. The Commission noted that the question whether BEST abused its
dominant position would depend on the extent of protection available to BEST under section 42(3) of the Electricity Act,
2003 by virtue of being a local authority. The Supreme Court in1165 asked the Central Electricity Tribunal to decide the
case on merits. The Commission noted that the findings of Central Electricity Tribunal would have a direct bearing on
determining the extent of protection available to BEST under section 42(3) of the Electricity Act, 2003, and therefore it
would not be appropriate to give a finding.
R PRASAD, Member, in his dissenting order1166 held that section 42(3) of the Electricity Act, 2003, did not prohibit TPCL
to supply electricity to a BEST consumer on the pretext of BEST being a local authority. He accordingly, opined that
Electricity Act, 2003 and the Maharashtra Electricity Regulatory Commission (Distribution Open Access) Regulations,
2005 did not grant immunity to BEST in the case. There was no dispute on the fact that BEST was not permitting supply of
electricity by TPCL through the wheeling on its distribution network. Wheeling of electricity1167 was found to exist
between TPCL and Reliance Infra which showed that BEST was directly or indirectly imposing unfair and discriminatory
conditions and prices in providing services of electricity/supply in its area of operation which was in violation of sections
4(2)(a)(i) and 4(2)(a)(ii) of the Act. Further, BEST was neither providing the wheeling of electricity through its own
network nor it was allowing the competitors to develop their own network, which practically resulted in non-existence of
any competitors in their area. Finally, by not providing the supply of electricity to its consumers either through its own
network or network of Tata Power, the BEST indulged in limiting and restricting the provision of services and denying
market access to its competitors in its area of operation. This conduct on the part of BEST, was in clear violation of the
section 4(2)(b)(i) of the Act.
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ML TAYAL, Member, in his Dissenting opinion noted that the question of section 42(3) of the Electricity Act, 2003 which
primary dealt with the issues of providing non-discriminatory open access of electricity by licensees was not in question in
the present case. BEST was supplying electricity to its consumers in its areas of operations in accordance with the Tariff
fixed and determined by the MERC and it could not be said that BEST on its own imposed unfair or discriminatory price
(tariff) for supply of electricity to its consumers. Further, BEST was also supplying electricity to all its consumers on the
conditions as per provisions of Electricity Act, 2003 and as per rules and regulations framed by MERC. Therefore, it could
not also be said that BEST on its own was engaged in imposing unfair conditions of supply of electricity on its consumers,
in contravention of provisions of section 4(2)(a). Further, he noted that there was no evidence to suggest that BEST limited
or restricted the provision of electricity or restricted its market. In the whole matter there was no case of limit or restriction
on the supply of electricity by TPCL due to the acts of BEST or limit or restriction on the overall market of electricity.
TPCL was free to distribute and supply electricity to its own consumers and also to the new consumers and develop its
own infrastructure for that. There was no case of limiting or restricting supplies or production of electricity or limiting or
restricting the overall market of distribution and supply of electricity except for the fact that the two competitors— BEST
and TPCL were competing for getting more consumers. Hence, there was no violation of provisions of section 4(2)(b)(i)
by BEST in the matter.1168
In the case of Royal Energy Ltd,1169 complaint was filed before the office of Directorate General of Investigation and
Registration (DGI&R), MRTPC against M/s Indian Oil Corporation Ltd (IOCL), M/s Bharat Petroleum Corporation Ltd
(BPCL) and M/s Hindustan Petroleum Corporation Ltd (HPCL) alleging unfair and monopolistic trade practice in breach
of the erstwhile Monopolies and Restrictive Trade Practices Act, 1969. It was alleged by the informant that since it was the
largest manufacturer of bio-diesel having its own retail bio-diesel pumps in Maharashtra, its product was causing a threat
to diesel supplied by IOCL, BPCL & HPCL (collectively called public sector OMCs) and they started informing their
clients that they would be supplying bio-diesel blended petro-diesel to them directly. It was also stated that as per purchase
policy of OMCs, they were supposed to purchase bio-diesel at a pre-determined rate, which at the time of filing the
information was Rs 26.50 per litre, while price of bio-diesel sold independently by the informant was Rs 31 per litre. Since
the consumers were bound to purchase blended bio-diesel only from the OMCs, the bio-diesel manufacturers were per
force to sell their product to OMCs at a rate lower than the cost of manufacturing.
The Commission noted that as per Motor Spirit and High Speed Diesel (Regulation of Supply, Distribution and Prevention
of Malpractices) Order, 2005, all authorised OMCs including private OMCs were authorised to market HSD IS 1460
which included B5, i.e. 5% bio-diesel blended with HSD. Although, there was no price restriction on private sector OMCs
for purchasing B100 to be blended with HSD and sold as B5 (HSD blended with 5% bio-diesel) as per blended with HSD
and sold as B5 as per BIS specifications but, due to subsidised HSD sale no private OMC could be expected to purchase
bio-diesel at higher price and sell it at a subsidised price, footing the subsidy at their cost. Prohibition on sale in open
market other than to OMCs had reportedly been imposed on account of various concerns mainly of adulteration of diesel
being marketed by OMCs. The Commission observed that even if an anti-competitive conduct flowed from any policy of
Government, Commission would still have jurisdiction to examine impugned conduct and in case any violation was found,
suitable orders could be passed under sections 27 and 28 of Competition Act, 2002. Competition Act, 2002 had not been
made any exemption in this regard. However, Commission found that, in the facts and circumstances of the present matter,
OMCs could not be forced to buy bio-diesel at a price which was higher than price of end product, that was, HSD in
present case, as it would not be commercially viable. Conduct of OMCs in present case could not be said to be
anticompetitive. There was no case of contravention of provisions of section 4 of Act also as PSU OMCs could not be said
to be dominant jointly as concept of collective dominance was not envisaged under provisions of section 4 of Act and
since, each OMCs was an independent, legal entity and no company could be said to be exercising control over other PSU
OMCs.
R PRASAD, Member, in his dissenting order held that order of 2005 was unconstitutional and in fact, resulted in ensuring
that a market for bio-diesel was not created and resulted in lessening employment in rural sector and lowering economic
development of country. He held that the order restricting movement and marketing of bio-diesel was not in public interest
as it was mainly enforced to ensure that, OMCs did not suffer a loss of business due to bio-diesel. He held that there were
entry barriers in market due to regulation, high cost of entry, marketing entry, barriers etc. which allowed enterprises or
group of enterprises to be dominant who could act independently of market and competitors or consumers or relevant
market were affected to action favour of group. Thus, he held that explanation in section 4 of Competition Act, 2002, was
attracted in present case and the group by limiting and restricting production of goods and market violated section
4(2)(b)(i) of Act.1170
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In the case of Kansan News Pvt Ltd,1171 the Commission held that by denying Kansan News Ltd to retransmit its news
channel through their cable network the Group could not be said to have limited or restricted the provision or market of
cable service, because the Kansan News Ltd was not a participant in the relevant market and the service of market of cable
TV was not getting affected. The Commission thus found that the group had not contravened the provisions of section
4(2)(b)(i) of the Competition Act, 2002.1172
In the case of Explosive Manufacturers,1173 it was alleged that Coal India Ltd engaged itself in unfair and discriminatory
practices, and had denied market access by entering into anti-competitive agreement with supplier(s) in the procurement of
industrial explosives. The Commission considered relevant market in this case to be the “the market of bulk and cartridge
explosives within India”. In light of data showing Coal India as major consumer of industrial explosives having large
resources (with 9 direct subsidiaries and 2 indirect subsidiaries; large scale production with sales of Rs 52187.79 crore and
net profit of Rs 9622.45 crore) the Commission held Coal India to be having a superior position. Therefore, based on the
market share of consumption of explosives, size and resources, comparative position of the other consumers, existing
policies of the Government, the Commission held that the Coal India enjoyed a position of dominant consumer in the
relevant market of industrial explosives. The Commission however, noted that the decision of Coal India was not to
procure entire explosives from IOCL-IBP only. The decision was to take only 20% of the required materials, thus, about
80% of the materials could still be sourced from other suppliers. Further, even when Coal India decided to source 20% of
explosives from IOCL-IBP to ensure continued supplies without disruptions, overall competition in the market prevailed.
Suppliers were free to compete for supply of rest of requirements. Further, suppliers are also able to supply materials to the
other consumers. The Commission also noted that the agreement with IOCL-IBP was entered into after apprising the
Ministry of Coal, Government of India about the difficulties being faced by it due to disruption in supply of explosives by
the members of the Informant and found merit in the whole contention that the contract with-IOCL was to avoid
disruptions in supplies and to ensure continuance of its mining operations without any problem. The Commission held:
8.3.5 The Commission feels that a consumer is free to select a supplier in its normal course of business after due diligence and after
following due procedure in accordance with the relevant rules governing procurement, particularly when the consumer is a
government body. A consumer will not harm itself consciously and if some wrong doing is done, for procedural flaws, relevant
rules will take care of such anomalies. Once consumer choice has been exercised and selection is done by a consumer for getting
supplies, other competing suppliers cannot claim that their supply or production is being restricted. The choice of supplier made by
consumer will not fall within the purview of Competition Act, unless the choice is made in a manner which restricts competition in
the market. In this case, since the OP has left open about 80% of the market for other suppliers and also since the members of
constituent members are not barred from supplying to the OP, there appears to be no harm to overall competition in the market.
The Commission held that by sourcing 20% of the supplies from IOCL-IBP, Coal India was not affecting the relevant
market in its favour since supplies of a major portion are being sourced from other manufacturers therefore, it could not be
said that there was any violation of section 4(2)(b)(i) and section 4(2)(c) of the Competition Act, 2002 since the
arrangement did not limit or restrict production of goods or provision of services or market or denied market access.
R PRASAD, Member, in his dissenting note1174 held that the DG correctly held that by not calling tender for 20% of the
procurement of explosives the market has not only been limited but it has also been restricted. Further, as far as 20% of the
procurement was concerned, there was a denial of market access to the other suppliers. Therefore, there was a
contravention of section 4(2)(c) of the Competition Act, 2002. He noted:
31. There is another issue to be discussed that freedom of a buyer to choose its suppliers and product. In the Competition Act,
freedom of trade is mentioned only in the Preamble to the Act and section 18 and nowhere else. But the other aspects in the
Preamble have to be considered and freedom of trade cannot be considered in isolation. The other factors are: (i) prevent practices
having adverse effect on competition, (ii) to promote and sustain competition in markets, (iii) to protect the interest of consumers,
(iv) economic development of the country. Similar view is expressed in section 18 of the Commission. The question is whether the
choice of supplier even if it leads to anticompetitive behaviour comes under the head freedom of trade. The next question is
whether any purchases by the State/sale of assets of the State i.e. in broad terms public procurement would come within the ambit
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of freedom to make a choice and hence freedom of trade. The State and its instrumentalities are not a living persons. The
purchases/sale of assets of such a person cannot be equated with private purchases where a person has the option to make his own
choice. As already discussed, public procurement can lead to make anticompetitive infringements. No general rule can be framed
and the facts have to be examined on case to case basis. But in any case the state looks towards the welfare of its citizen. It not only
protects the freedom of speech and trade but also sees that there is equality before law, equality of opportunity and economic
justice. No minion of the State or its instrumentalities can forget the laudable ideas for which the State exists, and take shelter
behind the maxim ‘freedom of choice’. Freedom of choice does not work in public procurement because many factors come into
play when a decision of procurement is made. Further, freedom of choice comes from freedom of trade. There has to be a
restriction on freedom of trade when the other factors mentioned in the preamble and the Competition Act are considered.
Otherwise, the Competition Act will be negated and become otiose. In such a case, any violator of competition law can take the
plea of freedom of trade and freedom of choice. That cannot be the aim of the Parliament and the citizens of the State.
32. Considering all these factors, it is established that Coal India Ltd had contravened the provisions of sections 3(1), 3(2), 3(4)(c),
4(2)(a)(i), 4(2)(b)(i) and 4(2)(c) of the Act.
In the case of ESYS Information Technologies Pvt Ltd,1175 the Commission found that there was substitutability between
microprocessors based on architecture, as detailed by the DG. Moreover, given nature of high technology industry,
substitutability across evolving products may undergo a change and relevant product definition itself may be dynamic. The
Commission observed that a few years back X86 could not be replaced by other architectures. However, changing
technological paradigm introduced possibility of substitution. Accordingly, Commission concluded that there were four
distinct relevant product markets, as identified by DG, to be considered viz. “the markets of microprocessors for desktops
PCs in India”; “the market for microprocessors of mobile/portable PCs such as laptops, notebooks, net-books, etc. in
India”; “the market of microprocessors for servers in India”; and “the market of microprocessors for tablets in India”. The
Commission noted that Intel was consistently enjoying very high market share in each of the three markets. Further, there
existed strong entry barriers in relevant markets on account of significant Intellectual Property Rights of Intel. This
combined with scale and scope that Intel enjoyed did accord it a position of dominance. Hence, in view of aforesaid
circumstances, Commission held view that Intel enjoyed a dominant position in three of four relevant markets i.e.
the markets of microprocessors for desktops PC s in India”; “ the market of microprocessors of mobile/portable PCs such as
laptops, notebooks, net-books, etc. in India”; and “market of microprocessors for servers in India.
The Commission on the basis of DG’s findings and material available on record observed that Intel had not imposed any
conditions on Informant in Agreement which could be termed as unfair or discriminatory. Further Informant’s allegation
that Intel restricted it to deal with products of its competitor or gave incentives in meeting target of sale of its high demand
product based on targets set for its low demand products did not get substantiated from available material on record.
Moreover there was no question of foreclosure of market for competitors of Intel. The scheme of incentives and targets
was not unfair or discriminatory. No clause in Agreement was found to be unfair or discriminatory as alleged by
Informant. The Commission agreeing with the DG’s report held that allegations of contravention of provisions of section
4(2)(a)(i) of the Competition Act, 2002 against Intel have not been established. Also Commission, agreeing with DG,
concluded that alleged pricing policy of Intel did not amount to secondary line price discrimination and had not resulted in
foreclosure of any of its downstream customers. It was observed that distributors were also dealing with competitor’s
products. This, the Commission was of opinion that Intel had also not restricted and limited market by foreclosing
distribution network to its competitors or denied access to market of microprocessor to its competitors or imposed
supplementary conditions or leveraged its dominant position in market of high demand products in market for low demand
products. Thus, Commission was of view that there was no contravention of provisions of sections 4(2)(b)(i), section
4(2)(c), section 4(2)(d) and section 4(2)(e) of the Act by Intel in present case.
In the WhatsApp case,1176 with regard to the abusive conduct of the WhatsApp in the relevant market (the market for
instant messaging services using consumer communication apps through smartphones) by introducing privacy policy
which compelled its users to share their account details and other information with “Facebook”, the Commission noted that
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the data sharing terms of the privacy policy related to sharing of users’ “WhatsApp” account information with “Facebook”
to improve the online advertisement and products experiences available on user’s “Facebook” page. It was also noted that
the WhatsApp provided the option to its users to “opt out” of sharing user account information with “Facebook” within 30
days of agreeing to the updated terms of service and privacy policy. The Commission also took into account the
submission of the opposite party that Facebook will use such information for the purpose of improving infrastructure and
delivery systems, understanding how their services were used, securing systems, and fighting spam, abuse or infringement
activities. The Commission, thus, taking note of the data safety system of the opposite party concluded that there was no
abuse of dominance.
In the case of Vidharbha Industries Association v MSEB Holding Co Ltd & Others,1177 it was alleged that the opposite
parties as a group abused their dominant position in the relevant market (market for the “provision of services for
distribution of electricity in the State of Maharashtra except Mumbai”) by deliberately generating and distributing
electricity in an extremely inefficient manner and denying market access to other efficient power generating companies for
generating and distributing electricity in the State of Maharashtra. It was averred that irrespective of the price charged by
Maharashtra State Power Generation Co Ltd (oppsite party-2), Maharashtra State Electricity Distribution Co Ltd (oppsite
party-4) purchased all the electricity/power generated by oppsite party-2.
It was alleged that opposite party-2, through its decision to shut down four units of Koradi Thermal Power Plant, had
limited/restricted the output of electricity and consequent limitation of output by opposite party-2. The Commission, from
the submissions made by opposite party-2, observed that the aforesaid four plant units had rendered service for more than
35 years and had become commercially unviable and harmful to the environment. Therefore, the Commission was of the
view that the allegation of the Informant that opposite party-2 had limited/restricted the output of electricity through the
above said conduct in violation of section 4(2)(b)(i) of the Competition Act, 2002 was misplaced and did not hold ground.
In the case of Vidharbha Industries Association v MSEB Holding Co Ltd & Others,1178 it was alleged that the opposite
parties as a group abused their dominant position in the relevant market (market for the “provision of services for
distribution of electricity in the State of Maharashtra except Mumbai”) by deliberately generating and distributing
electricity in an extremely inefficient manner and denying market access to other efficient power generating companies for
generating and distributing electricity in the State of Maharashtra. It was averred that irrespective of the price charged by
Maharashtra State Power Generation Co Ltd (opposite party-2), Maharashtra State Electricity Distribution Co Ltd
(opposite party-4) purchased all the electricity/power generated by opposite party-2. It was alleged that opposite party-4
purchased all of the power produced by opposite party-2 under long term PPAs entered for 25 years between opposite
party-4 and opposite party-2 irrespective of the price which hindered the scope of competition in the relevant market by
restricting opposite party-4 from purchasing electricity from sources other than opposite party-2. The Commission
however, observed that firstly, usually power from PSUs is purchased under long term PPAs through MOU route only,
whereas power from other sources is purchased through open bidding. Secondly, opposite party-4 had categorically
justified the long term PPAs with opposite party-2 by stating that the aforesaid PPAs were entered into during difficult
circumstances of shortage of electricity and prevalent load shedding of power in the State of Maharashtra. As competitive
bidding mechanism was in a nascent stage during that time and ensuring stable and continuous supply of electricity was
the top priority, long term PPAs were signed through MOU route. The Commission found this justification plausible and
held that there was no contravention of provisions of section 4(2)(c).
The Informant also alleged that opposite party-4, being responsible for essential facilities/infrastructure required for supply
of electricity i.e. distribution network, consistently refused to accept the request of the consumers who wanted to procure
electricity through open access. The Commission opined that in the absence of explicit provision in the Open Access
Regulations of 2005, opposite party-4 was unable to grant permission for open access through Indian Energy Exchange
(IEX). In view of this, the Commission was of the view that the conduct of opposite party-4 regarding open access through
IEX was not violative of section 4 (2)(c) of the Competition Act, 2002. Commission also did not find any contravention of
section 4(2)(c) for the alleged non-grant of open access excluding the IEX.
European Union - Cases
Article 102(b) of the TFEU prohibits limiting or restricting production of goods and provision of services to the prejudice
of consumers. Section 4(2)(b) of the Indian Competition Act, 2002 has been worded similarly. The following cases will
delineate the position of law:
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In Napier Brown/British Sugar1179, it was held that where the occupier of a dominant position established in the common market
aims at eliminating a competitor also established in the common market, it is immaterial whether this behaviour relates directly to
trade between Member States once it has been shown that such elimination will have repercussions on the patterns of competition
within the common market. This is particularly the case when a dominant company attempts to remove a competitor whose
activities include the import, transformation and resale of a product. BS’s actions, having the intention or foreseeable result of
precipitating NB’s removal from the retail sugar market, had a potential effect on the structure of competition and trade within the
common market, and thus on trade between Member States within the meaning of Article 86. The refusal of BS to sell industrial
sugar to NB had direct and appreciable effects on inter-State trade. Because NB could not purchase beet-origin sugar from BS, it
purchased such sugar (under 1986 market conditions more expensively) from other Community producers in France, Denmark and
the Netherlands. Even if NB had been able to purchase T & L sugar for repackaging, it would still have been unwilling to use such
sugar for this purpose, because it cannot receive the Community sugar storage rebate for the storage of cane-origin sugar. In this
respect, it was noted that NB ordered more than twice as much Continental sugar for import between October 1985 and June 1986
compared with the amounts purchased between October 1984 and September 1985. Thus, an artificial pattern of trade between
Member States was created because, had it not been for BS’s refusal to supply, NB would not have undertaken a large part of these
imports, rather purchasing cheaper sugar from BS. The fact that BS’s refusal to supply effectively increased the level of trade
between Member States did not prevent BS’s action from affecting trade within the meaning of Article 86.
In Klaus Hofner and ELser v Macrotron,1180 it was held that as an undertaking entrusted with the operation of services of general
economic interest, a public employment agency engaged in employment procurement activities is, pursuant to Article 90(2) of the
Treaty, subject to the prohibition contained in Article 86 of the Treaty, so long as the application of that provision does not obstruct
the performance of the particular task assigned to it. A Member State which has granted it an exclusive right to carry on that
activity is in breach of Article 90(1) of the Treaty where it creates a situation in which that agency cannot avoid infringing Article
86 of the Treaty. That is the case, in particular, where the following conditions are satisfied:
• the exclusive right extends to executive recruitment activities;
• the public employment agency is manifestly incapable of satisfying demand prevailing on the market for such activities;
• the actual pursuit of those activities by private recruitment consultants is rendered impossible by the maintenance in force
of a statutory provision under which such activities are prohibited and non-observance of that prohibition renders the
contracts concerned void;
• the activities in question may extend to the nationals or to the territory of other Member States.”
In Suiker Unie v Commission,1181 it was held that for the purpose of applying Articles 85 and 86 of the treaty, the relationship
between an economic operator and his intermediaries must only be determined in the light of community law, so that the fact that a
trade representatives contract, which imposes upon the representative a prohibition of competition, complies with the national law
governing this contract or that this law even imposes a similar prohibition is not determinative when considering whether such a
contract is not caught by Article 86. However, it must be admitted, independently of the content of the applicable laws of the
member states, that, in general, the fact that a producer or an association of producers forbids its agents, who sell in its name and
for its account, to act at the same time for competing producers without its consent, corresponds to the nature and spirit of a legal
and economic relationship of the kind in question. In fact, if such an agent works for the benefit of his principal he may in principle
be treated as an auxiliary organ forming an integral part of the latter’s undertaking, who must carry out his principal’s instructions
and thus, like a commercial employee, forms an economic unit with this undertaking. In these circumstances the abuse is not due to
the fact that the principal forbids such an auxiliary organ, without his consent, to trade in products which could compete with his
own. The position is different if the agreements entered into between the principal and his agents, whom the contracting parties call
“trade representatives”, confer upon these agents or allow them to perform duties which from an economic point of view are
approximately the same as those carried out by an independent dealer, because they provide for the said agents accepting the
financial risks of the sales or of the performance of contracts entered into with third parties. In fact, in such a case the agents cannot
be regarded as auxiliary organs forming an integral part of the principal’s undertaking with the result that, if a clause prohibiting
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competition is agreed between principal and agent and the principal is an undertaking occupying a dominant position, that clause
may constitute an abuse within the meaning of Article 86 as it is likely to consolidate that dominant position.
In Consten and Grundig v Commission,1182 it was held that what was particularly important was whether the agreement was
capable of constituting a threat,either, direct or indirect, actual or potential, to freedom of trade between Member States in a
manner which might harm the attainment of the objectives of a single market between states. Thus, the fact that an agreement
encourages an increase, even a large one, in the volume of trade between states, is not sufficient to exclude the possibility that the
agreement may “affect” such trade in the abovementioned manner.
The Court in Magill TV Guide – British Telecommunications1183 case noted that mere ownership of an intellectual property right
cannot confer a dominant position. However, since the appellants were the only source of the information, needed to allow an
undertaking like Magill, that wished to publish weekly listings. Appellants had a de facto monopoly over the information. The
appellants were thus in a position to prevent effective competition on the market in weekly television magazines and thus occupy a
dominant position. The court noted that the arguments of appellants and IPO wrongly presuppose that where the conduct of an
undertaking in a dominant position consists of the exercise of a right classified by national law as ‘copyright’, such conduct can
never be reviewed in relation to Article 86 of the treaty. Refusal to grant a license, even if it is the act of an undertaking holding a
dominant position, cannot in itself constitute abuse of a dominant position. However, it was also made clear that the exercise of an
exclusive right by the proprietor may, in exceptional circumstances, involve abusive conduct. The court agreed with the factors
cited by the CFI, listed below in finding that the appellants had abused their dominant position:
• There was no actual or potential substitute for the weekly television listings published by the appellants.
• Appellants were the only sources of the basic information on programme scheduling which was the indispensable raw
material for compiling a weekly television guide. Appellants’ refusal to provide the information prevented the
appearance of new products. Such refusal constituted an abuse under Article 86.
• There was no justification for such refusal either in the activity of television broadcasting or in that of publishing
television magazines.
Section 4(2)(c) - indulges in practice or practices resulting in denial of market access [in any
manner]1184
Denial of market access is occasioned only to a competitor - M/s Fast Way Transmission Pvt
Ltd and others
Kansan News Pvt Ltd,1185 a broadcaster of news and current affairs TV channel named “Day and Night News” operating
in the states of Punjab, Haryana, Himachal Pradesh and Union Territory of Chandigarh filed a complaint under section
19(1)(a) of the Competition Act, 2002 against M/s Fast Way Transmission Pvt Ltd and others (engaged in the business of
distribution of cable network channels of broadcasters [multi system operators (MSOs)] for the alleged infringement of
sections 3 and 4 of the Act. It was contended that the MSOs through their market share and political clout had complete
control over the cable network distribution system in the State of Punjab and the Union Territory of Chandigarh. It was
alleged that the MSO’s as a group formed a cartel abusing their dominant position and were acting in an illegal, arbitrary
and discriminatory manner resulting in denial of market access to the television channels in violation of section 4 of the
Act. Further, it was alleged that the obstructions and interruptions that caused interference with the transmission of Kansan
News channel were deliberate, conscious and was done with oblique motives to harass the broadcaster and dictate
following of their political agenda.1186
Since, cable TV systems are different from DTH or other platforms due to different product characteristics, the relevant
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product market taken was cable TV service. Also, since a cable TV service provider cannot operate beyond its jurisdiction
and the conditions of competition or provision of Cable TV being different in different States on account of difference in
consumer preferences and choices, the relevant geographic market was delineated as Punjab and UT of Chandigarh. The
“Group” (within the meaning of clause (b) of the explanation to section 5 of the Competition Act, 2002) comprising of the
three MSO’s (M/s Fast Way Transmission Pvt Ltd, M/s Hathway Sukhamrit Cable & Datacom Pvt Ltd M/s Creative Cable
Network Pvt Ltd) was held to be dominant in the relevant market on the grounds of very high turnover; Presence of weak
competitors and High dependency of the Consumers of Cable TV in Punjab and Chandigarh with no alternative of
substitutes.
The Commission noted that the action of the Group resulted in loss to informant-broadcaster as well as denial of services
to consumers who wanted to watch the channel of Kansan TV Ltd and it was effectively wiped out from the relevant
market by the conduct of the Group. The Commission held that Kansan News Pvt Ltd had been denied market access and
opportunity to compete and thus, there was violation of section 4(2)(c). The Commission noted that the TRP of the channel
as mentioned in the DG’s report was in the range of 3-7 which was equal to some other channels and it therefore rejected
the argument of the Operators that the reason of termination was low TRP of the channel. Also, since, subscriber base of
the Operators was more than 40 lakhs, they were in a position to affect the market in their favour and deny the opportunity
for transmission to the channel. The Commission therefore passed a cease and desist order and imposed a penalty of 8.4
crores on the Fastway Group.
The Tribunal, however, allowed the appeal and set aside the order of the Commission. The Tribunal discussed the
application of section 4(2)(c) at length and noted that the Fastway Group (MSOs), engaged in the business of downloading
the signals from the satellite for the purpose of providing feeds to the subscribers either directly or through the LCOs-the
local cable operators and Kansan News engaged in the business of broadcasting the signals by uplinking it to the satellite
with an arrangement with MSOs for downloading and carrying their signals and feeding them for the subscribers (viewers)
could not be said to be competing with each other as they were both at different levels of the supply chain. The question of
denial of market access to the broadcaster by a MSO, therefore, as per the Tribunal did not arise. The Tribunal also held
that the termination of the contract by the MSO could not be said to be a “practice” adopted for carrying on the trade by the
MSO. Furthermore, no case as per Tribunal had been made out to show that the termination of contract by the Appellants
was on account of their conduct of abuse of the dominant position as a group and that in fact it resulted in denial of market
access to the informant/broadcaster.
The Supreme Court however did not agree with the reasoning of the Appellate Tribunal. As per the Apex Court, the words
“in any manner” are words of wide import which must be given their natural meaning. Therefore, once it was established
that the opposite parties were dominant in the relevant market, whether a broadcaster is in competition with MSOs was an
irrelevant factor for the purpose of application of section 4(2)(c). The section becomes applicable because the broadcaster
was denied market access due to an unlawful termination of the agreement between the said broadcaster and the
Respondents. The Supreme Court however found the reason to terminate the agreement in form of low TAM ratings
justified and accordingly chose not to impose any penalty even though a breach of section 4(2)(c) was established.1187
Cases under Competition Act, 2002
In the BCCI case,1188 information was filed against BCCI for irregularities in the grant of franchise rights for team
ownership, grant of media rights and award of sponsorship rights and other local contracts in the conduct of Indian Premier
League (IPL), a Twenty 20, professional cricket league tournament. The DG found BCCI to abuse its dominant position in
the relevant market [“the underlying economic activities ancillary for organising the IPL twenty-20 cricket tournament
being carried out under the aegis of BCCI”] through grant of franchisee agreements, unfair and discriminatory tendering
process (for instance, the infinitum tenure of the franchisee agreements). DG further noted that, the BCCI entered into the
agreements with the franchisee on its own terms and conditions which restricted the market for others. Also, various media
rights awarded were neither fair nor transparent and were given for fairly long period of 10 years thereby limiting and
restricting the market in violation of section 4(2) of the Competition Act, 2002.1189 The Commission while identifying the
relevant product market relied on the publically available TRP and TAM Ratings. The Commission, however, made a
distinction between First Class/International events and Private Professional League Cricket event. The Commission
accordingly, defined the relevant market as the “Organisation of Private Professional Cricket Leagues/Events in India.”
The Commission noted that with the advent of the “private professional league”, BCCI extended its monopoly to the new
genre of cricket in the establishment of Indian Premier League, IPL. Also, BCCI assumed the right to sanction/approve
cricket events in India as per of section 32.4 of ICC Bye Laws making the approval of BCCI critical to the organisation
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and success of any competing league and is a very important source of dominance for BCCI. The Commission noted that
by explicitly agreeing not to sanction any competitive league during the currency of media rights agreement BCCI had
used its regulatory powers in arriving at a commercial agreement, which is at the root of a violation of section 4(2)(c).
Accordingly, a cease and desist order along with imposition of penalty was passed and clause 9.1(c)(i) in the Media Rights
Agreement was ordered to be deleted.1190
Difference in the demarcation of relevant market was argued before the Tribunal to be not problematic. The COMPAT
observed that since the two definitions were distinct in terms of the scope of investigation, the material relied upon by the
Commission in arriving at its definition of the relevant market was different from the DG and was not put to the Appellant.
Also, reliance on newspaper articles to arrive at this definition of the relevant market was neither part of the DG Report nor
provided by the informant. Since, the BCCI was not put to notice of the information/evidence relied upon by the
Commission and was, therefore, not provided an opportunity to effectively defend itself, COMPAT set aside the order of
the Commission for violation of principles of natural justice and the remitted to the Commission for fresh disposal in
accordance with law. CCI in May 2015 ordered further investigation in accordance to the directions of COMPAT. Report
was submitted in March 2016.
The Commission in its fresh order in the IPL1191 case, while acknowledging the importance of the system of approval
under pyramid structure of sports governance noted that sporting rules may also create a restrictive environment for the
economic activities that are incidental to the sport.1192 The Commission held that the representation and warranty given by
BCCI that it shall not organize, sanction, recognize, or support any other league that is competitive to the professional
domestic Indian T20 competition, during the rights period i.e. for a sustained period of ten years, forecloses the market for
organization of professional domestic cricket leagues/events in India. The Commission noted that the responsibility cast
upon dominant enterprises under section 4(1) of the Competition Act, 2002 does not get diluted on the pretext of the abuse
being pursued at the behest of the consumers or other stakeholders. Further, claims of nascency, limited time for
recoupment and the need for the self-imposed restriction running for a sustained period of ten years were held to have not
been substantiated by BCCI. Thus, BCCI was held to be working towards maintaining its monopoly in the relevant market
for organization of domestic professional cricket leagues in India. The Commission observed:
In this case, the impugned clause in the IPL Media Rights Agreement and Rule 28(b) create an insurmountable entry barrier in the
relevant market for organization of domestic professional cricket leagues. It the absence of any plausible regulatory rationale or
necessity of the same for promotion of the sport, the anti-competitive effect of the impugned clause is indubitable. Based on the
foregoing assessment, the Commission concludes that the representation and warranty given by BCCI in the IPL Media Rights
Agreement that “it shall not organize, sanction, recognize, or support during the Rights period another professional domestic Indian
T20 competition that is competitive to the league” and Rule 28(b) of the BCCI Rules, amounts to denial of market access for
organization of professional domestic cricket leagues/events in India, in contravention of Section 4(2)(c) read with Section 4(1) of
the Act.
The Commission therefore ordered that BCCI shall not place blanket restriction on organization of professional domestic
cricket league/events by non-members. The same however will not preclude it from stipulating conditions while
framing/modifying relevant rules for approval or while granting specific approvals, that are necessary to serve the interest
of the sport. Such changes shall entail principles of nondiscrimination and shall be applied in a fair, transparent and
equitable manner. Deliberate involvement in abusive conduct was taken as an aggravating factor by the Commission and
the Commission also refused to accept BCCI being a not for profit organization, as a mitigating factor. Accordingly, a
penalty of approx. 53 crores was imposed on BCCI.
Dhanraj Pillay v Hockey India:1193 The case pertained to the alleged imposition of restrictive conditions by Hockey India
(HI), the National Association for the sport of Hockey, on players in un-sanctioned prospective private professional
leagues resulting in denial of entry (permission) to competing leagues. The specific allegations levelled were:
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1. HI misused its regulatory powers and promoting its own Hockey League at the exclusion of WSH and is
engaging in practices resulting in denial of market access to rivals, in contravention of section 4(2)(c) of the
Competition Act, 2002.
2. HI used its dominance in conducting international events in India to enter into the market of conducting a
domestic event in India, in contravention of section 4(2)(e) of the Act.
3. The CoC Agreement entered by HI with the players was an exclusive supply agreement and the restrictive
conditions included thereunder, constitute a violation of section 3(4) of the Act.
The Commission in light of the Meca Medina judgment of Grand Chamber of ECJ decided to use the “inherence
proportionality principle”1194 to examine the regulations and the manner of application of regulations, for anticompetitive
effects on economic competition.
In the Hockey India case, the allegations centered on foreclosure of market to rival leagues by sports associations in the
garb of rules and Bye laws relating to sanctioned and unsanctioned events. The Commission considered the following
factors to decide if any abuse of dominance occurred:
• The WSH was a domestic event as per definition contained in FIH Bye laws, but it was very clear that the
sanction was to be given by the respective Continental Federations and by FIH. Since, HI was not the sanctioning
authority for such an event and hence cannot be faulted for refusing the sanction which was neither to be granted
by HI nor asked to be granted from HI.
• FIH was not advocating disciplinary action on those players/officials who entered into binding agreements with
WSH before the regulations of FIH were notified.
• The Commission agreed to HI’s submissions that, the reason behind the players who participated in the WSH
series, not being selected was their non-participation in training camp, which otherwise was mandatory, and not
owing to participation of players in WSH.
The Commission held that the allegation against HI/FIH for causing denial of market access under section 4(2)(c), to WSH
was not substantiated, considering the provisions of Bye laws as well as the manner of application of Bye laws.
Shamsher Kataria Informant v Honda Siel Cars India Ltd:1195 The Commission defined the relevant product market
consisting of two separate relevant markets; the primary market one for manufacture and sale of cars and the other for the
sale of spare parts and repair services. In light of the factors like technical specificity, market share of OEMs of the spare
parts and repair services aftermarket for their own brand of cars, dependence of consumers on the enterprise, entry barriers
created for independent repairers, the Commission was of the view that each OEM was a 100% dominant entity in the
aftermarket for its genuine spare parts and diagnostic tools and correspondingly in the aftermarket for the repair services its
brand of automobiles. The Commission analysed the alleged abusive practices of the OEMs within the parameters of
section 4(2) of the Competition Act, 2002 with two main considerations:
(a) Ability of the consumers to freely choose between an independent repairer and an authorised dealers without
being faced by any adverse financial consequences; and
(b) Ability of independent repairers to access the aftermarket and provide services in a competitive manner.
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Denial of Market Access under section 4(2)(c): The DG’s investigation revealed that most of the overseas suppliers were
not supplying spare parts directly into the Indian aftermarket. Also, the agreements/arrangements between the OEMs and
their respective overseas suppliers contained clauses which specifically restricted such overseas suppliers from supplying
spare parts directly into the Indian after market or were silent on the rights of such overseas suppliers from supplying
directly into the Indian aftermarket. However, the DG during the course of its investigation discovered that such overseas
suppliers in practice did not supply spare parts in the Indian aftermarket. Again, the perusal of the agreements entered by
the OEMs with the local OESs revealed that there were restrictions on the OES from supplying parts directly to third
parties without the prior written consent of the OEMs. The restrictions had been placed upon the OESs ability to sell spare
parts directly to third parties, where such spare parts were being manufactured by the OEMs using the
drawings/designs/specifications/knowledge/toolings/moulds/jigs/IPRs/trademarks etc. of the OEMs. It was noted that each
OEM had two type of customers; one in the primary market and the other in the secondary market. These customers were:
(a) car owners who purchased the automobiles manufactured by the OEMs in the primary market and (b) independent
service providers in the aftermarket. An owner of a car could not fit the spare parts into the machine by himself and
required the services of a specialised technician. Therefore, the owner of automobiles did not operate in the aftermarket as
purchasers of spare parts but required the service of firms engaged in maintenance and repair work. The independent
repairers, who were not part of the official dealer network of the OEMs, did operate in the market for as purchasers of
spare parts of the automobiles manufactured by the OEMs. Therefore, the independent service providers were customers of
the OEMs in the aftermarket and further compete with the OEMs in the repairs and maintenance service aftermarket. The
Commission noted that each OEM was a monopolistic player in the aftermarket for its own brand of spare parts and
diagnostic tools and was in effect the sole supplier of such spare parts and diagnostic tools to the aftermarket. The
Commission after an analysis of the practices of the OEMs to concluded that in effect each OEM severely limited the
access of independent repairers and other multi brand service providers to genuine spare parts and diagnostic tools required
to effectively compete with the authorised dealers of the OEMs in the aftermarket amounting to denial of market access by
the OEMs under section 4(2)(c) of the Competition Act, 2002. The Commission further held that such denial of market
access was specifically aimed at adopting a course of conduct with a view to exclude a competitor from the market by
means other than legitimate competition and such exclusionary abusive conduct allowed the OEMs to further strengthen
their dominant position and abuse it. On the claim of OEM on proprietary material, the Commission observed:
20.5.85 The OEMs have submitted that the spare parts and diagnostic tools, workshop manuals are their proprietary materials and
therefore accessible only to the authorised dealers network of each OEM. The Commission notes that unlike section 3(5) of the
Act, there is no exception to section 4(2) of the Act. Therefore, if an enterprise is found to be dominant pursuant to explanation (a)
to section 4(2) and indulges in practices that amount to denial of market access to customers in the relevant market; it is no defense
to suggest that such exclusionary conduct is within the scope of intellectual property rights of the OEMs. On the basis of aforesaid,
the Commission is of the opinion that the OEMs have denied market access to independent repairers and other multi brand service
providers in the aftermarket without any commercial justification.
The Tribunal1196 also concluded that either by virtue of express agreement or by practice OEMs do not allow a large
number of OESs to sell spare parts directly in the aftermarket including to independent repairers which was found true in
the case of restrictive practices imposed upon authorised dealers by OEMs in so far as over the counter sale to independent
repairers was concerned. The Tribunal held that since independent repairers were important potential competitors to
authorised dealers the impact of restriction was quite appreciable.
Unfair price/excessive price section 4(2)(a)
While agreeing with the decision of the Commission the Tribunal also noted:
91 ... According to section 4 of the Act a predatory pricing was clearly defined as unfair but excessive pricing had to be interpreted
as unfair on the basis of the circumstances and economic analysis. Calculation of economic value was a difficult task and required
extensive information. DG’s investigation had taken a relatively simplistic approach to assessment of the price of the spare parts
charged by appellants as unfair. Unfairness need not necessarily came from the price being excessive. It could also come from the
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special circumstances of a given situation when monopoly had been proved and consumers had nowhere else to go. In such cases
significantly higher prices could also operate as unfair prices. There was no denying the fact that in view of the dominance proved
in the earlier paragraphs, the OEMs had a natural temptation to charge high price for their spare parts. They may deny it on the
ground of reputational effect or defend it on the ground of R&D and other fixed costs including their brand equity, the fact remains
that they were not able to explain the 82 phenomenal differences between sourcing cost and selling price. In view they had not
even tried to do so. There was no doubt that the mark ups were very high but to what extent they could be justified by explaining
the additions through costs incurred on a variety of other operations, had not been considered by the DG. In absence of a very
reliable analysis either by the DG or by the OEMs offered in their defence, while might find it difficult to classify mark ups as
excessive pricing, it could definitely be recognised that the prices charged by OEMs were abnormally high. This also needed to be
seen in the background of yet another fact reported by the DG. The OEMs were asked to furnish the details of turnover and profits
from sale of automobiles as well as from spare parts separately. While all companies did not furnish this data, the analysis with
respect to companies that submitted the requisite data showed that in all cases, the margins from spares business exceeds the
margin from car business substantially. In fact, several OEMs were incurring overall losses as well as that from the sale of cars.
However, profits had been generated from spare parts business.
It was held in the case of Indian Exhibition Industry Association1197 that increase in the time gap restrictions for holding
third party events, before and after oppostie party-2’s own events of similar profile, amounted to denial of market access to
the third parties who competed with ITPO for organising events at Pragati Maidan amounts to denial of market access in
contravention of section 4(2)(c) of the Competition Act, 2002. The Commission also believed that ITPO had used its
dominant position in the relevant market of venue provider in Delhi for organising events to protect and enhance its
position in the market of event organisation and thereby contravened the provisions of section 4(2)(e) of the Act. The
Tribunal1198, however, noted that both the DG and the Commission committed grave illegality by refusing to appreciate
the rationale of the time gap policy framed by the Government of India from 1999 and its amendments from time to time,
the licensing policy framed by the appellant in July 2006, which also contained time gap clause, which was amended on
multiple occasions and lastly on 20 May 2013. Both the DG and the Commission completely lost sight of the fact that on
20 May 2013, the appellant had drastically amended the time gap policy and reduced the time gap to three days between its
own event and that of the private party of same product profile. The only restriction maintained was that such trade
fairs/exhibitions with the same profile cannot be organised at the same time and there was ample justification for doing
that.
In Shivam Enterprises,1199 it was found that the Society had limited and restricted the provision of services for freight
transport in Kirtarpur area in contravention of the provisions of section 4(2)(b) of the Competition Act, 2002. Kiratpur
Sahib Truck Operators Co-operative Transport Society by adopting illegal means imposed unfair and discriminatory prices
and also caused various obstructions and denied access to other truck operators from conducting business in the relevant
market and hence limited and restricted the freight transport services in the relevant market in contravention of the
provisions of sections 4(2)(a)(ii) and 4(2)(b)(i) of the Act. Further, it was concluded that these practices and conduct of OP
1 of misusing its dominant position has resulted into denial of market access to other competitors in the relevant market
which is a violation of the provisions of section 4(2)(c) of the Act.
In the case of Jupiter Gaming Solutions Pvt Ltd v Govt of Goa,1200 it was alleged that Government of Goa which enjoyed
a dominant position in the relevant market (lottery market in the State of Goa for the Goa Brand Lottery Scheme (Online
and Paper Lotteries) under the Lotteries Act), abused its dominant position by incorporating the condition requiring a
participating entity to have a minimum gross turnover of Rs 4,000 crore per annum during the last three financial years
which was designed to favor of M/s Martin Lottery Agency Ltd. The Commission held that given the exclusive authority
to run the lotteries in the State of Goa and the power to appoint operators for this purpose, Govt. of Goa was in a position
of strength to operate independently in the relevant market. The mere fact that this position was enjoyed by virtue of a
statute viz., the Lotteries Act, did not preclude it from enjoying a dominant position, making it subject to examination in
terms of the provisions of the Act. However, the Commission noted that the Hon’ble High Court of Bombay at Goa in the
matter of Pooja Fortune Pvt Ltd v Govt of Goa,1201 vide its order dated 13 April 2010 had upheld the conditions as
incorporated by the Government of Goa in the Lottery Tender and the Court had opined that the manner in which an
entity’s capability to participate in the lottery tender was to be ensured was left to the decision of the State. The
Commission quoted the relevant para from the judgment:
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5. ... The Respondents are well within their rights to require a participant to have a minimum gross turnover of Rs. 4000 crores, per
annum, during the last three financial years. This is obviously to ensure, as far as possible, that the participant would be in a
position to raise revenue per annum up to a turnover of Rs. 1000 crores. The manner in which the same is to be ensured must be
left to the decision of the Respondents.
6. The contention that a participant is required to pay only Rs. 12 crores are also not well founded, as the preformed letter itself
indicates that a participant is bound to pay 0.25% in respect of the turnover, over and above Rs. 1000 crores, per annum.
The Court relied on the decision of the Hon’ble Supreme Court in Directorate of Education v Educomp Datamatics
Ltd,1202 (where the government was given flexibility to set the terms of the tender).1203 The Commission noted that the
very fact that two other entities satisfied the requirements as laid down in the impugned condition negates the informant’s
contention that the impugned condition was tailored to favour only the opposite party No. 2. Further, the Commission
noted that there was no material on record to substantiate any mala fide intention or bias on the part of the opposite party
No. 1 for incorporating the impugned condition in the Lottery Tender. The Commission, therefore, held that there was no
substance in the allegation of denial of market access.1204
— In Explosive Manufacturers Welfare Association v Coal India Ltd and its Officers,1205 it was alleged that Coal
India Ltd engaged itself in unfair and discriminatory practices, and had denied market access by entering into
anti-competitive agreement with supplier(s) in the procurement of industrial explosives. The Commission
considered relevant market in this case to be the “the market of bulk and cartridge explosives within India”. In
light of data showing Coal India as major consumer of industrial explosives having large resources (with 9 direct
subsidiaries and 2 indirect subsidiaries; large scale production with sales of Rs 52187.79 crore and net profit of
Rs 9622.45 crore) the Commission held Coal India to be having a superior position. Therefore, based on the
market share of consumption of explosives, size and resources, comparative position of the other consumers,
existing policies of the Government, the Commission held that the Coal India enjoyed a position of dominant
consumer in the relevant market of industrial explosives. The Commission however, noted that the decision of
Coal India was not to procure entire explosives from IOCL-IBP only. The decision was to take only 20% of the
required materials, thus, about 80% of the materials could still be sourced from other suppliers. Further, even
when Coal India decided to source 20% of explosives from IOCL-IBP to ensure continued supplies without
disruptions, overall competition in the market prevailed. Suppliers were free to compete for supply of rest of
requirements. Further, suppliers are also able to supply materials to the other consumers. The Commission also
noted that the agreement with IOCL-IBP was entered into after apprising the Ministry of Coal, Government of
India about the difficulties being faced by it due to disruption in supply of explosives by the members of the
Informant and found merit in the whole contention that the contract with-IOCL was to avoid disruptions in
supplies and to ensure continuance of its mining operations without any problem. The Commission held:
8.3.5 The Commission feels that a consumer is free to select a supplier in its normal course of business after
due diligence and after following due procedure in accordance with the relevant rules governing procurement,
particularly when the consumer is a government body. A consumer will not harm itself consciously and if
some wrong doing is done, for procedural flaws, relevant rules will take care of such anomalies. Once
consumer choice has been exercised and selection is done by a consumer for getting supplies, other competing
suppliers cannot claim that their supply or production is being restricted. The choice of supplier made by
consumer will not fall within the purview of Competition Act, unless the choice is made in a manner which
restricts competition in the market. In this case, since the OP has left open about 80% of the market for other
suppliers and also since the members of constituent members are not barred from supplying to the OP, there
appears to be no harm to overall competition in the market.
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The Commission held that by sourcing 20% of the supplies from IOCL-IBP, Coal India was not affecting the relevant
market in its favour since supplies of a major portion are being sourced from other manufacturers therefore, it could not be
said that there was any violation of sections 4(2)(b)(i) and section 4(2)(c) of the Competition Act, 2002 since the
arrangement did not limit or restrict production of goods or provision of services or market or denied market access.1206
In the case of North Delhi Power Ltd,1207 it was alleged that the DISCOMS through their conduct restricted the market for
meters and denied access of the NCR meter market to eligible manufacturers other than the handful of specified
manufacturers/vendors. Foreclosure of competition was examined in the light of existing 200 meter manufacturers in the
country. The Commission held that the argument that listing on website provided publicity only to a few manufacturers
was not a sufficient ground to suggest foreclosure. Empanelment did not deny other manufacturers entry in the meter
market of DISCOMS as the list of vendors was revised at regular intervals. Vendors were selected on the basis of
competitive bidding. An all India meter market in which large number of manufacturers catering to the needs of
DISCOMS all over the country made the market competitive.1208
In the Schott Glass case,1209 the Commission, in order to check any violation of section 4(2)(b)(i), read all the agreements
(Trade Mark License Agreement, Sale Purchase Agreement, Supply Agreement and Market Support Agreement)
conjunctively along with the discount policies of Schott Glass and found it guilty. It was of the opinion that this was an
attempt to bind the Converters to procure the glass tubes only from it. Further, the Commission relied on the statements of
the Converters given before the DG, wherein, it was claimed restrictions were put on them to not purchase tubes from any
other sources. For allegations under section 4(2)(c), the Commission took note of two things. The reprehensible behavior
on the part of the Informant in printing fake labels of Schott Glass and passing them as well as the fact that the incident had
taken place before the charging sections became operational and therefore, such refusal could not be taken into
consideration.
SMT GEETA GOURI, Member, in her minority opinion held that there were no express or partial or full exclusivity clauses
present in the contracts, in the absence of which, it cannot be treated as imposition of unfair conditions – restricting choice,
access to competing suppliers and freedom from trade. Regarding TMLA, Schott Glass had a valid reason to enforce it to
protect its brand and reputation and prevent brand infringement through measures which are consistent with the provisions
of the Competition Act, 2002. On allegations of denial of market access, the pharma companies stated that switching or
shifting to a new supplier was not a significant constraint. The ability of the Informant to survive in market therefore, was
not determined by the availability of Schott Tubes as its input. Therefore, conduct of Schott Glass had not contravened the
above provisions of the Act.
The COMPAT however, held that the agreements did not suggest any clause of exclusive dealing with the Appellant nor
did it spell out any loyalty clause. Schott glass pleaded that the only purpose of TMLA requirement was to attach the logo
of Schott to the package of container made out of Schott tubes which the converter delivers to the pharmaceutical
companies. In this instance too, the COMPAT agreed with the minority order and found no infringement of the provisions
of 4(2)(b)(i) and 4(2)(c) of the Competition Act, 2002.
Essential Facilities Doctrine
A monopolist has a duty to provide competitors with reasonable access to essential facilities under his control without
which one cannot effectively compete in a given market. The Essential Facilities doctrine was first applied in EC
competition law in Sealink1210 and originates from US Antitrust Law. It is particular in that the “pure” essential facilities
doctrine applies to access to physical infrastructures such as ports, airports and pipelines. Such facilities are “essential” in
that, by nature, they cannot be replicated in an economically viable manner and therefore are subject to a natural
monopoly. An essential facility means the necessary usage of a product or infrastructure in order to enter into a market or
to initiate an activity, as no other alternative exists or is granted.
As defined above, in cases where an input, facility or infrastructure owned by an undertaking in dominant position is
essential to ensure effective competition on the downstream market and when it is not legally, technically or economically
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possible to find an alternative for this input, facility or infrastructure, an obligation to supply this input, facility or
infrastructure to competitors in the downstream market is imposed on undertakings in a dominant position through the
“essential facilities doctrine”.
In Oscar Bronner GmbH (1998),1211 Bronner was an Australian Newspaper of a daily newspaper, Der Standard, and
wished to have access to the highly developed home delivery distribution system of “Media Print”. Bronner complained
that a refusal to allow such access amounted to an infringement. The Court of Justice first determined whether there was a
separate market for home delivery of newspapers in Australia and whether there was insufficient substitutability between
Media Print and others. If the market was the nationwide home delivery distribution of newspapers in Australia, Media
Print had the monopoly. The Court held that it would have to be shown that refusal to grant access to home delivery
service would likely to eliminate all competition in the daily newspaper market (downstream market) on the part of person
requesting the service. The Court held that home delivery service of Media Print was not indispensable to carrying out
business in newspaper market. There were other means of distribution like shops, kiosks, post etc. Further, there was no
technical, legal or economic obstacle that made it impossible for other publishers of daily newspapers to establish home
delivery system of their own. Therefore, it was established by the Court that indispensability is major factor to determine
abuse. The input to which access is sought must be something that is incapable of being duplicated or could only be
duplicated with great difficulty. Duplication may be impossible in some situations (Ports; rail networks; oil storage; etc).
Criteria to determine whether there is an essential facility:1212
• Objective necessity of the essential facility: it does not mean that, without the refused input, no competitor could
ever enter or survive on the downstream market. Rather, an input is indispensable where there is no actual or
potential substitute on which competitors in the downstream market could rely so as to counter – at least in the
long-term – the negative consequences of the refusal.
• Elimination of Effective Competition in Downstream Market: Once the objective necessity of the input in the
downstream market is established, it should be considered whether a dominant undertaking’s refusal to supply is
liable to eliminate, immediately or over time, effective competition in the downstream market. The likelihood of
effective competition being eliminated is generally greater the higher the market share of the dominant
undertaking in the downstream market. The less capacity-constrained the dominant undertaking is relative to
competitors in the downstream market, the closer the substitutability between the dominant undertaking’s output
and that of its competitors in the downstream market, the greater the proportion of competitors in the downstream
market that are affected, and the more likely it is that the demand that could be served by the foreclosed
competitors would be diverted away from them to the advantage of the dominant undertaking.
• Consumer Harm: In evaluating the likely impact of a refusal to supply on consumer welfare, it should be
examined whether, for consumers, the likely negative consequences of the refusal to supply in the relevant
market outweigh over time the negative consequences of imposing an obligation to supply. For instance, it is
considered that consumer harm may arise where the competitors that the dominant undertaking forecloses are, as
a result of the refusal, prevented from bringing innovative goods or services to market and/or where follow-on
innovation is likely to be stifled. Similarly, it is also considered that a refusal to supply may lead to consumer
harm where the price in the upstream input market is regulated, the price in the downstream market is not
regulated and the dominant undertaking, by excluding competitors on the downstream market through a refusal to
supply, is able to extract more profits in the unregulated downstream market than it would otherwise.
• Efficiency Grounds: Even though the above-stated three conditions are fulfilled, the Board will consider the
claims put forward by the dominant undertaking that its conduct is justified and if the Board considers that the
claims of the dominant undertaking constitute efficiency grounds, the Board will not fine the dominant
undertaking. The non-commercial credibility of the dominant undertaking, complete or temporary interruption of
supply due to capacity limits or non-fulfillment of some safety requirement may be listed as efficiency grounds.
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Essential facilities Doctrine under Competition Act, 2002
In the case of Arshiya Rail Infrastructure Ltd (ARIL),1213 the DG examined the “Essential Facility Doctrine” in
competition law and in the DG’s view for essential facilities doctrine to be brought into operation, the enterprise in
question should be dominant player and that there would be a waste of national resources to replicate the infrastructure.
The DG reported that considering the facts of the case as CONCOR terminals were built on MOR land, the infrastructure
had to be treated as an essential facility. Based on these, the DG came to conclusion that this facility should have been
made available to the other players in the market at the reasonable rates. Thus, the doctrine of essential facility was found
to be violated by both CONCOR and MOR.
However, the Commission held that since none of the opposite parties IR or CONCOR were found to be dominant in the
relevant market, any allegation of abuse of dominant position was not sustainable. The Commission noted that the essential
facility doctrine is invoked only in certain circumstances, such as existence of technical feasibility to provide access,
possibility of replicating the facility in a reasonable period of time, distinct possibility of lack of effective competition if
such access is denied and possibility of providing access on reasonable terms. In the present case, there were no technical,
legal or even economic reasons as to why other CTOs should not be creating their own terminals or similar facilities. As
set out in the Indian Railways (Permission for operators to move container trains on Indian Railways) Rules, the Model
Concession Agreement (MCA) and Gazette Notification No. 458 dated 28 September 2006, CTOs were obligated to build
their own terminals at their cost.
In the case of Shamsher Kataria v Honda Siel Cars India Ltd,1214 the DG concluded that spare parts, diagnostic tools,
manuals etc. of each OEM would constitute essential facilities for the independent repairers to be able to provide
consumers with effective after sale repair and maintenance work and for such independent repairers to effectively compete
with the authorised dealers of the OEMs. The DG pointed out that the essential factors to be taken into account in
determining whether spare parts, diagnostic tools, manuals etc. of each OEM would constitute essential facilities for the
independent repairers, are: (a) control of the essential facility by the monopolist; (b) the inability to duplicate the facility;
(c) the denial of the use of the facility, and (d) the feasibility of providing the facility.
Further, the DG noted that due to the usage of high technology most of the models of automobiles manufactured by the
OEMs required sophisticated diagnostic tools, technical manuals for proper diagnosis, service and repair. Therefore, access
to such technology was critical for any entity to undertake after sale service to compete effectively with the authorised
dealers of the OEMs. Since, the DG found each OEM to be dominant with respect to its brand of automobiles and the spare
parts of each brand of automobile was unique and could not be replicated by the independent repairers from alternate
sources. Therefore, based upon such considerations, the DG concluded that the essential facilities doctrine was applicable
to the restrictive practices of the OEMs.
In the case of Anila Gupta v BEST Undertaking,1215 the Commission did not find it appropriate to give a finding in the
case as whether BEST abused its dominant position as per the provisions of the Competition Act, 2002, would depend
entirely on the extent of protection available to BEST under section 42(3) of the Electricity Act, 2003 by virtue of being a
local authority. The Hon’ble Supreme Court in Civil Appeal No. 2458 of 20111216 asked the Central Electricity Tribunal
to decide the case on merits. The finding of the Hon’ble Central Electricity Tribunal would have a direct bearing on
determining the extent of protection available to BEST under section 42(3) of the Electricity Act, 2003.
R PRASAD, in his dissenting opinion examined the application of essential facilities doctrine. He noted:
34 ... There is no doubt that TPCL can lay down its own network for the supply of electricity in the city of Mumbai but will this
laying a parallel line would be in the economic interest of the country as well as the consumers. Ultimately, the cost involved in
laying down another network would have to be passed on to the consumers. This issue came up before US Supreme Court in the
case of U S v Terminal Railroad Ass’n of St. Louis.1217 The issue in that case was that the railways had constructed a bridge which
was not put to use by others. The duplicating of facility of another bridge would have caused extra burden on the consumers. The
US Supreme Court held that the bridge can be used by the other rail networks subject to the levy of charges but could not be
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refused to others to use the facility. In fact, the ingredients of the essential facility doctrine which has been explained by the US
Supreme court are as under:—
(i) Control of the essential facility by a monopolist.
(ii) A competitor’s inability practically or reasonably to duplicate the essential facility.
(iii) The denial of the use of the facility to a competitor and
(iv) The feasibility of providing the facility to the competitor.
35. Following decision of the US Supreme court, I do not think there is a necessity for the TPCL to lay down a parallel network for
the supply of electricity when the network of BEST is available. BEST can only demand whiling charges from the TPCL. To sum
up, the abuse of dominance of BEST is established under section 27 of the Competition Act. BEST is directed to allow TATA
Power to use the network of BEST by demanding wailing charges so that the IP can get electricity supply from TATA Power.
BEST is also directed to cease and desist from preventing its consumers to switch over to TATA Power.
Absence of Objective Justification
Reasons to justify refusal to supply might vary from case to case and there is no principle to test. What might in practice,
constitute an objective justification for a refusal to supply a competitor. Possible justifications can be:
• inability to meet all demand, for example due to short supply of raw material or capacity constraints.
• A refusal to supply those distributors or customers that cannot offer the proper precautions, safeguards and
technical expertise with regard to potentially harmful products.
• to limit its exposure to third party liability claims.
• specific needs of certain customers may justify the refusal to sell the same product to other customers.
SECTION 4(2)(D)
(2) There shall be an abuse of dominant position [under sub-section (1), if an enterprise or a group]. —
(d) makes conclusion of contracts subject to acceptance by other parties of supplementary obligations which, by their nature or
according to commercial usage, have no connection with the subject of such contracts;
Under the Competition Act, 2002 forcing supplementary obligations by their nature or commercial usage have no
connection with the subject matter of the contract are anti-competitive prohibited by section 4 of the Act. In the case of
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Jefferson Parish Hospital v Hyde,1218 the Supreme Court of United States observed that “tying” arrangements need only
be condemned if they restrain competition on the merits by forcing purchasers that would not otherwise be made.
Tying occurs when the supplier makes the sale of one product (the tying product) conditional upon the purchase of another
distinct product (the tied product) from the supplier or someone designated by the latter.1219 Only the tied product can be
bought separately. However, the tying can take various forms and it does not necessarily require that the supplementary
obligation is direct.1220 The important factor is that the purchase is conditional in some way. Normally, tying is divided
into two different categories. The practice might be a technical tying1221 which was the case in Microsoft,1222 where
Microsoft integrated its products into one program. Consequently, two distinctive products must be physically integrated
with each other in order for technical tying to occur. The other is called contractual tying,1223 which was the case in
Hilti,1224 and Tetra Pak II.1225 In this case, the dominant undertaking leaves the customer without any choice of buying
the two products separately. Contractual tying is the classic version while technical tying is a relatively new concept within
European competition law. Tying arrangements are not necessarily anti-competitive and can be part of pure business
practice to make considerable savings in production, excluding smaller firms distribution and transaction costs.1226
Commercial Reasons for Tying and Bundling:
Tying or bundling can be uses for commercial reasons and may not be necessarily anti-competitive. Some of the reasons
are listed below:
• As a method for obtaining royalties or fees for the use of a process or product;
• To enable the supplier to spread the risk when trying to penetrate a new market;
• To achieve economies of scale;
• To ensure optimal performance or safety reasons products and services may be tied together.
Economic objections:
The basic objection to tying and bundling by dominant undertakings is that it enables “monopoly leveraging” of market
power – the projection of dominance from one market to another.1227
A company that is dominant in the tying market can through tying or bundling foreclose the tied market and can indirectly also
foreclose the tying market (horizontal foreclosure). By tying the dominant company reduces the number of potential customers that
is available for its competitors in the tied market. This may cause existing competitors to be marginalised or exit from the tied
market and create a barrier for new entrants. Economies of scale, network effects and high entry barriers in the tied market all
make such a strategy more likely and more successful. The foreclosure of the tied market may allow the dominant company to
achieve larger profits in the tied market, for example through catching more of the customers in that market. Moreover, tying may
allow the dominant company to protect or strengthen its dominant position in the tying market. If the tied good is important for
buyers of the tying good, a reduction of alternative suppliers of the tied good can make entry in the tying market more difficult,
since it may in the end make it necessary to enter both the tying and the tied market in order to compete effectively. Furthermore,
the dominant firm may through tying force the exit from the tied market of a product which is or may become itself a threat to the
dominant product in the tying market.1228
According to Article 102 TFEU, it is abusive to make
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the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or
according to commercial usage, have no connection with the subject of such contracts.
However, it may be abusive for a dominant company to tie sales of products even when this is in accordance with
commercial usage in the market. Possible abuse is the practice by which a dominant company either imposes on customers
the acquisition of one product or service conditional upon the purchase of another (tying) or forces or economically
induces customers to only buy a bundle consisting of the two products (pure or mixed bundling). For such practices to be
prohibited, the presence of the following elements is usually required:
The company concerned is dominant in the tying market: For tying to be abusive the company concerned needs to be
dominant in the tying market. It is not necessary that the company also is dominant in the tied market. However,
dominance also in the tied market renders the finding of an abuse more likely.
Tying and ties products are distinct: Two products are distinct if, in the absence of tying, from the customers’ perspective,
the products are or would be purchased separately. It is, however, not necessary that the two products belong to two
separate product markets. In a market with differentiated products, two products may be sufficiently differentiated that a
company can be said to tie or bundle two distinct products.1229
In the Hilti case, the sale of nail cartridge strips (for nail guns) was made conditional upon the customer buying a
corresponding complement of nails. The Commission held that Hilti’s practices “leave the consumer with no choice over
the source of his nails and as such abusively exploit him.”1230
In the Tetra Pak II case,1231 there was an Obligation that only Tetra Pak cartons were to be used in Tetra Pak packaging
machines and that cartons were to be obtained exclusively from Tetra Pak. General Court observed:
where an undertaking in a dominant position directly or indirectly ties its customers by an exclusive supply obligation, that
constitutes an abuse since it deprives the customer of the ability to choose his sources of supply and denies other produces access
to the market.
In the Microsoft case,1232 technological integration of Windows operating system and Windows Media Player was done.
Commission laid down the five step to determine abuse:
(a) Dominance in the tying market
(b) The tying and tied goods must constitute two separate products
(c) Coercion: customers have no choice of obtaining the tying product without the tied product
(d) Foreclosure effect on competition
(e) No objective justification.
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Commission found that Microsoft had tied its media player to its personal computer operating system which is distinct
products. The Court said that the distinctness of the product had to be determined by reference to consumer demand.1233
Market distorting foreclosure effect: The main direct anti-competitive effect of tying and bundling is possible foreclosure
on the market of the tied product. In principle, the assessment of the foreclosure effect on the tied market can be considered
to consist of two parts. First, to establish which customers are “tied” in the sense that competitors to the dominant company
cannot compete for their business. Second, to establish whether, these customers “add up” to a sufficient part of the market
being tied. However, an overall assessment of the likely foreclosure effect of the tying or bundling practice will be made,
which will combine an analysis of the practice, its application in the market, and the strength of the dominant position. The
elements described below therefore cannot be applied in a mechanical way. Where the Commission on the basis of the
elements described below finds that the dominant company ties a sufficient part of the market, the Commission is likely to
reach the rebuttable conclusion that the tying practice has a market distorting foreclosure effect and thus constitutes an
abuse of dominant position.1234
Possible Defences (Objective Justifications): The dominant company may argue that it is an objective necessity to tie
products for reasons of quality or good usage of the products necessary to protect the health or safety of the customers. The
dominant company may also invoke an efficiency defence. Tying and bundling may help to produce savings in production,
distribution or transaction costs. Combining two independent products into a new, single product may be an innovative
way to market the product(s). Such combinations are more likely to be found to fulfil the conditions for an efficiency
defence than is contractual tying or bundling. Tying would be considered abusive when a retailer is able to obtain, on a
regular basis, supplies of the same or equivalent products on the same or better conditions than those offered by the
supplier which applies the tying practice, as evidently the pass on is not realised. In many cases contractual tying may not
be indispensable to achieve the efficiencies and the price incentive contained in mixed bundling normally needs only to
reflect the effective cost efficiency that is realised. Similarly, for a claimed efficiency effect of tying helping to ensure a
certain uniformity and quality standardisation, it needs to be demonstrated that the positive effects cannot be realised
equally efficiently by requiring the buyer to use or resell products satisfying minimum quality standards, without requiring
the buyer to purchase these from the supplier or someone designated by the latter.1235
Cases under Competition Act, 2002
In the case of Schott Glass India Pvt Ltd,1236,1237 one of the issues was the Tie-in arrangement contravening provisions of
section 4(2)(d) in the sale of amber tubes. The allegation was that the Schott Glass in order to supply the clear borosilicate
glass tubes, also insisted upon the Converters to purchase the amber borosilicate glass tubes compulsorily and thus
engaged into tying-in exercise. The Commission in its majority opinion held that both the products were tied and marketed
together and a bundled discount was given to the customers on them. Additionally, the fact that Schott Glass had a large
market share of around 90% in NGA and NGC segments, which was a virtual monopoly, with the power to leverage the
sale of one contingent upon the sale of another. The policy of Schott Glass to market both the products jointly with
common incentive was designed with a view of protecting its dominance in the upstream market. The Commission further
read the discount policy of Schott Glass with the TMLA and the overall discount policy of the Schott Glass to hold that the
discount offered was a bundled discount. On this basis, the Commission found Schott Glass guilty of breach of section
4(2)(d).
The minority opinion, however, held that the allegation of tie-in was not backed by any documentary evidence wherein
sale of amber borosilicate glass tubes was contingent upon the Converters purchasing clear borosilicate glass tubes.
Further, glass tubes manufactured by Schott Glass were far more superior in quality and were much in demand in the
market.
The COMPAT was also of the opinion that NGA and NGC were not entirely different material. Also, since Schott Glass
had 90% market in the amber tubes, there was no need for Schott Glass of pushing the amber tubes along with the clear
tubes. The Tribunal held that in the absence of any documentary evidence there was no question of linking the discount
scheme with the tying-in as the parties could opt to purchase the amber tubes or ignore to purchase it. The Tribunal
observed that, merely because the NGC and NGA were the products from common tank and because the same were being
marketed by the same Appellant, did not mean that the Appellant was insisting on any tying-in arrangement in respect of
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NGC and NGA tubes. The Tribunal set aside the main Commission’s order and upheld the minority order thereby
exonerating Schott Glass of section 4(2)(d) charges.
In the case of Financial Software and Systems Pvt Ltd v ACI Worldwide Solutions Pvt Ltd,1238 the Commission agreed
with the DG’s report which found that ACI had made the license agreement for BASE24, subject to acceptance by banks
of supplementary obligation of obtaining its professional services in infringement of the provisions of section 4(2)(d) of the
Competition Act, 2002. Further, it was held that ACI, by denying its licensee banks the option of procuring modification
and customisation services from of Financial Software and Systems Private Ltd or any third parties, had compelled the said
banks to avail such services from it along with the BASE24 software. The Tribunal held that this was nothing but making
the conclusion of contracts of EFT Switch subject to acceptance by banks of a supplementary obligation which has no
connection with the subject of the contract.
European Union – Cases
In Eurofix-Bauco v Hilti:1239 the Commission held that the requirement that users of Hilti’s patented nail cartridges should
also acquire nails from it was held to be an abuse of dominance and a fine of 6 million was imposed. On appeal, The
General Court held that that there were three markets (nail guns; cartridge strips; nails) and the independent producers
should be free to manufacture consumables intended for use in equipment manufactured by others unless in doing so they
would infringe intellectual property rights.
In Tetra Pak International SA v Commission:1240 it was held that,
prices below average total costs but above average variable costs are only to be considered abusive if an intention to eliminate can
be shown.
The Commission found Tetra Pack to have abused its dominant position by among other things, tying the sale of
machinery for packaging with the sales of cartons and for engaging in predatory pricing. The General Court, in appeal
carried out the examination of predation in line with the Akzo judgment. Accordingly, the General Court considered the
prices of non-aseptic cartons in Italy between 1976 and 1981 and found that that these were considerably lower than
average variable costs.
SECTION 4(2)(E)
(2) There shall be an abuse of dominant position [under sub-section (1), if an enterprise or a group] —
(e) Uses its dominant position in one relevant market to enter into, or protect, other relevant market.
Refusal to supply amounting to a leveraging abuse
An enterprise or a group is said to abuse its position of dominance in the relevant market when it uses its dominance in that
relevant market to enter or protect or gain advantage in any other relevant market. Article 102 TFEU talks about prevention
of such form of leverage. Most refusal to supply cases concern a vertically integrated undertaking that is dominant in an
upstream market and which refuses to supply an existing or new customer in the downstream market on which it is also
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present. In the case of Commercial Solvents v Commission,1241 it was held that a refusal to supply a downstream customer
could amount to an abuse of dominant position. In the case, Zoja was an Italian producer of a drug used in the treatment of
tuberculosis. It was dependent on the supplies of a raw material, amino-butanol, dominant supplier of which was
Commercial Solvents. When the latter refused to supply amino-butanol to Zoja, the Commission (later affirmed by Court
of Justice) found it to abuse its dominant position and ordered it to resume supplies. Commercial Solvents was not only a
dominant player of amino-butanol in the upstream market for raw materials, its refusal to supply to Zoja was also because
of the emergence of Commercial Solvent’s own subsidiary, ICI, on to the downstream market for anti-tuberculosis drug, on
which Zoja was operating.
If an undertaking holding a dominant position on a particular market, without any objective necessity, reserves to itself or
an undertaking belonging to the same group an ancillary activity which might be carried out by another undertaking as part
of its activities on a neighbouring or separate market, with the possibility of eliminating all competition from such
undertaking.1242 Use of such dominance to reserve or enter or protect another market has been seen by EU Courts in
refusal to supply cases.1243 Even in cases of Tying, where the firm dominant in one market uses its position to encourage
or force customers also to buy from it which fall in to other market, is an example of use of dominance in one market to
strengthen position in another market. the markets concerned do not necessarily have to be upstream or downstream or
ancillary to one another.
In the case of Tetra Pak,1244 an undertaking was held to be have infringed Article 102 by predatory pricing where it was dominant
on one market and the predatory pricing took place on the another. Unlike tying or refusal to supply cases the dominant
undertaking was not directly using its dominant position to commit the abuse. [Although the fact that it was dominant facilitated
cross-subsidisation]. The case involved two carton markets: aseptic and non-aseptic. They were held to be separate distinct
markets, neither was ancillary to the other or upstream or downstream of the other. The Commission held that Tetra Pak was
dominant on the aseptic market but made no finding of dominance with regard to non-aseptic market. It held, however, that Tetra
Pak had abused its dominant position on the aseptic market by its conduct in the non-aseptic market which was designed to get a
competitive advantage on the latter. The Commission decision was upheld by GC,1245 which was affirmed by Court of
Justice.1246
The “Court of Justice” observed:
27. It is true that application of Article 86 presupposes a link between the dominant position and the alleged abusive conduct,
which is normally not present where conduct on a market distinct from the dominated market produces effects on that distinct
market. In the case of distinct, but associated, markets, as in the present case, application of Article 86 to conduct found on the
associated, non-dominated, market and having effects on that associated market can only be justified by special circumstances.
There is an abuse of dominant position where an undertaking occupies a dominant position on a market and which is thus
able to control the activities of the other undertakings on another market, decides to establish itself on the other market and
for no good reason refuses to supply the product or service in question on the market where it already occupies a dominant
position to the undertakings whose activities are centered on the market which it is penetrating. In the Telemarketing
case,1247 the European Court of Justice held that an abuse within the meaning of Article 106 is committed where, without
any objective necessity, an undertaking holding a dominant position on a particular market reserves to itself or to an
undertaking belonging to the same group an ancillary activity which might be carried out by another undertaking as part of
its activities on a neighbouring but separate market, with the possibility of eliminating all competition from such
undertaking.1248
Cases decided by the European Commission and the Courts generally evolve around vertically integrated dominant
firms.1249 Typically, a vertically integrated firm that is dominant in an upstream market refuses to supply the relevant
input to a competitor in a downstream market in which the dominant firm is also active. This refusal is found to have the
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effect of foreclosing the downstream competitor from the downstream market. Refusal to supply is correspondingly
considered an exclusionary abuse as opposed to exploitative and other types of abuses.1250 What characterises such typical
refusal to supply cases is the interest that the dominant firm has in foreclosing a competitor from the downstream market
which it does not (or not yet) dominate.1251 Under certain circumstances such a refusal could effectively allow the
dominant firm to leverage its dominant position in one market in order to extend that position into to the downstream
market.1252 A necessary condition for obtaining that effect is that the downstream competitor is unable to otherwise obtain
the input at a cost that would allow it to continue competing in the downstream market.
Therefore, the criteria to determine abuse can be summed up as follows:
1. The dominant company leverages its dominance in one market to benefit from it in the secondary market.
2. This leveraging has an effect of foreclosure in the secondary market, and
3. The behaviour of the dominant firm is not objectively justified.
Leveraging – the “Two Markets” requirement
The language of section 4(2)(e) of the Competition Act, 2002 suggests that there have to be two markets, one in which the
enterprise has a dominant position and the other in which it intends to enter or protect. However, both the markets must be
relevant markets distinct from each other. The Tribunal in the MCX Stock Exchange case,1253 laid down the conditions to
be held guilty of the breach of section 4(2)(e):
1. That the enterprise has a dominant position in one market;
2. That the enterprise is dealing in not only the market in which it is dominant, but some other market also; and
3. It wants to enter into an entirely new market or protect the same.
It is not necessary for the breach of section 4(2)(e) of the Competition Act, 2002 to be dominant in the second relevant
market. It is enough, even if the enterprise wishes to use its strength in the market in which it is dominant to enter into or to
protect the other (second market). In Tribunal’s opinion, in the MCX case, if relevant market as held by Commission was
only CD segment, then there could not be any other market like non-CD segment and there was no necessity of putting all
other segments in one group. The Tribunal held that NSE could not have been guilty of breach of section 4(2)(e) of Act,
basically on logic that there was only one market and that market was services of stock exchange and merely because at
relevant time period, services of stock exchange of MCX-SX were limited to CD segment, it did not mean that relevant
market had to be held as a CD segment market. As a result finding of Commission on this issue was set aside.
The Common aspect in all the cases is that the dominant firm leverages its position in the market where it has dominance
to possibly reserve another market completely or to a large extent to itself or to one of its subsidiaries. Dominance in one
market is in itself not considered abusive and may have been attained through competition but the problem only arises
when its abuses the dominance in the same relevant market or extends its dominance in the primary market in to secondary
market in ways that dominance in secondary market is achieved not on its merits but by taking advantage of the dominance
in the primary market.
In order to be guilty of section 4(2)(e), there have to be two markets, wherein the guilty party would have the participation.
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The Tribunal for instance in the Schott Glass case,1254 noted that once it was proved that the appellant had no presence in
the downstream market of ampoules, vials, dental cartridges and syringes etc. there was no question of applying section
4(2)(e) and even if it was held that Schott Kaisha was being favoured, so as to make it strong in the downstream market, it
would have to be established, the lack of which would not be sufficient for breach of section 4(2)(e). the Tribunal held that
breach would be possible only, if a finding is given, that the Appellant was itself trying to enter into the downstream
market or was trying to secure its presence in the downstream market and since both these factors were absent there was no
question of any such breach of section4(2)(e). It suffices if the dominant firm intends to enter into that market and
facilitates its entry by refusing to sell.1255 Similarly, the secondary market may also be a mere potential market at the time
when the refusal occurs. In the IMS Health case, this reasoning was taken a step further when the ECJ considered that in
order for there to be leveraging it was enough that there was a potential market that was dominated by the refusing firm.
The ECJ observed:
[paras 28, 30, operative part 1] In the assessment of the abusive character of a dominant position, in order to determine whether a
product or service is indispensable for enabling an undertaking to carry on business in a particular market, it must be determined
whether there are products or services which constitute alternative solutions, even if they are less advantageous, and whether there
are technical, legal or economic obstacles capable of making it impossible or at least unreasonably difficult for any undertaking
seeking to operate in the market to create, possibly in cooperation with other operators, alternative products or services. In order to
accept the existence of economic obstacles, it must be established, at the very least, that the creation of those products or services is
not economically viable for production on a scale comparable to that of the undertaking which controls the existing product or
service.
It follows that, for the purposes of examining whether the refusal by an undertaking in a dominant position to grant a licence for a
brick structure protected by an intellectual property right which it owns is abusive, the degree of participation by users in the
development of that structure and the outlay, particularly in terms of cost, on the part of potential users in order to purchase studies
on regional sales of pharmaceutical products presented on the basis of an alternative structure are factors which must be taken into
consideration in order to determine whether the protected structure is indispensable to the marketing of studies of that kind.
(para 52, operative part 2) The refusal by an undertaking which holds a dominant position and owns an intellectual property right
in a brick structure indispensable to the presentation of regional sales data on pharmaceutical products in a Member State to grant a
licence to use that structure to another undertaking, which also wishes to provide such data in the same Member State, constitutes
an abuse of a dominant position within the meaning of Article 82 EC where the following conditions are fulfilled:
– the undertaking which requested the licence intends to offer, on the market for the supply of the data in question, new
products or services not offered by the owner of the intellectual property right and for which there is a potential
consumer demand;
– the refusal is not justified by objective considerations;
– the refusal is such as to reserve to the owner of the intellectual property right the market for the supply of data on sales of
pharmaceutical products in the Member State concerned by eliminating all competition on that market.
Foreclosure & Indispensability
To determine anti-competitive effect of the action taken by the dominant enterprise, exclusion of competitors forms a
relevant consideration. The exclusion of one competitor, though, might not raise the alarm (if it is not a duopoly situation)
and the test generally taken is whether the action causes “substantial elimination of competition” which in the refusal to
supply cases will be linked with an extension of dominance into a secondary market.1256 In order to assess a substantial
elimination of dominance the situation ex ante as well as the situation ex post will need to be considered. Indispensability
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[s 4] Abuse of dominant position
of the refused input, it is argued, forms a major factor to examine foreclosure of competition. If the refused input is not
indispensable, it will not have a sufficient exclusionary effect. When considering whether an input is indispensable three
key questions need to be answered1257:
1. Whether, the input is essential to the commercial activity of the refused firm?
2. Whether, the input can reasonably be obtained from a source other than the dominant firm?
3. Whether, the requesting party can produce the input itself, in a legal and economically viable manner?
Cases under Competition Act, 2002
In the case of Atos Worldline India Pvt Ltd,1258 it was held that the conduct of M/s Verifone India Sales Pvt Ltd with
respect to seeking disclosure of sensitive business information from its customers in the downstream market in order to
enable to enter into the downstream market of VAS services was in contravention of the provisions of section 4(2)(e) of the
Competition Act, 2002.1259
In the case of Shamsher Kataria v Honda Siel Cars India Ltd,1260 the two relevant markets in the current case were the
market for spare parts and diagnostic tools and the market for repairs and maintenance services. The OEMs had an inherent
dominant position of strength in the market for spare parts and diagnostic tools because of limited inter-brand
interchangeability of spare parts and the fact that the OEMs, pursuant to a network of restrictive contracts and commercial
practices have become the sole supplier of genuine spare parts of various models of their automobiles and diagnostic tools
in the aftermarket. Given the inter-linkages between the repair/service markets and the spare parts/diagnostic tools market,
the OEMs had a commercial incentive to leverage their dominance from the relevant market of spare parts/diagnostic tools
to that of repairs and maintenance services. The Commission noted:
(a) The fact that OEMs indulged in such leveraging was evidence from the data that the OEMs (acting through their
authorised dealer network) deny 94.99% of the total service providers active in the Indian automobile aftermarket
(consisting of multi-brand retailers, semi-organised service stations and un-organised garage workshops),
effective access to the Indian aftermarket on competitive terms. (ACMA Report 2011). Even in cases where there
were no specific clauses in the agreements entered by the OEMs restricting over the counter sales, the enquiries
carried and submissions of stakeholders prove that the spare parts were not generally available over the counter
and at best were being sold selectively.
(b) All the OEMs (except BMW) had warranty clauses which effectively denied any warranty to the owners of
automobiles if such owners avail the services of the independent repairers or other multi brand service providers.
Moreover, in the limited instances where spare parts are available to the actual owners, the owners have to buy
such spare parts at the MRP and then avail the services of the independent repairers at additional costs; whereas
the authorised dealers are able to provide such services at cheaper rates since the applicable spare parts are
available to the authorised dealers at a discount over the MRP.
The Commission found that in most cases the owners of various brands of automobiles were completely dependent on the
authorised dealer network of the OEMs and were not in a position to exercise option of availing services of independent
repairers. In most cases, the users of car wanting to purchase the spare parts had to necessarily avail the services of the
authorised dealers of the OEM. The Commission held that the OEMs used their dominance in the relevant market of
supply of spare parts to protect the other relevant market namely; the after sales service and maintenance thereby violating
section 4(2)(e) of the Competition Act, 2002.
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In the case of Sunil Bansal v Jaiprakash Associates Ltd1261 the issue for consideration was whether the Jaypee Group had
abused its dominant position in its business of creating integrated townships. Commission held that since there was
sufficient degree of inter-changeability of residential apartments in standalone apartment projects with so called integrated
township in present case, integrated township did not constitute a distinct product market. Therefore, relevant product
market in present case was considered as market for “provision of services for development and sale of residential
apartments” in Noida and Greater Noida regions’.1262 The Commission noted that there were several established real
estate players (who had been operational in relevant geographic market for decades) offering world class amenities.
Accordingly, a large number of options were available to consumers who could actually choose from a wide range of
projects launched/developed by several builders and developers in geographic region. Further, rapid growth of real estate
sector together with presence of several big, small and medium sized companies in market was demonstrative of absence
of entry barriers/foreclosure of competition. The Commission held that JAL/JIL did not enjoy a position of dominance in
market for provision of services for development and sale of residential apartments in Noida and Greater Noida.1263
The Tribunal in Sunil Bansal v Jaiprakash Associates Ltd,1264 had set aside and the matter and remitted it back to the
Commission for fresh consideration on grounds of violation of principles of natural justice
The case of Hockey India,1265 pertained to the alleged imposition of restrictive conditions by Hockey India, the National
Association for the sport of Hockey, on players in un-sanctioned prospective private professional leagues resulting in
denial of entry (permission) to competing leagues. On the allegation of violation of section 4(2)(e) of the Competition Act,
2002 made by the informant, the Commission noted that the allegation by informants was based on their definition of
relevant market being the market for domestic hockey events and further considering WSH to be a domestic event that
required sanctioning from national association of hockey in India. The Commission’s definition differentiated between the
representative events and private professional leagues and was neutral to the definitions of domestic/international events as
contained in FIH bye laws. Thus, on the basis of the above facts and keeping in mind “inherent and proportionality”
approach to regulations, the Commission found no validity in the allegations relating to contravention of section 4(2)(e).
In Schott Glass India Pvt Ltd,1266 the COMPAT set aside the findings of the Commission main order. It upheld the
minority observation and exonerated Schott Glass from charges of section 4(2)(e). The Tribunal held:
67. ... In our opinion, the very language of section 4(2)(e) is clear enough to show that in order to be guilty of section 4(2)(e), there
have to be two markets, wherein the guilty party would have the participation. It is nobody’s case that the Appellant is in any way
dealing with or has any presence in the downstream market of ampoules, vials, dental cartridges and syringes etc. In fact the
biggest contradiction to be found is that Schott Kaisha is not even a party to the present proceedings, nor has it been dealt with by
the CCI. If it was through Schott Kaisha and to favour the interest of Schott Kaisha that the Appellant was vociferously working,
then it would have been in the fitness of the case that Schott Kaisha was joined as a party and dealt with by the CCI. That was
simply not done. Once it was established that the Appellant has no presence in the downstream market in any manner, there would
have been no question of applying section 4(2)(e). Even if it was held that Schott Kaisha was being favoured, so as to make it
strong in the downstream market, it will have to be established, the lack of which would not be sufficient for breach of section
4(2)(e). Breach would be possible only, if a finding is given, that the Appellant was itself trying to enter into the downstream
market or was trying to secure its presence in the downstream market. Both these factors are absent and therefore, there is no
question of any such breach of section 4(2)(e). In that view, we do not find the Appellant guilty of section 4(2)(e) and exonerate
the same. We set aside the finding of the CCI in that behalf.
In the case of JAK Communications Pvt Ltd v Sun Direct TV Pvt Ltd,1267 the Commission on the basis of the fact that the
cable and DTH platforms were distinct and distinguishable and the players operating in DTH services had Pan India
presence; held that the relevant market as the provision of DTH services all over India. Considering the clout of other
competitors and absence of entry barriers for new players, Sun Direct was held by the Commission to be not uniquely
positioned in the relevant market to act independently of its competitors.
R PRASAD, however, in his dissenting opinion held that in light of separate characteristics of the south Indian market held
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[s 4] Abuse of dominant position
that the relevant market should be restricted to the Southern India only and accordingly based on market share held Sun
Direct to be dominant in the relevant market.1268 He then moved to the allegation that since, Sun Direct DTH was a group
company of Sun Group which was the most dominant broadcaster in South India and with this dominant position in the
broadcasting market, it had entered into the DTH market for the distribution of TV channel signals in various states of
South India by the name Sun Direct and, therefore, it was using its dominant position in one relevant market of
broadcasting to enter into or protect, other relevant market of DTH service provider thereby contravening the provisions of
section 4(2)(e) of the Competition Act, 2002.
The Tribunal in the NSE case noted that NSE could not have been guilty of breach of section 4(2)(e) of Competition Act,
2002, because that there was only one market and that market was services of stock exchange. Merely because at relevant
time period, services of stock exchange of MCX-SX were limited to CD segment, it did not mean that relevant market had
to be held as a CD segment market. As a result finding of Commission on this issue was set aside.
847 Came into force on w.e.f. 20 May 2009 vide Notification No. S.O. 1241(E), dated 15
May 2009.
848 Substituted by Act 39 of 2007, section 3 (w.e.f. 20 May 2009).
849 Substituted by Act 39 of 2007, section 3, for “under sub-section (1), if an enterprise,”
(w.e.f. 20 May 2009).
850 Instituted by Act 39 of 2007, section 3 (w.e.f. 20 May 2009).
851 Instituted by Act 39 of 2007, section 3 (w.e.f. 20 May 2009).
852 See Anil Kumar Neotia v UOI,
AIR 1988 SC 1353 : (1988) 2 SCC 587
.
853 Thyssen Stahlunion Gmbef v SAIL,
(2000) 99 Com Cas 383 .
854 Mansukhlal Dhanraj Jain v Eknath Vithal Ogale, Mansukhlal
Dhanraj Jain v Eknath Vithal Ogale, AIR 1995 SC : (1995) 2 SCC 665
: [1995] 1 SCR 996 :
JT 1995 (8) SC 293 . See also, Doypack Systems Pvt Ltd v
UOI, AIR 1988 SC 782 :
(1988) 2 SCC 299 : [1988] 2 SCR 962
: JT 1988 (1) SC 304
: 1988 (36) ELT 201 .
855 Ramashre Chandrakar v Dena Bank,
(1996) 86 Com Cas 147 (MP).
856 See Sodan Singh v New Delhi Municipal Committee,
AIR 1989 SC 1988 : (1989) 4
SCC 155 : [1989] 3 SCR 1038
: JT 1989 (3) SC 553 .
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[s 4] Abuse of dominant position
857 See UOI v CCI, W.P.(C) 993/2012 & C.M. Nos. 2178–79/2012;
Case No 61/2011, Surinder Singh Barmi v Board for Control of Cricket in India; Case No 36/2011, Kansan News Pvt Ltd v
Fastway Transmission Pvt Ltd, (para 6.5.1) and Case Nos. 25/2010, 41/2010, 45/2010, 47/2010, 48/2010, 50/2010, 58/2010, &
69/2010, Reliance Big Entertainment Ltd v Karnataka Film Chambers of Commerce (Film Associations Case) (paras 6.2 to 6.41);
Appeal No. 63/2014; Biswanath Prasad Singh v DG-DGHS].
858 Manju Tharad, Proprietress and Manoranjan Films, Kolkata v
Eastern India Motion Picture Association (EIMPA), Kolkata and The Censor Board of Film Certification, Kolkata,
[2012] 114 SCL 20 (CCI) : [2012]
110 CLA 136 (CCI) : 2012 Comp LR 1178 (CCI).
859 The Malwa Industrial & Marketing Ferti-Chem Co-op Society Ltd v
CCI, Appeal No. 25/2015 and I.A.No. 43/2015.
860 UOI v CCI, AIR 2012 Delhi 66
: [2012] 107 CLA 362
(Delhi) : 2012 Comp LR 187 (Delhi) : (2012) 3 CompLJ 303 (Del) : 187 (2012)
DLT 697 : 2012 (128) DRJ 301
.
861 Wing Cdr (Retd) Dr Biswanath Prasad Singh, General Secretary,
Veterans Forum for Transparency in Public Life v Director General of Health Services (DGHS), Appeal No. 63/2014
862 Bangalore Water Supply and Sewage Board v A Rajappa,
AIR 1978 SC 548 :
AIR 1978 SC 969 : (1978) 2 SCC 213
: 1978 (2) SCC 213 : 1978 I
LLJ 349.
863 PWD Employees Union v State of Gujarat,
(1987)2 GLR 1070 .
864 N Nagendra Rao & Co v State of AP,
AIR 1994 SC 2663 : (1994) 6 SCC 205
: 1994 SCC (Cri) 1609
: 1994 AIR SCW 3753 : 1995 (1) GujLH 298 : 1994 (2) FAC 103 : 1994 FAJ 482 : 1995 (1) EFR 141 : 1994 (5) JT 572
: 1995 (1) CivLJ 77 :
JT 1994 (5) SC 572 : 1994 (2) LS SC 23.
865 Also see, Agricultural Produce Market Committee v Ashok
Harikunt, AIR 2000 SC 3116 :
(2000) 8 SCC 61 : [2000] 2 LLJ 1382
: 2000 (6) Scale 461
; State of UP v Deep Chandra, (2004) II LLJ 727 All.
866 Also see, Film & Television Producers Guild of India v Multiplex
Association of India (MAI), Mumbai, 2013 Comp LR 19 (CCI); Eros International Media Ltd v Central Circuit Cine Association,
Indore, Film Distributors Association, Kerala, Northern India Motion Pictures Association and Motion Pictures Association and
Sunshine Pictures Pvt Ltd v Motion Pictures Association, 2012 Comp LR 20 (CCI); Santuka Associates Pvt Ltd v All India
Organisation of Chemists and Druggists, Organisation of Pharmaceutical Producer of India, Indian Drug Manufacturers’
Association and USV Ltd, 2013 Comp LR 223 (CCI); Sandhya Drug Agency v Assam Drug Dealers Association, 2014 Comp LR 61
(CCI); Reliance Big Entertainment Ltd v Karnataka Film Chamber of Commerce, [2012]
108 CLA 116 (CCI) : 2012 Comp LR 269 (CCI).
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[s 4] Abuse of dominant position
867 Arshiya Rail Infrastructure Ltd (ARIL) v Ministry of Railways (MoR)
through the Chairman, Railway Board (KB) and Container Corp of India Ltd (CONCOR),
[2013] 112 CLA 297 (CCI) : 2012 Comp LR 937 (CCI) :
[2012] 116 SCL 417 (CCI).
868 GKB Hi Tech Lenses Pvt Ltd v Transitions Optical India Pvt Ltd,
Case No 01/2010, decided on 16 May 2012.
869 Coal India Ltd v CCI & Bijay Poddar, Appeal
No. 81/2014 [COMPAT], decided on 20 March 2017.
870 Para 12.42–43, Belaire Owners’ Association v DLF Ltd Haryana
Urban Development Authority Department of Town and Country Planning, State of Haryana,
[2011] 104 CLA 398 (CCI).
871 Para 12.46, Belaire Owners’ Association v DLF Ltd Haryana
Urban Development Authority Department of Town and Country Planning, State of Haryana,
[2011] 104 CLA 398 (CCI).
872 Pravahan Mohanty v HDFC Bank Ltd and Card Services Division
of the HDFC Bank, Case No 17/2010, decided on 23 May 2011.
873 Shamsher Kataria Informant v Honda Siel Cars India Ltd, 2014
Comp LR 1 (CCI).
874 Atos Worldline India Pvt Ltd v Verifone India Sales Pvt Ltd, 2015
Comp LR 327 (CCI).
875 Re Meru Travel Solutions Pvt Ltd, Case Nos 25–28 of 2017 [CCI],
decided on 20 June 2018.
876 HT Media Ltd v Super Cassettes Industries Ltd, 2014 Comp LR 129
(CCI).
877 MCX Stock Exchange Ltd v National Stock
Exchange of India Ltd, Case No 13/2009, decided on 3 June 2011, 2011 Comp LR 129 : [2011]
109 SCL 109 (CCI).
878 The dominant position referred to in Article 86 (Article 102) relates
to a position of economic strength enjoyed by an undertaking which enables it to prevent effective competition being maintained on
the relevant market by giving it the power to behave to an appreciable extent independently of its competitors, customers and
ultimately of its consumers. In general, a dominant position derives from a combination of several factors which, taken separately,
are not necessarily determinative. [United Brands Co and United Brands Continental BV v Commission of the European
Communities – Chiquita Bananas, Case 27/76].
879 Hoffman-La Roche & Co v Commission,
[1979] ECR 461 , para 38; United Brands v
Commission, [1978] ECR 207 , para 65.
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[s 4] Abuse of dominant position
880 Vijay Kapoor v DLF Ltd, Case No 84 of 2014 [CCI], decided on 31
August 2018.
881 Belaire Owner’s Association v DLF Ltd, Case No 19 of 2010 (CCI).
882 Re Meru Travel Solutions Pvt Ltd, Case Nos 25–28 of 2017 [CCI],
decided on 20 June 2018. See also, Case Nos 6 & 74 of 2015.
883 See also, XYZ v Indian Oil Corp Ltd, Case 5/2018, decided on
4/7/18.
884 Re Meru Travel Solutions Pvt Ltd, case 25–28/2017, decided on
20/6/18 (CCI). See also, Case Nos 6 & 74 of 2015.
885 Id.
886 HT Media Ltd v Super Cassettes Industries Ltd,
2014 Comp LR 129 (CCI).
887 ESYS Information Technologies Pvt Ltd v Intel
Corp (Intel Inc), Intel Semiconductor Ltd and Intel Technology India Pvt Ltd, 2014 Comp LR 126 (CCI).
888 Atos Worldline India Pvt Ltd v Verifone India Sales
Pvt Ltd, 2015 Comp LR 327 (CCI).
889 Unilateral conduct workbook, Chapter 3,
Assessment of Dominance, prepared by The Unilateral Conduct Working Group, presented at the 10th Annual ICN Conference The
Hague, Netherlands May 2011.
890 HNG Float Glass Ltd v Saint Gobain Glass India
Ltd, [2014] 118 CLA 500 (CCI) : 2013 Comp LR 876
(CCI).
891 British Airways Plc v Commission [ECJ, Case C-
95/04 P.
892 The Commission found, among other things, that
BA had abused this position contrary to Article 102 with commission bonus agreements which unfairly discriminated between
agents because they were based on meeting or improving upon certain sales targets rather than overall quantities or level of service.
The Commission’s finding of abuse was upheld by the GCEU and ultimately the ECJ.
893 HT Media Ltd v Super Cassettes Industries Ltd,
2014 Comp LR 129 (CCI).
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[s 4] Abuse of dominant position
894 Saint Gobain Glass India Ltd v Gujarat Gas Co
Ltd, 2015 Comp LR 431 (CCI).
895 HNG Float Glass Ltd v Saint Gobain Glass India
Ltd, [2014] 118 CLA 500 (CCI) : 2013 Comp LR 876
(CCI).
896 Re Vinod Kumar Gupta and WhatsApp Inc, Case
No 99 of 2016 [CCI], decided on 1 June 2017.
897 Prasar Bharati (Broadcasting Corp of India) v
TAM Media Research Pvt Ltd, Case No 70 of 2012, decided on 25 February 2016, 2016 Comp LR 595 (CCI).
898 Satyendra Singh v Ghaziabad Development
Authority (GDA), Case No 86 of 2016 [CCI], decided on 28 February 2018.
899 All India Online Vendors Association v Flipkart
India Pvt Ltd, Case No 20 of 2018 [CCI], decided on 6 November 2018.
900 Prasar Bharati (Broadcasting Corp of India) v
TAM Media Research Pvt Ltd, Case No 70 of 2012, decided on 25 February 2016, 2016 Comp LR 595 (CCI).
901 The National Stock Exchange of India Ltd v
CCI, 2014 Comp LR 304 (CompAT).
902 Belaire Owners’ Association v DLF Ltd
Haryana Urban Development Authority Department of Town and Country Planning, State of Haryana,
[2011] 104 CLA 398 (CCI) : 2011 Comp LR 239 (CCI) :
[2011] 109 SCL 655 (CCI).
903 The National Stock Exchange of India Ltd v
CCI, 2014 Comp LR 304 (CompAT).
904 Commercial Solvents v Commission,
[1974] ECR 223 , (para 25).
905 Belaire Owners’ Association v DLF Ltd
Haryana Urban Development Authority Department of Town and Country Planning, State of Haryana,
[2011] 104 CLA 398 (CCI).
906 Also see, Maharashtra State Power Generation
Co Ltd (MAHAGENCO) v Mahanadi Coalfields Ltd (MCL) and Coal India Ltd (CIL) and Gujarat State Electricity Corp Ltd v
South Eastern Coalfields Ltd and Coal India Ltd, 2013 Comp LR 910 (CCI).
907 Case No 12/2014, 21 April 2017, Order its
Available at: http://www.cci.gov.in/sites/default/files/Final%20
Order%2012%20of%202014%20%20draft%20dated%2021.04.2017.pdf (last accessed in February 2019).
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[s 4] Abuse of dominant position
908 Raghavan Committee Report:
State Monopolies Policy, paras 3.4.5–3.4.7.
909 Maharashtra State Power Generation Co Ltd
(MAHAGENCO) v Mahanadi Coalfields Ltd (MCL) and Coal India Ltd (CIL) and Gujarat State Electricity Corp Ltd v South
Eastern Coalfields Ltd and Coal India Ltd, 2013 Comp LR 910 (CCI).
910 The Tribunal on 17 May 2016 set aside the
Commission’s 2013 order which imposed a Rs 1,773 crore fine on Coal India Ltd (CIL) and three of its subsidiaries for misusing
their monopoly to supply poor quality coal and fixing prices, on grounds of violation of principles of natural justice. The Tribunal’s
decision was on a preliminary finding that not all the members of the Commission who signed off on the ruling were present during
the hearings. (Appeal No. 01/2014; Appeal Nos. 44-47/2014, Appeal No. 49/2014, Appeal No. 70/2014 and Appeal No. 52/2015).
The Commission in a order in March 2017 had cut the penalty imposed on Coal India Ltd to for abuse of dominant position to Rs
591 crores.
911 Arshiya Rail Infrastructure Ltd (ARIL) v Ministry of
Railways (MoR) through the Chairman, Railway Board (KB) and Container Corp of India Ltd (CONCOR),
[2013] 112 CLA 297 (CCI) : 2012 Comp LR 937 (CCI) :
[2012] 116 SCL 417 (CCI).
912 Rajat Verma v Haryana Public Works (B&R)
Department (Appeal No. 45 of 2015) dated 16 February 2016. See also, Prem Prakash v The Principal Secretary, Madhya Pradesh
Public Works Department, Appeal no. 51/2015.
913 Prasar Bharati (Broadcasting Corp of India) v
TAM Media Research Pvt Ltd, Case No 70 of 2012, decided on 25 February 2016.
914 Also see, The National Stock Exchange of India
Ltd v CCI, 2014 Comp LR 304 (CompAT).
915 Sunil Bansal v Jaiprakash
Associates Ltd, 2015 Comp LR 1009 (CCI).
916 Coal India Ltd v CCI & Bijay Poddar, Appeal
No. 81/2014 [COMPAT], decided on 20 March 2017.
917 Guidance on the Commission’s enforcement
priorities in applying Article 82 of the EC Treaty to abusive exclusionary conduct by dominant undertakings (Text with EEA
relevance) (2009/C 45/02), Official Journal of the European Union. Available at: http://eur-lex.europa.eu/legal-
content/EN/ALL/?uri=CELEX:52009XC0224(01) (last accessed in February 2019).
918 The National Stock Exchange of India Ltd v
CCI, 2014 Comp LR 304 (CompAT).
919 Schott Glass India Pvt Ltd v CCI and Kapoor
Glass Pvt Ltd, 2014 Comp LR 295 (CompAT).
920 GKB Hi Tech Lenses Pvt Ltd v Transitions
Optical India Pvt Ltd, Case No 01/2010, decided on 16 May 2012.
Page 122 of 148
[s 4] Abuse of dominant position
921 Also see, Financial Software and Systems Pvt
Ltd v ACI Worldwide Solutions Pvt Ltd, 2015 Comp LR 253 (CCI).
922 Fast Track Call Cab Pvt Ltd v ANI
Technologies Pvt Ltd and Meru Travel Solutions Pvt Ltd v ANI Technologies Pvt Ltd, Case No 6 & 74 of 2015 [CCI], order dated
19 February 2019.
923 Adcept Technologies Pvt Ltd And Bharat Coking Coal Ltd, Case No
16 of 2013, decided on 8 May 2013. See also, G P Konar v Department of Agriculture and Farmers Welfare, Government of
Haryana, case 22/2018, decided on 30 August 2018.
924 Atos Worldline India Pvt Ltd v Verifone India Sales Pvt Ltd, 2015
Comp LR 327 (CCI).
925 Also see, Three D Integrated Solutions Ltd v VeriFone India Sales
Pvt. Ltd, 2015 Comp LR 464 (CCI).
926 Re Matrimony.com Ltd, Case Nos 7 and 30 of 2012 [CCI], decided
on 8 February 2018.
927 GHCL Ltd v Coal India Ltd (CIL), 2015 Comp LR 357 (CCI) :
[2015] 131 SCL 408 (CCI).
928 Also see, GHCL Ltd v Coal India Ltd, 2015 Comp LR 357 (CCI) :
[2015] 131 SCL 408 (CCI).
929 Sharad Kumar Jhunjunwala v UOI, 2015 Comp LR 859 (CCI) :
(2015) 4 CompLJ 457.
930 Id.
931 Shivam Enterprises v Kiratpur Sahib Truck Operators Co-op
Transport Society Ltd, 2015 Comp LR 232 (CCI).
932 Shamsher Kataria Informant v Honda Siel Cars India Ltd, 2014
Comp LR 1 (CCI). The Tribunal, in appeal approved Commission’s conclusion of dominance.
933 Pankaj Aggarwal v DLF Gurgaon Home Developers Pvt Ltd, 2015
Comp LR 728 (CCI).
934 Pankaj Aggarwal v DLF Gurgaon Home Developers Pvt Ltd, Case
13 of 2010.
935 Sachin Aggarwal v DLF Gurgaon Home Developers Pvt Ltd, Case
21 of 2010.
Page 123 of 148
[s 4] Abuse of dominant position
936 Anil Kumar v DLF Gurgaon Home Developers Pvt Ltd, Case 55 of
2012.
937 Belaire case found DLF to be dominant in the market for services of
developer/builder in respect of high-end residential accommodation in Gurgaon. The COMPAT’s order confirmed this finding of
the Commission.
938 Surinder Singh Barmi v Board for Control of Cricket in India,
(BCCI), [2013] 113 CLA 579 (CCI) : 2013 Comp LR 297
(CCI) : [2013] 118 SCL 226 (CCI).
939 The Commission relied on a few foreign cases [Grand Chamber of
the European Court of Justice in MOTOE case Source C-49/07, Reference for a preliminary ruling under Article 234 EC, from the
Diikitiko Efetio Athinon (Greece), made by decision of 21 November 2006, received at the Court on 5 February 2007, in the
proceedings, Motosykletistiki Omospondia Ellados NPID (MOTOE) v Elliniko Dimosio, The Court (Grand Chamber)] to emphasise
the concern on regulatory powers being a potential source for abuse of dominance. Motosykletistiki Omospondia Ellados NPID
(MOTOE) v Elliniko Dimosio, C-49/07, Grand Chamber, decided on 1 July 2008. Available at:
http://curia.europa.eu/juris/liste.jsf?language=en&num=C-49/07 (last accessed in February 2019).
940 Dhanraj Pillay v Hockey India(HI), 2013 Comp LR 543 (CCI).
941 For discussion on “relevant market”, see chapter on Definitions,
section 2(r).
942 Automobile and Touring Club of Greece (ELPA), source:
Motosykletistiki Omospondia Ellados NPID (MOTOE) v Elliniko Dimosio, C-49/07, Grand Chamber, decided on 1 July 2008.
Available at: http://curia.europa.eu/juris/liste.jsf?language=en&num=C-49/07 (last accessed in February 2019).
943 Hemant Sharma v All India Chess Federation (AICF), Case 79 of
2011 [CCI], decided on 12 July 2018.
944 Om Datt Sharma v Adidas AG, Reebok International Ltd and
Reebok India Co, 2014 Comp LR 180 (CCI).
945 As per COMPAT [Om Datt Sharma v CCI, 2015 Comp LR 529
(CompAT)] Commission committed a jurisdictional error by entertaining the matter for the purpose of finding out whether the
appellant has succeeded in making out a prima-facie case in terms of section 26(1) of the Competition Act, 2002. The Tribunal
noted that the term of the franchisee agreement entered between Respondent No. 4 and M/s Kalpataru Emporium ended in
August/September, 2006. The Tribunal held that the information filed by the appellant on 17 February 2014 i.e. after more than
seven years of the expiry of the term of agreement was not maintainable. Also, it was held that the observations made by the
Commission about the status of group and the findings recorded on the issues of relevant market and dominant position would not
be binding on Respondents in any other proceedings before the Commission or any court of law.
946 HT Media Ltd v Super Cassettes Industries Ltd, 2014 Comp LR 129
(CCI).
947 Indian Exhibition Industry Association v Ministry of Commerce &
Industry and Indian Trade Promotion Organisation, 2014 Comp LR 87 (CCI).
948 India Trade Promotion Organisation v CCI, Appeal No. 36 of 2014
[COMPAT], decided on 1 July 2016.
Page 124 of 148
[s 4] Abuse of dominant position
949 Neeraj Malhotra, Advocate v North Delhi Power Ltd, BSES
Rajdhani Power Ltd and BSES Yamuna Power Ltd, No. 06/2009.
950 In India the electricity sector, in general, comprises of following
different product markets: (i) generation of electricity in power stations; (ii) transmission, of electricity over high tension networks;
(iii) distribution and supply of electricity to the final consumers.
951 The National Stock Exchange of India Ltd v CCI, 2014 Comp LR
304 (CompAT).
952 Id.
953 Re Bull Machines Pvt Ltd and JCB India Ltd, Case No 105/2013
[CCI].
954 AK Jain (OP) v The Dwarkadhis Projects Pvt Ltd, 2015 Comp LR
487 (CompAT) : III (2015) CPJ 15 .
955 Sunil Bansal v Jaiprakash Associates Ltd, Case Nos 72 of 2011, 16,
34, 53 of 2012 and 45 of 2013, decided on 26 October 2015, 2015 Comp LR 1009 (CCI). The Tribunal (Sunil Bansal v Jaiprakash
Associates Ltd, Appeal No. 21 of 2016 [COMPAT], decided on 28 September 2016) had set aside and the matter remitted back to
the Commission for fresh consideration on grounds of violation of principles of natural justice
956 Arshiya Rail Infrastructure Ltd (ARIL) v Ministry of Railways
(MoR) through the Chairman, Railway Board (KB) and Container Corp of India Ltd (CONCOR),
[2013] 112 CLA 297 (CCI) : 2012 Comp LR 937 (CCI) :
[2012] 116 SCL 417 (CCI).
957 Para 15, Id.
958 Paras 15.1 & 15.2, Id.
959 Para 15.4, Id.
960 Magnus Graphics, 2015 Comp LR 93 (CCI).
961 RV Ramgopal v Shri Ram Transport Finance Co Ltd,
[2012] 108 CLA 77 (CCI) : 2012 Comp LR 556 (CCI).
962 Cine Prakashakula Viniyoga Darula Sangham v Hindustan Coca
Cola Beverages Pvt Ltd & Consumer Guidance Society v Hindustan Coca Cola Beverages Pvt Ltd, Case No UTPE 99/2009 and
RTPE-16/2009.
Page 125 of 148
[s 4] Abuse of dominant position
963 Exclusive Motors Pvt Ltd v Automobili Lamborghini SPA,
[2014] 121 CLA 230 (CAT) : 2014 Comp LR 110
(CompAT).
964 The Commission considered the relevant market and held that the
market for Super Sports Car constituted a separate market within the auto industry, because of its characteristics, price, intended use
etc.
965 Id.
966 Pravahan Mohanty v HDFC Bank Ltd and Card Services Division
of the HDFC Bank, Case No 17/2010, decided on 23 May 2011.
967 Re Bull Machines Pvt Ltd and JCB India Ltd, Case No 105/2013
[CCI].
968 Re Southwest India Machine Trading Pvt Ltd and Case New
Holland Construction Equipment (India) Pvt Ltd, Case No 97 of 2015, decided on 3 May 2016.
969 Re Confederation of Real Estate Brokers’ Association of India and
Magicbricks.com, Case No 23 of 2016 [CCI], decided on 3 May 2016.
970 Re Kamble Sayabanna Kallappa and Bennett
Coleman and Co Ltd, Case No 35 of 2016 [CCI], decided on 2 June 2016.
971 Re Indian Paint & Coating Association and
Kanoria Chemicals & Industries Ltd, Case No 42 of 2016 [CCI], decided on 8 June 2016.
972 Re Actuate Business Consulting Pvt Ltd and
Ambika Trading & Construction Co Pvt Ltd, Case No 22 of 2016 [CCI], decided on 3 May 2016.
973 See also, Re Vinay Kala and DLF Ltd, Case No
13 of 2016 [CCI], decided on 5 July 2016.
974 Re Vishwambhar M Doiphode and Vodafone
India Ltd, Case No 04 of 2016 [CCI], decided on 5 May 2016.
975 Re A S Sharma and Prateek Realtors India Pvt
Ltd, Case No 28 of 2016 [CCI], decided on 1 June 2016.
976 See also, Re Sumit Kumar and KAMP
Developers Pvt Ltd, Case No 26 of 2016 [CCI], decided on 8 June 2016; Re Usha Roy and ANS Developers Pvt Ltd, Case No 48 of
2016 [CCI], decided on 31 August 2016. See also, Re Tirath Ram and Baba Associate, Case No 102 of 2016 [CCI], decided on 14
March 2017.
977 Re Aniket Sitaram Kokane and Ganesh Agency,
Case No 25 of 2016 [CCI], decided on 1 June 2016.
Page 126 of 148
[s 4] Abuse of dominant position
978 Case No 42 of 2016 [CCI], decided on 8 June
2016.
979 Penta is a basic organic chemical which is used
in the manufacture of alkyd resin, rosin esters, plasticisers, printing inks, synthetic rubber, stabilisers for plastics, modified drying
oils, detonators, explosives, pharmaceuticals, core oils and synthetic lubricants.
980 Re Deepak Verma and Clues Network Pvt Ltd,
Case No 34 of 2016 [CCI], decided on 26 July 2016.
981 See also, Bharti Retail Ltd and Future Retail
Ltd, Combination Registration No. C-2015/05/281; Mohit Manglani v Flipkart India Pvt Ltd, Case No 80 of 2014.
982 Case No 82/2015 and 96/2015.
983 Case Nos 82/2015 and 96/2015.
984 See also, Re Vilakshan Kumar Yadav and ANI
Technologies Pvt Ltd, Case No 21 of 2016 [CCI], decided on 31 August 2016.
985 Re Picasso Animation Pvt Ltd (PAPL) and
Picasso Digital Media Pvt Ltd (PDMPL), Case No 75 of 2016 [CCI], decided on 25 August 2016.
986 Re Prem Pal and Amrish Mohalla Sohan Nagar
and Indian Oil Corp Ltd, Case No 30 of 2016 [CCI], decided on 10 November 2016.
987 Re Indiacan Education Pvt Ltd and Aldine
Ventures Pvt Ltd, Case No 71 of 2016 [CCI], decided on 10 November 2016. See also, Re Rachakonda Satya Sravan Kumar and
ACE Educational Services Pvt Ltd, Case No 100 of 2016 [CCI], decided on 8 February 2017.
988 Re Ravi Beriwala Shyam Towers and Lexus
Motors Ltd, Case No 79 of 2016 [CCI], decided on 17 January 2017.
989 Re Bharti Airtel Ltd and Reliance Industries
Ltd, Reliance Jio Infocomm Ltd, Case No 03 of 2017 [CCI], decided on 9 June 2017. See also, Re C Shanmugam and Reliance Jio
Infocomm Ltd, Case No 98 of 2016 [CCI], decided on 15 June 2017.
990 Re Aditya Automobile Spares Pvt Ltd and Kotak
Mahindra Bank Ltd, Case No 103 of 2016 [CCI], decided on 15 March 2017.
991 See, Re Veer Pratap Naik Managing Director &
CEO, G2G Engineering Services Pvt Ltd and AVEVA Information Technology India Pvt Ltd, Case No 67 of 2016, decided on 5
December 2016; Re Eskay Video Pvt Ltd, Kamalalya Centre and Real Image Media Technologies Pvt Ltd, Case No 57 of 2016
[CCI], decided on 6 December 2016; Re Dr Ravi Bhushan Sharma and Toyota Kirloskar Motor Pvt Ltd, Case No 92 of 2016 [CCI],
decided on 6 December 2016; Re XYZ Informant and Sanofi India Ltd, Case No 80 of 2016 [CCI], decided on 19 February 2019;
Re South Gujarat Warp Knitters Association and Prafful Overseas Pvt Ltd, Case No 24 of 2016 [CCI], decided on 9 March 2017;
Re Onicra Credit Rating Agency of India Ltd and Indiabulls Housing Finance Ltd, Case No 43 of 2016 [CCI], decided on 3
February 2017; Re Ashish Dandona and Dhanlaxmi Bank Ltd, Case No 66 of 2016 [CCI], decided on 21 February 2017.
Page 127 of 148
[s 4] Abuse of dominant position
992 Competition Amendment Bill, 2012 (now lapsed): proposed to bring
in “Collective Dominance” within section 4. At present, the section 4 provides that no enterprise or group shall abuse its dominant
position, but the definition of group is restricted to entities under the same management or control. By inserting the wording
“jointly or singly,” the amendment sought to bring the group of independent and unrelated enterprises holding a dominant position
within the scope of section 4.
993 Consumer Online Foundation v Tata Sky Ltd, Dish TV India Ltd,
Reliance Big TV Ltd and Sun Direct TV Pvt Ltd, Case No 2/2009. Also see, Dish TV India Ltd v Hathway Cable & Datacom Ltd,
Case No 78 of 2013.
994 Manappuram Jewellers Pvt Ltd v Kerala Gold & Silver Dealers
Association, 2012 Comp LR 548 (CCI).
995 Hoffmann-La Roche & Co AG v Commission,
[1979] ECR 461 , para 91, cited in ALISON JONES & BRENDA SUFRIN, EU
Competition Law, 5th Edn, Oxford University Press, 2014.
996 Abuse of a dominant position, Understanding Competition Law,
Office of Fair Trading, December, 2004. Available at:
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/284422/oft402.pdf (last accessed in February 2019).
997 France Telecom v Commission, Case C-202/07,
[2007] ECR II-107 , para 100.
998 NV Nederlandsche Banden-Industrie Michelin v
Commission, [1983] ECR 3461 , para 57.
999 Prasar Bharati (Broadcasting Corp of India) v TAM Media
Research Pvt Ltd, Case No 70 of 2012.
1000 Abuse of Dominance, Competition Bureau, Government
of Canada. Available at: http://www. competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/h_00511.html (last accessed in February
2019).
1001 Id.
1002 Abuse of Dominance and monopolisation, OECD.
Available at: http://www.oecd.org/competition/abuse/(last accessed in February 2019).
1003 Provisions related to Abuse of Dominance, Advocacy
Series 4, Competition Commission of India. Available at:
http://www.cci.gov.in/sites/default/files/advocacy_booklet_document/AOD.pdf (last accessed in February 2019).
1004 Robert Anderson, Timothy Daniel, and Alberto Heimler,
with Thinam Jakob, Abuse of Dominance, Prosecution and Law Enforcement, Chapter 5. Available at:
http://www.oecd.org/daf/competition/prosecutionandlawenforcement/27123114.pdf (last accessed in February 2019).
Page 128 of 148
[s 4] Abuse of dominant position
1005 Id.
1006 Alison Jones & Brenda Sufrin, EU
Competition Law, Oxford University Press, 2014.
1007 Communication from the Commission —
Guidance on the Commission’s enforcement priorities in applying Art. 82 of the EC Treaty to abusive exclusionary conduct by
dominant undertakings (Text with EEA relevance), (2009/C 45/02) 24 February 2009 Official Journal of the European Union C
45/7.
1008
Id.
1009
Id.
1010
Id.
1011
Id.
1012
Id.
1013 Para 28–31, Id.
1014 Case C-53/92 paras 90, 91 and 92,
[1991] ECR II-1439 .
1015 Prasar Bharati (Broadcasting Corp of India) v TAM
Media Research Pvt Ltd, Case No 70 of 2012.
1016 Kapoor Glass Pvt Ltd v Schott Glass India Pvt Ltd,
[2012] 111 CLA 137 (CCI).
1017 ESYS Information Technologies Pvt Ltd v Intel Corp
(Intel Inc), Intel Semiconductor Ltd and Intel Technology India, Pvt Ltd, 2014 Comp LR 126 (CCI).
1018 H M M Ltd v Director General,
Monopolies and Restrictive Trade Practices Commission, Civil Appeal No. 2939 of 1989, 11 August 1998,
(1998) 6 SCC 485 .
1019 R v Re A Loyalty Bonus Scheme, (2001)
ECC 19.
Page 129 of 148
[s 4] Abuse of dominant position
1020 HT Media Ltd v Super Cassettes
Industries Ltd, 2014 Comp LR 129 (CCI).
1021 Atos Worldline India Pvt Ltd v Verifone
India Sales Pvt Ltd, 2015 Comp LR 327 (CCI).
1022 Also see, Three D Integrated Solutions
Ltd v VeriFone India Sales Pvt Ltd, 2015 Comp LR 464 (CCI).
1023 DLF Ltd v CCI, Belaire Owners’
Association, State of Haryana, through the Department of Town Country and Planning, Haryana (DTCP) and Haryana Urban
Development Authority, (HUDA) HUDA Complex [Alongwith Appeal Nos. 22 of 2011, 12, 19 and 20 of 2012 and 08, 09, 11 and
29 of 2013] and DLF Ltd and DLF Home Developers Ltd v CCI, 2014 Comp LR 1(CompAT).
1024 COMPAT had clubbed all the appeals
against the orders of CCI where it held similar view in complaints made by other flat buyer associations, Park Place Resident
Welfare Association and Magnolia Flat Owners Association of respective DLF projects in Gurgaon.
1025 Pankaj Aggarwal v DLF Gurgaon Home
Developers Pvt Ltd, 2015 Comp LR 728 (CCI).
1026 For discussion on Relevant market and
dominance see earlier discussion.
1027 DLF Ltd v CCI, Belaire Owners
Association, State of Haryana, through the Department of Town Country and Planning, Haryana (DTCP) and Haryana Urban
Development Authority, (HUDA) HUDA Complex [Along with Appeal Nos. 22 of 2011, 12, 19 and 20 of 2012 and 08, 09, 11 and
29 of 2013] and DLF Ltd and DLF Home Developers Ltd v CCI, 2014 Comp LR 1 (CompAT).
1028 With regard to penalty, the
Commission is of the view that since a penalty of Rs 630 crores has already been imposed on the Opposite Party in the Belaire’s
Case for the same time period to which contravention in the present cases belong, no financial penalty was imposed.
Appeal filed against order of the Commission in Belaires Owners’ Association v DLF
Ltd, HUDA and other was challenged before Tribunal and the verdict of the Tribunal is now subject matter of challenge before the
Supreme Court in the following appeals:
1. DLF Ltd v CCI (Belaire), C.A. No. 6328 of 2014.
2. DLF Ltd v CCI (Park Place), C.A. No. 6481 of 2014.
3. DLF Ltd v CCI (Magnolia), C.A. No. 6487 of 2014.
4. CCI v DLF Ltd d’ Others, C.A. No. 8014 of 2014.
5. Belaire Owners Association v DLF Ltd, C.A. No. 11108 of 2014.
6. DLF Park Place Residents Welfare Association v DLF Ltd, C.A. No. 11109 of 2014.
7. Magnolias Flat Owners Association v DLF Ltd, C.A. No. 9868 of 2014.
8. Pushkar Dutt d’ Others v DLF Ltd, C.A. No. 10540 of 2014.
9. Mili Marketing Pvt Ltd v DLF Ltd, C.A. No. 49 of 2015.
1029 GHCL Ltd v Coal India Ltd, 2015 Comp
LR 357 (CCI) : [2015] 131 SCL 408 (CCI).
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[s 4] Abuse of dominant position
1030 Coal India and Mahanadi Coalfields Ltd
(MCL), Case No 03 of 2012, Maharashtra State Power Generation Co Ltd (MAHAGENCO) v Mahanadi Coalfields Ltd (MCL) and
Coal India Ltd (CIL) and Gujarat State Electricity Corp Ltd v South Eastern Coalfields Ltd and Coal India Ltd, 2013 Comp LR
910 (CCI).
1031 Market structure/legal & regulatory
architecture in the coal industry in India: The Coal Mines (Taking over of Management) Act, 1973, extended the right of the
Government of India to take over the management of the coking and non-coking coal mines in seven States. This was followed by
the nationalisation of all these mines on 1 May 1973 with the enactment of the Coal Mines (Nationalisation) Act, 1973. Following
the enactment of the Nationalisation Acts, the coal industry was reorganised into two major public sector companies viz. CIL which
owns and manages all the old Government-owned mines of National Coal Development Corporation (NCDC) and the nationalised
private mines and SCCL which was in existence under the ownership and management of Andhra Pradesh State Government at the
time of the nationalisation. CIL is a holding company and has the following subsidiaries:
(i) Bharat Coking Coal Ltd (BCCL); (ii) Eastern Coalfields Ltd (ECL); (iii) Central
Coalfields Ltd (CCL); (iv) Northern Coalfields Ltd (NCL); (v) Western Coalfields Ltd (WCL); (vi) South-Eastern Coalfields Ltd
(SECL); (vii) Mahanadi Coalfields Ltd (MCL); (viii) Central Mine Planning & Design Institute Ltd (CMPDI).
Under the Coal Mines (Nationalisation) Act, 1973, coal mining was exclusively reserved
for the public sector. CIL and SCCL had the main responsibility of supplying coal to all end-users.
The Coal Mines (Nationalisation) Act, 1973 was amended in 1976 to allow captive coal
mining by private companies engaged in the production of iron and steel and sub-leasing of isolated small pockets not amenable to
economic development and not requiring rail transport. In 1993, the Nationalisation Act was further amended to allow captive coal
mining in the private sector for power generation, washing of coal obtained from a mine and such other end uses as may be notified
by the Central Government from time to time. Cement production was notified as a specified end-use for the purposes of captive
coal mining in 1996. By such amendments, coal mining for captive consumption by companies engaged in generation of power,
production of iron and steel, production of cement and washing of coal was allowed. Prior to 1 January 2000 the Central
Government was empowered under section 4 of the Colliery Control Order, 1945, as continued in force by the Essential
Commodities Act, 1955, to fix the grade-wise and colliery-wise prices of coal. The pricing of coal was fully deregulated after the
Colliery Control Order, 2000 was notified with effect from 1 January 2000 in supersession of the Colliery Control Order, 1945.
Under the Colliery Control Order, 2000, the Central Government has no power to fix the prices of coal.
1032 Brief case history for [(03/2012)
Maharashtra State Power Generation Co Ltd v Mahanadi Coalfields Ltd, (11/2012) Maharashtra State Power Generation Co Ltd v
Western Coalfields Ltd, (59/2012) Gujarat State Electricity Corp Ltd v South Eastern Coalfields Ltd, case 03, 11 and 59 of 2012]:
CCI on 9/12/13 found CIL and its subsidiaries to operate independently of market forces and thus enjoying undisputed dominance
in the relevant markets of supply of non-coking coal to the thermal power producers. The Commission also held the Opposite
Parties to be in contravention of the provisions of Section 4(2) (a)(i) of the Competition Act, 2002 for imposing
unfair/discriminatory conditions and indulging in unfair/discriminatory conduct in the matter of supply of non-coking coal, as
detailed in the said order. COMPAT vide its common order passed on 17 May 2016 in a batch of appeals arising out of the orders
of the Commission passed on 09 December 2013,15 April 2014 and 16 February 2015 in C. Nos. 03, 11 & 59 of 2012, C. Nos. 05,
07, 37 & 44 of 2013 and C. No. 08 of 2014 respectively set aside the impugned order. The Tribunal remanded the matter back to
CCI and asked the CCI to hear the parties afresh and pass appropriate orders.
1033 Madhya Pradesh Power Generating Co
Ltd (MPP) v South Eastern (SECL) Coalfields Ltd and Coal India Ltd and West Bengal Power Development (WBPDCL) Corp Ltd v
Coal India Ltd, Eastern Coalfields Ltd (ECL), Bharat Coking Coal Ltd and Mahanadi Coalfields Ltd (MCL) and Sponge Iron
Manufactures Association (SIMA) v Coal India Ltd, 2014 Comp LR 68 (CCI).
1034 Information filed in Case Nos 05, 07, 37
and 44 of 2013.
1035 Maharashtra State Power Generation Co
Ltd v Mahanadi Coalfields Ltd, Case Nos 03, 11 & 59 of 2012, decided on 9 December 2013
Page 131 of 148
[s 4] Abuse of dominant position
1036 Brief Case history [(05/2013) Madhya
Pradesh Power Generating Co Ltd v South Eastern Coalfields Ltd, (07/2013) Madhya Pradesh Power Generating Co Ltd v South
Eastern Coalfields Ltd, (37/2013) West Bengal Power Development Corp Ltd v Coal India Ltd, (44/2013) Sponge Iron
Manufactures Association v. Coal India Ltd, decided on 21/4/17]: the CCI on 15/4/14 had found CIL and its subsidiaries operating
independently of market forces and thus, enjoying an undisputed dominance in the relevant market of production and supply of
non-coking coal to the thermal power producers and sponge iron manufacturers in India. The Commission also held the Opposite
Parties to be in contravention of the provisions of section 4(2)(a)(i) of the Competition Act, 2002 for imposing unfair/discriminatory
conditions and indulging in unfair/discriminatory conduct in the matter of supply of non-coking coal, as detailed in the order.
COMPAT vide its common order passed on 17 May 2016 in a batch of appeals arising out of the orders of the Commission passed
on 09 December 2013, 15 April 2014 and 16 February 2015 in C. Nos. 03, 11 & 59 of 2012 (the present batch), C. Nos. 05, 07, 37
& 44 of 2013 and C. No. 08 of 2014 respectively set aside the impugned order. The Tribunal remanded the matter back to CCI and
asked the CCI to hear the parties afresh and pass appropriate orders. The Commission on 21/4/17 noted that since a penalty of Rs
591.01 crore has already been imposed upon the Opposite Parties vide separate order dated 24 March 2017 of the Commission
passed in the previous batch of informations (i.e. in Case Nos. 03, 11 and 59 of 2012) with respect to substantially similar conduct,
no further monetary penalty was required to be imposed.
1037 Bijay Poddar v Coal India Ltd, 2014
Comp LR 208 (CCI).
1038 Sai Wardha Power Co Ltd v Western
Coalfields Ltd, 2014 Comp LR 265 (CCI).
1039 Coal India Ltd v CCI & Bijay Poddar,
Appeal No. 81/2014, decided on 20 March 2017.
1040 Faridabad Industries Association (FIA) v
Adani Gas Ltd (AGL), 2014 Comp LR 185 (CCI).
1041
Id.
1042 See paras 63–67.
1043 The COMPAT stayed, the Commission’s
Rs 25 crore penalty, and modification of the gas sale contract order against Adani Gas Ltd, the city gas distribution arm of
Ahmedabad-based Adani Group. The matter is now pending before the NCLAT
1044 Schott Glass India Pvt Ltd v CCI through
its Secretary and Kapoor Glass Pvt Ltd and Kapoor Glass Pvt Ltd v CCI through its Secretary and Schott Glass India Pvt Ltd, 2014
Comp LR 295 (CompAT).
1045 Indian Exhibition Industry Association v
Ministry of Commerce & Industry and Indian Trade Promotion Organisation, 2014 Comp LR 87 (CCI).
1046 India Trade Promotion Organisation v
CCI, Appeal No. 36 of 2014 [COMPAT], decided on 1 July 2016.
1047 Satyendra Singh v Ghaziabad
Development Authority (GDA), Case No 86 of 2016 [CCI], decided on 28 February 2018.
Page 132 of 148
[s 4] Abuse of dominant position
1048 House of Diagnostics LLP v Esaote S.p.A,
case 09 of 2016, decided on 27/9/18.
1049 Re Matrimony.com Ltd, Case Nos 7 and
30 of 2012 [CCI], decided on 8 February 2018.
1050 Om Datt Sharma v Adidas AG, Reebok
International Ltd and Reebok India Co, 2014 Comp LR 180 (CCI).
1051 Note: As per COMPAT 2015,
Commission committed a jurisdictional error by entertaining the complaint for the purpose of finding out whether the appellant has
succeeded in making out a prima-facie case in terms of section 26(1) of the Competition Act, 2002 (the term of the franchisee
agreement entered between Respondent No. 4 and M/s Kalpataru Emporium ended in August/September, 2006. Section 4 which
prohibits abuse of dominant position by any enterprise or group and also declares certain acts as an abuse of dominant position
came into force on 20 May 2009. Thus, the information filed by the appellant on 17 February 2014 i.e. after more than seven years
of the expiry of the term of agreement was not maintainable). Also, the observations made by the Commission about the status of
group and the findings recorded on the issues of relevant market and dominant position shall not be binding on Respondent Nos. 2
to 4 in any other proceedings before the Commission or any court of law.
1052 AK Jain v The Dwarkadhis Projects Pvt
Ltd, 2015 Comp LR 487 (CompAT) : III (2015) CPJ 15
.
1053
This common order disposed of the information filed in C. Nos. 100 of 2013, 49 of 2014 and 89 of 2014 as similar issues were
involved in these cases
1054 Sharad Kumar Jhunjunwala v UOI, 2015
Comp LR 859 (CCI) : (2015) 4 CompLJ 457.
1055 A parallel may be
drawn between Member Sahoo’s dissent and the EU guidelines on Vertical Restraints which provide that undertaking should not
discriminate between e-commerce and brick and mortar stores. Though this applies in a vertical agreements scenario, the same
principle may be adopted to a dominant enterprise, especially given the “special responsibility” of dominant enterprises.
1056 Intel has been engaged in the activities of
designing and manufacturing of a wide range of IT components, peripherals, computer systems, etc. Besides, it has also been
engaged in manufacturing and distribution of electronic devices relating to communications and computing such as
microprocessors, chipsets, motherboard, integrated circuit, network interface controllers, flash memory, etc.
1057 For more information, see discussion on
dominance.
1058 Neeraj Malhotra, Advocate v North Delhi
Power Ltd, BSES Rajdhani Power Ltd and BSES Yamuna Power Ltd, Case No 06/2009 decided 11 May 2011.
1059 It is also borne out from the DG report
that after regulations of Central Electricity Authority (CEA) were published in March, 2006, the Bureau of Indian Standards (BIS)
published IS 15707: 2006. According to new Indian Standards, the maximum permissible error for the meters having accuracy of
Class 1.0 (which are meters generally used by the domestic consumers) shall be + 2.5% under on site conditions.
Page 133 of 148
[s 4] Abuse of dominant position
1060 2017 Comp LR 240 (CCI), Case No 63 of
2014, CCI, 16 February 2017, Order its Available at: http://www.cci.gov.in/sites/default/files/63%20of%202014.pdf (last accessed
in February 2019).
1061 Anand Parkash Agarwal v Dakshin Haryana Bijli Vitran
Nigam, Appeal No. 33/2016 [COMPAT], decided on 16 February 2017.
1062 Amministrazione Autonoma dei Monopoli
di Stato (AAMS) v Commission of the European Communities, Case T-139/98, [2001] ECR II-
3413 .
1063 1998 Football World Cup case, Case
IV/36.888 - 1998 Football World Cup.
1064 Shamsher Kataria v Honda Siel Cars
India Ltd, 2014 Comp LR 1(CCI).
1065 United Brands Co and United Brands
Continental BV v Commission, [1978] ECR 207
.
1066 HT Media Ltd v Super Cassettes
Industries Ltd, 2014 Comp LR 129 (CCI).
1067 Super Cassettes Industries Ltd (known
under brand name, T-Series), was engaged in manufacture, production and publication of music and videos in India and
internationally and it offered its repertoire of music to television stations, radio stations and mobile companies for use and
broadcast. FM radio channel Fever 104 was launched by HT media in 2006 and it was in operational in in Delhi, Mumbai, Kolkata
and Bengaluru. Fever 104 largely played Bollywood film music.
1068 For more discussion on relevant market
see chapter on Definitions.
1069 Factors that were considered included
high market share, size, resources and economic power of Super Cassettes in comparison to its competitors, Size, resources and
economic power of Super Cassettes in comparison to its competitors in terms of revenue, acquisition of movies, ownership of
popular content, dependence of consumers on Super Cassettes (owned majority of the music labels and it had 58% share of the top
100 songs played on private FM channels), barriers to entry and other factors contributing to dominance like Super Cassettes
royalty rates which were set on a needle per hour basis whereas most other competitors provided licenses at a rate either determined
by or equivalent to the Second Order of the Copyright Board. and MCC where Super Cassettes unlike any other competitor,
imposed MCC ranging from 30%–50% of playout which radio stations were required to pay irrespective of whether they play that
amount of music.
1070
Id.
1071 Shivam Enterprises v Kiratpur Sahib
Truck Operators Co-op Transport Society Ltd, 2015 Comp LR 232 (CCI).
1072 Kiratpur Sahib Truck Operators Co-op
Transport Society Ltd was held to be within the definition of “Enterprise”. See discussion on “Enterprise”.
Page 134 of 148
[s 4] Abuse of dominant position
1073 Shamsher Kataria v Honda Siel Cars
India Ltd, 2014 Comp LR 1 (CCI). The case was originally filed in 2011 by Shamsher Kataria against Honda, Fiat and
Volkswagen. The matter was examined by the Commission and after finding a prima facie case, it was referred to the DG for
investigation. The DG broadened the investigation to include similar practices from 14 other brands including Ford, Hindustan
Motors, Fiat, Nissan, General Motors, Premier, Mahindra & Mahindra, Maruti Suzuki, Tata Motors, Hyundai, Skoda, Toyota and
two premium brands, Mercedes Benz and BMW within the scope. After a detailed investigation, the DG concluded that each of
these 17 car manufacturers and original equipment manufacturers had contravened sections 3 and 4 of the Competition Act, 2002.
The Commission, then, issued a detailed order dated 25 August 2014 upholding the DG’s findings found 14 automobile companies
guilty and imposed a penalty of 2% of the total average annual turnover of each party. Three automobile companies [Hyundai, Reva
and Premier] had moved the Madras High Court [Writ Petition (Civil) No. 31808/2012] challenging the scope of investigation of
the DG. The case was later dismissed by the High Court leading to the Commission’s order holding them guilty for violation of
Competition Act, 2002. Eleven automobile companies moved Delhi high court, challenging the constitutionality of certain sections
of the Competition Act, 2002 pertaining to CCI’s powers. The high court reserved its verdict in January 2016. Ford, Nissan and
Toyota preferred an appeal to COMPAT which upheld the order of the Commission on 9 December 2016. Presently, they have
secured an interim relief order from the Supreme Court against the Tribunal’s December order.
1074 Price Difference (mark up) (%) = {(Price
at which available to Customer)-(Price at which procured from OES)}*100/(Price at which procured from OES).
1075 United Brands Continental BV v
Commission, Case 27/76.
1076 British Horseracing Board v Victor
Chandler International, [2005] EWHC 1074
(Ch), (para 56).
1077 General Motors Continental NV v
Commission, [1975] ECR 1376 .
1078 Also see, case against Hyundai, Reva and
Premier Case, No 03/2011.
1079 Case No 12/2014, 21 April 2017, Order
Available at: http://www.cci.gov.in/sites/default/files/Final%20
Order%2012%20of%202014%20%20draft%20dated%2021.04.2017.pdf (last accessed in February 2019).
1080 Spectrum Sports v Shirley McQuillan, 113 S.Ct. 884.
1081 USA v Grinnell Corp, 384 U.S. 563.
1082 Harrison Aire, 423 F.3d 381; Microsoft, 253 F.3d 51;
Rebel Oil, 51 F.3d 1439; See also, Matsushita Electrical Industrial Co v Zenith Radio Corp, 475 U.S. 574, 591 n. 15: 106 S.Ct.
1348: 89 L.Ed.2d 538 (1986).
1083 USA v Microsoft Corp, 253 F.3d 34.
1084 Conwood Co v US Tobacco Co, 290 F.3d 768.
Page 135 of 148
[s 4] Abuse of dominant position
1085 Aspen Skiing Co v Aspen Highland Skiing Co, 105 S.Ct.
2847.
1086 Otter Tail Power Co v USA, 93 S.Ct. 1022. See also, USA
v Griffith, 334 U.S. 100, 107, 68 S.Ct. 941.
1087 Associated Press v USA, 326 U.S. 1, 65 S.Ct. 1416.
1088 United Brands v Commission, Case
27/76, [1978] ECR 207 para 65.
1089 British Airways PLC v Commission, Case
C-95/04, [2007] ECR I 2331.
1090 Tetra Pak International SA v
Commission, 1994 ECR II 00755.
1091 Alsatel v SA Novasam,
1988 ECR 5987 .
1092 Tetra Pak II, 92/163/EEC.
1093 Para 82, Arshiya Rail Infrastructure Ltd (ARIL) v Ministry
of Railways (MoR) through the Chairman, Railway Board (KB) and Container Corp of India Ltd (CONCOR),
[2013] 112 CLA 297 (CCI) : 2012 Comp LR 937 (CCI) :
[2012] 116 SCL 417 (CCI).
1094 Re Trisure India Ltd, RTP Enquiry No. 8/78, Order dated
16 January 1980; Re Hyderabad Asbestos Cement Products Ltd, RTP Enquiry No 18/1977, Order dated 20 December 1980.
1095 Flyington Freighters Pvt Ltd v Airbus SAS, Case No
66/2010
1096 Re Fast Track Call Cab Pvt Ltd, Case No 06 of 2015, per
AUGUSTINE PATER, dissenting opinion.
1097 “(1) “Cost” in the Explanation to section 4 of the Act
shall, generally, be taken as average variable cost, as a proxy for marginal cost: Provided that in specific cases, for reasons to be
recorded in writing, the Commission may, depending on the nature of the industry, market and technology used, consider any other
relevant cost concept such as avoidable cost, long run average incremental cost, market value.” Regulation 2(1)(c) “Cost” as used in
regulation 3 and its derivation may have reference to:
i. “total cost” means the actual cost of production including items, such as cost of material consumed, direct wages and salaries,
direct expenses, work overheads, quality control cost, research and development cost, packaging cost, finance and
administrative overheads attributable to the product during the referred period;
ii. “total variable cost” means the total cost referred to in clause (i) minus the fixed cost and share of fixed overheads, if any,
during the referred period;
Page 136 of 148
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1098 Available at:
http://www.oecd.org/competition/abuse/2375661.pdf (last accessed in February 2019).
1099 Richard A Posner, Antitrust Law—An Economic
Perspective, (1976), pp 185–186.
1100 Scherer, Industrial Market structures and
Economic Performance, 2nd Edn, (1980), p 338.
1101 TJ Brennen, “Understanding “Raising Rivals” Costs’,”
US Department of Justice Discussion Paper EAG 86-16 (1986).
1102 Available at:
http://www.oecd.org/competition/abuse/2375661.pdf (last accessed in February 2019).
1103 Bull Machines Pvt Ltd v JCB India Ltd and JC Bamford
Excavators Ltd, Case No 105 of 2013.
1104 Unilateral Conduct Workbook, Chapter 4: Predatory
Pricing Analysis. Available at: http://www. internationalcompetitionnetwork.org/uploads/library/doc828.pdf (last accessed in
February 2019).
1105 See e.g., Easterbrook, Predatory
Strategies,, 333–37 (1981); John McGee, Predatory Pricing Revisited, 23 J. of Law and Econ. 289, 316–17 (1980). Available at:
http://www.oecd.org/competition/abuse/2375661. pdf (last accessed in February 2019).
1106 Philip Areeda and Donald F Turner,
“Predatory Pricing and Related Practices Under Section 2 of the Sherman Act”, 88 Harvard Law Review 697 (1975).
1107 E.g., Areeda and Turner, “Predatory
Pricing”, Id. at 711.
1108
Id.
1109 Areeda and Turner, 3 Antitrust Law 148
(1978).
1110 Areeda and Hovencamp, 3 Antitrust Law
329 (1986 Supplement).
1111 Areeda and Turner, 3 Antitrust Law 148
(1978).
1112 Areeda and Turner, 3 Antitrust Law 114
(1982 Supplement).
Page 137 of 148
[s 4] Abuse of dominant position
1113 Areeda and Hovencamp, 3 Antitrust Law
329 (1986 Supplement). The only exception they can see is the case where marginal costs substantially exceed average costs
because the plant is greatly exceeding its capacity, a situation which would not harm equally efficient rivals and be so rare it could
be ignored.
1114 Areeda and Turner, 3 Antitrust Law 148
(1978).
1115 Areeda and Turner, 3 Antitrust Law 148
(1978).
1116 Available at:
http://www.oecd.org/competition/abuse/2375661.pdf (last accessed in February 2019).
1117 Richard Posner, Antitrust Law: An
Economic Perspective, 191–192 (1976).
1118 Id. at 190.
1119 Id. at 55–60, 191.
1120 Id. at 189–90.
1121 Id. at 193.
1122 Paul Joskow and Alvin Klevorik, “A
Framework for Analysing Predatory Pricing Policy”, 89 Yale Law Journal 213 (1979).
1123
Id.
1124
Id.
1125 Phillip Areeda & Donald F Turner, “Predatory Pricing
and Related Practices Under section 2 of the Sherman Act”, 88 Harvard Law Review 697, 697 (1975).
1126 ECS/Akzo, [1985] OJ L374/1 :
[1986] 3 CMLR 273 ; on appeal case C-62/86, Akzo Chemie BV v Commission,
[1991] ECR I-3359 .
1127 Para 79, Id.
1128 Available at: http://eur-
lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A61986CJ0062 (last accessed in February 2019).
Page 138 of 148
[s 4] Abuse of dominant position
1129 Tetra Pak II, Case C-333/94P, Tetra Pack International
SA v Commission, [1996] ECR I-5951 .
1130 France Telecom, Case C-202/07P, France Telecom v
Commission, [2009] ECR I- 2369 .
1131 Post Danmark Case Case C-209/10, Post Danmark A/S v
Konkurrenceradet, [2012] 4 CMLR 23 .
1132 Alison Jones & Brenda Sufrin, EU Competition Law, 5th
Edn, Oxford University Press, (2014).
1133 Id.
1134 Re Johnson and Johnson Ltd, RTP
Enquiry No. 59/1985, Order dated 29 July 1986.
1135 Re Modern Food Industries (India) Ltd,
RTP Enquiry No. 78/1992, decided on 7 February 1996.
1136 UP Twiga Fibre Glass Ltd, RTP Enquiry
No. 117/1984, Order dated 12 October 1984.
1137 Rallis India Ltd, RTP Enquiry No.
5/1982, Order dated 29 December 1983.
1138 RTP Enquiry No. 68/85, order dated 12
June 1998; DG (I&R) v Seraikella Glass Works Pvt Ltd, (1998) 33 CLA 225
(MRTPC).
1139 Colgate Palmolive (India) Pvt Ltd, Coca
Cola Export Corp, Cadbury Fry India Ltd v UOI, (1980) 50 Com Cas 495
.
1140 The definition of “Monopolistic”
undertaking in section 2(j) has since been deleted by the MRTP (Amendment) Act, 1984, and necessary changes have also been
made in section 31 of the Act. Section 31 now provides for inquiry into monopolistic trade practice if one (or more) undertakings
are indulging in monopolistic trade practice or if monopolistic trade practice prevails in respect of any goods or services. The
concept of monopolistic undertaking has, thus, been given a go by. This judgment was delivered before the aforesaid Amendment
Act, and may be viewed accordingly.
1141 Apart from the three references made
prior to the Amendment Act of 1984, referred to above, another reference was made by the Central Government to the MRTP
Commission on 30 July 1987 in the matter of the Safety Razor Blades Industry in India (Reference No. 1 of 1987). Here again, the
MRTP Commission was not able to make any headway in the inquiry because of the stay granted by the Bombay High Court. In
addition, MTP Enquiries have also been instituted under section 10(b) of the MRTP Act, 1969 by the Commission in four other
cases, viz., Avery India Ltd, Indian Metal & Ferro Alloys Ltd, St. Michael’s School and Indian Rayon & Industries Ltd, which are
said to be pending.
Page 139 of 148
[s 4] Abuse of dominant position
1142 Re Indian Metals and Ferro Alloys Ltd,
MTP Enquiry No. 3/1985, Order dated on 1 September 1986.
1143 HNG Float Glass Ltd v Saint Gobain
Glass India Ltd, [2014] 118 CLA 500 (CCI) : 2013
Comp LR 876 (CCI).
1144
Id.
1145 Fast Track Call Cab Pvt Ltd v ANI
Technologies Pvt Ltd and Meru Travel Solutions Pvt Ltd v ANI Technologies Pvt Ltd, Case No 6 & 74 of 2015 [CCI], order dated
19 July 2017.
1146 Transparent Energy Systems Pvt Ltd v
TECPRO Systems Ltd, [2013] 575 CLA 575 (CCI) :
2013 Comp LR 681 (CCI) : [2013] 121 SCL 11 (CCI).
1147 Para 20, Id.
1148 Para 22, Id.
1149 HLS Asia Ltd, New Delhi v Schlumberger
Asia Services Ltd Gurgaon and Oil & Natural Gas Corp Ltd, New Delhi, [2013] 115 CLA
401 (CCI) : 2013 Comp LR 85 (CCI) : [2013] 120 SCL
138 (CCI).
1150 The National Stock Exchange of India Ltd
v CCI, 2014 Comp LR 304 (CompAT).
1151 R v Hoffman La Roche Ltd, (1981) 33 OR
(2d) 694.
1152 The Tribunal even though differed in
delineation of relevant market found that NSE’s zero price in currency derivatives trading was below cost. The Tribunal while
noting that that NSE’s Pricing Committee did not specify in any of the minutes of its meetings further held that NSE had intent to
indulge in predatory pricing and eliminate competition.
1153 Re Vinod Kumar Gupta and WhatsApp
Inc, Case No 99 of 2016 [CCI], decided on 1 June 2017.
1154 Atos Worldline India Pvt Ltd v Verifone
India Sales Pvt Ltd, 2015 Comp LR 327 (CCI).
1155 Shivam Enterprises v Kiratpur Sahib
Truck Operators Co-op Transport Society Ltd, 2015 Comp LR 232 (CCI).
Page 140 of 148
[s 4] Abuse of dominant position
1156 For facts of the case, see discussion in
section 4(2)(a).
1157 Indian Exhibition Industry Association v
Ministry of Commerce & Industry and Indian Trade Promotion Organisation, 2014 Comp LR 87 (CCI).
1158 For discussion on dominance, see earlier
discussion.
1159 India Trade Promotion Organisation v
CCI, Appeal No. 36 of 2014 [COMPAT], decided on 1 July 2016.
1160 Schott Glass India Pvt Ltd v CCI through
its Secretary and Kapoor Glass Pvt Ltd and Kapoor Glass Pvt Ltd v CCI through its Secretary and Schott Glass India Pvt Ltd, 2014
Comp LR 295 (CompAT).
1161 House of Diagnostics LLP v Esaote S.p.A
& other, Case 09 of 2016 [CCI], decided on 27 September 2018.
1162 Hemant Sharma v All India Chess
Federation (AICF), Case 79 of 2011 [CCI], decided on 12 July 2018.
1163 Case No 73 of 2011 [CCI], decided on 31
May 2013.
1164 Anila Gupta v BEST Undertaking
General Manager, 2012 Comp LR 115 (CCI).
1165 Brihanmumbai Electricity Supply and
Transport Undertaking (BEST) v Maharashtra Electricity Regulatory Commission (MERC), Civil Appeal No. 2458 of 2011.
1166
Id.
1167 Wheeling is the transportation of electric
energy (megawatt-hours) from within an electrical grid to an electrical load outside the grid boundaries.
1168
Id.
1169 Royal Energy Ltd v Indian Oil Corp Ltd,
Bharat Petroleum Corp Ltd and Hindustan Petroleum Corp Ltd MRTP, Case No 1/28 (C-97/2009/DGIR); 2012 Comp LR 563
(CCI).
1170
Id.
Page 141 of 148
[s 4] Abuse of dominant position
1171 Fast Way Transmission Pvt Ltd, Hathway
Sukhamrit Cable & Datacom Pvt Ltd, Creative Cable Network Pvt Ltd v Kansan News Pvt Ltd and CCI through its Secretary,
[2014] 122 CLA 31 (CAT) : 2014 Comp LR 59 (CompAT)
: [2014] 126 SCL 285 (CAT).
1172 For further details see comment on
section 4(2)(c).
1173 Explosive Manufacturers Welfare
Association v Coal India Ltd and its Officers, 2012 Comp LR 525 (CCI).
1174
Id.
1175 ESYS Information Technologies Pvt Ltd v
Intel Corp (Intel Inc.), Intel Semiconductor Ltd and Intel Technology India Pvt Ltd, 2014 Comp LR 126 (CCI).
1176 Re Vinod Kumar Gupta and WhatsApp
Inc., Case No 99 of 2016 [CCI], decided on 1 June 2017.
1177 Case No 12/2014, 21 April 2017, Order
Available at:
http://www.cci.gov.in/sites/default/files/Final%20Order%2012%20of%202014%20%20draft%20dated%2021.04.2017.pdf (last
accessed in February 2019).
1178 Case No 12/2014 [CCI], decided on 21
April 2017.
1179 Napier Brown/British Sugar,
88/518/EEC.
1180 Klaus Hofner and ELser v Macrotron,
1991 ECR I-01979 .
1181 Suiker Unie v Commission,
1975 ECR 1663 .
1182 Consten and Grundig v Commission,
Judgment of the Court of 13 July 1966.
1183 Magill TV Guide – British
Telecommunications, Joined Cases C-241/91 P and C-242/91 P.
1184 Instituted by Competition (Amendment) Act, 2007.
1185 Fast Way Transmission Pvt Ltd, Hathway
Sukhamrit Cable & Datacom Pvt Ltd, Creative Cable Network Pvt Ltd v Kansan News Pvt Ltd. and CCI through its Secretary,
Page 142 of 148
[s 4] Abuse of dominant position
[2014] 122 CLA 31 (CAT) : 2014 Comp LR 59 (CompAT)
: [2014] 126 SCL 285 (CAT).
1186 Commission’s Note: Distribution chain in
cable TV Services:
There are four main supply side players in the cable TV services such as Broadcasters, Aggregators, Multi-System Operators
(MSO) and Local Cable Operators (LCO). The broadcasters role in the supply chain includes transmitting or “up-linking” the
content signals to the satellite (from where they are “down-linked” by the distributor). The Multi System Operator is a
distribution agent who undertakes the distribution of TV channels from one or more broadcasters. The role of the aggregator
in the supply chain is to provide bundling and negotiation services for subscription revenue on behalf of the broadcasters. The
role of the MSO is to downlink the broadcaster’s signals, decrypt and encrypt channels and provide a bundled feed consisting
of multiple channels to the LCO. The role of the LCOs in the supply chain is to receive a feed (bundled signals) from the
MSOs and retransmit these signals to subscribers in his area of operations through cable network. The television programmes
distribution market in India consists of four platforms, namely, Terrestrial TV, Cable TV, DTH and IP TV. Terrestrial TV is
available free and is, therefore, different from the other platforms. IP TV is a new platform which is not available throughout
the country. The popular platforms in India are cable TV which has a wide network and subscriber’s base and DTH with
better quality and flexible programming which is the choice of higher income group people in India.
1187
CCI v Fast Way Transmission Pvt Ltd, (2018) 4 SCC 316
1188 Surinder Singh Barmi v Board for
Control of Cricket in India, (BCCI), [2013] 113 CLA 579
(CCI) : 2013 Comp LR 297 (CCI) : [2013] 118 SCL 226
(CCI).
1189 Also see, Pan India Infra Projects Pvt Ltd
v BCCI, Case No 91/2013, decided on 16 January 2014.
1190 The Board of Control for Cricket in India
v The CCI, [2015] 128 CLA 186 (CAT) : 2015
Comp LR 548 (CompAT) : [2015] 131 SCL 443 (CAT).
1191 Surinder Singh Barmi v. The Board of
Control for Cricket in India, Case No 61 of 2010 [CCI], decided on 29 November 2017.
1192 Also see, Hemant Sharma v All India
Chess Federation (AICF), Case 79 of 2011, decided on 12/7/18
1193 Dhanraj Pillay v Hockey India, 2013
Comp LR 543 (CCI).
1194 The inherence-proportionality test which
is currently considered as the appropriate approach to address the competition issues in sports sector provides that if the alleged
restrictive conditions is inherent to the objectives of the sports federation and the effect of restrictive condition on economic
Page 143 of 148
[s 4] Abuse of dominant position
competition among stakeholders or on free movement of players is proportionate to legitimate sporting interest perused, the same
may not be viewed as anti-competitive. This test may be applied to all rules, without needing to classify them as purely sporting or
otherwise.
1195 Shamsher Kataria Informant v Honda
Siel Cars India Ltd, 2014 Comp LR 1 (CCI).
1196 Toyota Kirloskar Motor Pvt Ltd v CCI,
Shamsher Kataria, Appeal No. 60/2014 [COMPATI; Ford India Pvt Ltd v CCI, Appeal No. 61/2014 [COMPATI; Nissan Motor
India Pvt Ltd v CCI, Appeal No. 62/2014 [COMPATI, decided on 9 December 2016.
1197 Indian Exhibition Industry Association v
Ministry of Commerce & Industry and Indian Trade Promotion Organisation, 2014 Comp LR 87 (CCI).
1198 India Trade Promotion Organisation v
CCI, Appeal No. 36 of 2014 [COMPAT], decided on 1 July 2016.
1199 Shivam Enterprises v Kiratpur Sahib
Truck Operators Co-op Transport Society Ltd, 2015 Comp LR 232 (CCI).
1200 Jupiter Gaming Solutions Pvt Ltd v Govt
of Goa, [2012] 106 CLA 339 (CCI) : 2012 Comp LR 56
(CCI) : [2011] 110 SCL 340 (CCI).
1201 Pooja Fortune Pvt Ltd v The Govt of
Goa, Writ Petition (Civil) No. 265 of 2010.
1202 Directorate of Education v Educomp
Datamatics Ltd, AIR 2004 SC 1962 :
[2004] 2 SCR 1010 : (2004)
4 SCC 19 : 2004 (3) Scale 111
.
1203 The Supreme Court held:
The government must have a free hand in setting the terms of the tender. It must have reasonable play in its joints as a
necessary concomitant for an administrative body in an administrative sphere. The courts would interfere with the
administrative policy decision only if it is arbitrary, discriminatory, malafide or actuated by bias. It is entitled to pragmatic
adjustments which may be called for by the particular circumstances. The courts cannot strike down the terms of the tender
prescribed by the government because it feels that some other terms in the tender would have been fair, wiser or logical. The
courts can interfere only if the policy decision is arbitrary, discriminatory or mala fide.
1204 R PRASAD, Member, in his dissenting
opinion went with the DG’s report and held the Government of Goa to have abused its dominant position by denying market access
to all lottery players by keeping high turnover criteria of Rs 4000 crore and net worth of Rs 40 crore which resulted in
denial/restriction of market access to the other parties in the relevant market.
Page 144 of 148
[s 4] Abuse of dominant position
1205 Explosive Manufacturers Welfare
Association v Coal India Ltd and its Officers, 2012 Comp LR 525 (CCI).
1206 R PRASAD, Member, in his dissenting
opinion held that the DG correctly held that by not calling tender for 20% of the procurement of explosives the market has not only
been limited but it has also been restricted. Further, as far as 20% of the procurement was concerned, there was a denial of market
access to the other suppliers. Therefore there was a contravention of section 4(2)(c) of the Act.
1207 Neeraj Malhotra, Advocate v North Delhi
Power Ltd, BSES Rajdhani Power Ltd and BSES Yamuna Power Ltd, Case No 06/2009.
1208 R PRASAD, (Member), and PN
PARASHAR, (Member), did not agree to the majority opinion and held that the DISCOMS by restraining the consumers from
exercising their full choice or freedom to procure the meters, abused their dominant position.
1209 Schott Glass India Pvt Ltd v CCI through
its Secretary and Kapoor Glass Pvt Ltd and Kapoor Glass Pvt Ltd v CCI through its Secretary and Schott Glass India Pvt Ltd, 2014
Comp LR 295 (CompAT).
1210 Sea Containers v Stena Sealink, (OJ L 15/8 (1993).
1211 Oscar Bronner GmbH & Co KG v Mediaprint Zeitungs,
Judgment of the Court (Sixth Chamber) of 26 November 1998. Available at: http://eur-lex.europa.eu/legal-content/EN/TXT/?
uri=CELEX%3A61997CJ0007 (last accessed in February 2019).
1212 H ERCÜMENT ERDEM, Turkey: Abuse of Dominant
Position through refusal to supply, 2014. Available at:
http://www.mondaq.com/turkey/x/287992/Antitrust+Competition/Abuse+of+Domi nant+ Position +through+Refusal+to+Supply
(last accessed in February 2019).
1213 Arshiya Rail Infrastructure Ltd (ARIL) v Ministry of
Railways (MoR) through the Chairman, Railway Board (KB) and Container Corp of India Ltd (CONCOR),
[2013] 112 CLA 297 (CCI) : 2012 Comp LR 937 (CCI) :
[2012] 116 SCL 417 (CCI).
1214 Shamsher Kataria v Honda Siel Cars India Ltd, 2014
Comp LR 1 (CCI).
1215 Anila Gupta v BEST Undertaking, 2012 Comp LR 115
(CCI).
1216 Brihanmumbai Electricity Supply and Transport
Undertaking BEST v Maharashtra Electricity Regulatory Commission (MERC).
1217 USA v Terminal Railroad Ass’n of St.
Louis, 224 U.S. 383 (1912), 224 U.S. 383.
1218 Jefferson Parish Hospital v Hyde, 466 U.S. 2 (1984).
Page 145 of 148
[s 4] Abuse of dominant position
1219 European Commission - DG Competition discussion paper
on the application of Article 82 of the Treaty to exclusionary abuses, Brussels, 2005. Available at:
http://ec.europa.eu/competition/antitrust/art82/discpaper2005.pdf (last accessed in February 2019).
1220 For more discussion on tying and bundling see, section
3(4)(a).
1221 European Commission, DG Competition discussion paper
on the application of Article 82 of the treaty of exclusionary abuses, Brussels, 2005, p 55.
1222 Case T-201/04, Microsoft Corp v Commission,
[2007] ECR II-3601 .
1223 European Commission, DG Competition discussion paper
on the application of Article 82 of the treaty of exclusionary abuses, Brussels, 2005, p 55.
1224 Case T-30/89 Hilti AG v Commission,
[1991] ECR II-1439 , Case 53/92P Hilti AG v Commission,
[1994] ECR I-667 .
1225 Case C-333/94P, Tetra Pak International SA v
Commission, [1996] ECR 1 -5951.
1226 Id.
Note: Both Article 101(1)(e) similar to section 3(4)(a)] and Article 102(2)(d) [similar to section
4(2) (d)] specifically state that tie-in agreements may amount to infringement. Although, Article 101 may be applicable, most cases
have been brought under Article 102(2)(d), making the conclusion of contracts subject to acceptance by the other parties of
supplementary obligations which, by their nature or according to commercial usage, have no connection with the nature of such
contracts.
1227 Alison Jones & Brenda Sufrin, EU Competition Law, 5th
Edn, Oxford University Press, p 487.
1228 European Commission - DG Competition
discussion paper on the application of Article 82 of the Treaty to exclusionary abuses, Brussels, 2005. Available at:
http://ec.europa.eu/competition/antitrust/art82/discpaper2005.pdf see para 180–181, Id. (last accessed in February 2019).
1229 Para 185, Id.
1230 Case T-30/89, Hilti v Commission, (IV/30.787 and 31.488
– Hilti, para 75). The case was later upheld by the General Court.
1231 Case T-83/91, Tetra Pak v Commission – Upheld by ECJ
in Case C-333/94, Tetra Pak v Commission.
Page 146 of 148
[s 4] Abuse of dominant position
1232 Microsoft Corp v Commission,
[2007] ECR II-3601 , [2007] 5 CMLR
846 .
1233 Upheld by the General Court in Case T-201/04, Microsoft
v Commission.
1234 Para 188 Id.
1235 Para 204–206, Id.
1236 Schott Glass India Pvt Ltd v CCI through its Secretary
and Kapoor Glass Pvt Ltd and Kapoor Glass Pvt Ltd v CCI through its Secretary and Schott Glass India Pvt Ltd, 2014 Comp LR
295 (CompAT).
1237 For details on facts of the case, see earlier discussion
section 4(2)(a).
1238 Financial Software and Systems Pvt Ltd v ACI Worldwide
Solutions Pvt Ltd, 2015 Comp LR 253 (CCI).
1239 Eurofix-Bauco v Hilti, OJ [1998] L65/19.
1240 Tetra Pak International SA v Commission,
1994 ECR II-00755 .
1241 Commercial Solvents v Commission,
[1974] SCR 223 : [1974] 1 CMLR
309 .
1242 Case 311/84, Centre Belge d’Etudes du Marche-
Telemarketing v Compagnie Luxembourgeoise de Telediffusion SA and Information Publicite Benelux SA, [198] ECR 3261: Luxem
bourg television stopped accepting tele-sales advertisements on its television station unless the sales agent phone number used was
that its own subsidiary.
1243 See Ellininki.
1244 Case C-333/94, Tetra Pack International
SA v Commission, [1996] ECR I-5951 .
1245 Case T-83/91, Tetra Pack Rausing v
Commission, [1994] ECR II-755 .
1246 Alison Jones & Brenda Sufrin, EU
Competition Law, 5th Edn, Oxford University Press, p 394.
Page 147 of 148
[s 4] Abuse of dominant position
1247 CBEM v CLT and IPB,
[1985] ECR 3261 ; [1986] 2 CMLR 558
.
1248 Id.
1249 O’donoghue & Padilla, p 410. EAGCP Report 2005, p 43.
1250 Boscheck, p 468. Discussion Paper, § 210.
1251 Discussion Paper, § 210, 212.
1252 Discussion Paper, § 212; EAGCP Report 2005, p 43.
Brouwer, p 2, 13; Humpe & Ritter, p 138.
1253 The National Stock Exchange of India Ltd v CCI, 2014
Comp LR 304 (CompAT).
1254 Schott Glass India Pvt Ltd v CCI through its Secretary
and Kapoor Glass Pvt Ltd and Kapoor Glass Pvt Ltd v CCI through its Secretary and Schott Glass India Pvt Ltd, 2014 Comp LR
295 (CompAT).
1255 See Commercial Solvents case.
1256 Humpe & Ritter, p 154.
1257 O’donoghue & Padilla, p 440; Humpe & Ritter, p 154–
157. Discussion Paper, sections 228–230. Bronner, sections 43–44; IMS Health, sections 28; Bronner per AG Jacobs, sections 65–
68.
1258 Atos Worldline India Pvt Ltd, 2012 Comp LR 115 (CCI).
1259 Three D Integrated Solutions Ltd v VeriFone India Sales
Pvt Ltd, 2015 Comp LR 464 (CCI).
1260 Shamsher Kataria v Honda Siel Cars India Ltd, 2014
Comp LR 1 (CCI). The Tribunal in December 2016 approved the order of the Commission. (Appeal No. 60,61 and 62 of 2014).
1261 Sunil Bansal v Jaiprakash Associates Ltd, 2015 Comp LR
1009 (CCI).
1262 For discussion on relevant product market and relevant
geographic market see chapter on definitions.
Page 148 of 148
[s 4] Abuse of dominant position
1263 SL BUNKER AND AUGUSTINE PETER Members
(Dissenting): In the relevant market of provision of services for development and sale of residential/dwelling units in Integrated
Townships in territory of Noida and Greater Noida, JAL/JIL was held to be in contravention of provisions of section 4(2)(a)(i) of
Act for imposing unfair/discriminatory conditions in terms and conditions of contract and had tilted them in its favour. It was held
that JAL/JIL abusing its dominant position, not only drafted standard terms and conditions of agreement without mutual
consultative process but sought to impose them on buyers.
1264 Appeal No. 21 of 2016 [COMPAT], decided on 28
September 2016.
1265 Dhanraj Pillay v Hockey India, 2013 Comp LR 543
(CCI).
1266 Schott Glass India Pvt Ltd v CCI through its Secretary
and Kapoor Glass Pvt Ltd and Kapoor Glass Pvt Ltd v CCI through its Secretary and Schott Glass India Pvt Ltd, 2014 Comp LR
295 (CompAT).
1267 JAK Communications Pvt Ltd v Sun Direct TV Pvt Ltd,
2011 Comp LR 519 (CCI).
1268 For discussion on relevant market and dominance see
earlier part of Chapter.
End of Document
[s 5] Combination
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > CHAPTER II
PROHIBITION OF CERTAIN AGREEMENTS, ABUSE OF DOMINANT POSITION AND REGULATION
OF COMBINATIONS > Regulation of Combinations
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
CHAPTER II PROHIBITION OF CERTAIN AGREEMENTS, ABUSE OF
DOMINANT POSITION AND REGULATION OF COMBINATIONS
Regulation of Combinations
1269[s 5] Combination
The acquisition of one or more enterprises by one or more persons or merger or amalgamation of enterprises shall be a
combination of such enterprises and persons or enterprises, if—
(a) any acquisition where—
(i) the parties to the acquisition, being the acquirer and the enterprise, whose control, shares, voting rights or
assets have been acquired or are being acquired jointly have,—
(A) either, in India, the assets of the value of more than rupees one thousand crores or turnover more than
rupees three thousand crores; or
1270[(B) in India or outside India, in aggregate, the assets of the value of more than five hundred
million US dollars, including at least rupees five hundred crores in India, or turnover more than fifteen
hundred million US dollars, including at least rupees fifteen hundred crores in India; or]
(ii) the group, to which the enterprise whose control, shares, assets or voting rights have been acquired or are
being acquired, would belong after the acquisition, jointly have or would jointly have,—
(A) either in India, the assets of the value of more than rupees four thousand crores or turnover more than
rupees twelve thousand crores; or
1271[(B) in India or outside India, in aggregate, the assets of the value of more than two billion US
dollars, including at least rupees five hundred crores in India, or turnover more than six billion US
dollars, including at least rupees fifteen hundred crores in India; or]
(b) acquiring of control by a person over an enterprise when such person has already direct or indirect control over
another enterprise engaged in production, distribution or trading of a similar or identical or substitutable goods or
provision of a similar or identical or substitutable service, if—
(i) the enterprise over which control has been acquired along with the enterprise over which the acquirer already
has direct or indirect control jointly have,—
(A) either in India, the assets of the value of more than rupees one thousand crores or turnover more than
rupees three thousand crores; or
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[s 5] Combination
1272[(B) in India or outside India, in aggregate, the assets of the value of more than five hundred
million US dollars, including at least rupees five hundred crores in India, or turnover more than fifteen
hundred million US dollars, including at least rupees fifteen hundred crores in India; or]
(ii) the group, to which enterprise whose control has been acquired, or is being acquired, would belong after the
acquisition, jointly have or would jointly have,—
(A) either in India, the assets of the value of more than rupees four thousand crores or turnover more than
rupees twelve thousand crores or
1273[(B) in India or outside India, in aggregate, the assets of the value of more than two billion US
dollars, including at least rupees five hundred crores in India, or turnover more than six billion US
dollars, including at least rupees fifteen hundred crores in India; or]
(c) any merger or amalgamation in which—
(i) the enterprise remaining after merger or the enterprise created as a result of the amalgamation, as the case
may be, have,—
(A) either in India, the assets of the value of more than rupees one thousand crores or turnover more than
rupees three thousand crores; or
1274[(B) in India or outside India, in aggregate, the assets of the value of more than five hundred
million US dollars, including at least rupees five hundred crores in India, or turnover more than fifteen
hundred million US dollars, including at least rupees fifteen hundred crores in India; or]
(ii) the group, to which the enterprise remaining after the merger or the enterprise created as a result of the
amalgamation, would belong after the merger or the amalgamation, as the case may be, have or would
have,—
(A) either in India, the assets of the value of more than rupees four-thousand crores or turnover more than
rupees twelve thousand crores; or
1275[(B) in India or outside India, in aggregate, the assets of the value of more than two billion US
dollars, including at least rupees five hundred crores in India, or turnover more than six billion US
dollars, including at least rupees fifteen Hundred Crores in India
Explanation.— For the purposes of this section,—
(a) “control” includes controlling the affairs or management by—
(i) one or more enterprises, either jointly or singly, over another enterprise or group;
(ii) one or more groups, either jointly or singly, over another group or enterprise;
(b) “group” means two or more enterprises which, directly or indirectly, are in a position to—
(i) exercise twenty-six per cent. or more of the voting rights in the other enterprise; or
(ii) appoint more than fifty per cent. of the members of the board of directors in the other enterprise; or
(iii) control the management or affairs of the other enterprise;
(c) the value of assets shall be determined by taking the book value of the assets as shown, in the audited books of
account of the enterprise, in the financial year immediately preceding the financial year in which the date of
proposed merger falls, as reduced by any depreciation, and the value of assets shall include the brand value, value
of goodwill, or value of copyright, patent, permitted use, collective mark, registered proprietor, registered trade
mark, registered user, homonymous geographical indication, geographical indications, design or layout-design or
similar other commercial rights, if any, referred to in sub-section (5) of section 3.
LEGISLATIVE BACKGROUND
The provisions of section 5 of the Competition Act, 2002 relating to regulation of combinations have been sought to check
concentration of economic power. Monopolies Inquiry Commission (1964/65) divided concentration of economic power in
two broad categories, namely product wise concentration and country-wise concentration. Vertical and conglomerate
mergers were relevant to be considered in the context of country-wise concentration, i.e., to say concentration of over-all
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[s 5] Combination
economic power. The MRTP Act, 1969, thus regulated mergers, amalgamations and takeovers by providing for their
approval by the Central Government.
This section was enforced vide Notification No SO 479(E) dated 4 March 2011 w.e.f. 1 June 2011.
Monopolies Inquiry Commission Report
The relevant extract of the report is as follows:
In our own country, political and economic thinkers have become increasingly aware in recent years of the need of an examination
of the problem. In addition to certain studies by academic investigators, some investigation of the extent of concentration of
economic power was also undertaken by the Committee on Distribution of Income and Levels of Living, under the Chairmanship
of Prof. Mahalanobis. The present study is however the first attempt to find a solution. The study has to be limited to the terms of
reference and so the industries in the public sector and also agriculture being outside these terms, we shall confine our study to the
different manifestations of economic power in the other fields of economic activity. One such manifestation is the achievement by
one or more units in an industry of such a dominant position that they are able to control the market by regulating prices or output
or eliminating competition. Another is the adoption by some producers and distributors, even though they do not enjoy such a
dominant position, of practices which restrain competition and thereby deprive the community of the beneficent effects of the
rivalry between producers and producers, and distributors and distributors, to give the best service. It is needless to say that such
prices must inevitably impede the best utilisation of the nation’s means of production. Economic power may also manifest itself in
obtaining control of large areas of economic activity, by a few industrialists by diverse means. Apart from affecting the economy
of the country, this often results in the creation of industrial empires, tending to cast their shadows over political democracy and
social values.
Clearly, concentration of economic power is the central problem; monopolistic and restrictive prices may be appropriately
considered to the ‘functions’ of such concentration. We were invited by some of the industrialists to give a precise definition of
concentration of economic power. This is not easy; nor is it necessary. It is proper however to state generally what, for the purpose
of this study, we shall consider to be such concentration. As we read the terms of reference, these require us to devote our attention
mainly if not wholly to concentration of economic power in the industrial field only. Two main kinds of concentration of economic
power may be said to prevail in industries. The first is where in respect of the production and distribution of any particular
commodity or service the controlling power whether by reason of ownership of capital or otherwise is in a single concern or
comparatively limited number of concerns or though in a fairly large number of concerns these concerns themselves are controlled
by only a single family or a few families or business houses; this may be called product-wise concentration. Where the industry is
engaged in the production of one product, it may be called also ‘industry-wise’ concentration. Again, where a large number of
concerns engaged in the production or distribution of different commodities are in the controlling hands of one individual or family
or group of persons, whether incorporated or not, connected closely by financial or other business interests, concentration of
economic power will also be clearly considered to exist. For lack of a power term we shall call this kind of concentration “country-
wise” concentration. These two kinds of concentration of economic power will claim the greater part of our attention.
Monopolies and Restrictive Trade Practices Act, 1969
Part III of the MRTP Act, 1969, (sections 20–26) was enacted to ensure that growth was channelised for public good and
not for perpetuating concentration of economic power to the common detriment. The said provisions were omitted by the
MRTP (Amendment) Act, 1991 as it was felt that pre-entry restriction under the MRTP Act,1969, on investment decision
of corporate sector has outlived its utility and had become a hindrance to the speedy implementation of industrial projects.
Report of the High-level Committee on Competition Policy and Law (Raghavan Committee)
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[s 5] Combination
The Committee suggested revival of earlier provision for seeking approval of Competition Commission relating to
mergers, amalgamations, acquisitions and takeovers with certain threshold limit of asset such value of the merged entity or
the group to which it belonged. The recommendations of the Committee are as follows:
D. Mergers, Amalgamations, Acquisitions and Takeovers (Mergers for short).—4.6.1 As in the case of agreements, mergers
are typically classified into horizontal and vertical mergers. In addition, merger between enterprises operating in different markets
are called conglomerate mergers. Mergers are a legitimate means by which firms can grow and are generally as much part of the
natural process of industrial evolution and restructuring as new entry, growth and exit. From the point of view of Competition
Policy it is horizontal mergers that are generally the focus of attention. As in the case of horizontal agreements, such mergers have
a potential for reducing competition. In rare cases, where an enterprise in a dominant position makes a vertical merger with another
firm in a (vertically) adjacent market to further entrench its position of dominance, the merger may provide cause for concern.
Conglomerate mergers should generally be beyond the purview of any law on mergers.
4.6.2 A merger leads to a ‘bad’ outcome only if it creates a dominant enterprise that subsequently abuses its dominance. To some
extent the issue is analogous to that of agreements among enterprises and also overlaps with the issue of dominance and its abuse
discussed in the previous sections. Viewed in this way, there is probably no need to have a separate law on mergers. The reason
that such a provision exists in most laws is to pre-empt the potential abuse of dominance where it is probable, as subsequent
unbundling can be both difficult and socially costly.
4.6.3 Thus, the general principle, in keeping with the overall goal, is that mergers should be challenged only if they reduce or harm
competition and adversely affect welfare.
4.6.4 Horizontal Mergers.—The following issues need to be considered, while assessing the permissibility of horizontal merger:
§ First, as in the case of horizontal agreements, it must first be established as to what the relevant market is. This requires a
focus on the demand side to establish whether the products are close enough substitutes or not. On the supply side, it is
important to identify the market shares of the firms. Clearly, it is not enough to go on current market shares. It is
important to assess how the relevant market is likely to evolve in the near future. This would depend on whether entry is
easy and whether there are potential entrants that could easily enter, if profitability in the sector increases, how foreign
competition is likely to evolve and the growth (or decline) of other incumbent firms.
§ The second important step is to establish whether the higher concentration in the market resulting from the merger will
increase the possibility of collusive or unilaterally harmful behaviour. Collusion is more likely in industries producing
relatively homogeneous products and characterised by small and frequent transactions, the terms of which cannot be
kept secret. The merger is likely to be unilaterally harmful when the two merging firms produce similar products in a
concentrated differentiated product market.
§ The third issue is regarding potential contestability. Even if no potential entrants are immediately visible, a large enough
price increase (or high enough profitability) could encourage entry. So, it needs to be established, how high the expected
price increase is likely to be. Following this, it is important to consider, whether entry is really likely, how quick it will
be and whether it will be sufficient enough to make up for the reduced competition resulting from the merger.
§ Fourth, the case can be made that even mergers that lead to an uncompetitive outcome could result in certain
“efficiencies” that more than make up for the welfare loss resulting from this. The Russian law has such a provision. The
US law has generally been balanced in favour of competition. However, the “failing firm” defence has, at times, been
accepted by courts. If a firm is, indeed failing and likely to go out of business, it is not clear what social welfare loss
would occur, if this firm’s assets were taken over by another firm.
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4.6.5 The question to be asked here is what rules should the law evolve such that monopolies may be prevented and competition is
preserved. Obviously, merely choosing market shares for the purposes of deciding the cut off point is fraught with problems.
4.6.6 We can consider two extreme examples to clarify this point. Suppose that two firms each having a significant market share of
say 5% each merge, the law cannot suppose that the firms have the objective of monopoly profits in mind. Such mergers can only
improve efficiency and, as such need not be struck down. On the other hand, if two larger firms merge, there is the possibility of
this having an adverse affect on competition and justifies investigation. It is obvious that as the composite market share increases,
the issue of the tradeoff between welfare and efficiency becomes more relevant and depends on other market conditions. The
analytical foundations for the rules should be derived from the market conditions.
4.6.7 Vertical mergers.—Competition Law must not normally have any objections to vertical mergers. Vertical mergers are
measures for improving production and, distribution and, distribution efficiencies. The process internalises the benefits of supply
chain management and, as such cannot be perceived as injuries to competition. Vertical mergers can be treated, as a process by
which there is a transmission of a good or a service across departments such that the commodity can be sold in the market without
much adaptation. This implies that firms choose to bypass market transaction in favour of internal control.
4.6.8 For the purposes of competition law, integration ought to imply only that administrative direction rather than a market
transaction forms the basis of the cooperation between two or more individuals engaged in productive or distributive activity. The
firm chooses, on the basis of relative costs, whether to perform the activity by itself, subcontract it to others, or to sell a finished or
semi finished product to other firms who in turn sell it to the market with or without further processing, as the case may be. The
law should understand that the definition of a firm should imply that the entity constitutes the area of operations within which
administration rather than market process coordinates work.
4.6.9 The prevailing wisdom has obfuscated the distinction between a market transaction with administrative direction, and
replaced the latter with the former. It would be naive for the law to suppose that vertical mergers create less efficiency rather than
internal growth. The only difference is a question of historicity. Vertical growth is usually the result of efficiencies that have been
present within the firm in the past. Vertical mergers on the other hand, are the result of as yet unrealised efficiencies, which the
firm attempts to attain through structural change.
4.7.0 There could, however, be some specific objections to vertical integration, (9) for example,—
§ Fear of Foreclosure:
It is supposed that, through vertical integration, a firm can create captive distribution channels. This will foreclose the
rival firms from the market, represented by the captive distribution network. This may be a problem, if it threatens
competition in general.
§ Entry Blocking:
Monopolies can have the ability to prevent the entry of firms into the market. Sometime it is claimed that even
competitors can came together to prevent a potential entrant. This is sometimes referred to as collective foreclosure. If
through integration, firms are able to internalise different levels of production, artificial barriers to entry could be created.
This implies that because of the size of the incumbent, a potential entrant’s capital requirements will be high.
§ Price Squeezes:
Vertical mergers and integration internalise the process of production and enable a firm to perhaps reduce costs. This will
result in reduction in output prices, which is usually interpreted as a price squeeze. The law should question only those
monopolies resulting from vertical mergers (integration) that lead to output restriction rather than preventing vertical
integration.
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4.7.1 Conglomerate Mergers.—A conglomerate merger that is neither horizontal nor vertical. For example, a merger between a
car manufacturer and a textile firm is a conglomerate merger. The theories for “restraining” vertical and horizontal mergers are
well formulated. There, however, is no clear mechanism for similar restraints on conglomerate mergers except those that are based
on folklore. There is sufficient evidence to suggest that conglomerate mergers do not pose any threat to competition. Conglomerate
mergers are objected to on several grounds.
4.7.2 Some of the objections to conglomerate mergers are,—
(a) They create deep pockets which enables that firm to devastate the rivals,
(b) Lower costs below the marginal cost of the industry,
(c) Raise barriers to entry,
(d) Engage in reciprocal dealing to the disadvantage of the rivals,
(e) Eliminate potential competition.
4.7.3 We examine some of these objections.
§ The theory of deep pockets
It is believed that firms operating in many markets can devastate their rivals through their potentially infinite capital
resources. This suggests that conglomerates can engage in predatory pricing.
However, law cannot presume that possession of capital can lead to harmful pricing practices even though predatory
pricing is a discredited theory. An objection based on the fact of possession of capital cannot be construed as a serious
objection.
§ Raising barriers to entry
Conglomerate mergers help in pooling the capital resources. It is believed that conglomerate mergers can lead to the
erection of entry barriers. If a firm that had for example, a limited promotional budget might now make use of the other
firm’s promotional expertise. However, if competition is equated with consumer welfare then, one should really ask why
is it not a valuable efficiency to bring capital to a firm that can use it? Why is it not good for the consumers, if the single
product firm shared on the cost savings in advertising and promotion that normally accrue to a multi-product firm?
§ Loss of potential competition
Two arguments are proposed to support this position. First, it is believed that because of the merger, there is less “space”
for new firms. Second, if instead of the merger the larger firm had tried to enter a market on its own, the threat of entry
would have forced the existing firms to become more competitive and efficient.
4.7.4 Pre-Notification.—One important issue with regard to mergers that needs to be addressed is regarding the requirements for
prior notification. There are two possibilities. The first is that approval or disapproval of the merger may be obtained (possibly
within a specified time) before going ahead with the merger. This will be subject to a threshold requirement based on assets or
market share. The second option is that no notification of permission is required and that the threat of action in case of a violation
should generally enforce legal behaviour. Although, both the US and EU laws require prior approval for mergers above certain
thresholds, they also impose a timeless requirement on the relevant authority, with delays being subject to limitation. There is no
pre-notification requirement in the existing U.K. law.
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4.7.5 Prior approval is likely to lead to delays and unjustified bureaucratic interventions. This is likely to hamper the vital process
of industrial evolution and restructuring and is, thus, not recommended. In any case, all mergers have to be approved by the High
Court and shareholders’ interests are protected in this way. The complete absence of a pre-notification requirement could lead to
more post-merger unscrambling with high social costs. For this reason, a pre-notification requirement for mergers above a certain
threshold level may be considered. The Committee is of the view that the threshold level may be considered. The Committee is of
the view that the threshold limit may be fixed on the basis of assets rather than market share, as the latter may not be an appropriate
barometer to determine affection adversely of competition. For instance, a firm with a high market share of 60% may not be in a
position to affect competition, if the remaining 40% is held by a competitor. The Committee further, suggests that the threshold
limit may be fixed at the asset value of the merged entity of Rs. 500 crores or more or, the asset value of the group to which the
merged entity belongs of Rs. 2000 crores or more both linked to wholesale Price Index. The expression “group” as presently
defined in the MRTP Act, 1969 may be adopted for the purposes of merger.
4.7.6 It may also be stipulated that if no reasoned order is received within a time limit, say of 90 days, prohibiting the merger, the
merger should be deemed to have been approved.
4.7.7 Any concern about mergers stems from a concern for the possible adverse effects that this could have on competition and
welfare as a result of the merged entity abusing its position of dominance. It could, therefore, be argued that the law should ignore
mergers and focus only on abuse of dominance if and when this arises. In spite of this, the competition laws of most countries have
a provision for notification and investigation of mergers. The reason for this is that scope for post-merger actions may be limited
and the cost of unscrambling may be socially high. In view of this, it is extremely important that the law regarding mergers be very
carefully framed and the provisions regarding prohibition of mergers be used very sparingly. This is particularly important at the
current stage of India’s corporate development. Relative to the size of major international companies, Indian firms are still small.
With the opening of trade and Foreign Direct Investment, Indian firms need to go through a period of consolidation in order to be
competitive. Any law on merger regulation must take account of this reality.
4.7.8 The Committee, however, would like to raise a note of caution regarding the monitoring of mergers by the Competition Law
Authority (Competition Commission of India/Mergers Commission). At present, very few Indian companies are of international
size. In the light of continuing economic reforms, particularly the opening up of trade and foreign investment, a great deal of
corporate restructuring is taking place in the country. Thus there is a need for mergers, amalgamations and takeovers as part of the
growing economic process before we can be on an equal footing to compete with global giants. The Committee is concerned that
premature implementation of Competition Law in this area could act as a disincentive for necessary mergers. Such a result would
harm the potential competitiveness of Indian companies and therefore hurt competition itself. It may also be mentioned that
mergers and take-over are also subject to other laws such as the Companies Act and the Securities and Contracts Regulation Act
(SCRA) as governed by Securities Exchange Board of India (SEBI). Thus mergers in India are already subject to a substantive legal
process. Competition Law in this area is only concerned with the effect of mergers on competition.
4.7.9 There is also an administrative aspect concerned with the implementation of Competition Law governing mergers. The
experience of other countries in the monitoring of mergers from the view of competition shows that a very small proportion of
mergers notified are actually restrained in any way. Thus the scrutiny of as many as a 100 mergers may result in some action on
only 2 or 3 of them. A great deal of relatively expert staff time is taken up in this process of scrutiny, apart from the uncertainty
injected into the merger process from the point of view of firms. If the Competition Law Authority is to monitor mergers in India,
it will have to be suitably equipped with adequate staff with relevant expertise in law, commerce, economics, and other relevant
disciplines. Such expertise will inevitably take time to be developed as we are already seeing in the case of the new regulatory
authorities that have been set up recently in the various infrastructure sectors.
4.8.0 The Competition Law Authority (Competition Commission of India/Mergers Commission) should also have the power to
advise a demerger or severance of interconnection between undertakings or division of undertakings on the lines of sections 27,
27A and 27B of the present MRTP Act, 1969 with suitable modifications.
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This power needs to be essentially advisory in character and it should be left to the Government to take a final view on a
demerger/severance of interconnection/division of undertakings.
4.8.1 Time Frame.—Taking the above overall aspects into consideration, the Committee recommends that the Government may
consider a suitable time frame after which these merger recommendations can be implemented. This time period may be utilised to
assemble a suitably qualified expert staff and for their training.
Competition Act, 2002
This section is based on the recommendations of the Raghavan Committee. The Notes on clauses of the Bill stated, thus:
Notes on clauses.—This clause deals with combination of enterprises and persons. The acquisition of one or more enterprises by
one or more persons or acquiring of control or merger or amalgamation of enterprises under certain circumstances specified in the
said clause shall be construed as combination. [Clause 5 of the Competition Bill, 2001].
Competition (Amendment) Act, 2007
Notes on clauses.—This clause seeks to amend section 5 of the Competition Act, 2002 relating to combination.
Under the existing provisions of section 5, there is no specific provision regarding local nexus for foreign entities which are parties
to combinations.
It is proposed to substitute item (B) in sub-clause (i) and item (B) in sub-clause (ii) of clause (a) of section 5 to provide for a local
nexus for combinations involving foreign entity and an Indian entity. A threshold value of local assets and operations in terms of
asset value of at least rupees 500 crores and turnover of at least rupees 1500 crores, is proposed for operation in India in addition to
the existing global asset or turnover limits provided in the Act. [Clause 4 of the Competition (Amendment) Bill, 2007].
SCOPE OF THE SECTION1276
“Acquirer” or “Acquisition”
It may be noted that the term “acquirer” has not been defined in the Competition Act, 2002 or in the Companies Act, 1956.
The term “acquirer” has, however, been defined in the SEBI (Substantial Acquisition of Shares and Takeovers)
Regulations, 2011 to mean:
any person who, directly or indirectly, acquires or agrees to acquire whether by himself, or through, or with persons acting in
concert with him, shares or voting rights in, or control over a target Company.
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The said definition is very wide. However, the said definition cannot be adopted under the Competition Act, 2002, and it
will be assumed that for purposes of this Act, the said term will cover only the single entity which is acquiring control or
shares of another enterprise or company or which is the transferor company in case of amalgamation or merger.
Group to which the enterprise belongs
In sub-clause (ii) of clauses (a), (b) and (c) of this section, the aggregate value of assets or turnover of the group to which
the acquirer or merged entity belongs is to be taken into account. The acquirer has no concern or control over the
constituents of the group of acquired entity, either before or after such acquisition or merger.
“Group”
There are three limbs of definition of “group” as contained in explanation (b) to section 5 of the Competition Act, 2002.
The first test of the two enterprises belonging to the same group is the ability to exercise 26% or more voting rights; the
second test is in terms of ability to control majority of composition of Board of Directors; and the third test, which is most
dynamic, is in terms of ability to control or manage the affairs of the other enterprise. In Telenor matter1277, it was argued
that the Act does not intend to envisage control with shareholding less than 50%. The Commission however, noted that the
three limbs are “either/or” tests and fulfilment of even a single limb would confer control. For example, if a particular
enterprise does not hold 50% shares in the other enterprise, it may still have the ability to control if it has majority on the
Board of Directors. Similarly, in the event, an enterprise does not have requisite shareholding nor the ability to control
majority composition of the Board of Directors, it is possible to infer control by virtue of ability to control and manage the
affairs of the other enterprise. The Commission observed that
12.09 ... the ability to manage the affairs of the other enterprise may be inferred from special rights/veto rights. However, special
rights/veto rights are not the only basis for inferring the ability to manage/control the affairs of an enterprise and there can be other
sources of control as well viz., status and expertise of an enterprise or person, Board representation, structural/financial
arrangements etc. In competition law practice, control is considered as a matter of degree. However, all degrees and forms of
control nonetheless constitute control. The international jurisprudence considers ‘material influence’ as the lowest form of control
with other higher forms such as de facto control and controlling interest (de jure control) in that order.
12.10. Material influence, the lowest level of control, implies presence of factors which give an enterprise ability to influence
affairs and management of the other enterprise including factors such as shareholding, special rights, status and expertise of an
enterprise or person, Board representation, structural/financial arrangements etc. De facto control implies a situation where an
enterprise holds less than majority of the voting rights, but in practice controls over more than half of the votes actually cast at a
meeting. Further, the factors relevant for material influence are relevant for ascertaining de facto control as well. It may be noted
that the concepts of material influence and de facto control are very significant in competition law as there can be situations where
the commercial realities can be more telling than the formal agreements and structures. Controlling interest or de jure control
means a shareholding conferring more than 50 percent of the voting rights of an enterprise. It may be noted that only one enterprise
can have a controlling interest in the other enterprise but more than one enterprise can control the other enterprise (situation of joint
control). Likewise, there are other terms which are used to express control such as negative control (by virtue of ability to block
special resolutions) or operational control (by virtue of commercial cooperation agreements with or without involving equity).
Thus, while examining the third limb of the definition of group, regard needs to be given to the likelihood of the aforesaid degrees
of control and not just the special rights as considered by the Acquirer. (emphasis supplied)
Mergers and amalgamations
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Mergers and amalgamations with the threshold limit as to the value of assets and turnover under clause (c) of this section
are covered.
Mergers or amalgamations may be broadly classified as follows:
(i) Cogeneric—within same industries,
(ii) Conglomerate—between unrelated businesses
Cogeneric Mergers
Cogeneric mergers are of two types:
Horizontal Merger.—This class of merger is a merger between business competitors who are manufacturers or distributors
of the same type of products or who render similar or same type of services for profit. It involves joining together of two or
more companies which are producing essentially the same products or rendering same or similar services or their products
and services directly compete in the market with each other. Horizontal mergers result into a reduction in the number of
competing companies in an industry and increase the scope for economies of scale and elimination of duplicate facilities.
However, their main drawback is that they promote monopolistic trend in the industrial sector.
Vertical Merger.—In a vertical merger two or more companies are complementary to each other, e.g., one of the
companies is engaged in the manufacture of a particular product, the other is established and expert in the marketing of that
product. In this merger, the two companies merge and control the production and marketing of the same product.
A vertical merger may result into smooth and efficient flow of production and distribution of a particular product and
reduction in handling and stockholding costs. It also possesses a risk of monopolistic trend in the industry.
Conglomerate Merger
A conglomerate merger involves coming together of two companies in different industries, i.e., the businesses of the two
companies are not related to each other, neither horizontally nor vertically. They lack any commonality either in their end
product, or in the rendering of any specific type of service to the society. This is the type of merger of companies which are
neither competitors, nor complementaries nor suppliers of a particular raw material nor consumers of a particular product
or consumable. A conglomerate merger is one which is neither horizontal nor vertical. In this, the merging companies
operate in unrelated markets having no functional economic relationship.
Mergers may further be categorised as:
Cash merger.—A merger in which certain shareholders are required to accept cash for their shares while other shareholders
receive shares in the continuing enterprise.
De facto merger—De facto merger has been defined as a transaction that has the economic effect of a statutory merger but
is cast in the form of an acquisition of assets.
Down Stream Merger.—The merger of parent company into its subsidiary is called downstream merger.
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Upstream merger.—The merger of subsidiary company into its parent company is called an upstream merger.
Short-form Merger.—A number of statutes provide special company rules for the merger of a subsidiary into its parent
where the parent owns substantially all of the shares of the subsidiary. This is known as a short form merger. Short-form
mergers generally may be effected by adoption of a resolution of merger by the parent company, and mailing a copy of
plan of merger to all shareholders of subsidiary and filling the executed documents with the prescribed authority under the
statute. This type of merger is less expensive and time consuming than the normal type of merger.
Triangular merger.—Triangular merger means the amalgamation of two companies by which the disappearing company is
merged into subsidiary of surviving company and shareholders of the disappearing company receives shares of the
surviving company.
Broadly, combination under the Act means acquisition of control, shares, voting rights or assets, acquisition of control by a
person over an enterprise where such person has direct or indirect control over another enterprise engaged in competing
businesses, and mergers and amalgamations between or amongst enterprises when the combining parties exceed the
thresholds set in the Act. The thresholds are specified in the Act in terms of assets or turnover in India and abroad. The
words “combination” and “merger” are used interchangeably in this booklet. Entering into a combination which causes or
is likely to cause an appreciable adverse effect on competition within the relevant market in India is prohibited and such
combination shall be void.
THRESHOLDS FOR COMBINATIONS UNDER THE ACT
Considering the fact that India is a rapidly growing economy where the growth process is driven both by organic and
inorganic (through the mergers and acquisition route) growth of enterprises, it was not considered feasible or advisable to
review all the mergers and acquisitions. It is natural to presume that in the case of small size combinations there is less
likelihood of appreciable adverse effect on competition in markets in India. The Act provides for sufficiently high
thresholds in terms of assets/turnover, for mandatory notification to the Commission. The Act also provides for revision of
the threshold limits every two years by the government, in consultation with the Commission, through notification, based
on the changes in Wholesale Price Index (WPI) or fluctuations in exchange rates of rupee or foreign currencies.1278
List of Notification with respect to Combinations
Notification regarding increase in value of assets and turnover
– S.O. 480(E) dated 4 March 2011.—In exercise of the powers conferred by sub-section (3) of section 20 of Competition
Act, 2002 (12 of 2003), the Central Government in consultation with Competition Commission of India, enhanced, on the
basis of wholesale price index, the value of assets and the value of turnover, by fifty percent for the purposes of section 5
of the said Act.1279
S.O. 675(E) dated 4 March 2016.—The Central Government, further, enhanced the threshold by 100% for the purposes
of section 5 of the said Act, from the date of publication of the notification in the Official Gazette.
Notification regarding definition of “Group” S.O. 481(E) dated 4 March 2011
The Central Government, in public interest, exempted the “Group” exercising less than 50% of voting rights in other
enterprise from the provisions of section 5 of the said Act for a period of five years.1280
S.O. 673(E) dated 4 March 2016—The Central Government vide this notification continued the exemption provided to
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the “Group” exercising less than 50% of voting rights in other enterprise from the provisions of section 5 of the said Act
for a period of five years with effect from the date of publication of the notification in the official gazette.
Notifications regarding Subject Exemptions
S.O. 3714 (E) dated 22 November 2017 - In exercise of the powers conferred by clause (a) of section 54 of the
Competition Act, 2002, the Central Government in the public interest has exempted all cases of combinations under section
5 of the Act involving the Central Public Sector Enterprises (CPSEs) operating in the Oil and Gas Sectors under the
Petroleum Act, 1934 and the rules made thereunder or under the Oilfields (Regulation and Development) Act, 1948 and the
rules made thereunder, along with their wholly or partly owned subsidiaries operating in the Oil and Gas Sectors, from the
application of the provisions of sections 5 and 6 of the Act, for a period of five years from the date of publication of this
notification in the Official Gazette.
S.O. 2828(E) dated 30 August 2017 - In exercise of the powers conferred by clause (a) of section 54 of the Competition
Act, 2002 (12 of 2003), the Central Government in the public interest has exempted, all cases of reconstitution, transfer of
the whole or any part thereof and amalgamation of nationalized banks, under the Banking Companies (Acquisition and
Transfer of Undertakings) Act, 1970 and the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980,
from the application of provisions of sections 5 and 6 of the Competition Act, 2002 for a period of 10 years from the date
of publication of this notification in the Official Gazette.
Notifications regarding Thresholds1281
Exercising its powers under section 20(7), the Central Government enhanced, on the basis of wholesale price index, the
value of assets and the value of turnover, by fifty percent for the purposes of section 5 of the said Competition Act, 2002.
The said values were in force till 3 March 2016. Again by issue of a fresh notification on 4 March 2016, the value of assets
and the value of turnover, were enhanced by hundred percent.
S.O 675 (E) dated 4 March 2016 -In exercise of the powers conferred by sub-section (3) of section 20 of the Competition
Act, 2002, the Central Government in consultation with the Competition Commission of India, enhanced, on the basis of
the wholesale price index, the value of assets and the value of turnover, by hundred per cent for the purposes of section 5
of the said Act, from the date of publication of this notification in the Official Gazette.
As a result, the thresholds for filing the notice w.e.f. 4 March 2016 (till 3 March 2021) would be as under:
THRESHOLDS FOR FILING NOTICE
ASSETS TURNOVER
ENTERPRISE LEVEL INDIA > 2000 INR CRORE OR > 6000 INR CRORE
WORLDWIDE WITH > USD 1 BN WITH > USD 3 BN WITH
INDIA LEG AT LEAST > 1000 AT LEAST > 3000
INR CRORE IN INDIA INR CRORE IN INDIA
OR
GROUP LEVEL INDIA > 8000 INR CRORE OR > 24000 INR CRORE
WORLDWIDE WITH > USD 4 BN WITH > USD 12 BN WITH
INDIA LEG AT LEAST > 1000 AT LEAST > 3000
INR CRORE IN INDIA INR CRORE IN INDIA
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De Minimis Exemption:
S.O. 482(E) dated 4 March 2011––In exercise of the powers conferred by clause (a) of section 54 of Competition Act,
2002, the Central Government, in public interest, exempted an Enterprise, whose control, shares, voting rights or assets are
being acquired has assets of the value of not more than Rs 250 crores or turnover of not more than Rs 750 crores from the
provisions of section 5 of the said Act for a period of 5 years.1282
S.O. 674(E) dated 4 March 2016—the Central Government, further, enhanced the exemption to an enterprise, whose
control, shares, voting rights or assets are being acquired has either assets of the value of not more than Rs 350 crores in
India or turnover of not more than Rs 1000 crores in India from the provisions of section 5 of the said Act for a period of
five years from the date of publication of the notification in the official gazette.
Accordingly, the revised thresholds for availing of the De Minimis Exemption for acquisitions are:
THRESHOLDS FOR AVAILING OF THE DE MINIMIS EXEMPTION FOR
ACQUISITIONS
ASSETS TURNOVER
TARGET ENTERPRISE IN INDIA < 350 INR CRORE OR < 1000 CRORE
Expansion of Merger Control Exemptions
In 2011 the Central Government had under a notification exempted for a period of five years from the provisions of section
5 those enterprises whose control, shares, voting rights or assets were being acquired, that had assets not exceeding Rs 2.5
billion in value or turnover not exceeding Rs 7.5 billion in India. The 2011 Notification was superseded by another
Notification in 2016, whereby the threshold for the asset value to be exempt was increased from Rs 2.5 billion to Rs 3.5
billion and the threshold for the turnover was increased from Rs 7.5 billion to Rs 10 billion for an additional period of five
years.
The Ministry of Corporate Affairs issued a Notification1283 on 27 March 2017 (2017 Notification) under the Competition
Act, 2002. This notification has enhanced the 2016 Notification and the de-minimus exemption. While there was no
increase in the thresholds for the asset value and turnover, the 2017 Notification intends to cover more situations in relation
to small enterprises and transactions.
The Central Government has exempted the enterprises being parties to ––
(a) any acquisition referred to in clause (a) of section 5 of the Competition Act, 2002;
(b) acquiring of control by a person over an enterprise when such person has already direct or indirect control over
another enterprise engaged in production, distribution or trading of a similar or identical or substitutable goods or
provision of a similar or identical or substitutable service, referred to in clause (b) of section 5 of the Competition
Act, 2002; and
(c) any merger or amalgamation, referred to in clause (c) of section 5 of the Competition Act, 2002,
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where the value of assets being acquired, taken control of, merged or amalgamated is not more than Rs 350 crores in India
or turnover of not more than Rs 1000 crores in India, from the provisions of section 5 of the said Act for a period of five
years from the date of publication of this notification in the official gazette.
Calculation of threshold: Where a portion of an enterprise or division or business is being acquired, taken control of,
merged or amalgamated with another enterprise, the value of assets of the said portion or division or business and or
attributable to it, shall be the relevant assets and turnover to be taken into account for the purpose of calculating the
thresholds under section 5 of the Act. The value of the said portion or division or business shall be determined by taking
the book value of the assets as shown, in the audited books of accounts of the enterprise or as per statutory auditor’s report
where the financial statement have not yet become due to be filed, in the financial year immediately preceding the financial
year in which the date of the proposed combination falls, as reduced by any depreciation, and the value of assets shall
include the brand value, value of goodwill, or value of copyright, patent, permitted use, collective mark, registered
proprietor, registered trade mark, registered user, homonymous geographical indication, geographical indications, design
or layoutdesign or similar other commercial rights, if any, referred to in sub-section (5) of section 3. The turnover of the
said portion or division or business shall be as certified by the statutory auditor on the basis of the last available audited
accounts of the company.
“in India”
As per the decisional practice of the Commission, the value of turnover, which has been provided in the books of accounts
of the enterprise concerned in considered. In terms of section 2(y) of the Competition Act, 2002, “turnover” includes “value
of sale of goods or services”. The statutory definition of turnover under the Act does not provide that turnover as reported
for a particular geographic segment, which may be recognised as reportable segment at the discretion of the management
of the enterprise concerned, is to be considered as turnover for purposes of section 5 of the Act.1284
Enterprises to be considered for calculation of thresholds
The entities to be considered for the purposes of calculating the thresholds differ according to the type of combination.
1. In the case of an acquisition of an enterprise by means of acquisition of its assets, shares, voting rights or control
under section 5(a) of the Competition Act, 2002, the entities are:
(a) the acquirer (including its subsidiaries, units or divisions) and the target enterprise (including its subsidiaries,
units or divisions); or
(b) the group, to which the target enterprise would belong after the acquisition.
2. In the case of an acquisition of control over an enterprise, where the acquirer already has direct or indirect control
over another enterprise competing with the target enterprise under section 5(b), the relevant entities are: the target
enterprise (including its subsidiaries, units or divisions); and other enterprises in the same or substitutable field
over which the acquirer has direct or indirect control (each including its subsidiaries, units or divisions), or the
group the target enterprise would belong to after the acquisition.
3. In the case of a merger or amalgamation under section 5(c), the relevant entity is the enterprise remaining after
the merger or the enterprise created as a result of the amalgamation; or the group the enterprise remaining after
the merger, or created as a result of the amalgamation, would belong to after the merger or amalgamation.
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Exemption to Banking Companies
S.O. 93(E) dated 8 January 2013 – As per this notification, a banking company in respect to which Central Government
has issued notification under section 45 of the Banking regulations Act, 1945 has been exempted from the application of
section 5 and 6 of Competition Act, 2002 for a period of five years from the date of publication of this notification in the
Official Gazette.
Exemption to Regional rural Banks1285
In 2017, the CCI in the cases of Rajasthan Marudhara Gramin Bank/State Bank of Bikaner and Jaipur17 and Sarva
Haryana Gramin Bank/Punjab National Bank1286 imposed a penalty of Rs 100,000 on the regional rural bank and sponsor
bank under section 43A of the Regional Rural Banks Act, 1976 (RRB Act, 1976), for consummating the amalgamation
without seeking its approval (“gun jumping”). As per section 23A of the RRB Act, 1976, the Central Government was
empowered to order the amalgamation of two or more RRBs, if it was in public interest or in the interest of the
development of the area served by such RRBs or in the interest of the RRBs themselves. Prior to the Notification, such
amalgamations, although undertaken pursuant to orders issued by the Central Government and not on the volition of the
RRBs, triggered the requirement to file a notification under the Act, to seek the prior approval of the CCI.
The Central Government in exercise of the powers conferred by clause (a) of section 54 of the Competition Act, 2002 has
now exempted the Regional Rural Banks from the application of provisions of sections 5 and 6 of the Competition Act,
2002 for a period of five years from the date of publication of the notification in the Official Gazette1287.
Acquisition of Trademarks
The Acquirer in ITC Ltd1288 contended that acquisition of trademarks does not tantamount to “acquisition of an
enterprise” as required under section 5 of the Competition Act, 2002 and therefore, the same cannot be a combination
notifiable under the Act. The Commission observed that section 5 (a) (i) of the Act provides that an acquisition, where the
parties to an acquisition, being the acquirer and the enterprise whose control, share, voting rights or assets have been
acquired or are being acquired jointly meet the prescribed thresholds, will be a combination. Accordingly, any acquisition
where the acquirer enterprise and the enterprise whose assets/control/voting rights/shares have been acquired jointly meet
the prescribed thresholds, the combination becomes reportable under section 6 (2) of the Act. As per section 5 (a) (i) of the
Act, acquisition of assets of an enterprise would also be a combination if the prescribed thresholds are met. The
Commission observed that trademarks are considered an asset as they provide economic value to their owners. Similar
treatment has been given to trademarks under the Act also. Explanation (c) of section 5 of the Act provides that under
competition law, trademarks are an asset which have to be considered while determining thresholds under the provisions of
the Act. Thus, acquisition of trademarks is an acquisition of assets in terms of section 5 (a) of the Act and is a combination
if the jurisdictional thresholds are met. The Commission also observed that acquisition of immovable properties or
manufacturing facilities is not a pre-requisite for attracting section 5 of the Act, as assets includes not only tangible assets
but also intangible assets, in the form of intellectual property rights viz. trademarks.
Combinations in respect of which Notice need not normally be filed
The Combination Regulations1289 provide that notice in respect of certain combinations, specified under Sch I, need not
normally be filed with the Commission as those transactions are ordinarily not likely to cause appreciable adverse effect on
competition in India.
Categories of combinations listed in sch I to the Combination Regulations must be interpreted in light of the Commission’s
objectives (listed in section 18 of the Competition Act, 2002) and the intent of sch I (expressed in regulation 4 of the
Combination Regulations). This means that the categories of combinations listed in sch I as normally not notifiable ought
not to include combinations which envisage or are likely to cause a change in control or are of the nature of strategic
combinations including those between competing enterprises or enterprises active in vertical markets.1290
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Categories of combinations listed in sch I are:
1. An acquisition of shares or voting rights, referred to in sub-clause (i) or sub-clause (ii) of clause (a) of section 5
of the Act, solely as an investment or in the ordinary course of business in so far as the total shares or voting
rights held by the acquirer directly or indirectly, does not entitle the acquirer to hold twenty five per cent (25%)
or more of the total shares or voting rights of the company, of which shares or voting rights are being acquired,
directly or indirectly or in accordance with the execution of any document including a share holders’ agreement
or Articles of Association, not leading to acquisition of control of the enterprise whose shares or voting rights are
being acquired. 1291[Explanation:—The acquisition of less than ten per cent of the total shares or voting rights of
an enterprise shall be treated solely as an investment:
Provided that in relation to the said acquisition,—
(A) the Acquirer has ability to exercise only such rights that are exercisable by the ordinary shareholders of the
enterprise whose shares or voting rights are being acquired to the extent of their respective shareholding; and
(B) the Acquirer is not a member of the board of directors of the enterprise whose shares or voting rights are
being acquired and does not have a right or intention to nominate a director on the board of directors of the
enterprise whose shares or voting rights are being acquired and does not intend to participate in the affairs or
management of the enterprise whose shares or voting rights are being acquired
Sch I (1): The Acquirers in the SCM Soilfert Ltd,1292 Combination notice, contended that the First
Acquisition was not notifiable as it was exempted from notification under Item 1 of sch I read with
regulation 4 of the Combination Regulations. The Acquirers further contended that the First Acquisition
was made “solely as an investment”. The Commission noted that from a perusal of Item 1 of sch I to the
Combination Regulations, it was amply clear that Item 1 read with regulation 4 of the Combination
Regulations deemed acquisitions as normally not notifiable provided that the proposed acquisition of
shares or voting rights did not entitle the acquirer to hold 25% or more of total shares or voting rights,
directly or indirectly, in the target enterprise and does not lead to a change of control and is made (i)
solely as an investment, or (ii) is in the ordinary course of business. Further, it was observed that the
phrase “solely as an investment” indicates “passive investment” as against a “strategic investment”.
Therefore, to qualify for Item 1 of Sch I to the Combination Regulations, an acquisition must not have
been made with an intention of participating in the formulation, determination or direction of the basic
business decisions of the target or likely to cause or result in the same. Such participation by the acquirer
in the business decisions of the target enterprise may be through various means including by means of
voting rights, agreements, representation on the board of the target or its affiliate companies,
affirmative/veto rights in the target, etc.
In Zuari Fertilisers and Chemicals Ltd (ZFCL),1293 the Commission noted that the absence of evidence
of written and binding documents between parties does not necessarily preclude the existence of
strategic intent behind an acquisition which is a combination under the provisions of section 5 of the
Competition Act, 2002. Therefore, other factors including surrounding circumstances must also be taken
into consideration to determine whether the proposed acquisition falls under Item 1 of sch I to the
Combination Regulations.
Similarly, in New Moon BV,1294 it was submitted by the Acquirer that the proposed acquisition would
be exempt in view of regulation 4 read with Item 1 of sch I to the Combination Regulations, as the said
acquisition of shares by Abbott in the Acquirer would be made solely as an investment, which would not
result in acquisition of control by Abbott over the Acquirer. However, the Commission observed that an
acquisition of shares or voting rights, even if it is less than 25%, may raise competition concerns if the
acquirer and the target are either engaged in business of substitutable products/services or are engaged in
activities at different stages or levels of the production chain. Such acquisitions need not necessarily be
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[s 5] Combination
termed as an acquisition made solely as an investment or in the ordinary course of business, and thus
would require competition assessment, on a case to case basis, under the relevant provisions of the Act.
1A. An acquisition of additional shares or voting rights of an enterprise by the acquirer or its group,1295[*****]
where the acquirer or its group, prior to acquisition, already holds twenty five per cent (25%) or more shares or
voting rights of the enterprise, but does not hold fifty per cent (50%) or more of the shares or voting rights of the
enterprise, either prior to or after such acquisition:
Provided that such acquisition does not result in acquisition of sole or joint control of such enterprise by the
acquirer or its group.
2. An acquisition of shares or voting rights, referred to in sub-clause (i) or sub-clause (ii) of clause (a) of section 5
of the Act, where the acquirer, prior to acquisition, has fifty percent (50%) or more shares or voting rights in the
enterprise whose shares or voting rights are being acquired, except in the cases where the transaction results in
transfer from joint control to sole control.
3. An acquisition of assets, referred to in sub-clause (i) or sub-clause (ii) of clause (a) of section 5 of the Act, not
directly related to the business activity of the party acquiring the asset or made solely as an investment or in the
ordinary course of business, not leading to control of the enterprise whose assets are being acquired except where
the assets being acquired represent substantial business operations in a particular location or for a particular
product or service of the enterprise, of which assets are being acquired, irrespective of whether such assets are
organised as a separate legal entity or not.
4. An amended or renewed tender offer where a notice to the Commission has been filed by the party making the
offer, prior to such amendment or renewal of the offer:
Provided that the compliance with Regulation 16 relating to intimation of any change is duly made.
5. An acquisition of stock-in-trade, raw materials, stores and spares, trade receivables and other similar current
assets in the ordinary course of business.
6. An acquisition of shares or voting rights pursuant to a bonus issue or stock splits or consolidation of face value of
shares or buy back of shares or subscription to rights issue of shares, not leading to acquisition of control.
7. Any acquisition of shares or voting rights by a person acting as a securities underwriter or a registered stock
broker of a stock exchange on behalf of its clients, in the ordinary course of its business and in the process of
underwriting or stock broking, as the case may be.
8. An acquisition of shares or voting rights or assets, by one person or enterprise, of another person or enterprise
within the same group, except in cases where the acquired enterprise is jointly controlled by enterprises that are
not part of the same group.
9. A merger or amalgamation of two enterprises where one of the enterprises has more than fifty per cent (50%)
shares or voting rights of the other enterprise, and/or merger or amalgamation of enterprises in which more than
fifty per cent (50%) shares or voting rights in each of such enterprises are held by enterprise(s) within the same
group:
Provided that the transaction does not result in transfer from joint control to sole control.
10. Acquisition of shares, control, voting rights or assets by a purchaser approved by the Commission pursuant to and
in accordance with its order under section 31 of the Act.1296
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CONSULTATION PRIOR TO FILING OF NOTICE OF THE PROPOSED
COMBINATION1297
In accordance with international best practices, the Competition Commission of India allows for an informal and verbal
consultation with the staff of the Commission prior to filing of the notice to a proposed combination in terms of regulation
5 of Combination Regulations, under sub-section (2) of section 6 of the Competition Act, 2002. Such pre-filing
consultations will help the parties intending to file a notice with the Commission in identifying the information required for
filing a complete and correct Forms I/II/III as well in identifying additional information that the Commission may require
to assess the likely impact of the proposed combination on competition in the relevant markets. The parties intending to
file a notice with the Commission are encouraged to approach the Commission for pre-filing consultations. A request for
pre-filing consultation should be made by the parties intending to file a notice at the earliest and at least 10 days before the
intended date of filing, to allow time for allocating a case team for the pre-filing consultation. A copy of draft application
comprising of Forms I/II/III, as the case may be and supporting documents should be forwarded along with the request for
scheduling a pre-filing consultation. A summary of the proposed combination along with the following details should also
be submitted with the following details:
(a) Basic details of the proposed combination including various steps involved in the same;
(b) A brief description of the relevant market(s) and sector(s) involved;
(c) The likely impact of the proposed combination on competition in those markets and sectors in general terms;
(d) Key issues regarding which the parties wish to seek consultation from the Commission;
(e) Any other details which according to the parties may be pertinent for a meaningful consultation.
It may be noted that the Commission may not respond to requests which are general in nature or which do not sufficiently
describe the factual situation, or which involve hypothetical situations. For seeking an appointment for a pre-filing
consultation, the parties to the proposed combination should contact the Combination Division on email id: cci-
consult@nic.in with the subject “Request for pre-filing consultation for proposed filing on [Insert proposed date of
filing]”. It may be noted that such consultations are generally scheduled within five to seven days of receipt of the request
for consultation. The presence of legal advisors as well as business representatives who have strong understanding of the
relevant market is strongly recommended in the pre-filing consultations.
With regard to the clarification of issues pertaining to sections 5 and 6 of the Competition Act, 2002 and the Combination
Regulations, a request for pre-filing consultations must be sent at least five to seven days before the meeting is requested to
be scheduled. Complete and sufficient details regarding facts of the case including the sector/relevant market, legal
provisions, decisional practices of the Commission and of other jurisdictions (if available and material to the facts of the
case) should be provided in the request for pre-filing consultations on interpretational issues. The email seeking pre-filing
consultation may be sent to the email id: cci-consult@nic.in with the subject “Request for pre-filing consultation on
interpretational issues”.
Prior to the consultation, the staff of the Commission may also ask the parties to provide additional information. It may be
noted that guidance would be given as an additional assistance facility, and would not be deemed to be the opinion of the
Commission in any manner, whatsoever, and such guidance will not be binding on the Commission. Such consultation is
held in strict confidence and is without prejudice to the assessment of the case on receipt of the formal notice.
COMBINATION NOTICE – PROCESS
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1. The review process for combination under the Competition Act, 2002 involves mandatory pre-combination
notification to the Commission. Any person or enterprise proposing to enter into a combination shall give notice
in accordance with sub-section (2) of section 6 of the Act and Combinations Regulations, 20111298 to the
Commission in the specified form disclosing the details of the proposed combination within 30 days of the
approval of the proposal relating to merger or amalgamation by the board of directors or of the execution of any
agreement or other document in relation to the acquisition, as the case may be. The notice under sub-section (2)
of section 6 of the Act, shall ordinarily be filed in Form I as specified in sch II of the regulations, and
accompanied by evidence of payment of requisite fee by the parties to the combination.1299
2. Who should file notice?1300
(a) In case of an acquisition or acquiring of control of enterprise(s), the acquirer shall file the notice in Form I or
Form II, as the case may be.
(b) In case the enterprise is being acquired without its consent, the acquirer shall furnish such information as is
available to him, in Form I or Form II, as the case may be, relating to the enterprise being acquired.
(c) In case of a merger or an amalgamation, parties to the combination shall jointly file the notice in Form I or
Form II, as the case may be.
(d) Where the ultimate intended effect of a business transaction is achieved by way of a series of steps or smaller
individual transactions which are inter-connected, one or more of which may amount to a combination, a
single notice, covering all these transactions, shall be filed by the parties to the combination.
3. The parties to the combination may, at their option, give notice in Form II, as specified in sch II to these
regulations, preferably in the instances where—
(a) the parties to the combination are engaged in production, supply, distribution, storage, sale or trade of similar
or identical or substitutable goods or provision of similar or identical or substitutable services and the
combined market share of the parties to the combination after such combination is more than 15% in the
relevant market;
(b) the parties to the combination are engaged at different stages or levels of the production chain in different
markets, in respect of production, supply, distribution, storage, sale or trade in goods or provision of
services, and their individual or combined market share is more than 25% in the relevant market.1301
4. The Commission may seek additional information from the parties. However, the time taken by the parties to the
combination in filing such additional information shall be excluded from the period provided in sub-section (11)
of section 31 of the Act and sub-regulation (1) of regulation 19 of these regulations.
5. Where the parties to the combination have filed notice in Form I and the Commission requires information in
Form II to form its prima facie opinion whether the combination is likely to cause or has caused appreciable
adverse effect on competition within the relevant market, it shall direct the parties to the combination to file
notice in Form II as specified in sch II to these regulations. Fee earlier paid will be re-adjusted while forming
Form II.1302
6. Where, in a series of steps or individual transactions that are related to each other, assets are being transferred to
an enterprise for the purpose of such enterprise entering into an agreement relating to an acquisition or merger or
amalgamation with another person or enterprise, for the purpose of section 5 of the Act, the value of assets and
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turnover of the enterprise whose assets are being transferred shall also be attributed to the value of assets and
turnover of the enterprise to which the assets are being transferred.1303
7. In case, a notifiable combination is not notified, the Commission has the power to inquire into it within one year
of the taking into effect of the combination. The Commission also has the power to impose a fine which may
extend to one per cent of the total turnover or the assets of the combination, whichever is higher, for failure to
give notice to the Commission of the combination. Any combination for which notice has been filed with the
Commission would not take effect for a period of 210 days from the date of notification or till the Commission
passes an order, whichever is earlier. If the Commission does not pass an order during the said period of 210
days, the combination shall be deemed to have been approved.1304
8. Procedure for filing notice—1305
(a) The duly filled in notice under Regulation 5 or Regulation 8 along with one copy and an electronic version
thereof shall be delivered to the Commission at the address published on its official website. If the parties to
the combination request confidentiality of information or document(s) under sub-regulation (1) of regulation
30, such request may be filed as per the procedure laid down in the Competition Commission of India
(General) Regulations, 2009, along with a duly filled in public version of the notice and an electronic version
thereof.
(b) A summary of the combination, not containing any confidential information, in not less than 2000 words,
comprising inter alia the details regarding: (a) the products, services and business(es) of the parties to the
combination; (b) the values of assets/turnover for the purpose of section 5 of the Act; (c) the respective
markets in which the parties to the combination operate; (d) the details of agreement(s)/other documents and
the board resolution(s) executed/passed in relation to the combination; (e) the nature and purpose of the
combination; and (f) the likely impact of the combination on the state of the competition in the relevant
market(s) in which the parties to the combination operate, along with nine copies and an electronic version
thereof shall be separately given while delivering the notice under sub-regulation (1).
(c) A summary of the combination, not containing any confidential information, in not more than 500 words,
comprising details regarding: (a) name of the parties to the combination; (b) the type of the combination; (c)
the area of activity of the parties to the combination; and (d) the relevant market(s) to which the combination
relates, along with an electronic version thereof shall be separately given while delivering the notice under
sub-regulation (1).
(d) The summary submitted under this sub-regulation shall be published on the website of the Commission.
(e) All responses or other documents required to be filed before the Commission consequent to the filing of the
notice under Regulation 5 or Regulation 8 of the these regulations shall also be filed as per the procedure
contained in sub-regulation (1).
Failure to file notice
Where the parties to a combination fail to file notice under sub-section (2) of section 6 of the Competition Act, 2002, the
Commission may under sub-section (1) of section 20 of the Act, upon its own knowledge or information relating to such
combination, inquire into whether such a combination has caused or is likely to cause an appreciable adverse effect on
competition within India. Where the Commission decides to commence an inquiry, it shall direct the parties to the
combination to file notice in Form I or Form II, as decided by the Commission. The notice then shall be filed, within 30
days of receipt of communication from the Commission, by the parties to the combination.1306
Exemption from 30 day filing deadline
The Ministry of Corporate Affairs, in exercise of the powers conferred by clause (a) of section 54 of the Competition Act,
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2002, has issued a notification1307, in public interest, exempting every person or enterprise who is a party to a combination
as referred to in section 5 of the said Act from giving notice within 30 days mentioned in sub-section (2) of section 6 of the
said Act, subject to the provisions of sub-section (2A) of section 6 and section 43A of the said Act, for a period of five
years from the date of publication of the notification. The measure has been taken to alleviate the concerns of stakeholders
who felt constrained by the 30 days deadline stipulated in the Act for submission of notices of combination to the
Competition Commission of India. Enterprises now will be free to submit notice of combinations to the Commission at a
time convenient to them but prior to giving effect to such combinations. This move will help bring down the number of
cases related to delayed filings.
Acquisition or financing facility by PFIs, VCFs etc.
In case of share subscription or financing facility or any acquisition, inter alia, by a public financial institution (PFI),
foreign institutional investor, bank or venture capital fund (VCF), pursuant to any covenant of a loan agreement or
investment agreement, details of such acquisition are required to be filed with the Commission within seven days from the
date of acquisition.1308
Prima facie opinion on the combination1309
The Commission shall form its prima facie opinion under sub-section (1) of section 29 of the Competition Act, 2002, on
the notice filed in Form I or Form II, as the case may be, as to whether the combination is likely to cause or has caused an
appreciable adverse effect on competition within the relevant market in India, within thirty working days of receipt of the
said notice. For this purpose, the Commission may seek additional information from parties or accept modifications
offered by the parties. After receipt of the response to the notice to show cause from the parties to the combination under
sub-section (1) of section 29 of the Act, the Commission may decide to call for a report from the Director General under
sub-section (1A) of section 29 of the Act within the time as specified by the Commission.1310 The Director General shall
include in his report the basis of having reached the conclusions therein together with all evidences or documents or
statements collected during the investigation and analysis thereof.1311
Publication of the details of the combination1312
Where the Commission under section 29(2) of the Act is of the prima facie opinion that the combination has caused or is
likely to cause appreciable adverse effect on competition within the relevant market in India, the Secretary shall, within
four working days of such decision convey the direction of the Commission to the parties to the combination, to publish
the details of the combination within 10 working days of the date of such direction (Form IV). Details have to be published
in newspaper (English and regional) and also on the websites of parties and the official website of the Commission.
Modification to the proposed combination1313
Where the Commission is of the opinion that combination has or is likely to have appreciable adverse effect on
competition but such adverse effect can be eliminated by suitable modification to such combination, it may propose
appropriate modification to the combination to the parties to such combination. Amendment may also be proposed by the
parties. Where the parties accept the modification proposed by the Commission or the Commission agrees with the
amendment submitted by the parties, it shall by order, approve the combination. But, if the parties to the combination fail
to accept the modification proposed by the Commission within the time referred to in section 31(6) of the Competition Act,
2002 or within a further period referred to in section 31(8) of the Act, the combination shall be deemed to have an
appreciable adverse effect on competition and be dealt with in accordance with the provisions of the Act. Modifications
shall be carried out by parties within the prescribed time frame and have to submit a compliance report to the
Commission.1314 The Commission may also appoint agencies, to oversee the modification.1315
Orders of the Commission1316
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• Where the Commission is of the opinion that the combination has, or is likely to have, an appreciable adverse
effect on competition in the relevant market in India, it shall pass an order that the combination shall not take
effect.
• Where the Commission is of the opinion that the combination does not or is not likely to have an appreciable
adverse effect on competition, it shall pass an order approving the combination.
• Where the Commission approves the combination with modification, the order of the Commission approving the
combination shall specify the terms, conditions and the time-frame for all the actions required for giving effect to
the combination.
APPROVAL OF NATIONAL COMPANY LAW TRIBUNAL UNDER THE COMPANIES
ACT, 2013
Section 232 read with section 230 of the Companies Act, 20131317 provides for approval of the Tribunal (in place of High
Court) for any compromise or arrangement proposed between a company and its shareholders and/or its creditors where
the compromise or arrangement has been prepared for the purposes of, or in connection with, a scheme for reconstruction
of any company or the amalgamation of any two or more companies or where the whole or any part of the undertaking or
properties or liabilities of any company concerned in the scheme is to be transferred to another company. The Tribunal
may consider the scheme of arrangement or amalgamation after obtaining consent of shareholders and creditors of the
transferor and transferee companies. Section 230(5) mandates a company to send the notice convening meeting pursuant to
the provisions of section 230(3) along with the copy of the scheme of compromise or arrangement, the explanatory
statement and the prescribed disclosures to the Competition Commission of India, if the proposed scheme attracts the
provisions of section 5 of the Competition Act, 2002.
A listed company, i.e., a company whose shares are listed for public dealing in any recognised stock exchange is also
required to comply with the requirements of Securities and Exchange Board of India (Substantial Acquisition of Shares
and Takeovers) Regulations, 2011. In terms of these Regulations, if an acquirer acquires 25% or more of the shares or
voting rights of any company, the acquirer shall make public announcement to acquire shares in accordance with the
regulations. Attention, in Particular, is invited to regulations 3, 4 and 5 in Chapter II of above Regulations.
PROVISIONS UNDER MRTP ACT, 1969, VIS-À-VIS THE COMPETITION ACT, 2002
Section 23 read with section 20 of MRTP Act, 1969, originally required approval of the Central Government for any
scheme of merger or amalgamation or any proposal of takeover relating to an undertaking the value of assets of which
(along with its inter-connected undertakings) was not less than Rs 100 crores or which was a dominant undertaking having
the value of assets (alongwith its inter-connected undertakings) not less than Rs 1 crore. The said provisions of law were
deleted by the MRTP (Amendment) Act, 1991. The said provisions of law, it seems, have again been revived under section
5 of the Competition Act, 2002 with certain changes as to the threshold limit of the value of assets or turnover. The concept
of assets/turnover “outside India” is, however, new in the Competition Act, 2002.
No distinction has been made under the Competition Act, 2002, between different types of mergers or amalgamations.
Instead of restricting the regulatory framework to only horizontal mergers, vertical and conglomerate mergers have also
been covered under the Competition Act, 2002, although they are primarily meant to curb concentration of economic
power. Under the extent provisions the power has vested in the Competition Commission while under the MRTP Act,
1969, the power was rested with the Central Government.
MERGERS UNDER US LAW
Most mergers actually benefit competition and consumers by allowing firms to operate more efficiently. But some are
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likely to lessen competition. That, in turn, can lead to higher prices, reduced availability of goods or services, lower quality
of products, and less innovation. Indeed, some mergers create a concentrated market, while others enable a single firm to
raise prices.
In a concentrated market, there are only a few firms. The danger is that they may find it easier to lessen competition by
colluding. For example, they may agree on the prices they will charge consumers. The collusion could be in an explicit
agreement, or in a more subtle form—known as tacit coordination or coordinated interaction. Firms may prefer to
cooperate tacitly rather than explicitly because tacit agreements are more difficult to detect, and some explicit agreements
may be subject to criminal prosecution.
When a merger enables a single firm to increase prices without coordinating with its competitors, it has created a unilateral
effect. A firm might be able to increase prices unilaterally if it has a large enough share of the market, if the merger
removes its closest competitor, and if the other firms in the market cannot provide substantial competition.
Generally, at least two conditions are necessary for a merger to have a likely anti-competitive effect: The market must be
substantially concentrated after the merger; and it must be difficult for new firms to enter the market in the near future and
provide effective competition. The reason for the second condition is that firms are less likely to raise prices to anti-
competitive levels if it is fairly easy for new competitors to enter the market and drive prices down.
Under these conditions, one of three basic kinds of mergers might facilitate coordinated or unilateral anti-competitive
behaviour: horizontal mergers, which involve two competitors; vertical mergers, which involve firms in a buyer-seller
relationship; and potential competition or conglomerate mergers—in which one of the firms is likely to enter the market
and become a potential competitor of the other.
Horizontal mergers
In a horizontal merger, the acquisition of a competitor could increase market concentration and increase the likelihood of
collusion. The elimination of head-to-head competition between two leading firms may result in unilateral anti-competitive
effects.
Witness the recent attempt by Staples, Inc, one “superstore” retailer of office supplies, to acquire Office Depot, another
giant retailer of office supplies. In many areas of the country, the merger would have reduced the number of superstore
competitors, often leaving Staples as the only superstore in the area. Evidence from the companies’ pricing data showed
that Staples would have been able to keep prices up to 13% higher after the merger than without the merger. The FTC
blocked the merger, saving consumers an estimated $ 1.1 billion over five years.
Vertical mergers
Vertical mergers involve firms in a buyer-seller relationship—a manufacturer merging with a supplier of component
products, or a manufacturer merging with a distributor of its products. A vertical merger can harm competition by making
it difficult for competitors to gain access to an important component product or to an important channel of distribution.
This is called a “vertical foreclosure” or “bottleneck” problem.
Take the merger of Time Warner, Inc, producers of HBO and other video programming, and Turner Corp, producers of
CNN, TBS, and other programming. The FTC was concerned that Time Warner could refuse to sell popular video
programming to competitors of cable TV companies owned or affiliated with Time Warner or Turner—or offer to sell the
programming at discriminatory rates. That would allow Time Warner-Turner affiliate cable companies to maintain
monopolies against, competitors like Direct Broadcast Satellite and new wireless cable technologies. What’s more, the
Time Warner-Turner affiliates could hurt competition in the production of video programming by refusing to carry
programming produced by competitors of both Time Warner and Turnover. The FTC allowed the merger, but prohibited
discriminatory access terms at both levels to prevent anti-competitive affects.
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Potential competition mergers
A potential competition merger is the acquisition of a company that is planning to enter a market and compete with the
acquiring company (or vice versa). It results in the elimination of a potential competitor. That can be harmful in two ways.
For one thing, it can prevent the increased competition that would result from the firm’s entry. For another, a firm can have
a pro-competitive effect on a market simply by being recognised as a possible entrant. What may be the reason? The firms
already in the market will avoid raising prices to levels that would make the outside firm’s entry more likely. The
elimination of the potential entrant though a merger would remove the threat of entry and make anti-competitive pricing a
real possibility.
The Questar Corp, which operated the only pipeline transporting natural gas to Salt Lake City, tried to acquire a major part
of a firm that was planning to begin service to the city. The potential entrant was already having a pro-competitive effect
on pricing. The FTC blocked the merger, preserving the price benefits for Salt Lake City consumers.
1992 Horizontal Merger Guidelines, issued jointly by Department of Justice and Federal
Trade Commission
The US Department of Justice (“Department”) and Federal Trade Commission (“Commission”) jointly issued Horizontal
Merger Guidelines revising the Department’s 1984 Merger Guidelines and the Commission’s 1982 Statement Concerning
Horizontal Merger Guidelines. The release marked the first time that the two federal agencies that share anti-trust
enforcement jurisdiction had issued joint guidelines.
Central to the 1992 Department of Justice and Federal Trade Commission Horizontal Merger Guidelines was recognition
that sound merger enforcement is an essential component of free enterprise system benefiting the competitiveness of
American firms and the welfare of American consumers. Sound merger enforcement must prevent anti-competitive
mergers yet avoid deterring the larger universe of procompetitive or competitively neutral mergers. The 1992 Horizontal
Merger Guidelines implemented this objective by describing the analytical foundations of merger enforcement and
providing guidance enabling the business community to avoid anti-trust problems when planning mergers. The Department
first released Merger Guidelines in 1968 in order to inform the business community of the analysis applied by the
Department to mergers under the federal anti-trust laws. The 1968 Merger Guidelines eventually fell into disuse, both
internally and externally, as they were eclipsed by developments in legal and economic thinking about mergers.
In 1982, the Department released revised Merger Guidelines which, reflecting those developments, departed dramatically
from the 1968 version. Relative to the Departments actual practice, however, the 1982 Merger Guidelines represented an
evolutionary not revolutionary change. Simultaneously, the Commission released its Statement Concerning Horizontal
Mergers highlighting the principal considerations guiding the Commission’s horizontal merger enforcement and noting the
“considerable weight” given by the Commission to the Department’s 1982 Merger Guidelines.
The Department’s Merger Guidelines, released in 1984, refined and clarified the analytical framework of the 1982 Merger
Guidelines. Although the agencies’ experience with the 1982 Merger Guidelines reaffirmed the soundness of its underlying
principles, the Department concluded that there remained room for improvement.
The revisions embodied in the 1992 Horizontal Merger Guidelines reflected the next logical step in the development of the
agencies’ analysis of mergers. They reflected the Department’s experience in applying the 1982 and 1984 Merger
Guidelines as well as the Commission’s experience in applying those guidelines and the Commission’s 1982 Statement.
Both the Department and the Commission believed that their respective Guidelines and Statement presented sound
frameworks for anti-trust analysis of mergers, but that improvements could be made to reflect advances in legal and
economic thinking. The 1992 Horizontal Merger Guidelines accomplished this objective and also clarified certain aspects
of the Merger Guidelines that proved to be ambiguous or were interpreted by observers in ways that were inconsistent with
the actual policy of the agencies.
The 1992 Horizontal Merger Guidelines did not include a discussion of horizontal effects from non-horizontal mergers
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(e.g., elimination of specific potential entrants and competitive problems from vertical mergers). Neither agency had
changed its policy with respect to non-horizontal mergers. Specific guidance on non-horizontal mergers was provided in
section 4 of the Department’s 1984 Merger Guidelines, read in the context of today’s revisions to the treatment of
horizontal mergers.
A number of these revisions were largely technical or stylistic. One major objective of the revisions was to strengthen the
document as an analytical road map for the evaluation of mergers. The language, therefore, was intended to be burden-
neutral, without altering the burdens of proof or burdens of coming forward as those standards have been established by
the courts. In addition, the revisions principally address two areas.
The most significant revision to the Merger Guidelines was to explain more clearly how mergers may lead to adverse
competitive effects and how particular market factors relate to the analysis of those effects. These revisions were found in
section 2 of the Horizontal Merger Guidelines. The second principal revision was to sharpen the distinction between the
treatments of various types of supply responses and to articulate the framework for analysing the timeliness, likelihood and
sufficiency of entry. These revisions were found in sections 1.3 and 3.
The new Horizontal Merger Guidelines observes, as did the 1984 Guidelines, that because the specific standards they set
out must be applied in widely varied factual circumstances, mechanical application of those standards could produce
misleading results. Thus, the Guidelines stated that the agencies will apply those standards reasonably and flexibly to the
particular facts and circumstances of each proposed merger.
Purpose, underlying policy assumptions and overview
These Guidelines outlined the enforcement policy of the Department of Justice and the Federal Trade Commission (the
“Agency”) concerning horizontal acquisitions and mergers (“mergers”) subject to section 7 of the Clayton Act, 1914,1318
to section 1 of the Sherman Act, 1890,1319 or to section 5 of the FTC Act, 1914.1320 They described the analytical
framework and specific standards normally used by the Agency in analysing mergers.1321 By stating its policy as simply
and clearly as possible, the Agency hoped to reduce the uncertainty associated with enforcement of the anti-trust laws in
this area.
2010 Horizontal Merger Guidelines, issued jointly by Department of Justice and Federal
Trade Commission1322
Overview1323
These Guidelines outlined the principal analytical techniques, practices, and the enforcement policy of the Department of Justice
and the Federal Trade Commission (the “Agencies”) with respect to mergers and acquisitions involving actual or potential
competitors (“horizontal mergers”) under the federal antitrust laws. The relevant statutory provisions include section 7 of the
Clayton Act, 15 U.S.C. § 18, sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1, 2, and section 5 of the Federal Trade
Commission Act, 15 U.S.C. § 45. Most particularly, section 7 of the Clayton Act prohibits mergers if “in any line of commerce or
in any activity affecting commerce in any section of the country, the effect of such acquisition may be substantially to lessen
competition, or to tend to create a monopoly.”
The Agencies seek to identify and challenged competitively harmful mergers while avoiding unnecessary interference with
mergers that are either competitively beneficial or neutral. Most merger analysis are necessarily predictive, requiring an assessment
of what will likely happen if a merger proceeds as compared to what will likely happen if it does not. Given this inherent need for
prediction, these Guidelines reflected the congressional intent that merger enforcement should interdict competitive problems in
their incipiency and that certainty about anti-competitive effect is seldom possible and not required for a merger to be illegal.
These Guidelines described the principal analytical techniques and the main types of evidence on which the Agencies usually rely
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to predict whether a horizontal merger might substantially lessen competition. They are not intended to describe how the Agencies
analyse cases other than horizontal mergers.
These Guidelines are intended to assist the business community and antitrust practitioners by increasing the transparency of the
analytical process underlying the Agencies’ enforcement decisions. They may also assist the courts in developing an appropriate
framework for interpreting and applying the antitrust laws in the horizontal merger context. These Guidelines should be read with
the awareness that merger analysis does not consist of uniform application of a single methodology. Rather, it is a fact-specific
process through which the Agencies, guided by their extensive experience, apply a range of analytical tools to the reasonably
available and reliable evidence to evaluate competitive concerns in a limited period of time. Where these Guidelines provide
examples, they are illustrative and do not exhaust the applications of the relevant principle.
For text of 2010 Horizontal Merger Guidelines, issued jointly by Department of Justice and Federal Trade Commission,
see Annexure.
A primary goal of the 2010 guidelines is to help the agencies identify and challenge competitively harmful mergers while avoiding
unnecessary interference with mergers that either is competitively beneficial or likely will have no competitive impact on the
marketplace. To accomplish this, the guidelines detail the techniques and main types of evidence the agencies typically use to
predict whether horizontal mergers may substantially lessen competition. The revised merger guidelines derive from the agencies’
collective experience in assessing thousands of transactions focusing on the types of evidence the department and the FTC use to
decide whether a merger of competitors may harm competition. Many of the proposed refinements and changes reflect issues
previously identified in the “Commentary on the Horizontal Merger Guidelines,” which the agencies jointly issued in 2006. In
crafting the revisions, the agencies considered a wide range of opinions gathered through a series of joint public workshops, as well
as hundreds of public comments submitted by attorneys, academics, economists, consumer groups and businesses.1324
The 2010 guidelines are different from the 1992 guidelines in several important ways1325. The guidelines:
• Clarify that merger analysis does not use a single methodology, but is a fact-specific process through which the agencies
use a variety of tools to analyse the evidence to determine whether a merger may substantially lessen competition.
• Introduce a new section on “Evidence of Adverse Competitive Effects.” This section discussed several categories and
sources of evidence that the agencies, in their experience, have found informative in predicting the likely competitive
effects of mergers.
• Explain that market definition is not an end itself or a necessary starting point of merger analysis, and market
concentration is a tool that is useful to the extent it illuminates the merger’s likely competitive effects.
• Provide an updated explanation of the hypothetical monopolist test used to define relevant antitrust markets and how the
agencies implement that test in practice.
• Update the concentration thresholds that determine whether a transaction warrants further scrutiny by the agencies.
• Provide an expanded discussion of how the agencies evaluate unilateral competitive effects, including effects on
innovation.
• Provide an updated section on coordinated effects. The guidelines clarify that coordinated effects, like unilateral effects,
include conduct not otherwise condemned by the antitrust laws.
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• Provide a simplified discussion of how the agencies evaluate whether entry into the relevant market is so easy that a
merger is not likely to enhance market power.
• Add new sections on powerful buyers, mergers between competing buyers, and partial acquisitions.
The Bank Merger Competitive Review guidelines, which the federal banking agencies and the Department of Justice developed in
1995 to facilitate the competitive review of bank mergers, remain unchanged.
American experience of pre-merger notification programme
The Hart-Scott-Rodino Act, 1976, which has amended the Clayton Act, 1914, in US by requiring companies to notify the
FTC and the Justice Department’s Anti-trust Division before mergers and acquisitions are consummated. It gives the
enforcement agencies time to examine the competitive consequences of the proposed mergers. The manner of Inquiry
made by the FTC is indicated in the following guidance note published by the FTC.
I. Introduction.—Title II of the Hart-Scott-Radino Anti-trust Improvements Act of 1976 (referred to in this Guide as “the
Act”) established the federal pre-merger notification program. The Act requires that parties to certain mergers or
acquisitions notify the Federal Trade Commission and the Department of Justice (“the anti-trust enforcement agencies”)
before consummating the proposed acquisition. The parties must wait a specified period of time while the enforcement
agencies review the proposed transaction. The premerger notification program became effective from 5-9-1978, after final
promulgation of the Federal Trade Commission’s premerger notification rules.
The premerger notification program was established to avoid some of the difficulties that the anti-trust enforcement
agencies encounter when they challenge anti-competitive acquisitions after they occur. The agencies have found that it is
often impossible to restore competition fully because circumstances change once a merger takes place; furthermore, any
attempt to re-establish competition is usually costly for the parties and the public. Prior review under the premerger
notification program has created an opportunity to avoid these problems by enabling the enforcement agencies to challenge
many anti-competitive acquisitions before they are consummated.
The premerger notification program has been successful because compliance with the Act’s notification requirements has
been excellent. As a result, since the inception of the program, the anti-trust enforcement agencies generally have been able
to challenge anti-competitive transactions prior to consummation, while completing review in an expeditious manner of
transactions that are not likely to lead to anti-competitive effects. Thus, the premerger notification program has reduced
costs and made the enforcement agencies more effective.
Parties to reportable transactions must submit to the anti-trust enforcement agencies a Pre-merger Notification and Report
Form with information about their businesses and wait a specified period of time before consummating their proposed
transactions. During that “waiting period”, the anti-trust enforcement agencies analyse the likely competitive effects of the
proposed transaction. If the investigating agency believes that it needs further information in order to complete its
competitive analysis, it may request additional information and documentary material from the parties to the transaction.
Issuance of this “second request” extends the statutory waiting period until a specified time after the parties submit
responses that comply substantially with the requirements of the second request. If, after analysing all available
information, the investigating agency believes that consummation of the proposed transaction will violate the anti-trust
laws, then it may seek to enjoin the transaction in federal court.
Because the pre-merger notification program applies to many different types of reporting person and to many different
types of transactions, the rules implementing the program are necessarily technical and complex. In order to assist those
unfamiliar with the program, the Pre-merger Notification Office of the Federal Trade Commission has issued a series of
compliance guides.
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a. Guide I is the first in a series of guides prepared by the Federal Trade Commission’s Premerger Notification
Office (PNO). It is intended to provide a general overview of the Premerger Notification Program and to help the
reader in determining which types of business transactions are reportable under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976. Guide I describes the basic reportability requirements and how the program works. It
also provides a list of alternative information sources to assist you in deciding whether or not you need to
file.1326
b. Guide II describes the criteria used to determine whether a transaction is subject to the requirements of the Hart-
Scott-Rodino Antitrust Improvements Act of 1976 and uses a hypothetical transaction to illustrate the application
of the Premerger Notification Rules.1327
c. Guide III provides background information on the process for a Request for Additional Information and
Documentary Materials (Second Request) and contains a sample model of a Second Request. Also, the Antitrust
Division of the Department of Justice Second Request Internal Appeal Procedure has been provided as
reference.1328
Illustrative examples
Automatic Data Processing, Inc; AutoInfo Inc; Orion Management Corp—Automatic Data Processing agreed to pay $2.97
million in civil penalties to settle charges that it failed to include key competitive documents in a premerger filing for its
acquisition of AutoInfo. The civil penalty settlement is the third largest ever obtained for a violation of the Hart-Scott-
Rodino (HSR) Antitrust Improvements Act, 1976 and is also the largest ever obtained under charges for failure to submit
documents required by item 4(c) of the Notification and Report Form. The complaint and consent judgment were filed in
the US District Court for the District of Columbia by Commission attorneys acting as special attorneys to the US Attorney
General.
Federated Department Stores, Inc—One of the country’s largest operators of department stores agreed to settle charges
that it violated a 1979 consent order prohibiting it from interfering with the entry of a competitor into a shopping mall in
which it operates a store. The complaint charged that Federated threatened to block another tenant from buying a
department store in a Florence, Kentucky, mall where Federated operates a Lazarus department store. Under terms of the
consent judgment, Federated agreed to pay $250,000 in civil penalties.
Foodmaker, Inc; Chi-Chi’s, Inc—Foodmaker paid $1.45 million in civil penalties to settle charges that its Chi-Chi’s
subsidiary failed to comply with the notification and filing requirements under the HSR Act, 1976, before it acquired
Consul, Inc, operator of 26 Chi-Chi’s franchises. The complaint was filed in the US District Court for the District of
Columbia by Commission attorneys acting as special attorneys to the US Attorney General.
Sara Lee Corp—Sara Lee agreed to pay $3.1 million, the largest civil penalty ever imposed under the HSR Act, 1976, for
allegedly failing to notify federal anti-trust agencies before acquiring the shoe care products assets of Reckitt & Colman
plc. The complaint was filed in the US District Court for the District of Columbia by Commission attorneys serving as
special attorneys to the US Attorney General. A consent order, finalised in 1994, required divestiture of the Griffin and
Esquire brands of shoe polish in settlement of charges that the acquisition could create a monopoly in the US market for
shoe care products.
Titan Wheel International, Inc; Pirelli Armstrong Tire Corp—Titan Wheel International agreed to pay a $130,000 civil
penalty to settle charges that it acquired a Pirelli Armstrong plant in Des Moines before notifying the two federal anti-trust
agencies and observing the statutory waiting period. According to the complaint, the parties transferred control of the
Pirelli Armstrong assets three days before filing notification under the HSR Act, 1976, with the Commission and the
Department of Justice. The complaint and proposed consent judgment were filed in the US District Court for the District of
Columbia by Commission attorneys acting as special attorneys to the US Attorney General.
Competition Mission—Civil Penalty Actions—Illustrative Cases
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Title Type of Matter Product/Service
Figgie International Inc. Premerger Notification Consumer and Industrial Products
Mahle GmbH Premerger Notification Diesel Engine Pistons
Red Apple Companies, Inc. Order Violation Grocery Stores
Schnuck Markets, Inc. Order Violation Grocery Stores
Figgie International Inc; Harry E Figgie, Jr1329—Figgie International and its former chairman and chief executive officer,
Harry E Figgie, Jr, agreed to pay a $150,000 civil penalty to settle allegations that they failed to notify federal anti-trust
enforcement agencies before Mr Figgie acquired restricted voting stock in Figgie International. The complaint alleged that
Mr Figgie failed to comply with the reporting provisions and waiting period requirements under the Hart-Scott-Rodino
Act, 1976. The complaint further alleged that Mr Figgie was required to file notification before he increased his holdings
to over 15% of the outstanding voting securities of Figgie International.
Mahle GmbH; Metal Leve, SA1330.—Mahle, a German corporation, agreed to pay a record $5.6 million civil penalty to
settle allegations that it failed to notify the two federal anti-trust agencies of its acquisition of a controlling interest in Metal
Leve, a Brazilian competitor engaged in the manufacture of diesel engine parts, including pistons. According to the
complaint filed in the US District Court for the District of Columbia by the Commission, Mahle acquired 50.1% of the
voting securities of Metal Leve for approximately $40 million, without first filing notification with the Commission and
the Department of Justice and observing the required waiting period, in violation of the Hart-Scott-Rodino Act, 1976. A
separate consent order with Mahle settled allegations that the acquisition could create a monopoly in the market for
articulated pistons.
Red Apple Cos, Inc; Sloan’s Supermarkets, Inc; Supermarket Acquisition Corp; John Catsimatidis.1331—Red Apple, its
chairman John Catsimatidis, and two affiliated supermarket operators, Sloan’s and Supermarket Acquisition, agreed to pay
a $600,000 civil penalty for failure to divest five Manhattan supermarkets, as required by order of the Commission, by
March 1996. The complaint and consent judgment were filed in the US District Court for the Southern District of New
York. The civil penalty was paid to the Department of the Treasury.
Schnuck Markets, Inc1332.—Schnuck Markets agreed to pay a $3 million civil penalty to settle allegations that the
supermarket chain allowed numerous stores, designated for divestiture under a 1995 Commission consent order, to
deteriorate before being sold. Under terms of the proposed settlement, Schnuck will be required to divest two closed
supermarkets in the St. Louis area within six months to a Commission-approved acquirer. The complaint and proposed
stipulations were filed in US District Court for the Eastern District of Missouri.
Competition Mission—Part 2 Consent Orders Issued—Illustrative cases
Title Type of Matter Product/Service
American Cyanamid Co Vertical Price Fixing Agricultural Chemicals
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American Home Products Corp Horizontal Merger Canine and Feline Vaccines
Autodesk, Inc Horizontal Merger Computer-Aided Design Software Engines
Baxter International Inc Horizontal Merger Blood Plasma Products
The Boeing Company Horizontal Merger Defence and Space Vehicles
Cadence Design Systems, Inc Horizontal Merger “Routing” Software for Integrated Circuits
Ciba-Geigy Ltd Horizontal Merger Research and Development in Gene Therapy
Treatments,
Class Rings, Inc Horizontal Merger Commemorative Class Rings
Cooperative Computing, Inc Horizontal Merger Electronic Automotive Parts Catalogs
CVS Corp Horizontal Merger Drug Stores
Dwight’s Energy Data, Inc Horizontal Merger Gas and Oil Production Data
Fresenius AG Horizontal Merger Hemodialysis Concentrate
General Mills, Inc Horizontal Merger Ready-to-Eat Cereals
Hale Products, Inc Exclusive Dealing Fire Truck Pumps
JC Penney Company, Inc Horizontal Merger Drug Stores
Mahle GmbH Horizontal Merger Diesel Engine Pistons
Montana Associated Physicians, Inc Horizontal Restraints Physician Services
NGC Corp Horizontal Merger Natural Gas Fractionation
Phillips Petroleum Co Horizontal Merger Natural Gas Transportation
Tenet Healthcare Corp Horizontal Merger Inpatient Hospital Services
Time Warner Inc Horizontal Merger Cable Television
Waterous Company, Inc Exclusive Dealing Fire Truck Pumps
Wesley-Jessen Corp Horizontal Merger Contact Lenses
American Cyanamid Co1333.—American Cyanamid agreed to settle allegations that it had fixed the resale prices of its
agricultural chemical products, violating the federal anti-trust laws. According to the complaint issued with the consent
order, American Cyanamid allegedly entered into agreements with its retail dealers offering substantial rebates if the
dealers sold its chemicals at or above specific prices. The consent order prohibits American Cyanamid from entering into
agreements that control prices and from conditioning the payment of rebates or other incentives on the resale prices its
dealers charge for its products.
American Home Products Corp1334.—American Home Products agreed to settle charges that its $463 million acquisition
of the animal health business of Solvay, SA, would create a monopoly in the market for canine Lyme disease vaccines,
canine coronavirus vaccines, and feline leukaemia vaccines. The consent order, designed to preserve competition, requires
American Home Products to divest Solvay’s US and Canadian rights to the three vaccines to Schering-Plough Corporation.
To ensure that there is no break in the supply of Solvay’s vaccines, the order requires American Home Products to
manufacture and supply the vaccines to Schering-Plough until Schering-Plough obtains all necessary government
certifications and approvals to manufacture and sell the vaccines.
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Autodesk, Inc; Softdesk, Inc1335.—Autodesk agreed to settle allegations that its acquisition of Softdesk would substantially
lessen competition in the development and sale of computer-aided design (CAD) software engines. Autodesk develops and
markets AutoCAD, a design engine for use in Windows-based personal computers. Prior to the acquisition, Softdesk sold
its developmental-stage CAD engine, IntelliCADD, to Boomerang Technology, Inc. The consent order prohibits Autodesk
or Softdesk from reacquiring IntelliCADD without prior Commission notice for 10 years. The order also requires that
neither Autodesk nor Softdesk interfere with Boomerang’s ability to recruit or hire Softdesk employees who worked on the
development of IntelliCADD.
Baxter International Inc1336.—Baxter International agreed to settle anti-trust concerns stemming from its proposed
acquisition of Immuno International AG. According to the complaint issued with the consent order, the acquisition would
create the world’s largest manufacturer of human plasma products used to treat haemophilia and to control bleeding in
surgical applications. The consent order requires Baxter to divest its Autoplex blood plasma product and to license
Immuno’s fibrin sealant to Commission-approved buyers.
The Boeing Co1337.—Boeing agreed to settle allegations that its $3.025 billion acquisition of Rockwell International
Corporation’s aerospace and defence business would reduce competition in two markets: high-altitude-endurance
unmanned air vehicles (UAVs) and space launch vehicles. In the first market, according to the complaint issued with the
consent order, the acquisition would make Boeing a member of both teams competing to develop UAVs for the
Department of Defence. Under terms of the consent order, Teledyne Ryan, the prime contractor of one team, could replace
Boeing on that team, with no significant cost or risk to Teledyne Ryan, thereby protecting competition in the UAVs
market. In the second market, Boeing would be positioned as both a competitor in the space launch vehicle business and a
provider of propulsion systems for other competitors. To remedy the possibility that as a competitor and supplier, Boeing
would have inappropriate access to competitively sensitive information, the consent order establishes two information
firewalls: (1) preventing the flow of competitively sensitive information between Boeing’s team and a division of
Rockwell that currently provides wings to the other team, and (2) prohibiting Boeing from disclosing non-public
information from any space launch vehicle manufacturer to its own launch vehicle division.
Cadence Design Systems, Inc1338.—Cadence agreed to settle allegations that its acquisition of Cooper & Chyan
Technology, Inc, would substantially reduce competition for “routing” software used to automate the design of integrated
circuits or microchips. According to the complaint accompanying the consent order, the merger would reduce Cadence’s
incentives to permit competing suppliers of routing tools to obtain access to its software infrastructure for layout
environments, resulting in less innovation, higher prices, and reduced services. To ensure that independent software
developers of commercial routing tools continue to compete with Cooper & Chyan’s technology, the consent order
requires Cadence to allow these developers to participate in Cadence’s software interface programs.
Ciba-Geigy Ltd; Ciba-Geigy Corp; Chiron Corp; Novartis AG; Sandoz Corp; Sandoz Ltd,1339.—Ciba-Geigy agreed to
settle allegations that its $63 billion merger with Sandoz Corporation raised anti-trust concerns in three markets affected by
the proposed acquisition of Sandoz Ltd: research and development in gene therapy products that are being targeted for life-
threatening conditions such as hemophilia and cancer, corn herbicides, and flea-control products. In the gene therapy
market, the order requires the licensing of certain intellectual properties to Rhone-Poulenc Rorer and other firms to permit
continued competition in research, development, and commercialisation for a broad range of future medical treatments. In
addition, in one of the largest divestitures ever required under a consent order, Sandoz agreed to divest its US and
Canadian corn herbicide business to BASF Aktiengesellschaft within 10 days. The consent order also requires the
divestiture of Sandoz’s flea-control business to Central Garden and Pet Supply of Lafayette, California, within 30 days.
Class Rings, Inc; Castle Harlan Partners II, LP; Town & Country Corp1340.—Three manufacturers of school class rings
agreed to settle allegations that their proposed merger would have increased the likelihood of coordinated interaction and
led to higher prices for commemorative rings. The consent order, designed to restore competition, prevents Class Rings
from acquiring Town & Country’s Gold Lance, Inc, division, which will remain as an independent competitor, and
prohibits Town & Country from acquiring any interest in Castle Harlan or Class Rings. In addition, for 10 years, the order
requires the three companies to obtain Commission approval before acquiring certain assets from one another.
Co-op Computing, Inc1341.—Cooperative Computing agreed to settle concerns that its proposed acquisition of Triad
Systems Corporation would substantially reduce competition in the development and sale of electronic parts catalogues
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used in the automotive parts after market. The consent order requires Cooperative Computing to divest its electronic parts
catalogue and related assets to MacDonald Computer Services or another Commission-approved buyer.
CVS Corp; Revco DS, Inc1342.—CVS agreed to settle allegations that its acquisition of Revco would substantially reduce
competition for the retail sale of pharmacy services to health insurance companies and other third-party payers in Virginia
and in the Binghamton, New York, metropolitan area. The consent order requires CVS to divest 114 Revco stores in
Virginia and six pharmacies in Binghamton. Under terms of the order, CVS agreed to divest the Revco stores in Virginia to
Eckerd Corporation, a subsidiary of JC Penney Company, and the pharmacies in Binghamton to Medicine Shoppe
International, Inc.
Dwight’s EnergyData, Inc; Geoquest International Holdings, Inc; SoftSearch Holdings, Inc1343.—Dwight’s EnergyData
(a subsidiary of SoftSearch) agreed to license its gas and oil production data to a Commission-approved buyer to settle
allegations that its acquisition of Petroleum Information Corporation (a subsidiary of Geoquest) could create a monopoly
in the collection and sale of well history data to the oil and gas industry. The consent order also requires the two firms to
notify the Commission before acquiring any interest in a provider of well history or production data.
Fresenius AG; Fresenius USA, Inc1344.—Fresenius AG and its US subsidiary, Fresenius USA, agreed to settle allegations
that their proposed acquisition of National Medical Care, Inc, would substantially reduce competition by combining two
significant producers of a haemodialysis concentrate used in the treatment of patients with chronic kidney failure. The
consent order requires Fresenius to divest a production facility in Lewisberry, Pennsylvania, to Di-Chem, Inc, or to another
Commission-approved acquirer.
General Mills, Inc1345.—General Mills agreed to settle allegations that its acquisition of the branded ready-to-eat cereal
and snack mix businesses of Ralcorp Holdings, Inc, would restrict the entry of new private-label products similar to the
branded cereals. Under terms of the consent order, Ralcorp retains its private-label cereal business, composed of cereals
identical to the Chex-brand cereals, as well as the right to transfer those private-label cereals to any other firm without the
authorisation or approval of General Mills. The consent order also prohibits General Mills from delaying production of the
private-label Chex rival cereals.
Hale Products, Inc1346.—Hale agreed to settle allegations that it and Waterous Company, Inc separately entered into
exclusive dealing agreements requiring their respective customers to purchase fire-truck-mounted fire pumps. Together,
Hale and Waterous account for about 90% or more of the market for truck-mounted fire pumps. According to the
complaint issued with the consent order, these practices reduced competition between the two firms and made it more
difficult for other firms to enter the market for truck-mounted fire pumps. The consent order prohibits Hale from engaging
in any conduct that restrains fire truck manufacturers from purchasing mounted fire pumps from any other company.
JC Penney Co, Inc; Thrift Drug, Inc1347.—JC Penney agreed to settle allegations that its acquisitions of Eckerd
Corporation and 190 Rite Aid drug stores would substantially reduce drug store competition and raise prices for pharmacy
services to health insurance companies and other third-party payers in certain areas of North Carolina and South Carolina.
The consent order requires JC Penney to divest 34 Thrift drug stores in the Charlotte and Raleigh-Durham areas of North
Carolina, all 110 Rite Aid drug stores in North Carolina, and all 17 Rite Aid drug stores in the Charleston, South Carolina,
area to a Commission-approved buyer. The Commission approved divestiture of the stores to New Kerr Drug, Inc, in May
1997.
Mahle GmbH; Metal Leve, SA1348—Mahle, a German piston manufacturer, agreed to settle allegations that its acquisition
of Metal Leve would create a monopoly in the manufacture and sale of articulated pistons used in truck engines for big
highway rigs and in locomotive engines. The consent order requires Mahle to divest Metal Leve’s two piston plants in
South Carolina and a research and development center in Ann Arbor, Michigan. A consent judgment filed in the US
District Court for the District of Columbia requires Mahle to pay a record $5.6 million civil penalty for failing to notify the
two federal anti-trust agencies before consummating the acquisition.
Montana Associated Physicians, Inc; Billings Physician Hospital Alliance, Inc1349.—Montana Associated Physicians and
Billings Physician Hospital Alliance agreed to settle allegations that they engaged in agreements with member physicians
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to control the prices they would accept from health insurance companies and other third-party payers and engaged in a
boycott to block the entry of a managed care plan. According to the complaint issued with the consent order, the
physicians’ acts reduced consumer choices for health care and increased the fees physicians charged for their services. The
consent order prohibits the two organisations from entering into any agreements with physicians to refuse to deal with
third-party payers and to fix or control the fees charged for any physician’s services.
NGC Corp1350.—NGC agreed to settle allegations that its acquisition of certain natural gas transportation and processing
assets of Chevron Corporation would substantially lessen competition by leaving only two companies operating four
natural gas liquids fractionation plants in Mont Belvieu, Texas, and increasing the likelihood that NGC could unilaterally
raise prices or engage in coordinated interaction. The consent order requires NGC to divest its 80% interest in the Mont
Belvieu I natural gas liquids fractionation facility in Texas. The Commission approved NGC’s sale of the assets to Koch
Hydrocarbon Company, a division of Koch Industries, Inc.
Phillips Petroleum Co1351.—Phillips agreed to divest 160 miles of its natural gas pipeline system in the Anadarko Basin
area of Oklahoma to KN Gas Gathering, Inc, under a consent order settling anti-trust concerns stemming from its
acquisition of certain ANR Pipeline Company gas gathering assets.
Tenet Healthcare Corp1352.—Tenet agreed to settle allegations that its proposed acquisition of OrNda Healthcorp would
reduce competition for inpatient hospital care in San Luis Obispo County, California. According to the complaint issued
with the consent order, the acquisition would substantially lessen competition in the area for inpatient acute hospital
services. The consent order requires Tenet to divest OrNda’s French Hospital Medical Center and related assets in the
county within six months to a Commission-approved acquirer.
Time Warner Inc; Tele-Communications, Inc; Turner Broadcasting System, Inc1353.—Time Warner agreed to restructure
its proposal to acquire Turner Broadcasting to settle anti-trust concerns that the merger would reduce competition in cable
television programming and allow Time Warner to unilaterally raise prices. The consent order, among other things,
requires Tele-Communications to either divest its interest in Time Warner or accept a limited nonvoting interest, requires
the three companies to cancel long-term carriage agreements, reduces Time Warner’s enhanced opportunities for bundling
Time Warner and Turner programming, bars Time Warner from discriminating in price against rival cable systems, and
requires Time Warner’s cable interests to carry a rival television station to Turner’s Cable News Network.
Waterous Co, Inc1354.—Waterous agreed to settle allegations that it and Hale Products, Inc separately entered into
exclusive dealing agreements requiring their respective customers to purchase fire-truck-mounted fire pumps. Together,
Waterous and Hale account for about 90% or more of the market for truck-mounted fire pumps. According to the
complaint issued with the consent order, these practices reduced competition between the two firms and made it more
difficult for other firms to enter the market for truck-mounted fire pumps. The consent order prohibits Waterous from
engaging in any conduct that restrains fire truck manufacturers from purchasing mounted fire pumps from any other
company.
Wesleyjessen Corp1355.—Wesley-Jessen agreed to settle allegations that its acquisition of Pilkington Barnes Hind
International, Inc, would create a monopoly in the market for opaque contact lenses used to change eye colour for cosmetic
reasons. The consent order requires Wesley-Jessen to divest the Pilkington Barnes Hind opaque lens business to a
Commission-approved acquirer. On 18 March 1997, the Commission approved divestiture of the business to The Cooper
Companies, Inc.
Competition Mission—Order Modifications—Illustrative cases
Title Type of Matter Product/Service
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Columbia/HCA Healthcare Corporation Horizontal Merger Inpatient Hospital Services
Commemorative Brands, Inc. Horizontal Merger Commemorative Rings
Compagnie de Saint-Gobain Horizontal Merger Refractories and Hot Surface Igniters
Del Monte Foods Company Horizontal Merger Canned Fruit
Geon Company, Horizontal Merger Chemicals
Health South Corporation Horizontal Merger Rehabilitation Hospital Facilities
(Home Oxygen and Medical Equipment Single-Firm Violation In-Home Oxygen
Company)
Oerlikon-Burhle Holding AG Horizontal Merger Turbomolecular Pumps, Company Disc
Metallizers
Onkyo U.S.A. Corporation Distributional Restraints Audio Components
Penn Traffic Company, The Horizontal Merger Supermarkets
Schwegmann Giant Super Markets, Inc. Horizontal Merger Supermarkets
Stop & Shop Companies, Inc., The Horizontal Merger Supermarkets
Order Modifications
Columbia/HCA Healthcare Corp1356.—The Commission granted the petition of Columbia/HCA to modify a 1995 consent
order that settled anti-trust concerns stemming from the acquisition of Healthtrust, Inc—The Hospital Company. The
consent order was modified ending Columbia/HCA’s obligation to divest a commercial lease for office space, which
Columbia had mistakenly represented to the Commission was part of its Pioneer Valley Hospital assets in West Valley
City, Utah.
Commemorative Brands, Inc (formerly Class Rings, Inc); Castle Harlan Partners II, LP1357—The Commission granted
the petition of Commemorative Brands to set aside a provision barring it from employing any person employed during
1996 by Gold Lance, Inc, or Town & Country Corporation, competitors in the market for the manufacture and distribution
of commemorative class rings purchased by high school and college students. The 1997 consent order settled allegations
that the proposed merger of Class Rings, Town & Country, and Castle Harlan would have increased the likelihood of
coordinated interaction and led to higher prices in the market; however, the market conditions for that order changed after
the order was made final. Gold Lance, formerly owned by Town & Country, was sold to Jostens, Inc. Keeping the order
provision would have had the unintended effect of precluding Commemorative Brands from competing against Gold
Lance’s new owner for experienced, skilled employees.
Compagnie de Saint-Gobain; The Carborundum Co; Saint-Gobain/Norton Industrial Ceramics Corp1358.—The
Commission granted a petition of Compagnie de Saint-Gobain, and its US subsidiary, Saint-Gobain/Norton, to modify a
1996 consent order settling allegations stemming from Compagnie de Saint-Gobain’s acquisition of Carborundum. The
modified order allows knowledgeable managers and officers of Carborundum to serve on the boards or management
committees of the separately held businesses.
Del Monte Foods Co1359.—The Commission granted in part a petition from Del Monte to modify a 1995 consent order by
ending the company’s obligation to obtain Commission approval before making certain acquisitions or entering into
certain marketing agreements. Consistent with the Commission’s policy, announced in June 1995, to reduce the burden on
companies while still protecting consumers, in place of prior approval, the Commission substituted a prior notice
requirement for certain acquisitions. The consent order settled allegations that supply agreements between Del Monte and
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Pacific Coast Producers eliminated Pacific Coast as a substantial and direct competitor to Del Monte in the canned fruit
business.
The Geon Co (successor to BF Goodrich).—The Commission granted a petition from Geon to modify a 1989 consent order
against The BF Goodrich Company and deleted the requirement that Goodrich and its successors obtain Commission
approval before acquiring certain vinyl chloride monomer (VCM) assets. The order had settled an administrative complaint
that alleged that Goodrich’s acquisition of the VCM business of Diamond Shamrock Chemical Company could lessen
competition in the production of polyvinyl chloride and vinyl chloride monomer materials used to make plastics. The
Commission’s modification was consistent with its policy, announced in June 1995, to reduce the burden on companies
while still protecting consumers.
HealthSouth Corp (successor to HealthSouth Rehabilitation Corp)1360—The Commission granted the petition of
HealthSouth, ending its obligation to obtain Commission approval before merging any of its rehabilitation hospital
facilities with competing facilities in three areas of South Carolina and Tennessee. The order had required prior
notification of such acquisitions. The 1995 order settled antitrust concerns stemming from the merger of HealthSouth
Rehabilitation and ReLife, Inc, two rehabilitation hospital facilities. The Commission’s modification was consistent with
its policy, announced in June 1995, to reduce the burden on companies while still protecting consumers.
(Home Oxygen and Medical Equipment Co) John E Sailer, MD1361—The Commission granted the petition of John E
Sailer, MD, to reopen and modify a 1994 consent order accepted with 11 pulmonologists and their Home Oxygen and
Medical Equipment joint venture. The order was modified by relieving Sailer, who has now retired, of all obligations
under the consent order. The Commission had alleged that the joint venture would create a barrier to others who might
provide oxygen to patients’ homes, thus reducing competition and risking higher consumer prices.
Oerlikon-Buhrle Holding AG.—The Commission granted a petition from Oerlikon-Buhrle to modify a 1995 consent order
to replace a requirement that the firm obtain prior Commission approval until February 2005 before acquiring certain
assets used in the manufacture and distribution of turbo molecular pumps or compact disc metallizers. A provision
requiring Oerlikon to give the Commission prior notice was substituted for the prior approval provision. The
Commission’s modification was consistent with its policy, announced in June 1995, to reduce the burden on companies
while still protecting consumers.
Onkyo USA Corp1362—The Commission granted in part and denied in part a petition from Onkyo to modify a 1982
consent order. The modified consent order permits the company to implement price-restrictive cooperative advertising
programs and to unilaterally terminate a dealer for failing to adhere to previously announced resale prices. The
Commission denied Onkyo’s request to end the firm’s obligation to furnish copies of the order to certain employees and to
terminate the order in the year 2002 rather than 20 years after a 1995 consent judgment was entered for allegedly violating
the consent order.
The Penn Traffic Co1363—The Commission granted the petition of Penn Traffic and modified a consent order ending the
firm’s obligation to divest one of its two supermarkets in Mount Carnel, Pennsylvania. The divestiture was one of three
required under a 1995 consent order that had settled anti-trust concerns stemming from the acquisition of 45 retail grocery
stores in Pennsylvania and New York from Acme Markets, Inc. The Commission found that new supermarket entrants into
the area eliminated the need for the divestiture.
Schwegmann Giant Super Markets, Inc1364.—The Commission granted a petition of Schwegmann to reopen and modify a
1995 consent order that had settled allegations stemming from the acquisition of supermarkets in New Orleans, Louisiana.
The order was modified by replacing the provision requiring that Schwegmann receive prior Commission approval before
acquiring retail grocery stores in the New Orleans metropolitan area with a provision requiring prior Commission notice
before such transactions. The Commission’s modification was consistent with its policy, announced in June 1995, to
reduce the burden on companies while still protecting consumers.
The Stop & Shop Cos, Inc1365.—The Commission granted a petition from Stop & Shop and deleted divestiture
requirements for two Purity Supreme super-markets in Massachusetts. Stop & Shop presented evidence that changed
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conditions, including the entry of new super-markets in Brookline and Roslindale, rendered the two Purity Supreme stores
unsalable. The 1996 consent order had settled allegations that Stop & Shop’s merger with Purity Supreme, Inc, would
substantially reduce competition and lead to higher prices in several markets in Massachusetts.
EUROPEAN UNION – MERGER CONTROL
The European Commission first proposed merger control regulation in 1973. In 1989, the Council of Ministers adopted
Regulation 4064/1989. However, the 1989 Regulation was heavily amended by Regulation 1310/97 which was finally
repealed and replaced by EU Merger Regulation (EUMR) in 2004 (802/2004).1366 The following points can be noted from
EUMR:
1. Notification: Article 4(1) of the EUMR provides that Mergers that have a community dimension1367 must be pre-
notified to the Commission following the conclusion of the agreement, the announcement of the public bid, or the
acquisition of controlling interest but prior to their implementation. It is an offence to consummate a merger
without a prior clearance from the Commission. Whether or not a merger has a community dimension is
determined by reference to the turnover of the undertakings concerned in a transaction. The Commission has
adopted Regulation 802/2004 which sets out the format in which notification has to be made. DG COMP has
published Best Practices on the conduct of EC merger control proceedings which seeks to clarify day-to-day
conduct of proceedings under the EUMR.
2. Notifications are made in the format called Form CO, an original, signed version of the Form CO, on paper, must
be submitted to the Commission together with a further five paper copies with annexes and 32 copies of the
notification in CD or DVD-ROM format. The notification is sent to registry called Greffe, which registers its
time of arrival, at which time the merger review timetable begins to run. Short Form notification s provided for
certain transaction enumerated in Annexure II of Regulation 802/2004:
(a) Joint Ventures that have no, or negligible, activities in the EEA
(b) Concentrations where the parties are not engaged in business activities in the same product and geographical
markets or in markets that are vertically related to one another
(c) Transaction where the parties’ combined market shares are below 15% in case of a horizontal concentration
or, in case of a vertical concentration, where the parties do not have an individual or combined market share
in excess of 25% at any level of the market
(d) Case where a party is to acquire sole control of an undertaking over which it already has joint control.
Also see Commission’ Notice on a simplified procedure for treatment of certain concentrations under
Council Regulation 139/2004.
3. The Commission publishes a notice of concentrations having a Community dimension in the Official Journal.
4. Annexure III of Regulation 802/2004 sets out the requirements for a Form RS where the parties seek a
reallocation of jurisdiction to or from the Commission.
5. Procedural Timetable: Decision has to be made within 25 working days at most following notification
(a) Phase I Investigations – the Commission is required by Article 6 to examine a concentration that has been
notified by the parties in accordance with EUMR. It must then make a decision either that the concentration:
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[s 5] Combination
(i) Is outside the EUMR
(ii) Is compatible with the common market
(iii) As modified by the parties no longer raises serious doubts and so may be declared compatible with the
common market
(iv) Raises serious doubts as to the compatibility with the common Market – In this situation the
Commission must initiate a Phase II investigation. The decisions the Commission may make at the end
of Phase II are laid out in Article 8. It may decide that the concentration: (decision has to be taken within
90 days)
(1) Is compatible with the common market, having regard to the provisions of Article 2(2)
(2) Is compatible with the common market, subject to commitments to ensure compliance with
modifications
(3) Is incompatible with the common market
(4) In so far it has already been implemented, or implemented in breach of a condition attached to an
Article 8(2) decision, must be reversed, or modified in an appropriate way.
[Note: Article 3 - Definition of concentration]1368
(1) A concentration shall be deemed to arise where a change of control on a lasting basis results from:
(a) the merger of two or more previously independent undertakings or parts of undertakings, or
(b) the acquisition, by one or more persons already controlling at least one undertaking, or by one or more
undertakings, whether by purchase of securities or assets, by contract or by any other means, of direct or
indirect control of the whole or parts of one or more other undertakings.
(2) Control shall be constituted by rights, contracts or any other means which, either separately or in
combination and having regard to the considerations of fact or law involved, confer the possibility of
exercising decisive influence on an undertaking, in particular by:
(a) ownership or the right to use all or part of the assets of an undertaking;
(b) rights or contracts which confer decisive influence on the composition, voting or decisions of the organs
of an undertaking.
(3) Control is acquired by persons or undertakings which:
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[s 5] Combination
(a) are holders of the rights or entitled to rights under the contracts concerned; or
(b) while not being holders of such rights or entitled to rights under such contracts, have the power to
exercise the rights deriving therefrom.
(4) The creation of a joint venture performing on a lasting basis all the functions of an autonomous economic
entity shall constitute a concentration within the meaning of para1(b).
(5) A concentration shall not be deemed to arise where:
(a) credit institutions or other financial institutions or insurance companies, the normal activities of which
include transactions and dealing in securities for their own account or for the account of others, hold on
a temporary basis securities which they have acquired in an undertaking with a view to reselling them,
provided that they do not exercise voting rights in respect of those securities with a view to determining
the competitive behaviour of that undertaking or provided that they exercise such voting rights only with
a view to preparing the disposal of all or part of that undertaking or of its assets or the disposal of those
securities and that any such disposal takes place within one year of the date of acquisition; that period
may be extended by the Commission on request where such institutions or companies can show that the
disposal was not reasonably possible within the period set;
(b) control is acquired by an office-holder according to the law of a Member State relating to liquidation,
winding up, insolvency, cessation of payments, compositions or analogous proceedings;
(c) the operations referred to in para 1(b) are carried out by the financial holding companies referred to in
Article 5(3) of Fourth Council Directive 78/660/EEC of 25 July 1978 based on Article 54(3)(g) of the
Treaty on the annual accounts of certain types of companies provided however that the voting rights in
respect of the holding are exercised, in particular in relation to the appointment of members of the
management and supervisory bodies of the undertakings in which they have holdings, only to maintain
the full value of those investments and not to determine directly or indirectly the competitive conduct of
those undertakings.
The Commission has published numerous Notices and Guidelines listed out below:
• Notice on the definition of Relevant Market1369
• Guidelines on the assessment of Horizontal Mergers1370
• Notice on a simplified procedure for treatment of certain concentrations1371
• Notice on restrictions directly related and necessary to concentrations1372
• Notice of case referral in respect of concentrations1373
• Notice on access to the file1374
• Consolidated Jurisdictional Notice1375
• Guidelines on the assessment of Non-Horizontal Mergers1376
• Notice on remedies acceptable under the EUMR1377.
Page 39 of 49
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UK LAW ON MERGERS
The Enterprise Act, 2002 (as amended by the Enterprise and Regulatory Reform Act, 2013, (ERRA) governs mergers in
UK. A new body, Competition and Markets Authority (CMA) was created which took over the competition (and some
consumer) functions of the Office of Fair Trading (OFT) and the Competition Commission (CC) on 1 April 2014. The
OFT and the CC were abolished at the same time. According to the Act, the trigger event is either when a “relevant merger
situation” is created or arrangements are in progress or in contemplation which, if carried into effect, will result in a
relevant merger situation.1378
Notification is voluntary in that, there is no requirement to notify the Competition and Markets Authority (CMA). Either
party can notify. However, it is customary for the acquiring party to do so. However, if a transaction meets the
jurisdictional thresholds and the parties do not notify, the CMA can open an investigation on its own initiative. This can be
triggered by its own market intelligence function or because of a complaint.
Procedure1379
Phase 1: Initial examination by the CMA
Pre-notification discussions (for voluntary notification): The CMA encourages parties to contact it a minimum of two
weeks before notification. The CMA allocates a case team to review the transaction and liaise with the parties regarding
relevant jurisdictional issues and the nature and scope of the information required.
Voluntary notification (Merger Notice): Businesses can formally notify a merger to the CMA by completing a Merger
Notice.
Own-initiative investigation: The CMA conducts an own-initiative investigation if there is a reasonable prospect that its
duty to refer would be met if it investigated the transaction. In these cases, it sends the merger parties an enquiry letter, to
which the parties must respond with the requested information. Once the CMA has sufficient information, it informs the
parties and confirms the statutory deadline for its Phase 1 investigation.
Phase 1 assessment. The assessment period is 40 working days as follows:
• Day 1: The investigation period begins on the first working day after the CMA confirms to the merger parties that
it received a complete Merger Notice or that it has sufficient information (for an own-initiative investigation).
• The CMA:
• engages in information gathering and invites views from interested third parties;
• may also directly contact third parties; and
• carries out a substantive examination of the proposed transaction, taking into account the information it gathered
from publicly available sources, third parties and the merger parties.
• Days 15 to 20: The CMA holds “state of play” discussions with the parties (usually over the phone).
Page 40 of 49
[s 5] Combination
• Days 25 to 35: An issues meeting is held in cases raising more complex or material competition issues. The CMA
sends an issues letter in advance of the meeting.
• By day 40: The CMA issues a clearance decision or a decision that the test for reference to Phase 2 is satisfied.
Phase 1: Decision. The CMA makes one of the following decisions at the end of Phase 1:
• Unconditional clearance.
• Clearance subject to legally binding undertakings
• Reference for a Phase 2 investigation
• The CMA must refer a transaction if it considers that it may result in a substantial lessening of competition (SLC)
on the market or markets concerned. The CMA must refer the transaction when it believes that the merger is
more likely than not to result in an SLC. If the CMA believes the likelihood is great, but below 50%, it has a
wide margin of appreciation in exercising its judgment. In such cases, it has a duty to refer when it believes there
is a realistic prospect that the merger will result in an SLC.
Phase 2: Full investigation by the CMA
The CMA has a statutory period of 24 weeks to conduct its investigation and publish a report and it must make one of the
following decisions at the end of Phase 2:
• Unconditional clearance.
• Conditional clearance, subject to legally binding undertakings (proposed by the merging parties and negotiated
with the CMA) or the CMA’s order making powers
• Prohibition
1269 Came into force on 1 June 2011, vide S.O. 479(E), dated 4 March 2011.
1270 Subs. by Competition (Amendment) Act, 2007, section
(w.e.f. 1 June 2011). Prior to substitution, it stood as under:
(B) in India or outside India, in aggregate, the assets of the value of more than five hundred million US dollars or turnover
more than fifteen hundred million US dollars; or.
Page 41 of 49
[s 5] Combination
1271 Subs. by Competition (Amendment) Act, 2007, section. 4
(w.e.f. 1 June 2011). Prior to substitution, it stood as under:
(B) in India or outside India, in aggregate, the assets of the value of more than two billion US dollars or turnover more than
six billion US dollars; or.
1272 Subs. by Competition (Amendment) Act, 2007, section 4
(w.e.f. 1 June 2011). Prior to substitution, it stood as undder:
(B) in India or outside India, in aggregate, the assets of the value of more than five hundred million US dollars or turnover
more than fifteen hundred million US dollars; or.
1273 Subs. by Competition (Amendment) Act, 2007, section 4
(w.e.f. 1 June 2011). Prior to substitution, it stood as undder:
(B) in India or outside India, in aggregate, the assets of the value of more than two billion US dollars or turnover more than
six billion US dollars; or.
1274 Subs. by Competition (Amendment) Act, 2007, section 4
(w.e.f. 1 June 2011). Prior to substitution, it stood as undder:
(B) in India or outside India, in aggregate, the assets of the value of more than five hundred million US dollars or turnover
more than fifteen hundred million US dollars; or.
1275 Subs. by Competition (Amendment) Act, 2007, section 4
(w.e.f. 1 June 2011). Prior to substitution, it stood as undder:
Page 42 of 49
[s 5] Combination
(B) in India or outside India, the assets of the value of more than two billion US dollars or turn over more than six billion US
dollars.
1276 In exercise of the powers conferred by sub-section (3) of
section 1 of Competition Act, 2002, the Central Government appointed 1 June 2011 as the date on which sections 5, 6, 20, 29, 30
and section 31 of the Act came into force vide Notification S.O. 479(E), dated 4 March 2011.
1277 Telenor ASA, Telenor (India)
Communications Private Limited and Telenor South Asia Investments Pte Limited, decided on 3 July 2018.
1278 Section 20(3), Competition Act, 2002.
1279 The 2011 notification is no longer in force and new
notification has been enforced in 2016.
1280 The 2011 notification is no longer in force and new
notification has been enforced in 2016.
1281 Revised Threshold – Summary. Available at:
http://www.cci.gov.in/revised-thresholds. (last accessed in February 2019).
1282 The 2011 notification is no longer in
force and new notification has been enforced in 2016.
1283 Notification S.O. 988(E), dated 27 March 2017.
1284 Penalty proceedings under section 43A of
the Competition Act, 2002, against against Intellect Design Arena Limited, decided on 7 May 2018.
1285 “Regional Rural Bank” means a Regional Rural Bank
established under sub-section (1) of section 3 of Regional Rural Banks Act, 1976. (Section 2(f) of the Regional Rural Banks Act,
1976). As per section 3 the Act, Regional Rural Bank is a body corporate established by the Central Government by notification in
the Official Gazette in a State or Union territory, on the request of by a Sponsor Bank. The Central Government also specifies the
local limits within which each Regional Rural Bank shall operate.
1286 Combination Registration No. C-2015/12/344.
1287 Notification S.O. 2561(E), dated 10 August 2017.
1288 ITC Limited, Combination Registration No.C-
2017/02/485, dated 11 December 2017.
1289 Competition Commission of India (Procedure in regard to
the transaction of business relating to Combinations) Regulations, 2011
Page 43 of 49
[s 5] Combination
1290 Zuari Fertilisers and Chemicals Ltd (ZFCL),
Combination Registration No. C-2014/06/181.
1291 Ins. by the Competition Commission of
India (Procedure in regard to the transaction of business relating to cion ombinations) Amendment Regulations, 2016 vide
F.No.CCI/CD/Amend/Com.Regl/2016 dated 7 January 2016.
1292 SCM Soilfert Ltd,
Combination Registration No. C-2014/05/175.
1293 Zuari Fertilisers and
Chemicals Ltd (ZFCL), Combination Registration No. C-2014/06/181.
1294 New Moon BV,
Combination Registration No. C-2014/08/202.
1295 The Competition Commission of India
(Procedure in regard to the transaction of business relating to combinations) Amendment Regulations, 2016 vide
F.No.CCI/CD/Amend/Com.Regl/2016 dated 7 January 2016 omitted the following
“not resulting in gross acquisition of more than five per cent (5%) of the shares or voting rights of such enterprise in a
financial year”.
1296 On 1 July 2015, the CCI amended the
Regulations and added another exemption, covering cases where the CCI has conditionally approved a transaction subject to
divestitures of assets to an approved acquirer, such acquisition will not require a separate notice or approval from the CCI.
1297 Consultation prior to filing of notice of the proposed
combination. Available at: http://cci.gov.in/sites/default/files/cci_pdf/ConsultationPrior250511.pdf (last accessed in February
2019).
1298 The Competition Commission of India
(Procedure in regard to the transaction of business relating to combinations) Regulations, 2011(Combinations Regulations, 2011).
1299 Regulation 5(2), Combinations
Regulations, 2011
1300 Regulation 9, Combinations
Regulations, 2011.
1301 Regulation 5(3), Combinations
Regulations, 2011.
Page 44 of 49
[s 5] Combination
1302 Regulation 5(5), Combinations
Regulations, 2011.
1303 Regulation 5(9), Combinations
Regulations, 2011.
1304 The Commission, without prejudice to
any penalty which may be imposed or any prosecution which may be initiated under the Act, shall direct the parties to the
combination to file notice in Form I or Form II, as decided by the Commission within 30 days of receipt of communication from the
Commission.
[Regulation 8(2), Combinations Regulations, 2011].
1305 Regulation 13, Combinations
Regulations, 2011.
1306 Regulation 8, Combinations Regulation, 2011.
1307 Notification S.O. 2039(E), dated 29 June 2017.
1308 Notice shall be filed without any fee in Form III, along
with a certified copy of the loan agreement or investment agreement referred to in sub-section (5) of section 6 of the Act.
[Regulation 6, Combinations Regulations, 2011].
1309 Regulation 19, Combinations Regulations, 2011.
1310 Regulation 20, Combinations Regulations, 2011.
1311 Regulation 21, Combinations Regulations, 2011.
1312 Regulation 22, Combinations Regulations, 2011.
1313 Regulation 25, Combination Regulations, 2011.
1314 Regulation 26, Combination Regulation, 2011.
1315 Regulation 27, Combination Regulation, 2011.
1316 Regulation 28, Combination Regulation, 2011.
1317 Sections 230 and 231 of the Companies Act, 2013, are not
yet enforced.
1318 15 U.S.C. section 18 (1988). Mergers
subject to section 7 are prohibited if their effect “may be substantially to lessen competition, or to tend to create a monopoly.”
Page 45 of 49
[s 5] Combination
1319 15 U.S.C. section 1 (1988). Mergers
subject to section 1 are prohibited if they constitute a “contract, combination or conspiracy in restraint of trade.”
1320 15 U.S.C. section 45 (1988). Mergers
subject to section 5 are prohibited if they constitute an “unfair method of competition.”
1321 These Guidelines updated the Merger
Guidelines issued by the US Department of Justice in 1984 and the Statement of Federal Trade Commission Concerning Horizontal
Mergers issued in 1982. The Merger Guidelines may be revised from time to time as necessary to reflect any significant changes in
enforcement policy or to clarify aspects of existing policy.
1322 These Guidelines replaced the Horizontal Merger
Guidelines issued in 1992, revised in 1997. They reflect the ongoing accumulation of experience at the Agencies. The Commentary
on the Horizontal Merger Guidelines issued by the Agencies in 2006 remains a valuable supplement to these Guidelines. These
Guidelines may be revised from time to time as necessary to reflect significant changes in enforcement policy, to clarify existing
policy, or to reflect new learning. These Guidelines do not cover vertical or other types of non-horizontal acquisitions.
1323 Source:
https://www.ftc.gov/sites/default/files/attachments/merger-review/100819hmg.pdf (last accessed in February 2019).
1324 Available at:
https://www.ftc.gov/sites/default/files/attachments/merger-review/100819hmg.pdf (last accessed in February 2019).
1325 Id.
1326 Available at :
https://www.ftc.gov/sites/default/files/attachments/premerger-introductory-guides/guide1. pdf (last accessed in February 2019)
1327 Available at :
https://www.ftc.gov/sites/default/files/attachments/premerger-introductory-guides/guide2. pdf (last accessed in February 2019)
1328 Available at :
https://www.ftc.gov/system/files/attachments/merger-review/guide3.pdf (last accessed in February 2019)
1329 USA v Figgie International, 1997-1 Trade
Cas.(CCH) 71,766 (D.D.C.)1997.
1330 USA v Mahle GmbH, 1997-2 Trade
Cas.(CCH) 71,868 (D.D.C.)1997.
1331 Red Apple Cos, docket 9266, Civil Action
No. 97 CV 0157, 5 Trade Reg. Rep. (CCH) 24, 108.
1332 Schnuck Markets, Inc, FTC Docket No.
C-3585
Page 46 of 49
[s 5] Combination
1333 American Cyanamid Co, File No.
9510106. Available at: https://www.ftc.gov/sites/default/files/documents/cases/1997/01/amercyan.htm (last accessed in February
2019).
1334 American Home Products, FTC File No.
971 0009 (consent agreement 1997).
1335 AutoDesk, Inc/SoftDesk, Inc, FTC File
No. 971 0049, Docket No. C 3756 (31 March 1997). Available at: http://www.ftc.gov/os/1997/03/autodesk.pdf (last accessed in
February 2019).
1336 Baxter Int’l, 135 FTC 49, 97 99 (2003)
1337 The Boeing Co, Docket no. C-3723
(consent order, 5 March 1997).
1338 Cadence Design Systems, Inc, FTC File
no. 971-0033. Available at: https://www.ftc.gov/system/files/documents/cases/cadence.pdf (last accessed in February 2019).
1339 Ciba-Geigy Ltd, FTC Docket. C-3725
(consent order, 24 March 1997).
1340 Castle Harlan Partners, II LP, FTC,
Docket. C-3699 (consent order, 20 December 1996).
1341 Co-op Computing, Inc, FTC File No. 971
0013 (consent agreement, 25 February 1997).
1342
CVS/Revco, FTC, Docket. No. C-3762, FTC File No. 9710060, 124 FTC 161
1343 Dwight’s Energy Data, Inc, FTC File No.
951 0130 (consent agreement, 3 December 1996).
1344 Fresenius AG, FTC Docket. C-3689
(consent order, 15 October 1996).
1345 General Mills, Inc, FTC File No. 961
0101 (consent agreement 18 December 1996).
1346 Hale Products, Inc, FTC Docket. C-3694
(consent order, 25 November 1996).
1347 JC Penney Co (Rite Aid), FTC Docket.
C-3722 (consent order, 28 February 1997).
Page 47 of 49
[s 5] Combination
1348 Mahle GmbH, FTC File No. 961 0085
(consent agreement, 26 February 1997).
1349 Montana Associated Physicians, Inc, FTC
Docket. C-3704 (consent order, 13 January 1997).
1350 NGC Corp, FTC Docket. C-3699
(consent order, 12 December 1996).
1351 Phillips Petroleum Co, FTC File No. 961
0056 (consent agreement 27 December 1996).
1352 Tenet Healthcare Corp, FTC File No. 971
0024 (consent agreement 28 January 1997).
1353 Time Warner Inc, FTC Docket No. C-
3709 (consent order, 3 February 1997).
1354 Waterous Co, FTC Docket No. C-3693
(consent order, 22 November 1996).
1355 Wesleyjessen Corp, FTC Docket No. C-
3700 (consent order, 3 January 1997).
1356 Columbia/HCA-Healthtrust, Merger--04/21/95, FTC File
No. 951 0022
1357 Commemorative Brands, Inc, Merger-09/24/96, FTC File
No. 961 0067
1358 Compagnie de Saint-Gobain, Docket No. C-3673. 5 Trade
Reg. Rep. (CCH)
1359 Del Monte Foods Co, Docket No. C-3569
1360 Health South Corp, Merger-04/17/1995, FTC File No.
951 0007, Docket No. C-3570
1361 Home Oxygen and Medical Equipment Co, 118 FTC 661
(1994), 122 FTC 278 (1996)
1362 Onkyo USA Corp, Merger-07/02/1982, Docket C-3092
1363 The Penn Traffic Co, Merger-08/04/2010, FTC File No.
101-0074
Page 48 of 49
[s 5] Combination
1364 Schwegmann Giant Super Markets, Dkt. No. C-3584
1365 Stop & Shop Cos, Inc, FTC File No. 951 0086
1366 Richard Whish & David Bailey, Competition Law, 7th
Edn, Oxford University Press, 2012.
1367 Article 1(2)—
A concentration has a Community dimension where: (a) the combined aggregate worldwide turnover of all the undertakings
concerned is more than EUR 5000 million; and (b) the aggregate Community-wide turnover of each of at least two of the
undertakings concerned is more than EUR 250 million, unless each of the undertakings concerned achieves more than two-
thirds of its aggregate Community-wide turnover within one and the same Member State.
3. A concentration that does not meet the thresholds laid down in para 2 has a Community dimension where: (a) the
combined aggregate worldwide turnover of all the undertakings concerned is more than EUR 2500 million; (b) in each
of at least three Member States, the combined aggregate turnover of all the undertakings concerned is more than EUR
100 million; (c) in each of at least three Member States included for the purpose of point (b), the aggregate turnover of
each of at least two of the undertakings concerned is more than EUR 25 million; and (d) the aggregate Community-wide
turnover of each of at least two of the undertakings concerned is more than EUR 100 million, unless each of the
undertakings concerned achieves more than two-thirds of its aggregate Community-wide turnover within one and the
same Member State.
1368 Article 3 - Definition of concentration.
Available at: http://eur-lex.europa.eu/legal-content/EN/ALL/?uri= CELEX:32004R0139 (last accessed in February 2019).
1369 [OJ (1997) C 372/5].
1370 [OJ (2004) C 31/5].
1371 [OJ (2005) C 56/32].
1372 [OJ (2005) C 56/24].
1373 [OJ (2005) C 56/2].
1374 [OJ (2005) C 327/7].
1375 [OJ (2008) C 95/1].
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[s 5] Combination
1376 [OJ (2008) C 265/6].
1377 [OJ (2008) C 267/1].
1378 A relevant merger situation arises when the following
criteria are met:
• Two or more enterprises cease to be distinct, or will cease to be distinct, as a result of being brought under common
ownership or control.
• The jurisdictional thresholds are met.
• Either the merger has not yet taken place, or it must have taken place not more than four months before a Phase 2
There are two alternative thresholds: [The target’s UK turnover exceeds GB£70 million or the
transaction results in the creation of, or increase in, a 25% or more combined share of sales or purchases in (or in a substantial part
of) the UK, of goods or services of a particular description. Available at: https://www.gov.uk/guidance/mergers-how-to-notify-the-
cma-of-a-merger (last accessed in February 2019).
1379 Id.
End of Document
[s 6] Regulation of combinations
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > CHAPTER II
PROHIBITION OF CERTAIN AGREEMENTS, ABUSE OF DOMINANT POSITION AND REGULATION
OF COMBINATIONS > Regulation of Combinations
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
CHAPTER II PROHIBITION OF CERTAIN AGREEMENTS, ABUSE OF
DOMINANT POSITION AND REGULATION OF COMBINATIONS
Regulation of Combinations
1380[s 6] Regulation of combinations
(1) No person or enterprise shall enter into a combination which causes or is likely to cause an appreciable adverse
effect on competition within the relevant market in India and such a combination shall be void.
(2) Subject to the provisions contained in sub-section (1), any person or enterprise, who or which proposes to enter
into a combination, 1381[shall] give notice to the Commission, in the form as may be specified, and the fee
which may be determined, by regulations,1382 disclosing the details of the proposed combination, within
1383[thirty days] of—
(a) approval of the proposal relating to merger or amalgamation, referred to in clause (c) of section 5, by the
board of directors of the enterprises concerned with such merger or amalgamation, as the case may be;
(b) execution of any agreement or other document for acquisition referred to in clause (a) of section 5 or
acquiring of control referred to in clause (b) of that section.
1384[(2A) No combination shall come into effect until two hundred and ten days have passed from the day on
which the notice has been given to the Commission under sub-section (2) or the Commission has passed orders
under section 31, whichever is earlier.]
(3) The Commission shall, after receipt of notice under sub-section (2), deal with such notice in accordance with the
provisions contained in sections 29, 30 and 31.
(4) The provisions of this section shall not apply to share subscription or financing facility or any acquisition, by a
public financial institution, foreign institutional investor, bank or venture capital fund, pursuant to any covenant
of a loan agreement or investment agreement.
(5) The public financial institution, foreign institutional investor, bank or venture capital fund, referred to in sub-
section (4), shall, within seven days from the date of the acquisition, file, in the form as may be specified by
regulations, with the Commission the details of the acquisition including the details of control, the circumstances
for exercise of such control and the consequences of default arising out of such loan agreement or investment
agreement, as the case may be.
Explanation.—For the purposes of this section, the expression—
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[s 6] Regulation of combinations
(a) “foreign institutional investor” has the same meaning as assigned to it in clause (a) of the Explanation to
section 115AD of the Income-tax Act, 1961 (43 of 1961);
(b) “venture capital fund” has the same meaning as assigned to it in clause (b) of the Explanation to clause
(23FB) of section 10 of the Income-tax Act, 1961 (43 of 1961).
LEGISLATIVE BACKGROUND
The Competition Act, 2002
The provisions of this section are based on the recommendation of Raghavan Committee. Notes on clauses of the Bill
stated, thus:
Notes on clauses.—This clause, inter alia, provides that no person or enterprise shall enter into a combination which is likely to
cause or causes an appreciable adverse effect on competition within the relevant market in India. It further provides exemption
from the provisions of this clause to certain institutions specified in sub-clause (2) of the said clause. [Clause 6 of the Competition
Bill, 2001].
The Competition (Amendment) Act, 2007
Notes on clauses.—This clause seeks to amend section 6 of the Competition Act, 2002 relating to regulation of combinations.
Under the existing provisions of section 6, it is voluntary for a person or enterprise to give notice of the formation of combination
within seven days to the Commission.
It is proposed to amend sub-section (2) of section 6 so as to provide for mandatory notice of combinations to the Commission
within thirty days. It is also proposed to add sub-section (2A) providing that no combination shall come into effect until two
hundred and ten days have passed from the day on which the notice has been given to the Commission or the Commission has
passed orders under section 31, whichever is earlier. [Clause 5 of the Competition (Amendment) Bill, 2007].
SCOPE OF THE SECTION
This section seeks to regulate combinations covered by section 5.
Competition assessment of a combination involves analysis of two counterfactual market scenarios, i.e., with and without
the combination. The Commission considers the relevant factors mentioned under section 20(4) of the Competition Act,
2002 which, inter alia, includes market share of the parties to the combination, entry barriers, extent of vertical integration
and the economic strength of the parties, and determines the effect of the proposed Combination on competition in the
relevant markets. In doing so, the endeavour is to address potential adverse implications resulting from the combination
“but not to address pre-existing conditions that are not attributable to the proposed combination or problems in the
markets, in general.”1385 The Commission in the Walmart combination observed:
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8. A market structure with the presence of a large number of players, presence of a formidable competitor of sufficient scale and
size and ease of entry are some of the fundamental factors indicative of a competitive market that will not allow any competition
harm of a combination to play out in the market post combination. If combinations do not alter the competition both in the
horizontal and vertical markets based on the parameters as spelt out in section 20(4) of the Act, then the combination does not pose
any competition harm. The purpose of this assessment is to assess the extent of competition that would be lost solely as a result of
the proposed combination. In general, a combination would pose competition concerns if the parties are close competitors in
similar lines of business (horizontal overlaps, in combination parlance). Similarly, a combination between a manufacturer and
distributor who are at different stages or levels of production chain in different markets (vertical overlaps, in combination parlance)
may pose competition concerns if it is likely to foreclose the market for other distributors. The perception of competition harm
would be an assessment of the competition landscape of the relevant markets based on several factors including market share,
barriers to entry, extent of vertical integration, extent of competition likely to remain after the combination, etc.1386
Standstill clause [section 6(2A)]
The basic objective of standstill obligations contained in section 6(2A) of the Competition Act, 2002 is to ensure that the
parties to a combination transaction compete as they were competing before the initiation of combination process till the
time the transaction is reviewed for any appreciable adverse effect on competition (AAEC) and approved by the
Commission. In other words, the standstill obligations essentially require that the parties carry on with their ordinary
course activities completely independent of each other and to the fact of the combination transaction. The rationale behind
such obligations is that if the parties stop competing as they were competing before, the resulting adverse effect on
competition in the interim period cannot be restored even if the Commission based on its review decides that the
transaction is likely to result in AAEC and therefore, does not approve the same or approve with modifications, i.e., even if
the transaction is not consummated or at least not consummated in the form as originally envisaged by the parties.
Accordingly, the basis of examination of a gun jumping contravention is whether the parties have ceased to compete as
they were competing earlier or whether they have ceased to act independently as regards their ordinary course activities
pursuant to the combination transaction.1387 The Supreme Court in SCM Soilfert observed:
19...The intent of the Act is that the Commission has to permit combination to be formed, and has an opportunity to assess whether
the proposed combination would cause an appreciable adverse effect on competition. In case combination is to be notified ex-post
facto for approval, it would defeat the very intendment of the provisions of the Act. The scheme and purpose of the Act is to
provide an opportunity to the Commission to evaluate the likely effects of the proposed combination on competition and regulate
them appropriately. If parties to the combination deny this statutory opportunity provided to the Commission, the same would
attract penalty under Section 43A of Act.1388
Who should file notice?1389
(a) In case of an acquisition or acquiring of control of enterprise(s), the acquirer shall file the notice in Form I or
Form II, as the case may be.
(b) In case the enterprise is being acquired without its consent, the acquirer shall furnish such information as is
available to him, in Form I or Form II, as the case may be, relating to the enterprise being acquired.
(c) In case of a merger or an amalgamation, parties to the combination shall jointly file the notice in Form I or Form
II, as the case may be.
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(d) Where the ultimate intended effect of a business transaction is achieved by way of a series of steps or smaller
individual transactions which are inter-connected, one or more of which may amount to a combination, a single
notice, covering all these transactions, shall be filed by the parties to the combination.
The notice shall be given within 30 days of approval of the proposal for amalgamation by the Board of Directors (BOD) of
the transferor and/or transferee copy or within 30 days of execution of agreement for acquisition of control. The notice
may be given by any party, acquirer, acquired entity or transferor or transferee company. On receipt of notice, the
Commission shall inquire whether the disclosure made in the notice is correct and whether the combination has or is likely
to have an AAEC (section 30).
The Commission may suo moto issue a show cause notice to the parties to its combination under section 29 for
investigation of combination.
After enquiry, the Commission may approve the proposed combination or may propose modification to the combination or
may order that the proposed combination be not given effect to, under section 31. The Combination shall not come into
effect until 210 days of the giving notice to the Commission or it has passed order under section 31, whichever is earlier.
EXEMPTION—SUB-SECTION (4)/(5)
Acquisition of control of an enterprise by way of share subscription or financing facility by (a) public financial institution,
as defined in section 2(p); (b) foreign institutional investor; (c) bank; or (d) venture capital fund pursuant to any loan
agreement or investment agreement, is outside the scope of this section, in view of public interest involved. However,
details of acquisition including the details of control, the circumstances for exercise of such control and the consequences
of default arising out of such loan agreement or investment agreement, as the case may be, are required to be filed in the
prescribed form before the Commission within seven days of the date of acquisition for its information.
DEFINITIONS
Public Financial Institution
It is defined in section 2(p) of the Competition Act, 2002, as being those specified in section 4A of the Companies Act,
1956.1390 See Notes under section 2(p).
“Foreign Institutional Investor” and “Venture Capital Fund” [under Income-tax Act, 1961]
[s 10.23FB]. Any income of a venture capital company or venture capital fund from investment in a venture capital
undertaking.
*****
Explanation 1.—For the purposes of this clauses,—
*****
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(b) “venture capital fund” means a fund—
(A) operating under a trust deed registered under the provisions of the Registration Act, 1908 (16 of 1908),
which—
(I) has been granted a certificate of registration, before the 21st day of May, 2012, as a Venture Capital
Fund and is regulated under the Venture Capital Funds Regulations;
or
(II) has been granted a certificate of registration as Venture Capital Fund as a sub-category of Category I
Alternative Investment Fund under the Alternative Investment Funds Regulations and which fulfils the
following conditions, namely:—
(i) it has invested not less than two-thirds of its investible funds in unlisted equity shares or equity
linked instruments of venture capital undertaking;
(ii) it has not invested in any venture capital undertaking in which its trustee or the settler holds, either
individually or collectively, equity shares in excess of fifteen per cent. of the paid-up equity share
capital of such venture capital undertaking; and
(iii) the units, if any, issued by it are not listed in any recognised stock exchange; or
*****
[S 115AD] Tax on income of Foreign Institutional Investors from securities or capital gains arising from their
transfer.—(1) Where the total income of a Foreign Institutional Investor includes—
*****
Explanation.—For the purposes of this section,—
(a) the expression “Foreign Institutional Investor” means such investor as the Central Government may, by
notification in the Official Gazette, specify in this behalf;
*****
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“Foreign Institutional Investor” and “Venture Capital Fund” [under Securities and
Exchange Board of India (SEBI) Regulations]
Foreign Institutional Investor
SEBI has promulgated SEBI (Foreign Institutional Investors) Regulations, 1995.1391 Foreign Institutional Investor has
been defined in clause 2(f) of these Regulations “to mean an institution established or incorporated outside India which
proposes to make investments in Indian securities”.
To put in place a framework for registration and procedures with regard to foreign investors who propose to make portfolio
investment in India, SEBI (Foreign Portfolio Investors) Regulations, 2014 was notified. SEBI introduced a new class of
foreign investors in India known as the Foreign Portfolio Investors (FPIs). This class had been formed by merging the
existing classes of investors through which portfolio investments were previously made in India namely, the Foreign
Institutional Investors, Qualified Foreign Investors and sub-accounts of the FIIs. As per section 2(g) of the Regulations
“foreign institutional investor” means an institution that is registered under the SEBI (Foreign Institutional Investors)
Regulations, 1995.1392 Further, section 2(h) defines “foreign portfolio investor” to mean:
a person who satisfies the eligibility criteria prescribed under regulation 4 and has been registered under Chapter II of the
regulations, which shall be deemed to be an intermediary in terms of the provisions of the Act:
Provided that any foreign institutional investor or qualified foreign investor who holds a valid certificate of registration shall be
deemed to be a foreign portfolio investor till the expiry of the block of three years for which fees have been paid as per the
Securities and Exchange Board of India (Foreign Institutional Investors) Regulations, 1995.
Venture Capital Fund
SEBI has promulgated Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012. Clause
2(z) of these regulations define a venture capital fund as an Alternative Investment Fund which invests primarily in
unlisted securities of start-ups, emerging or early-stage venture capital undertakings mainly involved in new products, new
services, technology or intellectual property right-based activities or a new business model and shall include an angel fund
as defined under Chapter III-A.
FORM OF NOTICE FOR THE PROPOSED COMBINATION1393
1. Any enterprise which proposes to enter into a combination shall give notice of such combination to the
Commission in accordance with sub-section (2) of section 6 of the Act and these Regulations.
2. The notice under sub-section (2) of section 6 of the Act, shall ordinarily be filed in Form I as specified in
Schedule II to these Regulations, duly filled in and accompanied by evidence of payment of requisite fee by the
parties to the combination.
3. The parties to the combination may, at their option, give notice in Form II, as specified in Schedule II to these
regulations, preferably in the instances where—
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(a) the parties to the combination are engaged in production, supply, distribution, storage, sale or trade of similar
or identical or substitutable goods or provision of similar or identical or substitutable services and the
combined market share of the parties to the combination after such combination is more than fifteen per cent
(15%) in the relevant market;
(b) the parties to the combination are engaged at different stages or levels of the production chain in different
markets, in respect of production, supply, distribution, storage, sale or trade in goods or provision of
services, and their individual or combined market share is more than twenty five per cent (25%) in the
relevant market.
3A. The parties to the combination shall give notice in Form I or Form II, as the case may be, in accordance with the
notes to Form I and Form II issued by the Commission and published on its official website, from time to time.
4. Where in the course of inquiry, it is found by the Commission that it requires additional information, the
Commission may direct the parties to the combination to file such additional information:
Provided that the time taken by the parties to the combination in filing such additional information shall be
excluded from the period provided in sub-section (11) of section 31 of the Act and sub-regulation (1) of
regulation 19 of these Regulations.
5. Having due regard to the provisions of sub-regulations (2) and (4), in cases where the parties to the combination
have filed notice in Form I and the Commission requires information in Form II to form its prima facie opinion
whether the combination is likely to cause or has caused appreciable adverse effect on competition within the
relevant market, it shall direct the parties to the combination to file notice in Form II as specified in Schedule II to
these regulations:
Provided that the fee already paid by the parties to the combination while filing notice in Form I shall be
reduced from the fee payable for filing notice in Form II:
Provided further that the time period mentioned in sub-section (2A) of section 6 of the Act, sub-section (11)
of section 31 of the Act and sub-regulation (1) of regulation 19 of these regulations shall commence from the
date of receipt of notice in Form II.
6. If the requisite details are not available for any of the columns in Form I or Form II, the date on which they may
be submitted should be clearly indicated against those columns, by the parties to the combination: Provided that
the time taken by the parties to the combination to submit the requisite details shall be excluded from the period
provided in sub-section (11) of section 31 of the Act and sub-regulation (1) of regulation 19 of these regulations.
7. The reference to the “board of directors” in clause (a) of sub-section (2) of section 6 of the Act, shall mean and
include,—
(a) the individual himself or herself including a sole proprietor of a proprietorship firm;
(b) the karta in case of a Hindu Undivided Family (HUF);
(c) the board of directors in case of a company registered under the Companies Act, 1956 (1 of 1956);
(d) in case of a corporation established by or under any Central, State or Provincial Act or a Government
company as defined in section 617 of the Companies Act, 1956 (1 of 1956)1394 or an association of persons
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or a body of individuals, whether incorporated or not, in India or outside India or any body corporate
incorporated by or under the laws of a country outside India or a cooperative society registered under any
law relating to cooperative societies or a local authority, the person or the body so empowered by the legal
instrument that created the said bodies;
(e) in the case of a firm, the partner(s) so authorised;
(f) in the case of any other artificial juridical person not falling within any of the preceding sub-clauses, by that
person or by some other person competent to act on his behalf.
8. The reference to the “other document” in clause (b) of sub-section (2) of section 6 of the Act shall mean any
binding document, by whatever name called, conveying an agreement or decision to acquire control, shares,
voting rights or assets:
Provided that if the acquisition is without the consent of the enterprise being acquired, any document
executed by the acquiring enterprise, by whatever name called, conveying a decision to acquire control,
shares or voting rights shall be the “other document”:
1395[Provided further that where a public announcement has been made in terms of the Securities and
Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, for
acquisition of shares, voting rights or control, such public announcement shall be deemed to be the “other
document”.]
9. Where, in a series of steps or individual transactions that are related to each other, assets are being transferred to
an enterprise for the purpose of such enterprise entering into an agreement relating to an acquisition or merger or
amalgamation with another person or enterprise, for the purpose of section 5 of the Act, the value of assets and
turnover of the enterprise whose assets are being transferred shall also be attributed to the value of assets and
turnover of the enterprise to which the assets are being transferred.
“OTHER DOCUMENT”
Old Position under the Combination Regulations, 2011
Regulation 5(8): The reference to the “other document” in clause (b) of sub-section (2) of section 6 of the Act shall mean
any binding document, by whatever name called, conveying an agreement or decision to acquire control, shares, voting
rights or assets:
Provided that if the acquisition is without the consent of the enterprise being acquired, any document executed by the
acquiring enterprise, by whatever name called, conveying a decision to acquire control, shares or voting rights shall be the
“other document”:
Provided further that where such document has not been executed but the intention to acquire is communicated to the
Central Government or State Government or a Statutory Authority, the date of such communication shall be deemed to be
the date of execution of the other document for acquisition.
Instances where “other document” was interpreted by Commission
The Commission in the Tesco Combination1396 held that in terms of Regulation 5(8), the Acquirer was required to give
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notice to the Commission within 30 days of its application to the DIPP and the FIPB (i.e., by 16 January 2014). However,
the notice was given by the Acquirer on 31 March 2014, with a delay of around 73 days. The Commission noted that the
Acquirer had sought the approval of the DIPP and FIPB for the proposal to acquire 50% of the issued and paid up equity
share capital of Trent Hypermarket Ltd (THL) and that the said application inter alia mentioned that the proposed
investment by the Tesco Overseas Investments Ltd (TOIL) will include subscription of equity shares of THL and
acquisition of existing equity shares of THL from Trent. As per the Commission, the acquirer had provided enough details
of the proposed combination which demonstrate that the parties were aware about the type, nature and purpose of the
proposed combination at the time of making the said application. Penalty of INR 3 crore was imposed on the acquirer.
In the Prime Focus Ltd (PFL)/Reliance Media Works Ltd (Reliance Media) Combination,1397 it was noted that on 2 July
2014, Reliance Media and the Promoters, inter alia, caused a public announcement to be issued under the relevant
provisions of the Takeover Code, 2011 for acquisition of up to 26% of the equity share capital of PFL by way of a
mandatory open offer. As the Open Offer was part of the proposed combination, it was observed that the public
announcement was required to be communicated to SEBI and therefore, in terms of section 6(2) of the Competition Act,
2002 read with Regulation 5(8) of the Combination Regulation, 2011, the date of communication of the public
announcement to the SEBI would be deemed to be the date of execution of the “other document”.
The Commission noted from the public announcements and a press release dated 26 June 2014 issued by Alstom SA1398
that on 30 April 2014, General Electric Co (GE) made a binding offer to acquire the thermal power, renewable power and
grid businesses of Alstom SA (the parent company of Alstom India Ltd and Alstom T&D India Ltd). As part of the
transaction, GE would also indirectly acquire 68.56% of equity share capital of Target 1 and up to 75% of equity share
capital of Alstom T&D India Ltd. The Commission noted that GE together with Alstom India Ltd and Alstom T&D India
Ltd met the thresholds specified in section 5 of the Competition Act, 2002 and the aforementioned public announcements
fell within the purview of “other document” as contained in section 6(2) (b) of the Act read with regulation 5(8). The
Commission further held that in order to establish that the Acquirers failed to give notice regarding the proposed
combination to the Commission in accordance with sub-section (2) of section 6 of the Act, the following three facts are
required to be established:
• The Acquirers had an intent to acquire shares in the Targets;
• The Acquirers communicated such intent to a Statutory Authority/Central Government/State Government (in the
present case, SEBI).
• The Acquirers failed to give notice to the Commission within 30 days of communication of such intent to SEBI.
It was concluded that the binding offer made by the Acquirers qualified as intent to acquire and since GE communicated
this intent to acquire to SEBI, a statutory authority, it fulfilled the requirement of second proviso of sub-regulation (8) of
regulation 5 of the Combination Regulations and thus constituted a valid trigger for filing a notification with the
Commission under sub-section (2) of section 6 of the Competition Act, 2002. A penalty of Rs 5 crore was levied on the
acquirers.
Competition Commission of India (Procedure in regard to transaction of Business relating to
Combinations) Amendment Regulations, 2015 [notified in July, 2015]
In regulation 5, in sub-regulation (8), the second proviso, the words “the Central Government or State Government or”
shall be omitted.
Under the earlier regulations, if an intention of an acquisition was conveyed to the Central or State Government or a
statutory authority, it would trigger a filing requirement. In the past, parties have tripped (see cases above) over this
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requirement and invited penalties from the Commission. The amendments have deleted references to the Central and State
Government. The amended regulations state that in addition to an agreement between the combining parties, if an intention
of an acquisition is conveyed to a “statutory authority”, it will be a notifiable event triggering the 30-day statutory period,
within which the acquirer must notify the Competition Commission of India (CCI).
Competition Commission of India (Procedure in regard to transaction of Business relating to
Combinations) Amendment Regulations, 2016 [notified in January, 2016]
In regulation 5, in sub-regulation (8), for the second proviso, the following proviso shall be substituted, namely:
Provided further that where a public announcement has been made in terms of the Securities and Exchange Board of India
(Substantial Acquisition of Shares and Takeovers) Regulations, 2011, for acquisition of shares, voting rights or control,
such public announcement shall be deemed to be the “other document”.
Earlier, in case of an acquisition, the acquirer was required to notify the Commission within 30 calendar days from the date
of execution of the “binding document or other document”. The Combination Regulations explained that where a binding
document had not been executed but the intention to acquire had been communicated to a Statutory Authority, the date of
such communication would be deemed to be the date of execution of the “other document”. The communication with a
Statutory Authority is no longer a trigger to filing a notice with the Commission. The new second proviso to regulation
5(8) of the Combination Regulations states that where a public announcement has been made in terms of the Takeover
Code, 2011, for the acquisition of shares, voting rights or control, such public announcement would be considered as the
trigger to filing the notice with the Commission.
OBLIGATION TO FILE THE NOTICE1399
1. In case of an acquisition or acquiring of control of enterprise(s), the acquirer shall file the notice in Form I or
Form II, as the case may be, which shall be duly signed by the person(s) as specified under regulation 11 of the
Competition Commission of India (General) Regulations, 2009.
Provided that in case of a company, apart from the persons specified under clause (c) of sub-regulation (1) of
regulation 11 of the Competition Commission of India (General) Regulations, 2009, Form I or Form II may
also be signed by any person duly authorised by the 1400[company].
2. In case the enterprise is being acquired without its consent, the acquirer shall furnish such information as is
available to him, in Form I or Form II, as the case may be, relating to the enterprise being acquired:
Provided that all information required to be filed, relating to the enterprise being acquired shall be filed with
the Commission within fifteen days from filing of the notice and in case the acquirer is not in a position to
furnish all the required information in Form I or Form II, as the case may be, relating to the enterprise being
acquired, the Commission may direct the enterprise being acquired to furnish such information as it deems fit
and the time taken by the parties to the combination or the acquired enterprise, as the case may be, in
furnishing the required information including document(s) shall be excluded from the period provided in
sub-section (11) of section 31 of the Act and sub-regulation (1) of regulation 19 of these Regulations.
3. In case of a merger or an amalgamation, parties to the combination shall jointly file the notice in Form I or Form
II, as the case may be, duly signed by the person(s) as specified under regulation 11 of the Competition
Commission of India (General) Regulations, 2009.
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Provided that in case of a company, apart from the persons specified under clause (c) of sub-regulation (1) of
regulation 11 of the Competition Commission of India (General) Regulations, 2009, Form I or Form II may
also be signed by any person duly authorised by the 1401[company].
4. Where the ultimate intended effect of a business transaction is achieved by way of a series of steps or smaller
individual transactions which are inter-connected 1402[***], one or more of which may amount to a
combination, a single notice, covering all these transactions, shall be filed by the parties to the combination.
5. The requirement of filing notice under regulation 5 of these regulations shall be determined with respect to the
substance of the transaction and any structure of the transaction(s), comprising a combination, that has the effect
of avoiding notice in respect of the whole or a part of the combination shall be disregarded.
BELATED NOTICE1403
Where a notice filed in Form I or Form II under sub-regulations (2) or (3) of regulation 5 of these Regulations is received
in the Commission beyond the time limit mentioned in sub-section (2) of section 6 of the Act, the Commission may,
without prejudice to other provisions including that of section 43A of the Act, admit such notice.
FAILURE TO FILE NOTICE1404
1. Where the parties to a combination fail to file notice under sub-section (2) of section 6 of the Act, the
Commission may under sub-section (1) of section 20 of the Act, upon its own knowledge or information relating
to such combination, inquire into whether such a combination has caused or is likely to cause an appreciable
adverse effect on competition within India.
2. Where the Commission decides to commence an inquiry, referred to in sub-regulation (1), the Commission,
without prejudice to any penalty which may be imposed or any prosecution which may be initiated under this
Act, shall direct the parties to the combination to file notice in Form I or Form II, as decided by the Commission.
3. The notice, referred to in sub-regulation (2), shall be filed, within 30 days of receipt of communication from the
Commission, by the parties to the combination.
PENALTY FOR DELAYED FILING
Under section 6(2) of the Competition Act, 2002, any person or enterprise, who or which proposes to enter into a
combination, shall give notice to the Commission, disclosing the details of the proposed combination within 30 days of: (a)
approval of the proposal relating to merger or amalgamation, referred to in clause (c) of section 5, by the BOD of the
enterprises concerned with such merger or amalgamation, as the case may be; (b) execution of any agreement or other
document for acquisition, referred to in clause (a) of section 5 or acquiring of control referred to in clause (b) of that
section. Under the Competition Act, 2002 if any proposed combination exceeds the threshold of assets and/or turnover
specified in section 5 of the Competition Act, 2002, the person/enterprise needs to intimate the same to the CCI within 30
days of board approval/entering into of the agreement for combination for approval.
CASES UNDER THE COMPETITION ACT, 2002
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[s 6] Regulation of combinations
The Commission received a notice under section 6(2) of the Competition Act, 2002 of the proposed combination between
Dewan Housing Finance Corporation Ltd (DHFL),1405 First Blue Home Finance Ltd (First Blue) and DHFL Holding Pvt
Ltd (DHPL) pursuant to a scheme of amalgamation. The BOD of each of the parties approved the scheme, through
separate resolutions on 28 September 2011. The parties also submitted an application for condonation of delay (around 388
days) in filing notice. The parties attributed the delay to the wrong legal advice given to them. The Commission, however,
noted that while delay on account of incorrect legal advice may be regarded as a mitigating factor in levying penalty, it
could not be done so in the present matter, considering the inordinate delay on part of the parties to give notice even after
clarifications regarding necessary requirement of notice in merger/amalgamation between parent and subsidiary was made
by the Commission in other cases. Accordingly, the Commission imposed a penalty of Rs 5 lakhs on the parties to be paid
within 60 days from the date of receipt of the order.
Jet-Etihad Deal:1406 On 1 May 2013, the Commission received a notice given by Etihad Airways PJSC (Etihad) and Jet
Airways (India) Ltd (Jet) pursuant to an Investment Agreement (IA), a Shareholder’s Agreement (SHA) and a Commercial
Co-operation Agreement (CCA), all executed on 24 April 2013. The Parties sought the Commission’s approval for the
acquisition of 24% equity interest in Jet by Etihad and in relation to all the rights and benefits which the parties have
commercially agreed upon in the amended SHA, CCA and CGC. The parties had also entered into agreements on 26
February 2013 regarding sale of three landing/take-off slots of Jet at London Heathrow Airport to Etihad; and lease of the
same slots back to Jet (LHR Transaction). The Commission while approving the transaction noted that some provisions of
CCA were already operational. Also sale of certain landing/take-off slots of Jet at the London Heathrow Airport (LHR
Transaction) had not been notified before consummation. Accordingly, the Commission imposed a penalty of Rs 1 crore
on the parties.
Similarly, in the notice given by Titan International, Inc (Titan International or Acquirer) and Titan Europe PLC (Titan
Europe),1407 involving the acquisition of the entire share capital of Titan Europe by Titan International, as a consequence
of which Titan International has indirectly acquired 35.91% equity share capital of Wheels India Ltd (Wheels India) from
Titan Europe, the Commission noted that the parties had reached an agreement on the terms of the recommended share
offer for the acquisition of entire share capital of Titan Europe on 10 August 2012 and therefore, in terms of section 6(2) of
the Competition Act, 2002, the Acquirer ought to have given the notice to the Commission within 30 days of reaching the
said agreement. However, the Acquirer gave the notice to the Commission only on 4 February 2013 with a delay of around
147 days and that too after the combination had already taken effect. The Commission in view of the fact that since both
Titan International and Titan Europe were based outside India and the said combination resulted from the acquisition of
one foreign enterprise based outside India by another foreign enterprise based outside India with the parties,
notwithstanding the delay, voluntarily giving the notice, took a lenient view and imposed a smaller amount of penalty on
the Acquirer (INR 1 crore) under the provisions of section 43A of the Act.
In the Zulia Investments Pte Ltd and Kinder Investments Pte Ltd [indirect wholly-owned subsidiaries of Temasek Holdings
Pvt Ltd (Temasek)] combination notice, it was argued that the reason for the delay (399 days) was due to incorrect advice
from their initial Indian counsel regarding the notification requirement and also since the transaction had been abandoned
and the SPA terminated leading to non-consummation of the impugned transaction, no penalties ought to be imposed. The
Commission, however, rejected the arguments and noted that both Temasek and DBS Group Holdings Ltd (DBSH) had
been operating in India for a long time and therefore, they cannot plead ignorance of the law. The Commission also held
that regulatory compliance in terms of timely filing of the notice of the proposed combination and the ultimate fate of the
transaction are two entirely different issues and therefore, the argument of non-consummation of transaction is not valid.
Accordingly, a penalty of Rs 50 Lakhs was levied on the parties.1408
The Commission in 2014 in the matter of Tesco Overseas Investment Ltd (TOIL) and Trent Hypermarket Ltd (THL)1409
approved the combination under section 31(1) of the Competition Act, 2002 but also levied a penalty of Rs 3 crore on
TOIL for its failure to notify the combination within 30 days of the trigger event.1410 The notice was given pursuant to the
execution of a Share Purchase Agreement (SPA) and a Joint Venture Agreement (JV Agreement) between TOIL, THL and
Trent Ltd (Trent) relating to TOIL’s acquisition of 50% of the issued and paid-up equity share capital of THL. The
Commission held that the application of TOIL to the Department of Industrial Policy and Promotion (DIPP) and Foreign
Investment Promotion Board (FIPB) on 17 December 2013 to seek requisite approval with regard to the Proposed
Combination was the trigger event and notice ought to have been filed 30 days after that. The Commission also noted that
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TOIL had given adequate information about the proposed transaction in its application to FIPB and DIPP for it to qualify
as a communication of “intention to acquire”.
The Commission in a recent matter, after taking suo-moto cognisance of the two public announcements dated 5 May 2014,
imposed a penalty of Rs 5 crores on GE Energy Europe BV, GE and GE Industrial France SAS (acquirers) for failure to
notify the proposed combination relating to acquisition of up to 26% of the total paid-up equity share capital of Alstom
India Ltd and acquisition of up to 25% of the total paid-up equity share capital of Alstom T&D India Ltd (collectively
Targets) in terms of section 6(2)(b) of the Competition Act, 2002 (Act) read with regulation 5(8) of Combination
Regulations, 2011. The Commission was of the view that the Acquirers were required to give notice within 30 days of the
public announcements, i.e., 6 April 2014. The Commission noted that the intent to acquire would include unilateral
measures such as public announcements under the Takeover Regulations. Further, the public announcements would
constitute a “communication” within the purview of second proviso to regulation 5(8) of the Combination Regulations.
While determining the quantum of penalty, the Commission considered (a) the bona fide conduct of the Acquirers as
regards the intent to file the notice, albeit after the expiry of statutory timelines; and (b) the fact that the combination was
not consummated by the Acquirers without the approval of the Commission.1411
In another matter, the Commission had imposed a penalty on the party for delayed filing. Appeal1412 was filed against the
Commission’s order imposing a fine of Rs 5 crores on Piramal Enterprises Ltd for failure to give notice of combination.
On 10 May 2013, the Appellant acquired equity stake of 9.96% in Shriram Transport Finance Co Ltd (STFC) by way of
block purchase of 2,26,00000 shares of the said company at BSE for a consideration of Rs 1635.96 crores through a broker
UBS Security India Pvt Ltd. The Appellant through a Collaboration agreement dated 17 April 2014 acquired an effective
20% equity stake in Shriram Capital Ltd (SCL). SCL was incorporated in 1974 and acted as an investment holding
company for the financial services entities of Shriram group and was the promoter of STFC. Along with the equity stake
and the right to appoint two directors on the board of SCL, the Appellant acquired certain affirmative voting rights at the
Board and shareholder levels for certain matters. On 3 June 2014, the Appellant acquired 9.99% stake in Shriram City
Union Finance Ltd (SCUF) pursuant to a preferential allotment of 6,57,9840 equity shares of Rs 10 each at a price of Rs
1200 per equity share, which meant a premium of Rs 1190 per equity share. SCUF was established in 1986 and specialised
in retail finance. It was promoted by SCL and was listed on the BSE & NSE. The Commission considered the submissions
of the Appellant and came to the conclusion that the three acquisitions by the Appellant were inter-connected and were
made strategically to enter into a partnership with and to acquire (joint) control over the financial services business of the
Shriram group of companies. The Commission listed the affirmative voting rights acquired along with the 20% equity
stake, to hold that consent of the Appellant was required for strategic commercial decisions of SCL and noted that the
appellant had admitted that the SCL Transaction was a notifiable combination under the provisions of the Competition Act,
2002 as it resulted in an acquisition of “control” under the Act. Accordingly, the Commission imposed penalty of Rs 5
crore, vide its order dated 2 May 2016, which was approximately 0.005% of the value of the worldwide assets of the
combination. The fact that the Appellant consummated the combination was considered as an aggravating factor. However,
the Commission considered the following mitigating factors while determining the quantum of penalty:
(a) absence of mala fide intention to evade compliance of the provisions of the Act;
(b) no previous instances of violation of the provisions of the Act or the Combination Regulations; and (c) the Appellant’s
cooperation with the Commission pursuant to the Commission’s inquiry under sub-section (1) of section 20 of the Act.
The Tribunal in appeal upheld the decision and the penalty imposed by the Commission. The Tribunal held that the three
acquisitions were inter-connected with the ultimate intended effect of gaining “control” in terms of section 5 of the
Competition Act, 2002 of the financial service entities of the Shriram Group. These acquisitions constituted entering into a
combination notifiable under section 6(2) of the Act.
Exemption from 30 days filing deadline
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The Ministry of Corporate Affairs, in exercise of the powers conferred by clause (a) of section 54 of the Competition Act,
2002, has issued a notification,1413 in public interest, exempting every person or enterprise who is a party to a
combination as referred to in section 5 of the said Act from giving notice within 30 days mentioned in sub-section (2) of
section 6 of the said Act, subject to the provisions of sub-section (2A) of section 6 and section 43A of the said Act, for a
period of five years from the date of publication of the notification. The measure has been taken to alleviate the concerns
of stakeholders who felt constrained by the 30 days deadline stipulated in the Act for submission of notices of combination
to the Competition Commission of India. Enterprises now will be free to submit notice of combinations to the Commission
at a time convenient to them but prior to giving effect to such combinations. This move will help bring down the number
of cases related to delayed filings.
Notification of merger given prior to trigger event
The Commission received a notice under sub-section (2) of section 6 of the Competition Act, 2002 of the proposed
combination jointly filed by Aditya Birla Nuvo Ltd (ABNL), Peter England Fashions and Retail Ltd (PEFRL), Indigold
Trade and Services Ltd (ITSL), Pantaloon Retail (India) Ltd (PRIL) and Future Value Fashion Retail Ltd (FVFRL)
pursuant to a Memorandum of Understanding (MoU) between parties. The Notice stated that ABNL, through its wholly-
owned subsidiary PEFRL proposed to acquire the Pantaloons format business of PRIL by way of a demerger on a going
concern basis; and merger of FVFRL into PEFRL, pursuant to a scheme of demerger and merger (Scheme of
Arrangement), for which the parties have signed the said MoU. The MoU also contemplated a series of other transactions
to be consummated alongside the Scheme of Arrangement namely: (i) ITSL and/or its affiliates may make a voluntary
open offer in accordance with Takeover Code and acquire further shares of another entity if required; (ii) A wholly-owned
subsidiary of ABNL would invest an amount of INR 800 crores in PRIL by way of optionally fully convertible debentures
(OFCD) convertible into approximately 13.15% of the equity share capital of PRIL, unless such OFCDs are cancelled
upon completion of demerger or redeemed earlier. At the time of the filing of the Notice the scheme was still under
finalisation and was yet to be approved by the BOD of the parties and that negotiations were currently underway. The
share entitlement ratio, the valuation reports and fairness opinion were also all under preparation.
The Commission held that the notice by the parties notifying about the proposed acquisition was invalid in terms of
regulation 14 read with regulation 5 of the Combination Regulations. The Commission rejected the argument regarding the
applicability of section 6 of the Competition Act, 2002 being triggered on signing of the MoU and held that the signing of
the MoU was only the first step towards negotiations between the parties in relation to the finalisation of the scheme,
valuation, exact scope of the assets to be acquired, share entitlement ratio and also approval of the same by the BOD of the
respective parties. The Commission further held that the MoU entered into between the parties was an interim arrangement
and could not be considered as a binding agreement due to the terms and conditions prescribed therein and the same would
be terminated upon execution of definitive agreements or failure to get approval from BOD of respective parties or
rejection of scheme by the Courts under sections 391–394 of the Companies Act, 1956. The resolution(s) of the BOD of
the parties submitted along with the Notice, did not pertain to the approval of the proposal relating to demerger or merger
pursuant to a Court sanctioned scheme under sections 391–394 of the Companies Act, 1956, as provided under sub-section
(2) of section 6 of the Competition Act, 2002. In view of the above, the Commission held that Notice filed by the parties
was invalid as done prior to triggering of relevant provisions of the Competition Act, 2002 and in violation of the
Regulations.
OBLIGATION TO PAY THE FEE AND AMOUNT OF FEE1414
The person or enterprise filing notice under regulation 5 or regulation 8 of the regulations shall pay the fee1415 as
specified under regulation 11 of these Regulations. The amount of fee payable alongwith the notice in Form I or Form II,
as the case may be, shall be as under:—
(a) where the notice is filed in Form I, the fee payable shall be rupees fifteen lakhs (Rs. 15,00,000) only;
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(b) where the notice is filed in Form II, the fee payable shall be rupees fifty lakhs (Rs. 50,00,000) only;
Where the notice is filed jointly, the fee shall be payable jointly or severally.
CONSULTATION PRIOR TO FILING OF NOTICE OF THE PROPOSED COMBINATION
UNDER SUB-SECTION (2) OF SECTION 6 OF THE COMPETITION ACT, 2002
1. In accordance with international best practices, the Competition Commission of India allows for an informal and
verbal consultation with the staff of the Commission prior to filing of the notice to a proposed combination in
terms of regulation 5 of Competition Commission of India (Procedure in regard to the transaction of Business
relating to Combinations) Regulations, 2011 (“Combination Regulations”), under sub-section (2) of section 6 of
the Competition Act, 2002.
2. Such pre-filing consultations will help the parties intending to file a notice with the Commission in identifying
the information required for filing a complete and correct Form I/II/III as well in identifying additional
information that the Commission may require to assess the likely impact of the proposed combination on
competition in the relevant markets.
3. The parties intending to file a notice with the Commission are encouraged to approach the Commission for pre-
filing consultations. A request for pre-filing consultation should be made by the parties intending to file a notice
at the earliest and at least 10 days before the intended date of filing, to allow time for allocating a case team for
the pre-filing consultation. A copy of draft application comprising of Form I/II/III, as the case may be and
supporting documents should be forwarded along with the request for scheduling a pre-filing consultation. A
summary of the proposed combination along with the following details should also be submitted:
(a) Basic details of the proposed combination including various steps involved in the same;
(b) A brief description of the relevant market(s) and sector(s) involved;
(c) The likely impact of the proposed combination on competition in those markets and sectors in general terms;
(d) Key issues regarding which the parties wish to seek consultation from the Commission;
(e) Any other details which according to the parties may be pertinent for a meaningful consultation.
4. It may be noted that the Commission may not respond to requests which are general in nature or which do not
sufficiently describe the factual situation, or which involve hypothetical situations.
5. For seeking an appointment for a pre-filing consultation, the parties to the proposed combination should contact
the Combination Division on email id: cci-consult@nic.in with the subject “Request for pre-filing consultation
for proposed filing on [Insert proposed date of filing]”. It may be noted that such consultations are generally
scheduled within 5-7 days of receipt of the request for consultation. The presence of legal advisors as well as
business representatives who have strong understanding of the relevant market is strongly recommended in the
pre-filing consultations.
6. With regard to the clarification of issues pertaining to sections 5 and 6 of the Competition Act, 2002 and the
Combination Regulations, a request for pre-filing consultations must be sent at least 5-7 days before the meeting
is requested to be scheduled. Complete and sufficient details regarding facts of the case including the
sector/relevant market, legal provisions, decisional practices of the Commission and of other jurisdictions (if
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available and material to the facts of the case) should be provided in the request for pre-filing consultations on
interpretational issues. The email seeking pre-filing consultation may be sent to the email id: cciconsult@nic.in
with the subject “Request for pre-filing consultation on interpretational issues”.
7. Prior to the consultation, the staff of the Commission may also ask the parties to provide additional information.
It may be noted that guidance would be given as an additional assistance facility, and would not be deemed to be
the opinion of the Commission in any manner, whatsoever, and such guidance will not be binding on the
Commission. Such consultation is held in strict confidence and is without prejudice to the assessment of the case
on receipt of the formal notice.
PROCEDURE FORREQUESTING MEETINGS IN COMBINATION CASES
The parties to a combination who intend to meet the officers of the Combination Division regarding a notice which is
under review of the Commission should send the written request to cdmeeting@cci.gov.in with the subject as “Meeting
Request for Case no. [insert case registration no.].” The request for meeting should clearly indicate the agenda for the
meeting. Further, the name of the participants should be provided along with contact details of at least one of the
participants. Such requests should preferably be sent at least 3 days in advance so that the availability of all concerned may
be confirmed. It is requested that wherever possible, business heads and/or general counsels of the parties to the
combination should be present for all meetings with the Combination Division.
PROCEDURE FOR FILING NOTICE1416
1. The duly filled in 1417[***] notice under regulation 5 or regulation 8 of the regulations along with one copy and
an electronic version thereof shall be delivered to the Commission at the address published on its official website
with a summary of the combination, not containing any confidential information, in not less than 2000 words,
comprising inter alia the details regarding:
(a) the products, services and business(es) of the parties to the combination;
(b) the values of assets/turnover for the purpose of section 5 of the Act;
(c) the respective markets in which the parties to the combination operate;
(d) the details of agreement(s)/other documents and the board resolution(s) executed/passed in relation to the
combination;
(e) the nature and purpose of the combination; and
(f) the likely impact of the combination on the state of the competition in the relevant market(s) in which the
parties to the combination operate, along with nine copies and an electronic version thereof shall be
separately given while delivering the notice under sub-regulation (1).
A summary of the combination, not containing any confidential information, in not more than 500
words, comprising details regarding: (a) name of the parties to the combination; (b) the type of the
combination; (c) the area of activity of the parties to the combination; and (d) the relevant market(s) to
which the combination relates, along with an electronic version thereof shall be separately given while
delivering the notice. The summary submitted under this sub-regulation shall be published on the
website of the Commission.
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2. All responses or other documents required to be filed before the Commission consequent to the filing of the
notice under regulation 5 or regulation 8 of the Regulations shall also be filed as per the procedure. The Secretary
may through public announcement inform the procedure for electronic filing, increase or decrease the number of
copies or vary the format in which the electronic version is to be filed.
Mode of service of notice(s)1418
Mode of service of notice shall be in the manner as provided in regulation 22 of the Competition Commission of India
(General) Regulations, 2009 or by electronic transmission as considered appropriate by the Commission.
Scrutiny of notice – Power of Commission to invalidate notice1419
The notice to be valid should be complete and in conformity with the Regulations. The Commission may, after recording
reasons, invalidate a notice filed under regulation 5 or regulation 8 of the regulations when it comes to the knowledge of
the Commission that such notice is not valid and, in that case, the Secretary shall convey the decision of the Commission
to the parties to the combination within seven days of such decision of the Commission. The Commission however, has to
give an opportunity of being heard to the parties to the combination1420 before invalidating the notice.1421 The period
between the commencement of proceedings till the decision of the Commission regarding validity of the notice, shall be
excluded from the period specified in section 31(11) of the Competition Act, 2002 and 19(1) of the Combination
Regulations.
Parties to combination may also seek to remove such defect(s) or furnish the required information including document(s) if
they feel that the notice is incomplete. The parties shall comply with the directions within the time specified by the
Commission and in the case of the notice filed under regulation 5 the time taken by the parties in removing such defects or
furnishing the required information including document(s) shall be excluded from the period provided section 31(11) of the
Competition Act, 2002 and 19(1) of the Combination Regulations. In case the parties fail to remove the defects or fail to
furnish the required information including documents(s), within the time specified, the notice filed under regulation 5 or
regulation 8 of the regulations shall not be treated as a valid notice.
Intimation of any change1422
The parties to the combination having filed a notice shall inform the Commission of any change in the information
provided in the notice to the Commission at the earliest during the continuation of the proceedings under the Competition
Act, 2002. The Secretary shall place the information relating to any change in the notice before the Commission not later
than the third working day of its receipt in the Commission. The Commission shall assess the significance of the
information relating to that change and, if satisfied, take on record the information received. Where the Commission is of
the view that the change is likely to affect the factors for the determination of the AAEC significantly, it may, after giving
an opportunity of being heard and after recording reasons, treat the notice already filed as not valid.
Under the existing provision, if in the opinion of the Commission, any material change in the notice filed which is likely to
affect the factors for determination of the AAEC, it has to invalidate the notice filed, after recording reasons, and after
giving the parties an opportunity to be heard. The new Procedure in regard to the transaction of business relating to
combinations Amendment Regulations, 2018 gives the parties to combination an option to address the material
deficiencies in the notice without facing an invalidation by the CCI.
16A. Withdrawal and refiling of notice.-
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1. At any time prior to the issuance of notice under sub-section (1) of section 29 of the Act, the Commission may on the
request of the parties to the combination allow withdrawal and refiling of the notice given under regulation 5 or
regulation 8 of these regulations.
2. In case of withdrawal of notice under sub-regulation (1), the fee already paid in respect of such notice shall be adjusted
against the fee payable in respect of new notice given by the parties to the combination provided the new notice is given
within three months from the date of withdrawal.
Prima facie opinion on the combination1423
The Commission shall form its prima facie opinion under section 29(1) of the Competition Act, 2002 on the notice filed in
Form I or Form II, as the case may be, as to whether the combination is likely to cause or has caused an AAEC within the
relevant market in India, within thirty working days of receipt of the said notice.
The Commission may require the parties to the combination to file additional information or accept modification, if offered
by the parties to the combination before the Commission has formed prima facie opinion. Again, the time taken by the
parties to the combination, in furnishing the additional information or for offering modification shall be excluded from the
period provided in regulation 19(1) and section 31(11) of the Competition Act, 2002.
In such a case where the modification is offered by the parties to the combination before the Commission has formed the
prima facie opinion, the additional time, not exceeding fifteen days, needed for evaluation of the offered modification,
shall be excluded from the period provided in regulation 19(1) and section 31(11) of the Competition Act, 2002.
The Commission may also call for information from any other enterprise while inquiring as to whether a combination has
caused or is likely to cause an AAEC in India. The time taken in obtaining the information from such enterprise(s) shall be
excluded from the time, not exceeding 15 working days, provided in regulation 19(1).
Calling for a report from the Director General1424
After receipt of the response to the notice to show cause from the parties to the combination, the Commission may decide
to call for a report from the Director General. The Secretary shall convey the direction of the Commission to the Director
General, along with copy of the notice filed by the parties to the combination with all other documents, materials,
affidavits, statements, which have been filed or are otherwise available with the said notice, the notice to show cause to the
parties to the combination and response of the parties to the same.
Director General’s report1425
The Director General shall include in his report the basis of having reached the conclusions therein together with all
evidences or documents or statements collected during the investigation and analysis thereof. Two copies of the report of
the Director General duly signed on each page by the Director General, or his authorised officer, along with an electronic
version in document format, shall be forwarded to the Secretary within the time specified by the Commission.
Publication of the details of the combination1426
Where the Commission is of the prima facie opinion that the combination has caused or is likely to cause AAEC within the
relevant market in India, the Secretary shall, within four working days of such decision convey the direction of the
Commission to the parties to the combination, to publish the details of the combination within 10 working days of the date
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of such direction. The details of combination shall be published by the parties in Form IV (sch II, Combination
Regulations, 2011). The details of combination shall be published on the official website of the Commission and also on
the websites of the respective enterprises. The parties shall also publish the details of the combination in all India editions
of four leading daily newspapers including at least two business newspapers. Proof of publication has to be submitted to
the Secretary not later than the 15th day of the direction of the Commission for publication of the details of the
combination.1427
Modification to the proposed combination1428
Where the Commission is of the opinion that combination has or is likely to have AAEC but such adverse effect can be
eliminated by suitable modification to such combination, it may propose appropriate modification to the combination to
the parties to such combination and where the parties to the combination have accepted the modification proposed by the
Commission or the Commission agrees with the amendment to the proposed modification by the parties and approves the
combination or the parties, in terms of the provisions of sub-section accept the modification proposed by the Commission,
the parties to the combination shall carry out such modification as per the terms and conditions and within the period as
may be specified by the Commission and submit an affidavit to that effect. The Commission then shall approve the
combination.
If the parties to the combination fail to accept the modification proposed by the Commission within the time referred to in
section 31(6) of the Competition Act, 2002 or within a further period referred in section 31(8) of the Act, the combination
shall be deemed to have an AAEC and be dealt with in accordance with the provisions of the Act.
The parties to the combination shall, upon completion of modification, file a compliance report for the actions required for
giving effect to the combination before the Secretary within seven days of such completion. In case the parties to the
combination fail to file the compliance report, the Secretary shall place the matter of such non-compliance before the
Commission for appropriate directions.1429 The Commission may also appoint independent agencies to monitor the
modifications.1430 These agencies should be independent of the parties to the combination having no conflicts of interest
and may include an accounting firm, management consultancy, law firm, any other professional organisation, or part
thereof, or independent practitioners of repute. The payment to the agencies shall be made by the parties to the
combination by depositing it with the Commission or as may be directed by the Commission.
Voluntary modification
Parties to combinations can now submit remedies voluntarily in response to the notice issued under section 29(1) of the
Competition Act, 2002. If such remedies are considered sufficient to address the perceived competition harm, the
combination can be approved.1431 The following has been added by the 2018 Amendment.
Prior to issue of show-cause notice
In regulation 19, for sub-regulation (2), the following sub-regulation shall be substituted,
namely:-
“(2) Before the Commission forming an opinion under sub-section (1) of section 29 of the Act, the
parties to the combination may offer modification to the combination and on that basis, the Commission may approve the proposed
combination under sub-section (1) of section 31 of the Act: Provided that where modification is offered by the parties to the
combination, the additional time, not exceeding fifteen days, needed for evaluation of the offered modification, shall be excluded
from the period provided in sub-regulation (1) of this regulation, sub-section (2A) of section 6 of the Act and sub-section (11) of
section 31 of the Act.”;
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After issue of show-cause notice
In regulation 25, after sub-regulation (1), the following sub-regulation shall be inserted, namely:-
“(1A) Along with their response to the notice issued under sub-section (1) of section 29 of the Act,
the parties to the combination may offer modification to address the prima facie concerns in the said notice and on that basis, the
Commission may approve the proposed combination under sub-section (1) of section 31 of the Act:
Provided that in such a case, the additional time, not exceeding fifteen days, needed for
evaluation of the modification offered, shall be excluded from the period provided in sub-section (2A) of section 6 of the Act, sub-
section (2) of section 29 of the Act and subsection (11) of section 31 of the Act.”;
The notifying parties can after the above-mentioned amendment offer modifications even while providing their response to
the show cause notice and the CCI can, on the basis of such voluntary modifications, approve the combination.
Cases where modifications to combination were made
In Re Holcim Ltd,1432 the Commission received a notice under sub-section (2) of section 6 of the Competition Act, 2002
of the proposed combination structured as an acquisition of shares falling under section 5(a) of the Act. In pursuance to the
proposed combination, Holcim Ltd (Holcim) would file a public offer for all outstanding shares of Lafarge SA (Lafarge).
Each Lafarge shareholder tendering Lafarge shares to the contemplated public exchange offer initiated by Holcim would
receive nine Holcim shares for 10 Lafarge shares. Therefore, pursuant to the proposed combination, Lafarge would become
a subsidiary of Holcim. The offer would be subject to Holcim holding at least 2/3rd of the share capital and voting rights of
Lafarge on a fully diluted basis. The new entity would be named as “Lafarge Holcim” and will be listed on SIX Swiss
Exchange and Euronext, Paris. The Commission formed a prima facie opinion that the proposed combination was likely to
cause an AAEC within the relevant markets in India and therefore, decided to issue a show-cause notice to the Parties in
terms of sub-section (1) of section 29 of the Competition Act, 2002.
Relevant Market: For the purpose of competition assessment, the Commission identified two product segments on the
basis of product overlaps between the Parties in India, viz., cement and ready mix concrete (RMC). The Commission
observed that white cement and grey cement differs in terms of their physical characteristics and intended use and
therefore, constituted separate relevant product markets and that different varieties of grey cement were considered to be
largely interchangeable. The Commission further noted that in India, the Parties operated in the grey cement segment only.
Accordingly, the Commission decided that the relevant product market for the purpose of competition assessment of the
proposed combination would be market for grey cement.
The Commission noted that cement being a bulk commodity, involved significant transportation costs and, therefore, the
consumption of cement was generally centered on the production clusters, which were located in the vicinity of limestone
resources. From the perspective of demand and supply, these self-contained areas, having homogeneous conditions of
competition, constituted the relevant geographic market from the point of view of the competition assessment. Applying
the Elzinga Hogarty Test, the Commission decided that the relevant geographic market for the Eastern region may be
defined in terms of area comprised by the states of Chhattisgarh, Odisha, West Bengal, Bihar and Jharkhand.
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AAEC: The Commission was of the opinion that the proposed combination was likely to have an AAEC in India in the
relevant market for grey cement in the Eastern region because of the following factors:
Level of concentration: The change in HHI1433 in terms of both current installed capacity and the installed capacity likely
to be in operation by the end of 2015 was substantial and the proposed combination had the impact of significantly
increasing concentration in the relevant market.
Countervailing buying power: A substantial part of the market comprised of small consumers who generally did not have
countervailing buying power.
Constraints exerted by competitors: The second biggest player in the relevant market was Ultratech, with a market share of
17% in terms of installed capacity. The other players were relatively small and, therefore, had limited reach both in terms
of capacity and area.
Entry barriers: There were significant entry barriers in cement industry. These were in the form of high costs of
installation of a production line, logistics relating to location of a cement plant, availability of limestone and energy
requirements and distribution networks, etc.
Pre-combination degree of competition between the Parties: Both the Parties were premium players and close competitors
in the relevant market. Their ability to charge high prices together with their control over substantial installed capacity in
the region suggested the possibility of AAEC, post the proposed combination.
Prevailing Market structure: Cement industry in India was oligopolistic in nature. Factors such as homogeneous product,
relatively small sale transactions and entry barriers made the cement industry in India prone to collusion and under such
circumstances, the likelihood of coordinated effects assumed significance. The Commission noted that CR 4 in the relevant
market would increase from pre-combination level of 65% to 72%. This is indicative of possibility of strengthening the
likelihood of coordinated effects, leading to AAEC.
Efficiencies: The Parties had stated that the proposed combination would allow pooling of their skills, resources and
establishing synergistic operational practices leading to a better consumer experience, increased availability of cement with
minimum turn-around time, increased consumer choice, and would have a downward impact on distribution and other
costs. The Commission observed that the efficiencies were not combination-specific and the submissions of the Parties
lacked quantification and verifiability and no specific suggestion has been made or evidence provided as regards the
efficiencies translating into lower prices for customers.
Modification to address AAEC Concerns: The Commission noted that in accordance with the provisions of the
Competition Act, 2002 it may either direct that the combination shall not take effect in accordance with sub-section (2) of
section 31 of the Act or may propose a modification to the combination in accordance with sub-section (3) of section 31 of
the Act. The Commission was of the opinion that the likely AAEC of the proposed combination could be eliminated by
suitable modification to the combination and thereby proposed divestiture as a remedy to eliminate the competition
concerns.1434 The Commission considered various combinations of plants located in states of Jharkhand, West Bengal
and Chhattisgarh forming part of the relevant market and decided on the basis of location of plants, pan relevant market
impact, impact on concentration; self-contained divestiture package and impact on market structure, that a divestiture of
Lafarge’s Jojobera plant located in Jharkhand with a cement grinding capacity of 4.6 MTPA and Lafarge’s integrated unit
located at Sonadih in Chhattisgarh with a cement grinding capacity of 0.55 MTPA and clinker capacity of 3.10 MTPA
would be most effective in eliminating the concerns of AAEC in the relevant market. Accordingly, the Commission
proposed modification to the combination, to the Parties, in terms of sub-section (3) of section 31 of the Act. Pursuant to
the agreement of the parties on the terms and conditions imposed by the Commission, it approved the proposed
combination under sub-section (7) of section 31 of the Act, subject to the Parties carrying out the modification to the
proposed combination.1435, 1436
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—In Sun Pharmaceutical Industries Ltd and Ranbaxy Laboratories Ltd,1437 the Commission received a notice under sub-
section (2) of section 6 of the Competition Act, 2002 of the proposed combination relating to the merger of Ranbaxy into
Sun Pharma pursuant to the scheme of arrangement. Post combination, the existing shareholders of Ranbaxy would hold
approximately 14% of the equity share capital of the Merged Entity on a pro forma basis. Further, the promoter group of
Sun Pharma was expected to own approximately 54.7% equity share capital of the Merged Entity. Further, as Ranbaxy
held 46.79% equity share capital of Zenotech, the proposed combination would result in acquisition of this 46.79% equity
share capital of Zenotech by Sun Pharma from Ranbaxy. As Zenotech was a listed company and as per the details given in
the Notice, in terms of SAST Regulations, 2011, Sun Pharma had announced an open offer for 28.10% equity share capital
of Zenotech through the public announcement to be commenced after the merger of Ranbaxy into Sun Pharma. The
Commission considered the facts on record and formed a prima facie opinion that the proposed combination was likely to
cause an AAEC in the relevant markets in India. Accordingly, a show-cause notice was issued to the Parties in terms of
sub section (1) of section 29 of the Act.
Relevant Market: The Commission found it appropriate to define the relevant product market at the molecule level, i.e.,
medicines/formulations based on the same active pharmaceutical ingredients (API) to be considered to constitute a separate
relevant product market. Since the products of the Parties were available across India, the relevant geographic market was
considered to be the territory of India.
Horizontal Overlap: On the basis of combined market share of the Parties, incremental market share as a result of the
proposed combination, market share of the competitors, number of significant players in the relevant market, etc., the
Commission focused its investigation on 49 relevant markets where the proposed combination was likely to have AAEC in
the relevant market in India along with two other relevant markets for formulations wherein Sun Pharma was already
marketing and selling its products whereas Ranbaxy had pipeline products to be launched in the near future. Based on its
assessment of the relevant markets, the Commission was of the view that the proposed combination was likely to result in
AAEC.
In some of the defined relevant markets, the Commission noted that as a result of the proposed combination, the number of
significant players will be reduced which would eliminate a significant competitor from the market and will likely to have
an AAEC in the relevant market. The other players in the relevant market were noted to have a negligible market share and
thus may not be in a position to exert significant competitive constraint on the Merged Entity.1438
Assessment of AAEC in other relevant markets was made on the basis of their collective market share. In all of them, it
was held that AAEC was not likely due to stiff competition prevalent in those markets.1439 In relation to five relevant
markets of formulations containing,1440 the Parties had submitted that Ranbaxy had discontinued its product and
accordingly, at present there was no horizontal overlap between the products of the Parties. Further, in relation to relevant
market of Somatostatin | H1D3, it was submitted by the Parties that the products of Sun Pharma and Ranbaxy were entirely
different and it was only due to an error that they had been classified in a single category in the AIOCD database.
Market for APIs: Horizontal Overlap: It was noted that both the Parties sold APIs to Third Parties. However, it was
observed that the horizontal overlap in APIs was insignificant to raise any competition concern.
Vertical integration post-merger: It was observed that post combination there was a possibility of vertical integration
between the parties as the APIs manufactured and sold by one party could be used as raw material for the formulations
produced by the other. However, in light of marginal share of API to the revenue of the parties and the fact that there were
a number of suppliers, both within and outside India, which supplied APIs to the formulation manufacturers, the
Commission held that the proposed combination was not likely to result in vertical foreclosure.
Modifications Recommended: The Commission was of the opinion that the adverse effect of the proposed combination on
competition could be eliminated by suitable modification. Accordingly, the Commission approved the proposed
combination under sub-section (7) of section 31 of the Competition Act, 2002 subject to the Parties carrying out the
modification to the proposed combination as provided below:
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1. Sun Pharma would divest all products containing Tamsulosin + Tolterodine which are currently marketed and
supplied under the Tamlet brand name.
2. Ranbaxy would divest:
(i) All products containing Leuprorelin which are currently marketed and supplied under the Eligard brand
name. In the event the Divestiture of distribution rights of Eligard is not achieved within the First Divestiture
Period, Sun Pharma shall divest its products containing Leuprorelin currently marketed and supplied under
Sun Pharma’s brand name Lupride, as provided in Appendix B.
(ii) All products containing Terlipresslin which are currently marketed and supplied under the Terlibax brand
name which are currently marketed and supplied under the Triolvance brand name.
(iii) All products containing Rosuvastatin + Ezetimibe which are currently marketed and supplied under the
ROSUVASEZ brand name.
(iv) All products containing Olanzapine + Fluoxetine which are currently marketed and supplied under the
Olanex F brand name.
(v) All products containing Levosulpiride + Esomeprazole which are currently marketed and supplied under the
Raciper L brand name.
(vi) All products containing Olmesartan + Amlodipine + Hydroclorthiazide which are currently marketed and
supplied under the Triolvance brand name.
In Re Orchid Chemicals & Pharmaceuticals Ltd,1441 the Commission received a notice under sub-section (2) of section 6
of the Competition Act, 2002 of the proposed combination given by Orchid Chemicals & Pharmaceuticals Ltd (OCPL) and
Hospira Healthcare India Pvt Ltd (HHIPL) pursuant to the execution of a business transfer agreement dated 29 August
2012 by and among OCPL, Mr K Raghavendra Rao and HHIPL (the “BTA”). As stated in the notice, in terms of the BTA,
OCPL had agreed to sell its (Betalactum Penems including Carbapenems and Penicillins) API business, manufacturing
facilities for the said API business and the NPNC API manufacturing facility located at Aurangabad together with the
associated process R&D facility at Shozhanganallur, Chennai to HHIPL (“Transferred Business”). However, the
transferred business excluded the oral formulation business of OCPL in Penems (including Carbapenems) and Penicillins
verticals; oral formulation as well as API business in the Cephalosporin vertical; and API and formulation business in
NPNC vertical.
The BTA also contained a non-compete clause which stipulated that OCPL and its promoter, i.e., Mr K Raghavendra Rao,
could not undertake certain business activities pertaining to the transferred business, for a period of eight years and five
years, respectively. The said non-compete obligation also restricted research, development and testing of Penem (including
Carbapenem) and Penicillin APIs for injectable formulations. The Commission was of the view that non-compete
obligations, if deemed necessary to be incorporated, should be reasonable particularly in respect of (a) the duration over
which such restraint is enforceable; and (b) the business activities, geographical areas and person(s) subject to such
restraint, so as to ensure that such obligations do not result in an AAEC. The parties to the combination were accordingly
required to provide justification regarding the duration of the non-compete obligation and restricting activities. In response,
the parties to the combination modified the BTA to limit the duration of non-compete obligation to four years in relation to
domestic market in India and provided that OCPL would be allowed to conduct research, development and testing on such
new molecules which would result in the development of new Penem (including Carbapenem) and Penicillin APIs for
injectable formulations which are currently non-existent worldwide. The Commission accepted the modifications offered
by the parties to the combination under the provisions of sub-regulation (2) of regulation 19 of the Combination
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Regulations. Also, the Commission held that the proposed combination was not likely to have an AAEC in India and,
therefore, approved the proposed combination under sub-section (1) of section 31 of the Competition Act, 2002.1442
In the Linde-Praxair deal,1443 the Commission noted the horizontal overlap as both the parties were market leaders for
tonnage supplies of industrial gases [(i) Industrial gases; (ii) Medical gases; and (iii) Speciality gases]. The activities of the
Parties also overlapped in the provision of medical engineering services to hospitals and healthcare facilities. Further,
Linde was also engaged in a related business of constructing and supplying plants for production of industrial gases. The
proposed combination had the likelihood of increasing market concentration and increasing the gap between competitors.
The parties, post combination, were likely to gain considerable advantage in terms of bidding for tenders, costs,
distribution networks. The remedies ordered by the Commission aimed to eliminate the substantial overlap in terms of
presence of the Parties in the affected regions and for establishment of independent competitor(s) or strengthening of the
existing competitor(s) by ensuring that they have an integrated presence in markets for industrial gases encompassing
tonnage, bulk and cylinder businesses. The Commission proposed the following amendments which were to be
implemented by way of sale and transfer of respective businesses to an independent entity(ies), which met the parameters
prescribed in the order of the Commission:
a. Divestment of Linde India’s entire shareholding in Bellary Oxygen Company Pvt Ltd (Belloxy), a joint venture
between Linde India and Inox Air Products Ltd;
b. Divestment of Praxair’s three on-site plants in the East Region, namely, Tata 1 and Tata 2 and 3 located at
Jamshedpur and two cylinder filing stations located at Asansol and Kolkata; and
c. Divestment of Linde’s one on-site plant in the South Region, namely, JSW – two located at Bellary, Karnataka
and two cylinder filling stations located at Hyderabad and Chennai.
The proposed combination notice filed by Bayer1444 related to acquisition of Monsanto by Bayer AG. In order to address
competition concerns, the Commission proposed the following modifications:
a. Divestment of the following businesses of Bayer to an independent entity, which meets the parameters prescribed
in the order of the Commission:
• Glufosinate ammonium (a non-selective herbicide);
• Crop traits of cotton and corn; and
• Hybrid seeds of vegetables
b. Divestment of the shareholding of Monsanto in Maharashtra Hybrid Seed Company Ltd (26%), to an
independent entity, which meets the parameters prescribed in the order of the Commission.
c. Bayer to be bound by the following commitments for a period of 7 (seven) years from the closing of the
Bayer/Monsanto transaction,
a. The resultant entity of the combination (Combined Entity) would follow a policy of broad based, non-
exclusive licensing of Genetically Modified (GM) as well as non-GM traits currently commercialised in
India or to be introduced in India in the future, on a fair, reasonable and non-discriminatory terms (FRAND
Terms);
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b. The Combined Entity would follow a policy of non-exclusive licensing of non-selective herbicides and/or
their active ingredient(s) in case of launch of new GM/non-GM traits in India that restrict agricultural
producers including farmers to use specific non-selective herbicide(s) being supplied only by the parties, on
a fair, reasonable and non-discriminatory basis;
c. Combined entity would allow Indian users/potential licensees to access the following on FRAND Terms: (a)
existing Indian agro-climatic data owned and used by the Combined Entity for its digital applications
commercialised in India; (b) commercialised digital farming platform(s) of the Combined Entity for
supplying/selling agricultural inputs to agricultural producers in India; and (c) digital farming applications of
the Combined Entity, commercialised in India, on subscription basis. This remedy shall operate for a period
of seven years from the commencement of commercialisation of digital farming product(s) or digital farming
platform(s), subject to a total period of 10 years from the closing of the combination.
d. Combined Entity would also grant access to Indian agro-climatic data, free of charge to Government of India
and its institution(s), to be used exclusively for creating a public good in India.
e. Combined Entity is barred from offering its clients, farmers, distribution channels and/or its commercial
partners, two or more products as bundle which may potentially have the effect of exclusion of any
competitor.
f. Combined Entity is further barred from imposing, directly or indirectly, commercial dealings capable of
causing exclusivity in the sales channel for supply of agricultural products.
g. In case the Combined Entity offers better commercial terms to a new licensee for any of the above licenses,
then it would be bound to offer, within 60 days, such similar terms to all existing licensees.
Non-compete clauses
In a significant number of Merger & Acquisition transactions, it was noted that as a part of the agreement, parties to a
combination often entered into Non-compete restriction(s). These Non-compete restriction(s)/clause(s) appeared in various
types of combinations, including acquisition of a business or an enterprise, formation of a joint venture, etc. Considering
that non-compete restriction(s)/clause(s) may adversely impact competition landscape, many competition agencies have
issued guidance on the framework and approach for the assessment of non-compete restriction(s)/clause(s). In accordance
with international best practices, the Competition Commission of India had also issued Guidance Note on non-compete
restriction(s)/clause(s). The Guidance Note highlights general approach of the Commission while dealing with the non-
compete restriction(s)/clause(s) entered into by the Parties. While the Guidance Note was not binding on parties to a
proposed combination/combinations requiring approval from the Commission, nonetheless, it served as an important tool
in drafting non-compete restriction(s)/clause(s). It may, however, be noted that the standards set forth in the Guidance Note
would not be applied mechanically in the assessment of Merger & Acquisition transactions; however, the Commission
would take into consideration the specific circumstances of each case, while assessing the combination, including non-
compete restriction (s)/clause(s).
COMMISSION’S GUIDANCE ON NON-COMPETE RESTRICTIONS1445
A. INTRODUCTION
1. It is recognised that non-compete restrictions may arise in various types of combinations, including the
acquisition of a business or an enterprise, formation of a joint venture or acquisition of controlling/non-
controlling interest in an enterprise. Where a non-compete restriction is found to follow the principles set out in
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the Commission’s Guidance, the Commission’s order approving the combination under section 31 of the
Competition Act, 2002 (“Act”) will be deemed to cover the non-compete restriction. Thus, in such cases, the non-
compete restriction will be deemed to be directly related and necessary to the implementation of the combination.
2. In contrast, non-compete restrictions that do not comply with the principles set out in the Commission’s
Guidance, will not be regarded as directly related and necessary to the implementation of the combination and the
Commission’s approval of the combination will not therefore include the non-compete restriction.
3. In such cases, the Commission’s order would state that the non-compete restriction is not “ancillary” to the
combination. However, the finding that a non-compete restriction is deemed to be not ancillary to a combination,
as such, will not be prejudicial to the legal status thereof, i.e., there is no presumption that those non-compete
restriction that do not comply with the Guidance would automatically infringe the provisions of the Act.
4. Importantly, the standards set forth in this Guidance would not be applied mechanically, but would take into
consideration the specific circumstances of each case. Each case would be evaluated in the light of its own facts.
B. GENERAL PRINCIPLES
5. The non-compete restriction should be directly related and necessary to the implementation of the combination:
5.1 In order to be directly related, the non-compete restriction must be connected and closely linked to the
combination, but ancillary or subordinate to its main object. It is not sufficient if the restriction has been
entered into at the same time or in the same context as the combination or because it merely expressed to be
so related. A non-compete restrictions is considered directly related where it is economically related to the
main combination and it is intended to allow a smooth transition to the post-combination scenario.
5.2 The necessity of a non-compete restraint means that in the absence of such restrictions, the combination
could not be implemented or could only be implemented under more uncertain conditions, at substantially
higher cost, over an appreciably longer period or with considerably higher difficulty.
5.3 The non-compete restriction should not exceed what is reasonably required. If equally effective alternatives
are available for attaining the same objective, parties to a combination must have chosen one which is the
least restrictive of competition.
6. In determining the necessity and proportionality of the non-compete restriction, it is appropriate to take account
of its duration, subject matter and geographic field of application, scope of application, having due regard to the
nature of the business concerned:
6.1 Where the transfer includes both goodwill and know-how, the non-compete clause is justified only for a
period of up to 3 years and up to 2 years if the transfer of goodwill only is involved. Longer durations may
still be justified in a limited range of circumstances where, for example, in certain industries and sectors,
customer loyalty to a seller will persist longer durations or the nature of the know-how transferred justifies
an additional period of protection. In the case of a joint venture, the duration of the restriction can normally
be the standing period of the joint venture. In certain circumstances, a period longer than the standing period
of the joint venture may be justified.
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6.2 In the case of an acquisition, the geographical scope of a non-compete clause must be limited to an area in
which the seller has offered the products or services before the transfer. This protection from competition
may also extend to those territories that the seller was planning to enter at the time of the transaction,
provided that the seller has already invested in such a move. The acquirer does not need to be protected
against competition from the seller in other territories where the latter had not previously operated.
6.3 In the case of a joint venture, the geographic scope of a non-compete should be limited to the area in which
the parent enterprise(s) of the joint venture offered the relevant products or services before establishing the
joint venture (this may extend to territories which the parents were planning to enter at the time of the
transaction, provided necessary investments evidencing this intention have been made). Any extension of the
non-compete covenant imposed on parents to areas in which the joint venture may in the future decide to
become active, is not ancillary. Where a joint venture has been set up to enter a new market, the scope of
non-competition clauses can be extended to the products, services and territories in which the joint venture is
supposed to operate pursuant to the joint venture agreement. However, one parent need not be protected
against competition from the other parent(s) of the joint venture in markets in which the joint venture does
not operate or does not propose to operate from the outset, i.e., a non-compete should not be used for the
purposes of protecting one parent’s interest against competition from the other parent(s) in markets other
than those in which the joint venture will be active from the outset).
6.4 A non-compete obligation must be restricted to the products and services which comprise the main activity
of the transferred business/enterprise or the joint venture, as the case may be. This may include improved
versions or updates of products as well as successor models. It can also include products and services at an
advanced stage of development at the time of the combination, or products which are fully developed but not
yet marketed. Protection against competition from the seller in product or service markets in which the
transferred enterprise/joint venture, as the case may, was not active before the transfer, will not be considered
necessary;
6.5 A non-compete obligation may bind only the seller, its subsidiaries and agents. Non-compete obligations
imposed on others, such as resellers, will not be considered as ancillary to the combination. Non-competition
obligation may be imposed only on controlling shareholders of an enterprise. A non-compete obligation on
non-controlling shareholders will not be considered directly related and necessary to the implementation of
the combination.
6.6 Clauses which limit a seller’s right to purchase or hold shares in an enterprise competing with the business
transferred shall be considered directly related and necessary to the implementation of the combination under
the same conditions as outlined above, provided it does not prevent the vendor from purchasing or holding
shares solely for investment purposes, without granting him/her, directly or indirectly, management functions
or any material influence in the competing company. The same principle applies to parents of a joint venture.
Cases related to non-compete clauses
In the Combination application of HP Inc,1446 notice was filed pursuant to execution of Master Purchase Agreement
(MPA) between HP and Samsung Electronics Co Ltd(Samsung) on 12 September 2016 for acquisition by HP of global
printer business of Samsung. The Commission sought justification from the Acquirer in relation to the non-compete
obligation imposed on Samsung for a duration of five years in respect of the Target Business and for duration of seven
years in respect of printer-related consumables. In the context, the Acquirer, under sub-regulation (2) of regulation 19 of
Combination Regulations voluntarily undertook to reduce the duration of non-compete clause imposed on Samsung,
specifically in relation to India, to a period of three years for both printer as well as printer-related consumable business.
The Commission, while accepted the above-said modification, directed the Acquirer to make necessary amendment(s) in
the MPA, so as to incorporate the said modification and submit a copy of such amended agreement, along with other
relevant documents, to the Commission within 30 days of the receipt of the order under sub-section (1) of section 31 of the
Competition Act, 2002.
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In the Combination application filed by insurance companies,1447 the Commission observed that it was agreed that L&T
and its affiliates would not invest in equity securities or carry on or be engaged in any manner with the business of
provision of general insurance or health insurance in India for a period of five years. The Parties were required to provide
justification regarding the non-compete obligations. In response, the Parties offered the modification under the provisions
of sub-regulation (2) of regulation 19 of the Combination Regulations, to limit the duration of non-compete obligations to
three years. The Commission accepted the modification offered by the Parties and directed the Parties to make necessary
amendments in the documents so as to incorporate the modification and submit a copy of such amended documents within
a period of three months from the date of the Order.
The Commission in the Combination application filed by Power and Energy International (Mauritius) Ltd1448 pursuant to
the Subscription Agreement (SA) and Share Holder Agreement (SHA) between PIL, GMR Energy Ltd (GEL), GMR
Infrastructure Ltd (GIL), GMR Renewable Energy Ltd (GREL), GMR Energy Projects (Mauritius) Ltd (GEPL) and
Tenaga Nasional Berhad (TNB) relating to acquisition of 30% of equity shares of GEL by PIL, observed that the SHA
contained non-compete covenant which provided that all shareholders of GEL, PIL and TNB, and their respective affiliates
shall not, whilst remaining a shareholder of GEL, either alone or in conjunction with or on behalf of any other person: (a)
establish, engage or be directly or indirectly interested in carrying on any business in India which is a “Relevant Business”
other than through GEL or an entity controlled by GEL; and (b) assist any other person in relation to the above activities.
The Commission noted that the aforesaid non-compete covenant, to the extent it related to the scope of products/services
of the proposed combination, was beyond what was necessary for the implementation of the proposed combination and
therefore, not ancillary to the proposed combination.
The Commission has observed that non-compete obligations, if deemed necessary to be incorporated, should be reasonable
particularly in respect of (a) the duration over which such restraint is enforceable; and (b) the business activities,
geographical areas and person(s) subject to such restraint, so as to ensure that such obligations do not result in an
AAEC.1449
The Commission received a notice given by Torrent Pharmaceuticals Ltd (Torrent) and Elder Pharmaceuticals Ltd
(Elder),1450 pursuant to the execution of a Business Transfer Agreement (BTA) and a Manufacturing and Supply
Agreement (MSA) between the Parties, on 13 December 2013 relating to the acquisition of Elder’s identified branded
domestic formulations business or parts thereof (in various therapeutic segments), in India and Nepal, by Torrent, pursuant
to the BTA. However, as stated in the notice, the manufacturing facilities of Elder, its operations of in-licensing deals, anti-
infective product categories and exports business would not be transferred to Torrent and do not form part of the Identified
Business. The Commission cleared the deal on the following grounds:
• In most of the therapeutic categories, the combined market share of both the companies was not significant
enough to raise any competition concern [at the molecule/therapeutic subgroup level also, the horizontal overlap
between the existing products of Torrent and the products covered under the Identified Business is not likely to
result in any appreciable adverse effect on the competition in India].
• Both Elder and Torrent were engaged in the production and sale of generic medicines wherein entry is relatively
easier.
• The prices of the medicines are regulated/monitored by National Pharmaceutical Pricing Authority in accordance
with applicable rules and regulations.
During the assessment of the proposed deal, the Commission asked the firms to provide clarification and justification on
certain aspects of Non-Compete Obligations1451 entered between the two companies – Elder and Torrent while providing
clarification proposed certain modifications1452 including reduction of the duration of the “Non-Compete Obligations” for
the primary therapeutic areas from five years to four years which was approved by the Commission.
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The Commission in Mylan Inc1453 noted that the duration of the non-compete covenant was six years and in spite of the
fact that the Target Enterprises were engaged in the business of injectable products belonging to a few therapeutic
categories, the non-compete covenant sought to impose a blanket restriction covering injectable products across all the
therapeutic categories. Moreover, the scope of the non-compete covenant covered all products under the oncology and
ophthalmic categories even though there were products under these categories which were not being currently
manufactured by the Target Enterprises. The non-compete covenant also placed restrictions on the development of new
molecules which are presently non-existent. The Commission observed that the scope of the non-compete covenant should
cover only those products which are either being presently manufactured/sold or are under development, by the Target
Enterprises. The Acquirer was, therefore, required to provide a detailed justification for the duration as well as scope of
business activities restricted under the non-compete covenant. In their response, the Parties to the Agreement proposed
certain modification(s) in the non-compete covenant, as contained in the SPA and the RCA. The following modifications
were thereby proposed which were accepted by the Commission and the scheme was approved:
• Reducing the duration of the non-compete obligations under the SPA and the RCA as applicable to the Indian
market only to a period of four years from the date of closing of the proposed transaction;
• Restricting the scope of the non-compete covenant as applicable to the Indian market;
• Permitting each of Arun Kumar, Pronomz Ventures LLP, SAL and any of SAL’s group companies to conduct
research, development and testing on such new APIs/molecules which would result in development of new
APIs/molecules for injectable formulations which are currently non-existent worldwide.
The Commission received a notice relating to the proposed combination between Mumbai International Airport Pvt Ltd
(MIAL), Indian Oil Corporation Ltd (IOCL), Bharat Petroleum Corporation Ltd (BPCL), Hindustan Petroleum
Corporation Ltd (HPCL) [Oil PSUs] and Mumbai Aviation Fuel Farm Facility Ltd (MAFFFL), pertaining to creation of a
joint venture by IOCL, HPCL, and BPCL along with MIAL in MAFFFL. The said joint venture was proposed to be
created to construct and manage an integrated fuel facility at Chhatrapati Shivaji International Airport, Mumbai (CSIA or
Mumbai Airport). Post combination, it was proposed that each of the JV partners would have 25% shareholding in
MAFFFL and MAFFFL will own the existing fuel facilities at Mumbai Airport, modify the existing fuel infrastructure
owned by the Oil PSUs to create an integrated fuel facility and operate it after commissioning. The Commission was not
satisfied with the plea of the Parties that the proposed combination will provide impetus to the market for aviation turbine
fuel (ATF) supply in Mumbai Airport and formed a prima facie opinion that the proposed combination was likely to cause
AAEC in the relevant market as defined by the Parties, i.e., market for supply and distribution infrastructure necessary to
supply ATF to aircrafts within the Mumbai Airport. The Parties, in their response to the show-cause notice, clarified that
the off-site infrastructure (i.e., pipelines) was unlikely to constrain the ability of a new ATF supplier since ATF suppliers at
other airports use both tank trucks and pipelines to transport ATF to airports. Moreover, the pipelines are connected to
fuelling infrastructure at CSIA on one end and to HPCL’s and BPCL’s respective refineries at the other, as a result of
which allowing access to any other ATF supplier is not physically possible. The Parties also, inter alia, agreed
• to amend the SHA to remove any restrictive clauses,
• that the ownership of the infrastructure would be transferred to MAFFFL, and that it could be used by any ATF
supplier in an open access and arm’s length basis,
• that the equitable distribution of shareholding in the facility would mean that no single shareholder could abuse it
to their advantage, and that there were sufficient checks and balances to ensure it did not happen,
• that a Joint Co-Ordination Committee (JCC) would be formed with varied representation that would ensure that
the MAFFFL is treating air suppliers and carriers fairly,
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• the storage space at the facility would be shared equally,
• they would ensure increased space by construction, and
• to provide information relating to the facility on its website, and incorporate clauses in supplier agreements to
ensure compliance with competition law, and provide adequate monitoring mechanisms.
The Commission approved the proposed transaction subject to the voluntary commitments above being complied
with.1454
PVR - DT Cinema Acquisition
The Commission received a notice from PVR Ltd (Acquirer) pursuant to the execution of an agreement between DLF
Utilities Ltd (DUL) and PVR relating to the acquisition by PVR of DUL’s film exhibition business, comprising of 39
screens (29 existing and 10 upcoming) as a going concern on a slump sale basis. Commission’s analysis has been
explained in detail in the following paragraphs:
Relevant Product Market: Based on the decisional practice of the Commission,1455 the responses received from the single
screen theatres, multiplex theatres, distributors, and the differences established between single screen theatres and
multiplex theatres based on characteristics, intended use and prices, the Commission was of the view that the relevant
product market for the purpose of the Proposed Combination should be exhibition of films through multiplexes. The
Commission also noted that though high-end single screen theatres may offer some of the facilities of multiplexes and at
comparable prices to multiplex theatres; they were distinct from multiplex theatres in terms of other characteristics like
number of films screened per day, limited timing options to consumers, absence of related services, etc. However, based,
inter alia, on regulation 19(3) responses, the Commission recognised that high-end single screen cinema theatres may
attract a similar clientele and may offer similar facilities and in some cases, act as a competitive constraint to multiplex
theatres. Hence, the Commission observed that for the purpose of assessment of the Proposed Combination, the relevant
product market may be widened to include high-end single screen theatres in the geographic areas where such theatres are
present in addition to multiplex theatres.
Relevant Geographic Market: The delineation of relevant geographic market was done on various factors:
(a) Consumers usually prefer to view films in theatres in nearby areas and would choose among the available nearby
theatres.
(b) Theatres located in a particular area compete only with theatres in that local area.
(c) Prices charged by the multiplex theatres are different across different parts of Delhi NCR with higher prices
being charged in certain parts, such as, South Delhi and Gurgaon.
(d) Clientele of multiplex theatres is different in different regions of Delhi NCR.
Accordingly, Commission delineated the relevant markets as under:
1. Relevant market for exhibition of films in multiplex theatres in Gurgaon;
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2. Relevant market for exhibition of films in multiplex theatres and high-end single screen theatres in South Delhi;
3. Relevant market for exhibition of films in multiplex theatres and high-end single screen theatres in North, West
& Central Delhi;
4. Relevant market for exhibition of films in multiplex theatres in Noida; and
5. Relevant market for exhibition of films in multiplex theatres in Chandigarh.
Assessment of AAEC: The Commission, in order to check AAEC took into account firstly, the Herfindahl Hirschman Index
(HHI) to indicate market concentration1456 and second, in order to account for future overlaps and consequent impact on
competition, the Commission carried out competition assessment in terms of current scenario as well as number of screens
likely to be operational by 2018.
Markets without AAEC: The Commission in the relevant market for exhibition of films in multiplex theatres in Chandigarh
and market for exhibition of films in multiplex theatres and high-end single screen theatres in North, West and Central
Delhi, noted that the additional number of screens acquired by the Acquirers was only three and four respectively and the
incremental market share was 5.2% and 5.1% respectively, which was not significant. Further, considering the upcoming
entries till 2018, the Commission noted that there would continue to be a number of competitors such as Cinepolis, Inox,
Carnival, Wave, Movietime, INOX and M2K. Accordingly, the Commission was of the opinion that the Proposed
Combination was not likely to have an AAEC in this relevant market. The Commission observed that post combination,
market concentration, after taking account of imminent entry (by the year 2018), was significant. However, considering the
aspects such as low incremental market shares and presence of effective competitors and keeping in view the factors laid
down in sub-section (4) of section 20 of the Competition Act, 2002 the Commission was of the opinion that the Proposed
Combination was not likely to have an AAEC in this relevant market (relevant market for exhibition of films in multiplex
theatres in Chandigarh and relevant market for exhibition of films in multiplex theatres and high-end single screen theatres
in North, West and Central Delhi).
Markets with AAEC:
• Relevant market for exhibition of films in multiplex theatres in Noida
The Commission in the relevant market for exhibition of films in multiplex theatres in Noida noted that the
Acquirers post-deal would operate 37 screens out of 69 screens in Noida and the resulting incremental market
share of 10.1% was significant.1457 Further, considering the upcoming entries till 2018, the Commission noted
that the next biggest competitors, i.e., Wave and Spice, had market shares of 14.5% and 13% respectively, as
compared to PVR’s relatively high market share at 53.6% and therefore, they may not constitute an adequate
competitive constraint. The Commission observed that the likelihood of combination resulting in
sustained/significant increase in prices was high as there would be limited incentive for the Acquirer to maintain
competitive prices in the absence of effective competition. It was also observed that post combination the
incentives for the Acquirer to innovate further were very limited owing to lack of effective competition. However,
the Commission was of the view that the commitments offered by PVR (listed below) would adequately alleviate
the competition concerns arising in this relevant market, subject to compliance with the requirements.
(a) Termination of the agreement dated 31 March 2015, entered into with International Recreational Parks Pvt Ltd
for the development of a multiplex with 15 screens in Garden Galleria Mall, Noida (Garden Galleria).
(b) PVR shall not acquire any influence/ownership/interest, either directly or indirectly, over Garden Galleria for a
period of five years from the date of the termination notice.
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(c) PVR shall not expand, i.e., open through organic expansion or takeover through inorganic acquisition, any new
screens (either single screen or multiplex), for a period of three years from the date of completion of the proposed
combination in the relevant geographic market of Noida.
(d) Relevant market for exhibition of films in multiplex theatres in Gurgaon
The Commission in the relevant market for exhibition of films in multiplex theatres in Gurgaon noted that parties together
operated 24 screens out of a total of 38 screens in Gurgaon.1458 Further, considering the increase in the market share and
HHI post combination, the Commission noted that increase in market concentration even after taking into account entries
up to 2018 was significant. The Commission noted vide comments that post combination PVR will acquire increased
market power which may lead to significant and sustainable increase in prices and deterioration in quality also leading to
reduction in choice available to consumers. Further, considering the imminent entries till 2018, the competitors may not
constitute an adequate competitive constraint. Further, the Commission noted that no evidence had been provided as
regards the efficiencies translating into lower prices or better quality for customers on a lasting basis. Overall, there was no
evidence to suggest that efficiency gains as a result of the proposed combination would offset, to any significant extent, the
concerns of AAEC. However, the Commission was of the view the commitments offered by PVR (listed below) would
adequately alleviate the competition concerns arising in this relevant market, subject to compliance with the requirements.
(a) PVR shall not expand, i.e., open through organic expansion or takeover through inorganic acquisition, any new
screens (either single screen or multiplex), for a period of three years from the date of completion of the proposed
combination.
(b) PVR shall terminate its agreement dated 18 September 2015, entered into with Reach Promoters Pvt Ltd for the
development of a multiplex in Airia Mall.
(c) PVR shall not acquire any influence/ownership/interest, either directly or indirectly, over Airia Mall for a period
of five years from the date of the termination notice.
• Relevant market for exhibition of films in multiplex theatres and high-end single screen theatres in South
Delhi: The Commission in this market made the following observations:
• Parties together operated 27 screens out of a total of 34 screens in South Delhi. Considering the increase in
the market share and HHI post combination, increase in market concentration even after taking into account
entries up to 2018 was significant.1459
• Additional number of screens acquired by the Acquirer was 17 and considering the upcoming entries by
2018, the incremental market share would be 42.5%, which was significant.
• Acquisition by PVR of its closest competitor would result in the removal of a vigorous and head to head
competitor of PVR, i.e., DT. As compared to the Acquirer’s post-combination market share of 75%, the next
biggest remaining competitor would be Inox with a market share of only 12.5%, which would constitute an
inadequate competitive constraint.
• Elimination of DT from the market may lead to monopolisation of the market, enabling PVR to sustainably
increase prices. Further, PVR may also acquire a position wherein it would be able to monopolise the choice
of movies leading to reduction in choice for the end consumer. Stakeholders also raised issues regarding the
quality of services, stating that cinema goers would have no option other than PVR Cinemas, irrespective of
the quality of services provided.
• Given the limited availability of real estate for the purpose of exhibition of films through multiplex theatres
on account of regulatory restrictions, there was limited scope for new entry through the organic route by way
of either the opening of new theatres on owned land or operating theatres on a tenancy/revenue-sharing basis
in a new shopping mall.
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• No evidence was provided as regards the efficiencies translating into lower prices or better quality for
customers on a lasting basis.
• In the market of multiplexes, the only countervailing buying power with the consumer was to switch to
another multiplex in the relevant market that provided comparable facilities at a lower price. However, in
South Delhi, there would hardly be any option available to consumers if the Acquirer, post combination,
decided to raise its prices or the service quality was unsatisfactory.
• The likelihood of proposed combination resulting in sustained/significant increase in prices was high as there
would be limited incentive for the Acquirer to maintain competitive prices in the absence of effective
competition.
• Post combination, the incentive for the Acquirer to innovate further, was likely to be very limited owing to
lack of effective competition.
• While the distributors control the nature of content, the exhibition and derivation of commercial value from
that content was completely in the hands of the exhibitor as they controlled the terms of films exhibition,
such as show timings and the duration of exhibition. Discretion at the hands of the exhibitor may result in
foreclosure in the upstream market and thus, may resultantly affect the consumer.
The Acquirer made certain commitments with respect to cap on ticket prices, cap on food & beverages (F&B) prices,
quality commitment, freeze on expansion and commitment with distributors. However, the Commission was not satisfied
and noted that behavioural remedies such as price caps and quality commitments would not adequately replicate the
outcomes of a competitive market. The Commission (by majority) rejected the commitments offered by the Acquirer in the
relevant market and observed that in order to alleviate the likely AAEC concerns in this relevant market, divestiture of
screens (minimum 11) of the Acquirer would be required. Reduction of market share post divestiture would be able to
provide significant competitive constraints to the Acquirer, though it would still have a market share of at least
27.5%.1460
The Commission (by majority) was of the view that divestiture of screens belonging to DT would address the contractual
limitations, as the divestiture would take place after consummation of the proposed combination and PVR would not be
required to divest any of its existing theatres in South Delhi.1461 The Commission (by majority) decided to propose
modification to the proposed combination under sub-section (3) of section 31 of the Competition Act, 2002. Accordingly, it
was proposed that the parties shall divest, or procure divestiture of:
(a) DT Saket Theatre Assets and DT Vasant Kunj Theatre Assets (collectively referred to as “Saket-VK Assets”); or
(b) DT Chanakyapuri Theatre Assets, DT Savitri Theatre Assets and DT Vasant Kunj Theatre Assets (GK-CH-VK
Assets) (Divestment Assets)
In its response, the Acquirer proposed amendment to the Proposal for Modification under sub-section (6) of section 31 of
the Competition Act, 2002 by way of an alternate proposal (Alternate Proposal) comprising the following:
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• The Combination Agreement will be amended, such that the cinema assets (comprising one screen) located at DT
Savitri and DT Saket (comprising six screens) will be excluded from the scope of the Amendment to
Combination Agreement.
• PVR will not acquire any influence/ownership/interest, either directly or indirectly over DT Savitri Assets or DT
Saket Assets for a period of three/five years from the date of completion of the proposed combination.
• PVR will not expand, i.e., either through organic expansion or takeover through inorganic expansion (either
single screens or multiplexes) for a period of five years from the date of completion of the proposed combination
in the relevant geographic market of South Delhi (Freeze on Expansion).
• The Acquirer also proposed, inter alia, that the Commission may re-consider the “Hybrid Remedy Proposal”
(behavioural remedies) which, inter alia, included: (a) ticket price cap (at 10% discounted rate) for five years
(with a marginal increase of 5% in the fourth and fifth years); (b) F&B price cap at existing prices for a period of
five years (with a marginal increase of 5% in the fourth and fifth years); (c) quality commitments; (d)
commitment not to seek exclusivity with distributors (on pan India basis) for five years; and (e) freeze in
expansion for five years.
The Commission noted that in order to alleviate the competition concerns arising in this relevant market in addition to the
Freeze on Expansion, an undertaking in relation to the non-acquisition of direct/indirect influence over DT Savitri Assets
and DT Saket Assets would be necessary for a period of five years (Non-Acquisition of Interest). The Commission was of
the opinion that keeping in view the facts and circumstances of the present case, the Alternate Proposal including
Amendment to Combination Agreement, Freeze on Expansion and Non-Acquisition of Interest, as above (Accepted
Alternate Proposal) would alleviate AAEC concerns emanating from the Proposed Combination in the relevant market for
the exhibition of films in multiplex theatres and high-end single screen theatres in South Delhi. The Commission noted that
behavioural remedies were offered by the Acquirer at various stages during the inquiry. It was noted that while issuing the
Proposal for Modification, the Commission (by majority) rejected the offered behavioural remedies on grounds that they
did not address AAEC concerns in the relevant market and the Commission (by majority) deemed fit to issue the Proposal
for Modification requiring structural remedies. Accordingly, the “Hybrid Remedy Proposal” would not be regarded an
amendment to the Proposal for Modification in terms of sub-section (6) of section 31 of the Competition Act, 2002 and
thus cannot be considered under sub-section (7) of section 31 of the Act.
Pursuant to the above, the Commission approved the Proposed Combination under sub-section (7) of section 31 of the
Competition Act, 2002 subject to the parties complying with commitments in relation to: (a) relevant market for exhibition
of films in multiplex theatres in Noida; (b) relevant market for exhibition of films in multiplex theatres in Gurgaon; (c) Co-
operation Agreement; and (d) Non-Compete Agreement and carrying out the Modification to the Proposed Combination.
ORDERS OF THE COMMISSION1462
• Where the Commission is of the opinion that the combination has, or is likely to have, an appreciable adverse
effect on competition in the relevant market in India, it shall pass an order under section 31(2) of the Competition
Act, 2002 that the combination shall not take effect.
• Where the Commission is of the opinion that the combination does not or is not likely to have an appreciable
adverse effect on competition, it shall pass an order under section 31(1) of the Act, approving the combination.
• Where the Commission approves the combination with modification, the order of the Commission approving the
combination shall specify the terms, conditions and the time-frame for all the actions required for giving effect to
the combination and if the parties to the combination fail to carry out the modification within the stipulated time
limit, the Commission shall issue appropriate directions.
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• The Commission shall endeavour to pass an order or issue direction in accordance with sub-section (1) or sub-
section (2) or sub-section (7) of section 31 of the Act within one hundred and eighty days of filing of the notice
under sub-section (2) of section 6 of the Act.
• Subject to the provisions of section 57 of the Act, and regulation 30, the orders passed by the Commission under
section 31 of the Act shall be published on its website.
REQUEST FOR CONFIDENTIALITY1463
The Commission considers any request for confidentiality of information or documents submitted during the investigation.
However, the request under sub-regulation (1) shall clearly state the reasons, justification and implications for the business
of the parties to the combination so that all relevant factors may be considered by the Commission while taking decision in
the matter. The parties requesting for confidentiality shall file an affidavit as specified in regulation 42 of the Competition
Commission of India (General) Regulations, 2009 stating that the conditions prescribed in regulation 35 of the
Competition Commission of India (General) Regulations, 2009 are satisfied.
PROCEDURAL DETAILS
Introductory Notes to Forms
1. As per sub-section (2) of section 6 of the Competition Act, 2002 (“Act”), any person or enterprise, who or which
proposes to enter into a combination shall give notice to the Competition Commission of India (“Commission”)
in the form as may be specified, disclosing the details of the combination, and the fee which may be determined
by regulations, within 30 days of: (i) approval of the proposal relating to merger or amalgamation, referred to in
clause (c) of section 5, by the BOD of the enterprises concerned with such merger or amalgamation, as the case
may be; (ii) execution of any agreement or other document for acquisition referred to in clause (a) of section 5 or
acquiring of control referred to in clause (b) of that section. Such notice may be given in Form I, Form II or Form
III, as specified in sch II to the Competition Commission of India (Procedure in regard to the transaction of
business relating to combinations) Regulations, 2011 (“Combination Regulations”), in accordance with the
provisions of the Act read with the Combination Regulations.
2. In terms of sub-regulation (2) of regulation 5 of the Combination Regulations, the notice under sub-section (2) of
section 6 of the Competition Act, 2002 shall ordinarily be filed in Form I as specified in sch II to the Combination
Regulations, duly filled in, verified and accompanied by evidence of payment of requisite fee by the party(ies) to
the combination. In cases, where the parties to the combination fail to give notice under sub-regulation (2) of
section 6 of the Act, the notice may also be required to be filed under sub-regulation (2) of regulation 8 of the
Combination Regulations, pursuant to directions of the Commission in this regard. The text of the Act and the
Combination Regulations can be found on the Commission’s website.
3. The forms provided in sch II to the Combination Regulations (including the notes to respective forms) constitute
an integral part of the Combination Regulations.
4. Form I specifies the information that must be provided by the person or enterprise who or which proposes to
enter into a combination and in accordance with sub-regulation (2) of regulation 5 of the Combination
Regulations, notice under sub-section (2) of section 6 of the Competition Act, 2002 should ordinarily be given in
Form I for combinations, wherein:
(a) the parties to the combination are engaged in production, supply, distribution, storage, sale or trade of similar
or identical or substitutable goods or provision of similar or identical or substitutable services and the
combined market share of the parties to the combination after such combination is not more than fifteen per
cent (15%) in the relevant market; and
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(b) the parties to the combination are engaged at different stages or levels of the production chain in different
markets, in respect of production, supply, distribution, storage, sale or trade in goods or provision of
services, and their individual or combined market share is not more than twenty-five per cent (25%) in the
relevant market.
5. In accordance with sub-regulation (3) of regulation 5 of the Combination Regulations, in the event the combined
market share of the parties to the combination are higher than those provided above, a notice should preferably be
given in Form II as specified in sch II to the Combination Regulations. In terms of sub-regulation (5) of
regulation 5 of the Combination Regulations, in cases where the parties to the combination have filed notice in
Form I and the Commission requires information in Form II to form its prima facie opinion whether the
combination is likely to cause or has caused AAEC within the relevant market in India, it shall direct the parties
to the combination to file notice in Form II.
6. In terms of sub-section (11) of section 31 of the Competition Act, 2002 the Commission is required to pass an
order or issue direction in accordance with provisions of section 31 of the Act within two hundred and ten days
from the date of the notice given to the Commission under sub-section (2) of section 6 of the Act. Further, in
accordance with sub-regulation (1) of regulation 19 of the Combination Regulations, the Commission shall form
its prima facie opinion as to whether a combination is likely to cause or has caused an AAEC within the relevant
market in India within thirty working days of the receipt of such notice.
7. In view of the stipulated timelines, it is essential that the Commission is provided the requisite information
needed to examine the notice and to determine whether the combination would have the effect of or is likely to
have AAEC in the relevant market, in a timely manner. This includes information that must be provided at the
time of notification.
CASES UNDER THE COMPETITION ACT, 2002
The Commission’s approach in dealing with combination notices is quite clear. It considers inorganic growth through
combinations as a positive business strategy for the economy that deserves due support, and the analysis at the prima facie
stage focuses on quickly sifting out only those few cases where competition concerns may require a more in-depth inquiry
in phase II. As it is, the Competition Act, 2002 has laid down high thresholds of assets/turnover, above which only the
parties to the proposed combination are required to file a notification. This implicitly means that only a limited number of
combinations are required to be notified, and these cases involve big companies with substantial resources, including
MNCs with multi-jurisdictional operations. The Commission has also put in place an effective pre-notification consultation
mechanism to assist the parties in clarifying any issues in case of any doubts.
Combination involving parent-subsidiary
(a)—In Tata Chemicals Ltd,1464 the Commission received a notice of the proposed combination relating to the
amalgamation of Wyoming 1 (Mauritius) Pvt Ltd (Wyoming 1) into Tata Chemicals Ltd (TCL) under sub-section (2) of
section 6 of the Competition Act, 2002 pursuant to the approval of the proposed combination by the BOD of TCL and
Wyoming.. The parties to the proposed combination made certain preliminary submissions as to whether the proposed
transaction would require notification to the Commission under the Act. It was submitted by the parties that the proposed
combination would not require filing of notice with the Commission as, (a) the definition of “enterprise” did not require
notification of transactions between a parent company and its subsidiaries because a parent and its subsidiaries are
effectively a “single economic enterprise” for the purpose of the Act, (b) since the proposed combination was entirely an
outbound stream of acquisition by TCL, the proposed combination would fall squarely within the intent of the exemption
provided under Item 10 of sch I to the Competition Commission of India (Procedure in regard to the transaction of
business relating to combinations) Regulation, 2011 and (c) if the proposed transaction had taken place pursuant to an
acquisition of assets of Wyoming 1 by TCL, the same would fall under the exemption provided under Item 8 to the
Combination Regulations.
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The Commission, however, noted that the term “person” has been defined under section 2(l) of the Competition Act, 2002
to include a company which in turn does not include a subsidiary, as the subsidiary has a separate and distinct legal
personality and is a company by itself. The word subsidiaries in section 2(h) of the Act has been used with respect to one
of the modes by which an enterprise engages in the activities mentioned therein and the same does not emphasise
consideration of subsidiaries as a part of its holding company or enterprise. A subsidiary, being a separate entity and a
legal person, would constitute a separate and different enterprise if it meets the requirements of section 2(h). Secondly,
since the parties to the proposed combination met the threshold relating to assets/turnover in India as mentioned in section
5(c) of the Act and one of the parties to the proposed combination was in India, Item 10 to sch I of the Combination
Regulations would not be applicable. Thirdly, the proposed combination fell within section 5(c) of the Act and was
pursuant to a scheme of amalgamation and not by way of acquisition. Therefore, the question of application of Item 8 to
sch I of the Combination Regulations would not arise in the instant case. In view of the foregoing, the parties were
required to give notice of the proposed combination under sub-section (2) of section 6 of the Act.
The Commission further held that TCL and Wyoming 1 were not engaged in the production, supply, distribution, storage,
sale or trade of similar or identical or substitutable goods or provision of similar services. The business activities of TCL
and Wyoming 1 were also not related at different stages or levels of the production chain in different markets. It was also
noted that the ultimate control over the activities carried by TCL and Wyoming 1 before and after the proposed
combination remained with the management of TCL. Therefore, the proposed combination did not give rise to any adverse
competition concern.1465
Relevance of the market structure
The competitive effects of a combination are analysed by delineating the relevant market in terms of relevant product
market and relevant geographic market. The markets are defined in a manner that would include the relevant constraints on
the behaviour of firms.
—In SCB India,1466 the Commission received a notice under sub-section (2) of section 6 of the Competition Act, 2002 of
the proposed combination between Standard Chartered Bank, India Branch (SCB India) and Barclays Bank PLC, India
Branch (Barclays India) pursuant to the framework agreement signed by Barclays India and SCB India on 7 December
2011 and related to acquisition of the credit card business of Barclays India by SCB India. It was stated in the notice that
the credit card business proposed to be acquired included selected sale accounts, customer relationship, customer data and
files and outstanding receivables of identified cardholders (credit card assets). It was stated in the notice that SCB India
was not acquiring any of the processes, infrastructure, assets or employees of Barclays India. Further, it was also stated in
the notice that Barclays India would notify the concerned credit card customers about the transaction along with the offer
of SCB India for re-carding, and those customers who conveyed their objection to receiving the SCB India credit cards will
not be issued credit cards by SCB India. It was also stated in the notice that for identified customers of Barclays India
whose credit card relationship would be migrated to SCB India, Barclays India would not: (i) in any capacity (except for
any regulatory or statutory reporting purposes), use any information which it has from the customer data and files in
respect of the identified cardholders (who, at the time of transfer to SCB India are not customers of Barclays India or any
other group company of Barclays India, other than as a cardholder), to conduct marketing activities in relation to any of
products of Barclays India in India; and (ii) for a period of two years from the transfer date, in any capacity (except for any
regulatory or statutory reporting purposes), use any information which it has from the customer data and files (or
information derived from the customer data and files) in respect of identified cardholders (who, at the time of transfer to
SCB India, are not customers of Barclays India or any other group company of Barclays India, other than as a cardholder),
to conduct any marketing activities in relation to credit cards in India.
The Commission noted that the credit card business in India was fragmented with presence of many players and that as
regards the total credit card business in India, the aggregate share of SCB India and Barclays India had no arrangement
among themselves in any activity, relating to the production, supply, distribution, storage, sale and service or trade in
products or provision of services which was at different stages or levels of production chain in the credit card business in
India. The Commission was of the opinion that the proposed acquisition was not likely to have an AAEC in India.
Therefore, the Commission approved the proposed combination under section 31 of the Competition Act, 2002.1467
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—In Capgemini SA,1468 the Commission received a notice under sub-section (2) of section 6 of the Competition Act, 2002
of the proposed combination given by Capgemini SA (Capgemini/Acquirer), pursuant to an Agreement and Plan of
Merger, entered into between Capgemini SA, Capgemini North America Inc, Merger Sub Inc (Merger Sub) and iGate
Corporation (iGate/Target) on 25 April 2015. The proposed combination related to the acquisition of iGate by Capgemini
as a result of which iGate would become a wholly-owned subsidiary of Capgemini through the merger of a newly formed
special-purpose vehicle (i.e., Merger Sub) and iGate. The Commission observed that within the overall market for IT and
IT-enabled services, there were overlaps between Capgemini and iGate in the segments of consulting, implementation
services, business process outsourcing and IT outsourcing in India. However, it was also observed that the overall IT
services industry was fragmented and characterised by the presence of large players which was evident from the fact that
even the largest player in the market of IT and IT-enabled services in India, had an estimated market share of around 10%–
13% for the year 2014. Further, the combined market share of Capgemini and iGate in the relevant market in India was
negligible and even within the narrower scope of each overlapping segment as identified above, the combined market share
of Capgemini and iGate was insignificant (below 3% in each segment in India). The Commission, therefore, was of the
view that the combination was not likely to have an AAEC in India.
Similarly, in the notice given by Sutlej Textiles and Industries Ltd,1469 the Commission noted that the activities of both
Sutlej Textiles and Target Division overlapped in the relevant market for manufacture, production and supply of cotton
yarn, blended yarn and 100% non-cotton yarn in India. The combined market shares of Sutlej Textiles and the Target
Division for the financial year 2013/14, in cotton yarn, blended yarn and 100% non-cotton yarn in India were 0.53%,
0.78% and 13.34%, respectively. In respect of cotton and blended yarn, it was therefore, noted that the combined market
shares of the parties to the combination was insignificant and not likely to give rise to any competition concern.
Maturity of relevant market
— In G&K Baby Care Pvt Ltd and Danone Asia Pacific Holdings Pte Ltd1470, the Commission received a notice under
sub-section (2) of section 6 of the Competition Act, 2002 of the proposed combination by which (a) G&K Baby Care Pvt
Ltd (G&K) will acquire the nutrition business of Wockhardt Ltd (Wockhardt), as a going concern, on a slump-sale basis
which includes intellectual properties consisting of brands and know-how, debtors, inventories and other moveable assets,
creditors, employees relating to the above business and research and development equipment; (b) G&K will acquire the
contract manufacturing business of Carol Info Services Ltd (Carol) in respect of nutrition products, as a going concern, on
a slump-sale basis which includes a manufacturing unit for manufacture of nutrition products, consisting of land, building,
plant and machinery, equipment, other fixed assets, employees, debtors and creditors; and (c) Danone Asia Pacific
Holdings Pte Ltd (Danone Asia Pacific) will acquire certain intellectual properties, by way of sale and assignment, from
Wockhardt EU Operations Swiss AG (hereinafter referred to as “Wockhardt EU”) that are used in nutrition business.
The Commission noted that the Indian nutraceutical sector was at its infancy and was less than 1% of the global
nutraceutical sector. The share of Wockhardt group in both the segments of baby food business in India, i.e., weaning
cereals and milk food, was less than 7%. Nestle was the leading player in the baby food business in India. As regards the
medical nutrition business, as per the details provided by the Acquirer(s), the share of Wockhardt group was less than 10%
in India. There were other prominent players. The Danone Group had no presence in India in any activity that either
competes or was vertically related to any of the businesses proposed to be acquired. Further, given the significant presence
of other players in the baby food and medical nutrition businesses in India, the proposed combination was held to not
likely to have significant competition concern in India.
Effect on competition in India
In Re Baxalta Incorporated,1471 the Commission received a notice under sub-section (2) of section 6 of the Competition
Act, 2002 of the proposed combination pursuant to the execution of Global Separation and Distribution Agreement
(GSDA) between Baxter International Inc (Baxter) and Baxalta, on 30 June 2015 relating to the acquisition by Baxalta of
the bioscience business and related assets of Baxter (Target Business). Baxter and Baxalta were stated to be public limited
companies registered in USA and listed on the New York Stock Exchange. It was submitted that pursuant to the GSDA,
the Target Business had been effectively transferred to the Acquirer on 30 June 2015 (Global Implementation), except in
certain “deferred” jurisdictions, including India, where the transfer of the local target businesses would take place at a later
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date pursuant to local separation agreements. The Commission noted that prior to the Global Implementation, Baxalta was
a wholly-owned subsidiary of the Baxter, and did not carry out any business activities. Thus, there was no horizontal
overlap or vertical relationship between the business activities of Baxter and Baxalta. It was also observed that the
combination, including the eventual India Separation, related to a structural separation of the Target Business from Baxter
into a newly-incorporated company, Baxalta. Accordingly, the Commission held that the said structural change was
unlikely to result in any impact on competition in any market(s) in India.1472
In the combination approval order in the Nippon Life Insurance Co,1473 the Commission noted that the Acquirer and the
Target Enterprise were engaged in similar services, i.e., asset management services and portfolio management services.
However, it was observed that the Acquirer did not provide the said services in India, except through the Target Enterprise,
and therefore, there was no horizontal overlap between the services provided by the Acquirer and the Target Enterprise, in
India.
Similar opinion was given by the Commission in the notice given by Bradken Operations Pty Ltd.1474 The Commission
received a notice under sub-section (2) of section 6 of the Competition Act, 2002 of the proposed combination by Bradken
Operations Pty Ltd (Bradken/Acquirer) pursuant to the execution of a Business Transfer Agreement between Bradken and
Larsen & Toubro Ltd (L&T) on relating to the acquisition by Bradken of an undertaking of L&T located in Coimbatore
which was engaged in the manufacture and sale of grey iron and/or spheroidal graphite iron castings in India (Target
Undertaking). The Commission noted that Bradken Ltd had no presence in India, either directly or indirectly, through
subsidiaries, joint ventures and associate companies or in any other manner. Further, it did not hold any assets in India or
derive any turnover from India. Therefore, it was noted that there was no horizontal or vertical overlap between the
business activities of Bradken Ltd and Target Undertaking in the foundries market or in any other market in India. Also,
the market share of the Target Undertaking in the foundry business in India was negligible. Therefore, the Commission
ruled out any competition concern and approved the Combination.
—In Caladium Investment Pte Ltd,1475 the Commission received a notice under sub-section (2) of section 6 of the
Competition Act, 2002 of the proposed combination given by Caladium Investment Pte Ltd (Caladium), pursuant to
execution of two agreements on 24 April 2015, namely, (a) Share Subscription Agreement (SSA) between, inter alios,
Bandhan Bank Ltd (Bandhan Bank), Caladium, Bandhan Financial Services Ltd (BFSL) and Bandhan Financial Holdings
Ltd (BFHL) and (b) Policy Agreement (PA), inter alios, between Caladium, Bandhan Bank, BFSL, BFHL, International
Finance Corporation (IFC) and Small Industries Development Bank of India (SIDBI). The proposed combination consisted
of an investment by the Caladium (Acquirer) by subscribing to equity shares, constituting 4.99% stake in Bandhan Bank,
on a fully diluted basis, leading to its acquisition of joint control over Bandhan Bank. It was stated in the notice that the
Acquirer, being a private equity investor, was acquiring a stake in Bandhan Bank solely as a financial investment, in the
ordinary course of business. However, it was noted that the PA entered into between, inter alios, the Acquirer, Bandhan
Bank, BFSL, BFHL and IFC reserved certain limited matters as “GIC Reserved Matters” in respect of which no resolution
or decision may be passed/taken without the prior written consent of the Acquirer. Some of these matters on which
Caladium along with other investors of Bandhan Bank may have joint control over the bank were (a) creation of or
entering into or termination of joint ventures or partnerships and/or creation or sale/liquidation of its significant strategic
investments, direct/indirect joint ventures or its subsidiaries and (b) reorganisation or change in the nature of its current
business or activities or launch of any new line of business(es). In view of the foregoing, it was observed that the PA
envisaged joint control of Caladium over Bandhan Bank. Further, it was also observed that not only did Caladium acquired
joint control over Bandhan Bank on account of the provisions of the PA, it had also acquired indirect joint control over
Bandhan Bank on account of its rights under the Restated Shareholders Agreement of BFSL executed between, inter alios,
BFSL, BFHL, Small Industries Development Bank of India (SIDBI), IFC, Caladium and Bandhan Employee Welfare
Trust (BEWT) on 24 April 2015. However, the Commission noted that Bandhan Bank currently had no operations in the
banking sector. Also, the Acquirer had insignificant presence in the financial services market through non-controlling
minority stake in companies engaged in the financial services industry in India. It was therefore, noted that there was no
significant horizontal overlap or vertical relationship between the parties to the combination. And therefore, the
Commission approved the proposed combination under sub-section (1) of section 31 of the Competition Act, 2002.1476
—In Tetra Laval BV,1477 the Commission received a notice under sub-section (2) of section 6 of the Competition Act,
2002 of the proposed combination relating to acquisition of shares by Tetra Laval in Alfa Laval AB (Alfa Laval) through a
series of share purchases on the Stockholm Stock Exchange between the period 22 August 2011 to 13 December 2011,
whereby the shareholding of Tetra Laval in Alfa Laval increased from 18.83% to 26.1%, which also resulted in an increase
of the indirect shareholding to approximately 23.16% in Alfa Laval (India) Ltd (Alfa Laval India), the Indian subsidiary of
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Alfa Laval Corporate AB, which in turn was a wholly-owned subsidiary of Alfa Laval. Tetra Laval, along with the notice,
also filed an application requesting the Commission for condoning the delay in filing the notice as the same was given
beyond the time limit mentioned in sub-section (2) of section 6 of the Competition Act, 2002.
The Commission took serious note of the fact that the notice was not only given belatedly but was also given after the
combination had already taken effect, which is in contravention of the relevant provisions of the Competition Act, 2002.
Further, the Commission strongly emphasised that any person or enterprise, who or which proposes to enter into a
combination, has to mandatorily give a notice to the Commission under sub-section (2) of section 6 of the Competition Act,
2002 prior to entering into a combination. It, however, decided not to initiate proceedings for imposition of penalty under
section 43A of the Competition Act, 2002 as it was the first year of implementation of the provisions relating to
combinations in the Competition Act, 2002.
The Commission noted that the purchase of heat transfer equipment, separation equipment and flow equipment made by
Tetra Laval from Alfa Laval constituted only a small fraction of the demand for heat transfer equipment, separation
equipment and flow equipment in India. Further, it was also observed that the increase in shareholding by Tetra Laval in
Alfa Laval to 26.1%, which had resulted in an increase of its indirect shareholding in Alfa Laval India to approximately
23.16%, was in the nature of a non-controlling minority shareholding. The Commission was therefore, of the opinion that
the combination was not likely to have an AAEC in India, and therefore, it approved the combination under sub-section (1)
of section 31 of the Competition Act, 2002.1478
No horizontal or vertical overlap
The Commission has in a large number of applications filed under section 6 for approval concluded that the proposed
combination was not likely to have any AAEC on the ground that there was no horizontal or vertical overlap between the
parties to combination.1479
Size of the Market
—In Re Terra Transmission and Distribution India (P) Ltd,1480 the Commission received a notice under sub-section (2)
of section 6 of the Competition Act, 2002 of the proposed combination pursuant to the execution of a Business Transfer
Agreement entered into, inter alia, between Terra Transmission & Distribution India Pvt Ltd (Terra) and Vijai Electricals
Ltd (Vijai) relating to the acquisition by Terra of the distribution transformers, the power transformers, and the switchgears
businesses of Vijai operated from the Rudraram plant of Vijai.
The Commission noted that as per the “Indian Electrical Equipment Industry Mission Plan 2012/2022”, published by the
Ministry of Heavy Industries & Public Enterprises, Government of India, for the year 2011/12, the size of the Indian
electrical industry was estimated at Rs 1.20 lakh crore of which the generation equipment segment accounted for Rs
31,000 crore, the major transmission and distribution equipment segment of transformers, cables, transmission lines,
switchgears, capacitors, energy meters, etc., accounted for Rs 64,235 crore, while the remaining related to other electrical
equipment. The estimated size for transformers was Rs 12,400 crore and the size for switchgear & control gear was Rs
9,800 crore. Accordingly, as per the details provided in the notice, on the basis of the turnover of Vijai for the year
2011/12, the estimated share of Vijai in the electrical transmission and distribution equipment market, transformers market
and switchgear market in India would be small. Consequently, pursuant to the proposed combination, the share of the
Acquirer, which at present was not engaged in any business activity, in the market for electrical transmission and
distribution equipment in India would be only marginal. It was also observed that there were already several major
established players present in the field of manufacture of electrical transmission and distribution equipment in India and
therefore, the proposed combination was not likely to have an AAEC in India and, therefore, the Commission approved the
proposed combination under sub-section (1) of section 31 of the Competition Act, 2002.
Size of proposed acquisition
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—In Re JSW Steel Ltd,1481 the Commission received a notice under sub-section (2) of section 6 of the Competition Act,
2002 of the proposed acquisition of the cement manufacturing undertaking of Heidelberg Cement India Ltd (HCIL)
situated at Dolvi, district Raigad (Maharashtra) (Raigad Undertaking), by JSW Steel, on a slump-sale basis. The
Commission noted that JSW Steel was principally engaged in the manufacture of steel and steel products and also operated
a cement grinding unit located at Bellary (Karnataka), the entire production of which was captively consumed. The Raigad
Undertaking, which was proposed to be acquired by JSW Steel, had an installed capacity of 0.6 MTPA only. It was
observed that JSW Cement, which was a part of the JSW group and manufactured and sold different varieties of cement
similar to that of HCIL, had a cumulative annual installed capacity of about 5.2 MTPA, at its plants at Vijaynagar and
Nandyal. Further, JSW Cement was a relatively new player in the cement industry, having commenced its Vijaynagar plant
in the year 2009. Moreover, the grinding unit acquired by JSW Cement at Dolvi, Raigad (Maharashtra) with an installed
capacity of 0.1 MTPA, was stated to start its commercial operations in the year 2013/14. Accordingly, the Raigad
Undertaking, having a capacity to produce only 0.6 MTPA, once acquired, would not substantially increase the total
cement production capacity of the JSW group. Further, JSW Steel was also selling BF slag generated as a residue from its
steel plant at Dolvi, Raigad (Maharashtra) to the Raigad Undertaking of HCIL. It was also stated in the notice that as part
of the proposed combination, the obligation of HCIL to lift BF slag from JSW Steel would end and the proposed
combination would help JSW Steel to use the blast furnace slag produced by it effectively and efficiently. Therefore, it was
held that the proposed combination was not likely to give rise to any competition concern.1482
Composite Merger
—In Thomas Cook (India) Ltd v Competition Commission of India,1483 the Commission held that considering two
different transactions as one combination depends on the facts and circumstances of each case with due regard to the
subject matter of the transactions; the business and entities involved; simultaneity in negotiation, execution and
consummation of the transactions; and also, whether, it is practical and reasonable to isolate and view the transactions
separately. Determination of composite nature would proceed on whether the transaction was inter-connected and inter-
dependent on each other. However, “mutual interdependence would not be the sole test.”
Appeal was filed against the Commission’s 2014 order whereby penalty of Rs 1 crore was imposed on the appellants on
the ground of non-compliance of section 6(2) of the Competition Act, 2002 and it was argued that the market purchases
were not combination. In the case, the BOD of Appellants (Thomas Cook (India) Ltd (TCIL), Thomas Cook Insurance
Services (India) Ltd (TCISIL) and Sterling Holiday Resorts (India) Ltd (SHRIL), passed Resolutions dated 7 February
2014 and approved composite two-step scheme whereby the resorts and time-share business of SHRIL was proposed to be
transferred to TCISIL by way of demerger and in lieu thereof, certain equity shares of TCIL were proposed to be issued to
the shareholders of SHRIL. It was further, decided that after transfer of resorts and time-share business, SHRIL would be
amalgamated into TCIL and certain equity shares of TCIL would be issued to the shareholders of SHRIL. Another
resolution was passed by the BOD of TCISIL on 7 February 2014 authorising the market purchases of the equity shares of
SHRIL. In furtherance of that resolution, TCISIL acquired 90,26,794 equity shares of SHRIL representing 9.93% of its
equity share capital on a fully diluted basis through open market purchases on Bombay Stock Exchange Ltd (BSE Ltd). In
terms of the mandate of section 6(2) of the Act, the appellants filed notice dated 14 February 2014 for approval of the
merger/amalgamation. The notice contained details of various resolutions passed by the BOD of the appellants. A
reference was also made to public announcements made by TCIL and TCISIL about the purchase of up to 20% of the
equity share capital of SHRIL from public shareholders and the market purchase of equity shares of SHRIL by TCISIL.
The Commission examined the entire record and felt satisfied that the scheme did not have any adverse effect on
competition. Accordingly, order dated 5 March 2014 was passed under section 31(1) of the Competition Act, 2002 for
approval of the two-stage scheme envisaged in the resolutions passed by the appellants subject to the rider that the same
will not affect the action which may be taken under section 43A.
The Commission’s decision to later impose penalty on the appellants for alleged non-compliance of section 6(2) of the
Competition Act, 2002 was founded on the following factors:
(a) The two-stage scheme and the market purchases were authorised in the same meeting of the Board of Directors of
TCISIL held on 7 February 2014 though separate resolutions were passed for that purpose.
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(b) On the same day i.e. 7 February 2014, TCIL and SHRIL issued a joint press release stating that they have
announced a merger and the fact that the transaction was likely to close by 4th quarter of 2014.
(c) All the transactions relate to the business and shares of SHRIL and, therefore, the same could be regarded as one
composite business combination.
(d) The parties did not clarify the need for TCISIL to go for the market purchase of the equity shares of SHRIL when
SHRIL itself was proposed to demerged and amalgamated into TCISIL and TCIL respectively.
(e) As per joint press release dated 7 February 2014, the parties announced a merger between them and the part
equity, part merger deal was structured as a multi-stage process comprising the acquisitions and the scheme.
(f) The warrantees given by TCIL and TCISIL under the share subscription agreement and share purchase agreement
included their ability to consummate the transaction in the respective agreements and the merger cooperation
agreement which prescribed the manner of implementation of the scheme.
(g) The execution of various agreements on the same day and the market purchases suggest that all transactions were
inherently connected and interdependent on each other and form part of one wider business transaction.
(h) Though the market purchases do not contain any reference to the merger cooperation agreement, share
subscription agreement and share purchase agreement or the scheme, the close proximity of these actions and
transactions and the fact that the market purchases were consummated between 10 and 12 February 2014 show
that the market purchases had close nexus with other transaction and in the absence of scheme of other
acquisitions, TCISIL would not have pursued the market purchases.
The Tribunal however, allowed the appeal, set aside the penalty and held that the factors relied upon by the Commission
for holding that the market purchases of the equity shares of SHRIL by TCISIL constituted an integral part of the scheme
and other transactions did not supply sound legal basis for recording of a finding that the appellants had violated the
mandate of section 6(2) in so far as the market purchase of equity shares of SHRIL was concerned. The Tribunal noted:
21... There is no dispute between the parties that the exemption granted by the Central Government under section 54(a) is
applicable in the present case. The Commission declined to give benefit of exemption to the appellants mainly on the ground that
the market purchases were intrinsically connected with other transactions. In doing so, the Commission failed to take cognisance of
the fact that the implementation of two-stage scheme for demerger/amalgamation was not dependent on the market purchase of
equity shares of SHRIL by TCISIL and vice versa. Therefore, the mere fact that various transactions were executed in close
proximity of the market purchases of the equity shares of SHRIL by TCISIL is not sufficient to deny the benefit of the exemption
notification to the appellants. A bare reading of notification dated 4 March 2011 makes it clear that the exemption contained
therein is not riddled with any condition. Therefore, it must be held that the transaction involving the market purchases of the
equity shares of SHRIL was covered by the exemption notification and the same was not required to be notified under section 6(2).
As a corollary, it is held that the Commission committed serious error by imposing penalty on the appellants under section 43A on
the premise that they had violated section 6(2) of the Act.
22. Even if the reasoning of the Commission for rejecting the appellants’ plea based on the exemption notification is held to be
correct, I do not see any valid ground or justification for sustaining the penalty because the violation, if any, of section 6(2) was
purely technical. At the cost of repetition, it deserves to be mentioned that while filing notice dated 14 February 2014, the
appellants had disclosed each and every transaction including the market purchase of equity shares of SHRIL by TCISIL and while
granting approval under section 31 of the Act, the Commission was very much aware of the same.
23. I am also of the view that the passing of the resolutions on the same day for demerger and amalgamation as also the market
purchase of equity shares of SHRIL cannot be made basis for taking the view that the appellants were duty bound to file separate
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notice under section 6(2) of the Act for securing Commission’s approval under section 31(1) in respect of the market purchase of
equity shares of SHRIL and that too despite the fact that the factum of market purchase of equity shares was very much disclosed
in notice dated 14 February 2014 filed under section 6(2) for seeking approval of the demerger/amalgamation scheme.
24. I may hasten to add that if the appellants had filed separate notice under section 6(2) for grant of approval of the market
purchases of equity shares, the same would, in all probability, have been granted by the Commission by relying upon the order
dated 5 March 2014.
25. In so far as regulation 9(4) is concerned, the object thereof is to facilitate filing of one notice in respect of various
interconnected/interrelated/interdependent transactions. This implies that if the parties take several steps or enter into multiple
transactions for achieving the object of combination then they are not required to file separate notice under section 6(2) and it will
be sufficient if one notice is filed for seeking approval under section 31(1). The Commission is right in observing that any technical
interpretation of section 5 to isolate two different steps/transactions of a composite combination is against the spirit and provisions
of the Act, but this observation has no bearing on the applicants’ case.1484
The Supreme Court held that the market purchases were not independent and were part of the composite combination and
the same were consummated before giving notice to the Commission. The Court further held that the market purchases did
not qualify as a combination in view of the target exemption notification. It was held that since the market purchases were
not independent, Regulation 9(4) cannot be interpreted to enable consummation by a composite combination before giving
notice to the Commission and that such an interpretation would be defeating the intent and purpose of the Competition Act,
2002 and in particular sections 5 and 6 thereof. The Supreme Court upheld the decision of the Commission and restored
the penalty of Rs 1 crore.1485
Horizontal Overlap and Vertical Relationship1486
—In Re Alstom Bharat Forge Power Ltd (KBFPL),1487 the Commission received a notice under sub-section (2) of section
6 of the Competition Act, 2002 of the combination given pursuant to the approval by the BOD of ABFPL and KAPL of the
scheme of amalgamation. Under the proposed combination, KAPL would merge into ABFPL as a result of which, KAPL
will cease to exist and all the assets and liabilities of KAPL would be transferred to ABFPL. Post combination, ABFPL
will be the surviving entity. The Commission noted that post combination, the ultimate control over the business activities
of ABFPL and KAPL, which would merge in ABFPL, would continue to be under the joint control of the Alstom Power
Holdings SA and Bharat Forge Ltd. ABFPL was in the business of manufacturing and selling of steam turbines and
generators, whereas KAPL was in the business of manufacturing heat exchangers and other auxiliary equipment for steam
turbine generators. As such, the Commission held that there exists no horizontal overlap between the activities of ABFPL
and KAPL in India. Further, it was envisaged that the products of ABFPL and KAPL would be complementary to each
other for the setting up of turbine islands for sub-critical and super-critical technology-based power plants. The
Commission was, therefore, of the opinion that the proposed combination was not likely to have AAEC in India.
Horizontal overlap
—In Everstone Capital Partners II LLC,1488 the Commission received a notice under sub-section (2) of section 6 of the
Competition Act, 2002 of the proposed combination filed by Everstone Capital Partners II LLC (Everstone or Acquirer),
pursuant to execution of the Share and Assets Sale and Purchase Agreement (SAPA) between the Acquirer and Aon
Corporation (Aon). The proposed combination which was a global transaction, involved acquisition of Asia Pacific-based
payroll business of Aon carried on through its indirect subsidiaries in India, China, Philippines and Singapore, by the
Acquirer in accordance with the SAPA. In India, the proposed combination involved acquisition of the payroll business of
Aon Services India Pvt Ltd (Aon India), an indirect subsidiary of Aon, as a going concern, by the Acquirer, through
Payfront Technologies India Pvt Ltd, a newly incorporated indirect subsidiary of the Acquirer. The Commission noted that
the Acquirer was an investment company and did not directly undertake any business activities. In this regard, it was also
noted that one of the portfolio companies of the Acquirer, namely Aparajitha Corporate Services Ltd (Aparajitha)
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undertook payroll services business in India. However, on the basis of the nature of services provided by Aparajitha and
the scale of operations of Aparajitha, the Commission observed that the horizontal overlap arising in this regard was
insignificant and was not likely to raise any competition concern. Further, as regards vertical relationship, the Parties
agreed to certain referral and sub-contracting arrangements in the SAPA. However, the Commission noted that the same
was not likely to raise any competition concern.1489
Similarly, in the HBL Global Pvt Ltd,1490 the Commission observed that the proposed combination primarily related to
provision of BPO services in the banking, financial services and insurance (BFSI) sector in India and though there was
horizontal overlap between the business activities of the Parties regarding BPO services, considering the fact that the
Parties provided BPO services only to HDFC Bank and other HDFC group companies, the proposed combination was not
likely to change the existing market structure for the provision of BPO services, in India. Further, it was also observed that
the Parties had insignificant market shares in the provision of BPO services in the BFSI sector in India.
— In Glaxo Smith Kline plc (GSK) and Novartis AG,1491 the Commission received a notice under sub-section (2) section
6 of the Competition Act, 2002 of the proposed combination relating to the following three inter-conditional and inter-
dependent transactions: 1. Acquisition of the global human vaccines business of Novartis (excluding its influenza vaccines
business) by GSK (Vaccines Transaction) pursuant to the Share and Business Sale Agreement and the Implementation
Agreement; 2. Formation of a consumer healthcare joint venture (JV), in which GSK will own an equity interest of 63.5%
and Novartis will own the remaining 36.5% equity interest. As per the information given in the notice, GSK will contribute
its global consumer healthcare business (excluding inter alia GSK’s consumer healthcare business in India) and Novartis
will contribute its over-the-counter consumer healthcare business (excluding the products that are managed by and reported
for financial purposes within Novartis’ Pharmaceutical Division, Alcon Division, and Sandoz Division), to the JV
(Consumer Healthcare Transaction), pursuant to the Contribution Agreement and the Implementation Agreement; and 3.
Acquisition of GSK’s business relating to a portfolio of oncology products (excluding manufacturing) by Novartis
(Oncology Transaction) pursuant to the Sale and Purchase Agreement and the Implementation Agreement.
Vaccines Transaction: Parties submitted that the monovalent and multivalent vaccines belonged to different product
markets and therefore, the trivalent and pentavalent vaccines were not substitutable and therefore, there was no overlap
between the products of the Parties in Vaccine Transaction. Even if the DTP vaccines of the Parties were considered to be
substitutes, it was noted the market share of GSK was only 5%–10% in the market for the DTP vaccines, whereas Novartis
launched its DTP vaccine in March 2014 only and presently had negligible sales. Therefore, in light of negligible market
share presence of competitors, it was observed that Vaccine Transaction was not likely to result in AAEC in India. Further,
it was noted that the vertical integration of GSK post combination was not likely to result in any vertical foreclosure in
India.1492
Consumer Healthcare Transaction: the Commission held that there was a possibility of horizontal overlap between existing
products and certain pipeline products of the Parties in the Consumer Healthcare Transaction. However, considering the
negligible presence of the Parties and presence of significant competitors in the product market, the Consumer Healthcare
Transaction was held to not likely result in any AAEC in the market in India.
Oncology Transaction: the Commission after seeking expert opinions from the leading hospitals in India held that even
though there were certain pipeline oncology products of the Parties which were part of the Oncology Transaction, they
were based on different molecules which could also be differentiated on the basis of the type/stage of cancer targeted, line
of treatment and mechanism of action. Accordingly, it was observed that there were no overlaps between the pipeline
oncology products of the Parties.
The Commission, therefore, was of the opinion that the proposed combination was not likely to have any adverse effect of
competition within India.
Similarly, in the matter of Res Rei Finance Pvt Ltd,1493 it was observed that the parties to the combination were not
engaged in production, supply, distribution, storage, sale or trade of similar or identical or substitutable goods or provision
of similar or identical or substitutable services as Res Rei Finance Pvt Ltd, which was not carrying out any business
activities, was a holding company holding investments in its group companies and AAA Entertainment Pvt Ltd was
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carrying out the entertainment business through its wholly-owned subsidiary. The parties to the combination were also not
engaged at different stages or levels of the production chain in different markets in respect of production, supply,
distribution, storage, sale or trade in goods or provision of services in which another party to the proposed combination
was engaged. The proposed combination was held to not likely to give rise to any adverse competition concern.
—In Alpha TC Holdings Pte Ltd and Tata Capital Growth Fund I,1494 the Commission received a notice under sub-
section (2) of section 6 of the Competition Act, 2002 of the proposed combination pursuant to the execution of an
Investment Agreement, entered into between Standard Greases & Specialties Pvt Ltd (SGSPL), the promoters of SGSPL
and the Acquirers (Alpha TC Holdings Pte Ltd (Alpha TC Holdings) and Tata Capital Growth Fund I (TCGF I). The
proposed combination involved acquisition of shares by the Acquirers, by way of subscription up to 17.36% of the post-
issue equity share capital of SGSPL on a fully diluted basis. Acquirers, i.e., Alpha TC Holdings and TCGF I would each
subscribe up to 8.68% of the post-issue equity share capital of SGSPL. The proposed combination involved acquisition of
a minority stake in SGSPL by the Acquirers for purely investment purposes. Further, as stated by the Acquirers, in terms
of the Investment Agreement, the rights conferred on the Acquirers were largely investor protection rights with no control
being granted over the strategic commercial decisions of SGSPL. The Acquirers had further, submitted that ordinarily such
a combination would be exempt under Item 1 of sch I of the Combination Regulations. In this regard, it was noted by the
Commission:
8... that Regulation 4 of the Combination Regulations states that since the categories of combinations mentioned in sch I are
ordinarily not likely to cause appreciable adverse effect on competition in India, notice under sub-section (2) of section 6 of the Act
need not normally be filed. One such category (i.e. Item 1 of sch I of the Combination Regulations) pertains to an acquisition of
shares or voting rights, referred to in sub-clause (i) or sub-clause (ii) of clause (a) of section 5 of the Act, solely as an investment or
in the ordinary course of business in so far as the total shares or voting rights held by the acquirer directly or indirectly, does not
entitle the acquirer to hold 25% or more of the total shares or voting rights of the company, of which shares or voting rights are
being acquired, directly or indirectly or in accordance with the execution of any document including a share holders’ agreement or
articles of association, not leading to acquisition of control of the enterprise whose shares or voting rights are being acquired.
9. With respect to the submissions of the Acquirers, it is observed that the Investment Agreement reserves certain matters
(Reserved Matters) in respect of which no action may be taken without the prior written consent of the Acquirers. The Reserved
Matters inter-alia include, (i) appointment and removal of the Managing Director and the Chief Financial Officer of SGSPL; (ii)
increasing or decreasing the number of Directors on the Board or any committees thereof other than as set out in the Investment
Agreement; (iii) approving, adopting, amending or modifying the annual budget and business plan (including any capital
expenditure budget, operating budget and financing plan); (iv) pay emoluments/bonuses to promoters or directors, except as agreed
in their employment contracts; (v) any amendment to the memorandum of association or articles of association of SGSPL; etc. In
addition, Investment Agreement also confer certain rights on the Acquirers which inter alia provides that (a) each Acquirer is
entitled to appoint one director on the Board of Directors (“Acquirer Directors”); (b) TCGF I is entitled to appoint one Acquirer
Director as the Chairman of the Audit, Remuneration and Recruitment Committees of the Board of Directors of SGSPL; (c) In the
event any Reserved Matters is to be discussed at any Board Meeting, then the quorum for a Board Meeting shall require the
presence of at least one of the Acquirer Directors. It is observed that the Reserved Matters for which consent of the Acquirers is
required include strategic commercial decisions of SGSPL and the same, therefore, cannot be considered as mere minority
protection rights, as also observed by the Commission in its earlier orders. In view of the foregoing, it is observed that the
Investment Agreement envisages Acquirers’ joint control over SGSPL and therefore, the proposed combination does not fall under
Item I of sch I to the Combination Regulations.
It was noted that while the Acquirers were engaged in investment activities, SGSPL was primarily engaged in the business
of manufacturing and processing of greases and lubricating oils. It was also observed that none of the portfolio companies
of the Acquirers was currently engaged in any activity relating to manufacturing of greases and lubricating oils in India.
There was no horizontal overlap or vertical relationship between the business activities of SGSPL and any enterprise of the
Acquirers’ group. Therefore, the Commission held that the proposed combination was not likely to have any adverse effect
on competition within India.
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—In Sanofi-Synthelabo (India) Ltd,1495 the Commission received a notice under sub-section (2) of section 6 of the
Competition Act, 2002 of the proposed combination relating to acquisition of equity shares in Apollo Sugar Clinics Ltd
(ASCL) by Sanofi, pursuant to execution of the Shareholders’ Agreement and Share Subscription and Purchase Agreement
both entered into between Apollo Health and Lifestyle Ltd (AHLL), Sanofi and ASCL. As a result of the proposed
combination, Sanofi would hold 20% of the total equity shareholding and exercise certain rights, in relation to
management of ASCL. Post combination, ASCL would be jointly controlled by Sanofi and AHLL. In addition, Sanofi will
have an option to increase its shareholding in ASCL to 26% which can be exercised during a certain period of time, as
defined in the Agreements. Further, as stated in the notice, it was also proposed that Apollo group will transfer their
operational clinics to ASCL. The Commission observed that Sanofi and ASCL operated at different levels of the supply
chain in the healthcare industry in India and there was no horizontal overlap between the business of Sanofi and ASCL.
The sugar centres were already presently functioning within the different enterprises of Apollo group and would continue
to do so after the proposed combination. The proposed combination, would not, therefore, result in the removal of any
competitor from the market. Further, the vertical relationship between Sanofi and ASCL was complementary and would
enable them to harness their respective expertise to provide out-patient healthcare services for diabetes. Therefore, the
Commission held that there was no likelihood of adverse effect on competition and thereby approved the combination.
—In Bombay Stock Exchange Ltd and United Stock Exchange of India Ltd,1496 the proposed combination related to the
merger of United Stock Exchange of India Ltd (USE) with Bombay Stock Exchange Ltd (BSE) pursuant to scheme of
amalgamation. Both BSE and USE were engaged in the business of providing stock exchanges services. However, while
BSE operated in a number of segments including equity, equity derivatives, currency derivatives and interest rate
derivatives; USE operated only in CD segment. Consequently, the competition analysis of the proposed combination
focused on the CD segment where the overlap between the parties existed (relevant market). Using cumulative turnover
during the period November 2013 to June 2014 as an indicator, NSE emerged as a clear market leader with around 53%
market share, distantly followed by MCX SX (23%), BSE (18%) and USE (6%), respectively. The Commission noted that
BSE commenced operations in the CD segment in November 2013 when all the three other exchanges were already
providing their services in the CD segment. The competition assessment of the proposed combination was also guided by
the market dynamics of stock exchanges. The Commission further observed that single product exchanges were finding it
difficult to compete with multi-product exchange and the multi-product exchanges had the advantage of having netting
opportunities (offered by product scope) in the post-trading stage of clearing and settlement, which can make a trader
prefer to trade an asset on the exchange where he was already trading in other assets. It was observed that from a firm’s
perspective, it would be profitable to add products on the platform without incurring significant capital cost, thus
benefitting from the scope economies. By virtue of its strength in other segments, BSE was in a position to offer better
economies of scope to the market participants. The Commission was, therefore, of the opinion that the proposed
combination was not likely to have an AAEC in India in any of the relevant market(s) and therefore, approved the same
under sub-section (1) of section 31 of the Competition Act, 2002.
No change in “Control”
—In Re India Power Corp Ltd and DPSC Ltd,1497 the Commission received a notice under sub-section (2) of section 6 of
the Competition Act, 2002 of the proposed combination between India Power Corporation Ltd (IPCL) and DPSC Ltd
(DPSC). As per the scheme, IPCL would amalgamate into DPSC, pursuant to implementation of the scheme of
arrangement and amalgamation approved by the BOD of each of the parties to the combination and the following shall be
deemed to have occurred: (a) Transfer of Investment Division by IPCL to an investment trust – Beneficial ownership of
the investment trust will be with IPCL. (b) Amalgamation of IPCL into DPSC – As a result of the amalgamation,
beneficial interest in the investment trust will also get transferred to DPSC. (c) Change of name of DPSC from “DPSC
Ltd” to “India Power Corporation Ltd”. The Commission noted that IPCL held 93% equity shares of DPSC and on
amalgamation of IPCL into DPSC, as per the Scheme, the shareholders of IPCL would become the shareholders of DPSC
and thus, there would be no change in ultimate control over the activities carried out by IPCL and DPSC before and after
the proposed combination. The Scheme also provided that pursuant to the amalgamation of IPCL into and with DPSC, the
control over DPSC would not change. Based on this, the Commission ruled out any adverse effect on competition and
approved the scheme under sub-section (1) of section 31 of the Competition Act, 2002.
Re-organisation within the same group
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—In Sundaram Clayton Ltd,1498 the Commission received a notice under sub-section (2) of section 6 of the Competition
Act, 2002 of the proposed combination pursuant to the Composite Scheme of Arrangement jointly filed by Sundaram-
Clayton Ltd (SCL), Anusha Investments Ltd (AIL) and Sundaram Investment Ltd (SIL). The parties to the combination
were direct or indirect subsidiaries of TV Sundaram Iyengar & Sons Ltd which was the flagship company of the TVS
Group. The said Scheme was to be executed with the objective to split and restructure the business of SCL into automotive
and non-automotive related businesses and included amalgamation of AIL into SCL; demerger of non-automotive related
business of SCL into SIL after amalgamation of AIL with SCL and consequential reduction of equity share capital and
reserves of SCL; and keeping the equity shares of SIL unlisted and providing exit opportunity to the shareholders of SIL
after demerger of non-automotive related business of SCL into SIL. Further, as per the Scheme, the investment of AIL in
Sundaram Engineering Products Services Ltd (SEPSL) which would vest in SCL pursuant to the amalgamation of AIL into
SCL, would, pursuant to the demerger of non-automotive related business of SCL into SIL in terms of the said Scheme, be
transferred to SIL. It was stated in the notice and other documents placed on record that SEPSL was an unlisted public
limited company, incorporated on 1 December 2011 under the Companies Act, 1956, in which AIL held 49% of the equity
shares and Sundaram Auto Components Ltd and TVS Energy Ltd, both of which were subsidiaries of TVS Motors Ltd,
together held the balance 51% equity shares. Under the Scheme, SEPSL was proposed to provide an exit route for the
public shareholders of SCL, who pursuant to the Scheme would hold equity shares in SIL.
It was observed that the proposed amalgamation of AIL into SCL and the subsequent transfer of non-automotive related
business of SCL into SIL involved consolidation and division of the existing businesses within the same group. While
SCL, a subsidiary of TV Sundaram Iyengar & Sons Ltd, which was engaged in automotive as well as non-automotive
businesses through its various direct and indirect subsidiaries, would on implementation of the Scheme continue to be
predominantly engaged in the automotive business, AIL would be amalgamated into SCL, and SIL would be engaged in
the non-automotive related business transferred to SIL under the Scheme. Considering that the Scheme involved
reorganisation of the businesses of SCL and the ultimate control over the business activities carried on by the parties to the
combination, before and after the proposed combination, remained unchanged, the proposed combination was held to not
likely have any adverse competition concern. And the Commission therefore, approved the proposed combination under
sub-section (1) of section 31 of the Competition Act, 2002.
Contract is not an investment agreement
In Re GS Mace Holdings Ltd,1499 the Commission received details of acquisition under sub-section (5) of section 6 of the
Competition Act, 2002 in Form III under regulation 6 of the Combination Regulations. The details of acquisition were filed
by GS Mace Holdings Ltd (Acquirer), a Mauritius-based sub-account of Goldman Sachs & Co which was a Foreign
Institutional Investor (FII) registered with SEBI for acquisition of shares of Max India Ltd (Max). The details of
acquisition related to the acquisition of 6.499% of the issued and paid-up equity share capital of Max. The said acquisition
was made by the acquirer on the National Stock Exchange on 13 December 2011. Prior to the said acquisition, Xenok Ltd,
a Cyprus-based company and an affiliate of the acquirer, pursuant to an investment agreement dated 25 February 2010, had
acquired 9.101 % of the issued and paid-up equity share capital of Max. Also, 0.002% of the issued and paid-up equity
share capital of Max was held by an Indian affiliate of the acquirer. Therefore, after the said acquisition of shares in Max,
the aggregate shareholding of the acquirer, along with its affiliates, had increased to 15.602% of the issued and paid-up
equity share capital of Max. The Acquirer, inter alia, provided a copy of the contract note issued by the stock broker and
stated that the contract note provided by a stock broker to an FII in relation to the acquisition of shares on the stock
exchange under the Portfolio Investment Scheme (PIS) was the investment agreement for the purposes of sub-section (4)
of section 6 of the Competition Act, 2002 being the agreement evidencing the investment in shares by the FII. Further, the
investments by FIIs under PIS were merely financial investments and are not intended to obtain rights beyond limited
voting rights.
The Commission observed that the provisions of sub-section (4) of section 6 of the Competition Act, 2002 apply to share
subscription or financing facility or any acquisition by a public financial institution, foreign institutional investor, bank or
venture capital fund, only if it was made pursuant to any covenant of a loan agreement or investment agreement. The
contract note, stated by the acquirer to be the investment agreement for the purposes of sub-section (4) of section 6 of the
Competition Act, 2002 was issued by a stock broker in terms of the National Stock Exchange (Capital Market) Trading
Regulations, 1994, confirming the execution of trade on the stock exchange by the stockbroker on behalf of and as per the
instructions of the buyer/seller of the securities. It was held that the contract note was more in the nature of a receipt issued
by the stock broker to its client, and was indicative of an agent-principal relationship between the broker and the client,
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rather than an investor-investee relationship which would be expected in case of an investment agreement. Further, the
contract note was issued by the stock broker subsequent to the execution of trade on the stock exchange. Therefore, for the
purposes of provisions of sub-section (4) of section 6 of the Competition Act, 2002 the contract note cannot be considered
to be an investment agreement.
Further, it was observed that as the said acquisition was not pursuant to any loan or investment agreement and also
exceeded 15% of the issued and paid up equity share capital of Max, neither the provisions of sub-section (4) of section 6
and sub-section (5) of section 6 of the Competition Act, 2002 apply to the present case nor the said acquisition could be
said to be covered under the provisions of regulation 4 read with para 1 of sch 1 of the Combination Regulations as in
force at the time of the acquisition. Therefore, in respect of the said acquisition, the notice ought to have been filed by the
acquirer under sub-section (2) of section 6 of the Competition Act, 2002 prior to the acquisition of shares. As the acquirer
had filed details of acquisition under sub-section (5) of section 6 of the Competition Act, 2002 there was a failure to give
notice to the Commission under sub-section (2) of section 6 of the Competition Act, 2002. Further, it was noted that
according to the Combination Regulations as amended on 23 February 2012, an acquisition as specified in para 1 of sch 1
thereof which did not entitle the acquirer to hold 25% or more of the total shares or voting rights of the company, was
ordinarily not likely to cause an AAEC in India and therefore, in respect of such acquisition, the notice under sub-section
(2) of section 6 of the Competition Act, 2002 need not normally be filed.
No horizontal overlap: Different area of operation
Notice was filed by Cinepolis1500 pursuant to execution of a Business Transfer Agreement entered into between Cinepolis
India and DUL. The proposed combination related to acquisition of business of operating and maintaining cinema
theatres/multiplexes of DUL, located at DT Saket (six screens) and DT Savitri GK-II (one screen) by Cinepolis India, as a
going concern on a slump-sale basis. With regard to horizontal overlap between the Parties, Commission noted that
Cinepolis India did not have any operations in the South Delhi region whereas DUL operated a multiplex cinema theatre at
DT Saket and a single screen theatre at DT Savitri in South Delhi region. Thus, there was no horizontal overlap between
the Parties. The Commission further noted that there was no vertical relationship between the Parties. The Commission,
therefore, held that proposed combination was not likely to have an AAEC in India.
Insignificant horizontal and vertical overlap
Notice1501 was filed pursuant to execution of Stock and Asset Purchase Agreement (SAPA) between FIH, HMD and
Microsoft Mobile Oy in relation to acquisition by FIH of certain assets that are utilised in feature phone business from
Microsoft MO and simultaneous acquisition by HMD of the IP rights pertaining to feature phone business from Microsoft
Corporation (Microsoft). The proposed combination contemplated following acquisition by FIH from Microsoft MO and
other entities affiliated to Microsoft MO (all of which were subsidiaries or affiliates of Microsoft): (a) 100% of the equity
share capital of Microsoft Mobile (Vietnam) Ltd Liability Co (MMV) through an indirect wholly-owned subsidiary of
FIH; and (b) certain assets utilised in the manufacturing of feature phones. Simultaneously, the SAPA also envisaged
acquisition of intellectual property (IP) rights related to feature phone business by HMD from Microsoft. The Commission
observed that the activities of the parties overlapped in India as both Hon Hai and Microsoft were active in the business of
EMS. Thus, there existed horizontal overlap between Hon Hai and Microsoft in relation to EMS in India. The Commission
also noted that the provision of EMS may be sub-segmented into EMS for communications, i.e., EMS communications,
EMS for computers, EMS for automotive sector, etc. Based on the submission of the parties, the Commission observed
that the activities of Hon Hai and Microsoft overlapped in the EMS communications sub-segment in India. The
Commission, however, observed that the market share of Hon Hai and Microsoft in both EMS segment and EMS
communications sub-segment was insignificant in India and that HMD was not engaged in any business in India.
Therefore, delineation of relevant market was left open. Owing to the small market share of Hon Hai and Microsoft in
EMS segment as well as in EMS communications sub-segment and the presence of competitors like Micromax,
Flextronics and Intex who would continue to pose competitive constraint to the parties, post combination, the Commission
was of the view that the proposed combination was not likely to have AAEC within India. Further, the vertical overlap
Hon Hai and Microsoft in India (Microsoft had purchased certain components from Hon Hai for use in the manufacturing
of feature phone), was also held to be insignificant owing to the miniscule proportion of sales to Microsoft to total sales of
Hon Hai.1502
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In the combination approval1503 order with respect to acquisition of 20% shareholding of the total share capital in Flipkart
by SVF, the Commission with regard to B2B segment noted that the combined market shares of parties including portfolio
companies and Flipkart entities was insignificant to raise any competition concern and there were other players such as
Reliance Retail, Walmart, Metro Cash and Carry India, Amazon Wholesale India and Indiamart providing similar
products/services. Further, it was noted that the combined market shares of the parties in overall B2C segment or any
segment therein was not significant to raise any competition concern. Moreover, with regard to B2C retail including e-
commerce retail, it was observed that there are a number of players such as the Future Group, Reliance Retail, Tata group,
Aditya Birla Group, Amazon, Alibaba, Shoppers Stop, Pantaloons and Vijay Sales providing similar services along with a
number of individual outlets selling products in electronics and apparel category. In relation to B2C e-commerce platforms
for vendors, it was observed that there are a number of e-platforms providing similar services such as Amazon, Paytm
Mall, homeshop18, naaptol, AliExpress, Indiaplaza, Tata CLIQ, ShopClues as well as those providing products in specific
segments such as apparels (yebhi.com, FashionAndYou, FirstCry, Shopper Stop, Lifestyle); Consumer electronics
(Reliance Digital, TechShop.in, Smartshoppers. in, Bigadda.com, Ezonee, gadgetsguru.com); Beauty Products &
Accessories (Nykaa, thebodyshop, theskinstore, blueheavenconsmetics, shahnaz); Food & Grocery (bigbasket, zopnow,
bazaarcart, merakisan); and Furniture (Pepperfry, homestudio.com, Urbanladder, Homecentre, Godrej, fabindia). With
regard to digital payment services, it was noted that incremental market share due to proposed combination was
insignificant, and there are other players such as Airtel Money, Jio Money, Idea Money, Oxygen Wallet, mPurse providing
services related to digital payments segment.
In the amalgamation notice given by IndusInd Bank Ltd and Bharat Financial Inclusion Ltd,1504 the Commission noted
horizontal overlap as both IBL and BFIL were engaged in providing microfinance services. However, it was observed that
combined market share of the parties in different relevant markets was insignificant to raise any competition concerns as
such. Further, the relevant market had the presence of several other players, including public sector banks. IBL was also
placed vertically upstream to BFIL in regard to relevant market for provision of credit facilities for micro financing also.
Since the parties had a limited presence in such markets, the proposed combination was held to not result in any input or
customer foreclosure so as to appreciably adverse competition in any relevant market.
The Commission in the Walmart-Flipkart Combination1505 noted that the parties were neither close competitors in the
B2B sales nor had a combined market share that raised any competition concern. It was found that the operations of
Flipkart were relatively strong in mobile and electronics products, which constituted substantial majority of its business.
However, operations of Walmart in the same products were insignificant. On the other hand, operations of Walmart were
focussed on groceries but Flipkart was not present in this segment. While there was some horizontal overlap in lifestyle
products, the combined value of sales of the parties in the segment was low and relatively insignificant to the size of the
markets for the said products. The Commission held that the market of organised B2B sales was competitive due to the
presence of larger players such as Reliance Retail, Metro Cash and Carry, Amazon wholesale, etc. Apart from these
players, unorganised sector also posed a significant constraint on organised wholesalers.
No resultant change in competition dynamics
The Commission received a notice1506 from Tata Sons, Tata Steel, Tata Industries, Tata Communications and Tata Power
pursuant to the execution of Consent Terms entered between Tata Sons and NTT Docomo Inc, Japan relating to acquisition
of 21.63% shareholding in Tata Teleservices Ltd (TTSL/Target) from Docomo by the Acquirers, as per the Consent
Terms. Currently, Docomo and Tata Sons jointly exercise controlled TTSL, however, post the proposed combination,
Docomo would cease to be a shareholder of TTSL and Tata Sons would be solely in control of TTSL. The Commission
noted that Tata Sons held 47.91% of the equity shares in the Target and also hold non-cumulative compulsorily convertible
preference shares (CCPS) in TTSL. In the event Tata Sons converted the CCPS, the equity shareholding of Tata Sons in
the Target would increase to 67.92%. The proposed combination envisaged exit of Docomo from TTSL and the
shareholding of Tata Companies would increase from existing 66.79% to 88.42%. The Commission also noted that
Docomo did not have any independent presence in telecom sector. Thus, the change in control over TTSL post the
combination would not likely result in a change in competition dynamics in any market in India. Therefore, based on the
assessment of the proposed combination on the basis of the factors stated in section 20(4) of the Competition Act, 2002, the
Commission found the proposed combination was not likely to have an AAEC in India and, therefore, approved the same
under section 31(1) of the Competition Act, 2002.
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In another matter Kotak Mahindra Bank Ltd1507 (Acquirer) filed a notice before the Commission pursuant to execution of
a share purchase agreement (SPA) between Kotak and Old Mutual Plc. The proposed combination envisaged the
acquisition of 26% equity share of Kotak Mahindra Old Mutual Life Insurance Ltd (Target) by Kotak Bank from Old
Mutual. Before the notice, Kotak Bank, directly and indirectly, held 74% equity shares of Kotak Insurance and the
remaining 26% equity was held by Old Mutual. Accordingly, the proposed combination envisaged change of control of
Kotak Insurance from joint control to sole control by Kotak Bank. Old Mutual was incorporated under the laws of England
and Wales and was engaged in the business of international investment, savings, insurance, and banking. The Commission
observed that the case pertains to insurance sector in India, which can be broadly sub-divided into four categories namely,
life insurance, non-life insurance, standalone health insurance and re-insurance. The Commission noted that Kotak Bank
was present in life insurance sector in India indirectly through Kotak Insurance. In the absence of any competition
concerns, the Commission decided to keep the delineation of relevant product market and relevant geographic market
open. It observed that there were no horizontal overlaps between the Acquirer and the Target as Kotak Bank was only
present in the life insurance sector through Kotak Insurance in India. In respect of vertical relationship, the Commission
noted that Kotak Bank procured life insurance products from Kotak Insurance as a group customer. However, the said
vertical relationship between the activities of the Parties was held to be insignificant. Given the fact that the proposed
combination envisaged change of control (from joint control to sole control), there would be no change in the competition
dynamics in the life insurance business sector in India. Therefore, the Commission approved the proposed combination
since it was not likely to have an AAEC in India.1508
In the notice jointly filed by CA Rover Holdings and State Bank of India,1509 the proposal related to acquisition of 14%
shares by SBI and 26% shares by Rover in Target 1, from GE Capital. SBI already held 60% shares of Target 1 with
remaining 40% shares held by GE Capital. Post combination, SBI would hold 74% shares and Rover would have
remaining 26% shares of Target 1.With respect to Target 2, SBI had existing shares of 40% and remaining 60% was held
by GE Real Estate. The proposal related to acquisition of 34% shares by SBI and 26% shares by Rover in Target 2, from
GE Real Estate. Post combination, SBI would hold 74% shares and Rover would have remaining 26% shares of Target 2.
The Commission observed that the proposed combination envisaged: (i) increase in the shareholding of SBI in the Targets;
(ii) Rover becoming new shareholder in Targets; and (iii) exit of GE from the Targets, as shareholder. Thus, it was held
that the proposed combination did not change the existing competition dynamics.
In LIC notice,1510 the proposed combination related to acquisition of controlling stake to the extent of 51% shareholding
and management control rights in IDBI by LIC. The Commission noted that both LIC and IDBI, through their subsidiaries,
associate companies (controlled) and joint ventures (JVs), were engaged in the provision of life insurance, housing finance,
and mutual funds management. Further, LIC had equity shareholding in various banks along with right to nominate
director on the board of a few banks. As regards provision of life insurance services, the Commission observed that
although LIC was the market leader with significant market share both in terms of value and volume, IDBI’s presence in
this product market was insignificant. Thus, the proposed combination was held to not cause any significant change in
competition dynamics of the provision of life insurance services in India. Similar observation was made in regards to the
market for housing finance. As regards the mutual funds, the Commission noted overlap in the segments of (a) growth-
/equity-oriented scheme; (b) income-/debt-oriented scheme; (c) balanced fund scheme; (d) money market/liquid fund
scheme; and (e) gilt funds. Since the presence of LIC and IDBI in any of the aforesaid segments was not significant the
combination was held not to cause any AAEC. As regards the banking services (other than housing finance), the
Commission observed that the activities of LIC and IDBI overlapped in segments of (i) deposits; (ii) home loans; (iii)
agricultural banking; (iv) card business; (v) retail banking services other than card business, deposits and home loan; (vi)
medium and small business banking; and (viii) wholesale banking (other than retail business banking). In all the aforesaid
segments of banking services, the overlaps were held to be not significant to cause any change in competition dynamics
considering the extent of presence of IDBI.
Acquisition of assets
The Commission received notice1511 from Bharti Airtel and Bharti Hexacon Ltd1512 relating to acquisition by Airtel of
the Right to Use of 20 MHz Spectrum in the 2300 MHz band of BWA Spectrum in each of eight licensed services areas,
namely, Andhra Pradesh, Assam, Bihar, Jammu and Kashmir, North East, Tamil Nadu, Odisha and West Bengal from
Aircel Ltd (Aircel), Aircel Cellular Ltd (Aircel Cellular) and Dishnet Wireless Ltd (Dishnet). In pursuance of the
combination, the Parties entered into eight separate Spectrum Trading Agreements. The Right to Use of the aforesaid
Spectrum for the eight licensed service areas was transferred pursuant to the approval of the DoT. The Commission
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observed that the combination had been effectuated in accordance with the Spectrum Trading Guidelines. It noted that
Airtel’s spectrum holding, post-acquisition, was within the Spectrum Caps prescribed by the DoT. However, the
Commission was of the view that the assessment of the combination would need to be based on factors given in section
20(4) of the Competition Act, 2002 independently of such guidelines/Spectrum Caps. Therefore, the Commission examined
spectrum holding of different telecom service providers in all telecom circles covered in the combination. The Commission
found that the spectrum holding of Airtel in 2300 MHz band and its overall spectrum holding post acquisition, would not
likely result in an AAEC in any of the markets that may be affected by the combination. Therefore, the Commission
approved the proposed combination under section 31(1) of the Competition Act, 2002.1513
Product overlap: Bharti Airtel Ltd (Airtel) and Telenor (India) Communications Pvt Ltd (Telenor India) (collectively
“Parties”) filed a notice1514 before the Commission under section 6(2) of the Competition Act, 2002. The Parties were
engaged in provision of telecommunication services. On the basis of product overlaps between the Parties in India, the
Commission identified three product segments, viz., (i) retail mobile telephony services; (ii) National Long-Distance
Services (NLD); and (iii) International Long-Distance Services (ILD) for the purpose of competition assessment.
Retail Mobile Telephony Services: The Commission decided that the relevant geographic market be defined in terms of
each overlapping circle, i.e., Andhra Pradesh, Bihar, Gujarat, Maharashtra, Uttar Pradesh (East), Uttar Pradesh (West) and
Assam. However, as Telenor India had not commenced its commercial operations in Assam, competition assessment was
carried out only for six telecom circles, excluding Assam. As regards assessment in terms of market shares, the
Commission noted that the issue of market shares was also dealt by the guidelines for transfer/merger of service licences
on compromises, arrangement and amalgamation of companies, issued by Ministry of Communications and Information
Technology, Government of India in 2014 (DoT Merger Guidelines). As per the guidelines, in case of merger or
acquisition or amalgamation proposals that result in market share in any service area exceeding 50%, the resultant entity
should reduce its market shares to the limit of 50% within a period of one year from the date of approval of merger or
acquisition or amalgamation. If the resultant entry fails to reduce its market share to the limit of 50% within the specified
one year, then suitable action shall be taken by the licensor.
The Commission observed that the market share in Bihar telecom circle (57%) would be impacted by the DoT Merger
Guidelines and that an undertaking was submitted by Airtel regarding its compliance with the prescribed market shares as
per the said guidelines. The Commission also observed that assessment of a proposed combination would need to be based
on factors contained in section 20(4) of the Competition Act, 2002 independently of such guidelines, to form an opinion on
the impact of the proposed combination in the relevant market. The Commission assessed how Telenor India was placed in
terms of closeness of competition to Airtel and its overall effectiveness as a competitor. It found that Telenor India had a
limited product offering and the Diversion Ration from Airtel to Telenor India was negligible and that from Telenor India
to Airtel, the Commission noted that Airtel was not the most preferred operator for subscribers of Telenor India in the
overlapping circles. The analysis revealed that neither did Telenor India seem to be a close competitor of Airtel nor was it
an effective competitor going forward. Therefore, Commission found the proposed combination not to result in substantial
change in competition dynamics in retail mobile telephony services in any of the overlapping telecom circles and
accordingly does not raise unilateral or coordinated effects concerns.
NLD & ILD: The Commission assessed the impact of the proposed combination in the market for NLD in India. It
observed that Airtel was a market leader, in terms of revenue derived by various telecom operators, with a share of around
27% and Telenor India was a small player in this market with market share less than 3%. For ILD, the Commission
observed that Telenor India had not yet commenced provision of ILD services in India and therefore, the overlap in this
market was only potential. Furthermore, the market continues to be competitive in both NLD and ILD markets with
presence of competitors such as BSNL, RCOM – Aircel, Vodafone, Tata Communications, Idea, etc. Hence, the
Commission observed that Airtel was not likely to have the ability and incentive to restrict the supply of NLD and ILD
services and caused any competition concern.
Existing customer-supplier relationships: Bharti group was engaged in the provision of passive infrastructure services
(towers) and wholesale data services to Telenor India and to other third-party operators on an arm’s length basis in all the
circles where Telenor India was active. Telenor India was not active in the market for provision of passive infrastructure
services (towers) and wholesale data services. Accordingly, the Proposed Combination was not likely to change the
existing competition dynamics. Therefore, the Commission was of the opinion that the proposed combination was not
likely to have an AAEC in India and therefore, approved the same.
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Horizontal overlap – miniscule combined market share and presence of other competitors
While assessing AAEC for the proposed combination relating to acquisition of assets by Venture Lighting India Ltd (VL
India/Acquirer) from GE India Industrial Pvt Ltd (GEIIPL/Seller),1515 the Commission observed that there was a
horizontal overlap between the products offered by the Parties in respect of different types of electrical lighting products,
viz., “electric lamps”, “fittings or luminaires” and “accessories or components”. The Commission noted that in the market
for “electrical lighting products” “electric lamps”, “fittings or luminaries” and “accessories and components” in India, the
combined market share of the Parties (VL India and GEIIPL) was less than 5% in FY 2015/16. The Commission also
noted that there were significant competitors present in the market for electrical lighting products in India which would
continue to offer significant competitive constraints to the Acquirer post combination. Further, it was noted that the
vertical relationship with respect to electric lamps between the Parties was not likely to have AAEC in India in either the
upstream or downstream markets. Hence, the proposed combination was approved by the Commission.1516
The Commission in the amalgamation notice given by Capital First Ltd, Capital First Home Finance Ltd, Capital First
Securities Ltd and IDFC Bank Ltd observed that horizontal overlap between the Parties existed in the following product
segments – MSME loans, vehicle loans, personal loans, corporate loans, and distribution of insurance products. The
Commission noted that in each of the overlapping segments, the combined market share of the Parties was in the range of
0%–5% and there was a significant presence of competitors such as IDBI Bank, ICICI Bank, Axis Bank, etc., and other
NBFCs such as Bajaj Finance, PNB Housing Finance, DHFL, etc.1517
No actual vertical relationship
Notice was jointly given by Wirecard Acquiring & Issuing GMBH, Wirecard Technologies GMBH Wirecard Sales
International Holding GMBH and Wirecard India Pvt Ltd,1518 pursuant to execution of: (a) Master Asset Purchase
Agreement (MAPA) between Wirecard Acquiring & Issuing, Wirecard Technologies, Wirecard Sales, Citibank, N.A. and
Citibank Overseas Investment Corporation (COIC) for purchase of Merchant Acquiring Business (Target Business) in
Australia, Hong Kong, India, Indonesia, Macau, Malaysia, New Zealand, Philippines, Thailand, Taiwan and Singapore at
global level; and (b) India Local Purchase Agreement entered into between Citibank, N.A. India and Wirecard India.
(Hereinafter, Citibank NA, COIC and Citibank NA India are collectively referred to as “Sellers”, and Acquirers and Sellers
collectively referred to as the “Parties”). As per the terms of the MAPA, the Target Business along with related assets
comprising of contracts with merchants, contract files, collaterals and equipment, etc., of Sellers would be acquired by
Wirecard Acquiring & Issuing, Wirecard Technologies and Wirecard Sales globally. In India, Wirecard India would
acquire the Target Business. The Commission noted that various activities like settlement of dues, provision of POS
terminals, technical services for online transactions, authentication of transactions and other payment gateways, etc., were
associated with Merchant Acquiring Services, while “authorisation and capture services” fell within the ambit of Acquiring
Processing Services. The Commission noted that the acquiring processing services was the upstream activity and merchant
acquiring services was the downstream activity in the value chain of merchant acquiring business. Further, the
Commission observed that the Acquirers were present in upstream market and the Sellers were present in the downstream
market. Given the nature of combination where the Acquirer and Sellers had negligible market shares in the upstream and
the downstream market, respectively and presence of well-established players like State Bank of India, HDFC Bank, ICICI
Bank in the market for provision of merchant acquiring services, the Commission observed that the proposed combination
was not likely to raise any significant competition concern and accordingly decided that the exact delineation of the
relevant market be left open. The Commission observed that there were no overlaps in the market for provision of
Merchant Acquiring services in India. Further, it observed that although the Acquirers were present in upstream market of
acquiring processing services and the Sellers were present in the downstream market of Merchant Acquiring Services,
there was no actual vertical relationship among the Parties. The Commission noted that the Acquirers had insignificant
share in the upstream market. Therefore, on assessing of the proposed combination on the basis of factors stated in section
20(4) of the Competition Act, 2002, the Commission approved the proposed combination since it was not likely to have an
AAEC in India.
De Minimis Exemption
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Notice was given by JTEKT Corporation1519 relating to acquisition of 25.12% stake in Sona Koyo Steering Systems Ltd
(Target) by JTEKT Corporation (Acquirer) from Sona Aut. The acquirer was also required to make an open offer to
acquire additional 26% of the Target from the public shareholders, as triggered under the SEBI Takeover Code. One of the
inter-connected steps to the combination was the transfer of stake held by Target in Sona Skills Development Centre Ltd
(SSDCL) to the Seller. JTEKT, a Japanese company, was a manufacturer and supplier of automotive parts, bearings and
machine tools. In India, the company was present through two subsidiaries – Koyo Bearings India Pvt Ltd (KBIN) and
Toyoda Micromatic Machinery India Pvt Ltd (TMI). KBIN manufactured and sold bearings to various entities including
the Target and its two subsidiaries. TMI was engaged in the manufacture of machine tools including machines for milling,
grinding, etc. SKSSL, an Indian Company, was engaged in the business of automotive parts, i.e., steering systems and
parts thereof, catering to the passenger vehicles, farm equipment and commercial vehicles. The commission noted that
transfer of shares of SSDCL from Target to Seller or its nominee was an intra-group transaction and was not notifiable in
view of the De Minimis exemption. With regard to the horizontal overlaps, the Commission observed that the Acquirer was
not present in the market for steering systems and components thereof. The pre-and post-combination market share (in
volume terms) of the Parties was in the range of 36% to 41%, with no increment. Further, the market was noted to be
characterised by the presence of other well-established players. With regard to vertical relationships, the Commission
observed that KBIN, one of the Indian Subsidiary of the acquirer, supplied bearings to the Target and its subsidiaries.
However, the Target and its subsidiaries procured only a part of its requirements from KBIN in 2015/16. KBIN also had an
insignificant market share of 1%-2% in the bearings market. Furthermore, KBIN did not supply bearings to any other
steering systems manufacturers and there was no input foreclosure concern arising out of this vertical relationship. Thus,
on an assessment of facts, the Commission noted that the proposed combination was not likely to have AAEC and thus
approved the transaction.
Miniscule increase in market share
In the combination application of Adani Transmission,1520 the proposed combination was notified as a composite
transaction comprising of two transactions, viz.: (i) asset sale of Western Region Transmission Gujarat project (WRTG)
and Western Region Transmission Maharashtra project (WRTM) (Asset Acquisition) and (ii) share sale of Parbati Koldam
Transmission Co Ltd (PKTCL) (Share Acquisition). It was proposed that Reliance Infrastructure Ltd (RInfra/Seller) will
transfer the WRTG and WRTM into one or more SPVs by way of slump sale and ATL will acquire 100% shareholding of
SPVs so created. Further, Adani Transmission Ltd ATL would also acquire 74% shareholding in PKTCL from RInfra. The
Commission observed that the combined market share of the Acquirer and the Target Assets in the segment of power
transmission lines of 220 KV and above was miniscule and the incremental market share was insignificant to raise any
competition concern. Further, significant competitors like PGCIL, Maharashtra State Electricity Transmission Co Ltd,
Gujarat Energy Transmission Corporation Ltd, etc., were noted to continue to pose competitive constraints in the post-
combination scenario.
Horizontal and vertical overlap: the Commission noted that post combination RInfra would continue to operate in the
transmission sector as an independent entity. Further, the tariffs being charged by transmission companies were regulated
and required the approval of CERC. Considering these factors, the Commission was of the view that the horizontal overlap
with respect to the proposed combination was not likely to have any AAEC in India. With regard to vertical overlaps, the
Commission observed that RInfra and Adani group were present in activities at different levels of the production chain
(such as power generation and power distribution) vis-a-vis transmission of electricity. However, Commission was of the
view that the same was not likely to cause any AAEC in India as transmission licensees did not have any control over the
decision with regard to the entities who used its transmission line to transmit power or to whom power was ultimately
transmitted to through its transmission lines.
Insignificant presence of the Parties and presence of a number of other players
The Commission on a number of occasions has noted the insignificant presence of the Parties1521 and presence of a
number of other players (competitors)1522 in the relevant market to conclude that the proposed combination was not likely
to cause AAEC.
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Combined market share of the parties less than 20%
In the Combination application of Aircel Ltd,1523 the proposed combination was envisaged in two steps, viz., (i) demerger
of: (a) wireless telecom business undertaking of RCOM, and (b) wireless telecom business undertaking of RTL and (ii)
subsequent transfer and vesting of the said demerged business into Aircel. The Commission observed that the Parties were
engaged in provision of telecommunication services. On the basis of product overlaps between the Parties in India, the
Commission identified five product segments, viz.: (i) retail mobile telephony services; (ii) internet access services; (iii)
NLD; (iv) ILD; and (v) Global and Enterprise services (including ILL, NPLC, IPLC, Domestic and International MPLS –
VPN, PRI, M2M, Video Conferencing, WAN Acceleration, IoT, Ethernet Data Services, and Global Managed Networks)
for the purpose of competition assessment.
The Commission, however, observed that the combined market share of the parties in the retail mobile telephony services,
internet access service, NLD services and ILD services was less than 20% in all the overlapping circles except a few states.
In these states also, incremental market share was very miniscule. The Commission observed that the change in
concentration as a result of the proposed combination was not significant to cause any substantial change in market
competition. The Commission, further, noted the presence of other significant competitors in each overlapping circle and
observed that competitors like Airtel, Idea, TATA and Vodafone would continue to impose significant competitive
constraints on the Parties post combination. With respect to global and enterprise services, the Commission observed that
Aircel did not have any significant presence in overall global and enterprise services or any of its sub-segments.
Accordingly, the proposed combination was held to not likely to cause an AAEC in the relevant market. The Commission,
further, observed that Parties had existing vertical relation in respect of: (i) Towers; (ii) IUC; (iii) NLD services; and (iv)
Intra Circle Roaming (ICR) and National Roaming Arrangements and there was potential vertical relationship between the
Parties with respect to: (i) Internet Data Centres; and (ii) Bandwidth and Internet Services. Considering the specificities of
telecom industry and extent of operations of the Parties, the Commission observed that none of the existing or potential
vertical relationships was likely to have any AAEC in India.1524
In the Combination notice relating to proposed acquisition of 100% of the consumer mobile business run by Tata
Teleservices Limited (TTSL) and Tata Teleservices (Maharashtra) Limited (TTML) (Tata CMB) by Airtel,1525 the
Commission approved the Combination on the following grounds:
• Tata CMB was neither a close competitor of Airtel nor an effective competitor going forward (on the basis of
comparative market share, product offering, diversion ratio of customers).
• Significant constraint on the TSPs from the buyer side in the mobile retail telephony services market (on the basis
of factors such as multi-SIMing, ease of substitution due to option of mobile number portability and significant
churn rates).
• The retail mobile telephony services market, post the proposed combination would have four private TSPs
including the Aircel, RJio, Vodafone-Idea and the Acquirer and one state-owned TSP, i.e., BSNL/MTNL in all
telecom circles that would exercise adequate competitive constraints on the Acquirer.
Delineation of relevant market – not always necessary
—In Kotak Mahindra Bank Ltd and ING Vysya Bank Ltd,1526 theCommission received a notice under sub-section (2) of
section 6 of the Competition Act, 2002 of the proposed combination filed by Kotak Mahindra Bank Ltd (Kotak) and ING
Vysya Bank Ltd (ING Vysya) relating to merger of ING Vysya into Kotak under a scheme of amalgamation. The Merger
Scheme provided that for every 1000 shares held by the shareholders of ING Vysya, 725 shares of Kotak will be allotted to
the shareholders of ING Vysya. It was noted that both the Parties were engaged in the provision of banking services. In
addition, there was a horizontal overlap in other services provided by the Parties, namely, (i) investment advisory services;
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(ii) portfolio management services; and (iii) securities depository services, in which the Parties are present either by
themselves or through their subsidiaries.
The Commission observed that banking services would not constitute a relevant product market since many of the products
provided by the banks may not be substitutable, and therefore, separate relevant markets based on type of services may
have to be delineated within the overall banking services. Further, it was also observed by the Commission that the
geographic market for banking products may be dependent on the nature of products as well as consumer preferences and
requirements. As regards the plea of the parties regarding usage of information technology enabling banks to offer services
on a nationwide basis, it was observed that electronic banking facilities were complementary in nature than constituting a
substitute for the traditional banking. In view of international best practices regarding the assessment of the mergers in the
banking sector, it was noted that the relevant market for banking services may be divided into distinct relevant product
markets, such as, (i) deposits; (ii) home loans; (iii) agricultural banking; (iv) card business; (v) retail banking services other
than card business, deposits and home loan; (vi) medium and small business banking; and (viii) wholesale banking other
than small business banking, with a possibility of further segmentation in the above.
The Commission however, did not go on to delineate relevant market in a definitive manner in the present case because the
market shares of the Parties in any of the relevant markets, that may be defined as above was insignificant. Further, the
presence of large players, such as State Bank of India, Punjab National Bank, HDFC Ltd, ICICI Bank, etc., in these
markets would also act as a competitive constraint to the Parties. It was also observed that since ING Vysya did not have
significant market share in any of the said relevant markets, the proposed combination would not result in the removal of a
significant competitor. With regard to investment advisory services, securities depository services and portfolio
management services, it was observed that the market shares of the Parties were insignificant in comparison to the other
larger players present in the markets. The Commission was therefore, of the opinion that the proposed combination was not
likely to have an AAEC in India.
—In Jet Airways (India) Ltd (Jet) and Etihad Airways PJSC (Etihad),1527 the Commission received a notice under sub-
section (2) of section 6 of the Competition Act, 2002 of the proposed combination pursuant to the execution of an
Investment Agreement (IA), a Shareholders Agreement (SHA) and a Commercial Co-operation Agreement (CCA),
(Binding Documents) relating to acquisition by Etihad of 24% equity interest in Jet with all rights and benefits which the
Parties had commercially agreed upon. The proposal got approved by the Security Exchange Board of India (SEBI), the
Foreign Investment Promotion Board (FIPB) and Cabinet Committee of Economic Affairs (CCEA). Thereafter, the IA,
SHA and a CCA between Jet and Etihad were submitted to the Commission for its approval. The relevant market in this
case was concluded to be the market of international passenger air transport based on the point of origin or point of
destination (O&D).1528 Thus, each such O&D constituted a different route, and hence each different route, constituted a
different relevant market. To ascertain relevant market following points were considered:
1. Direct and Indirect flights between O&D being substitutable.
2. Indirect flights by competitor between O&D being substitutable.
3. Different classes of passengers, and inflight services rendered to different classes, being substitutable.
4. Time and price sensitive passengers (Business/Holidays).
5. Etihad being not operating in domestic (Indian) aviation sector and India’s open skies policy in respect of
international air cargo transportation. Thus, the Commission concluded that the relevant market in the instant
case would be pertaining to:
1. O&D from or ending in nine cities in India to/from UAE.
2. O&D from or ending in India to/from international destinations on the overlapping routes of the parties to the
combination.
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The Commission stressed upon the relevancy of trans-boundary competition, as routes were international, while
ascertaining AAEC through this proposed combination. It was observed that there were 38 routes to/from India to other
destinations where Etihad and Jet fly and there was at least one competitor on each of such route. Except seven
destinations, where Jet and Etihad had a combined share of more than 50%, rest all destinations had less combined share.
Also of these seven destinations, on three routes, the share of one was more than 50% and of the other less than 5%. Thus,
post transaction change in the market share was observed, not to marginally alter the competition dynamics. However, the
Commission observed that when considering the network effects, the assessment must go beyond the O&D pairs and
consider potential network effects of the proposed combination. It was noted that the complementarity of routes of Jet and
Etihad makes the network effects stronger. Hubs increased access to gates, slots and other infrastructure interfaces that link
markets. Competition was observed to be increasing among systems rather than on point to point O&D pairs. Therefore,
high market shares of Jet (India) and Etihad (Abu Dhabi), in their respective hubs, was held to indicate presence of
competition.1529
The Commission observed that airlines alliance results in improving and expanding services and thereby inducing
competition in that sector. It also postulated that the proposed combination may pave way for other similar combinations
by other stakeholders and thereby rising competition in the sector. The Commission also considered the importance of the
proposed equity infusion, as Jet has been facing certain financial crisis, therefore, such combination would allow Jet to
continue to compete effectively in the relevant market in India and internationally. Therefore, in the light of the above-
mentioned reasoning and observations, the Commission concluded that the proposed combination was not likely to have
AAEC in India and therefore, the combination was approved with a caution that the approval is based on the
information/details as provided by the parties and in case of any modifications later on, fresh approval should be sought.
Also, it was incumbent upon the parties to ensure that this ex ante approval does not lead to ex-post violation of the
provision of the Competition Act, 2002.1530
Post its decision, the Commission imposed Rs 1 crore penalty under section 43 of the Competition Act, 2002 on Etihad for
consummating parts of the deal without getting its approval. Etihad had purchased three Heathrow airport slots of Jet
Airways for $70 million and leased it back to the Indian airline ahead of the deal. Despite the matter being pending for
approval, the two parties had entered into an agreement which was not disclosed to CCI.
Sectoral Combinations
Banking merger
The proposed combination1531 involved amalgamation of Bharatiya Mahila Bank Ltd (BMBL) with State Bank of India
(SBI). As a part of the proposed combination, SBI was to issue 4.42 crore shares of Rs 1 each to Government of India
(GOI), in lieu of GOI’s holding of 100 crore shares of Rs 10 each in BMBL resulting into increase in GOI’s shareholding
in SBI from around 61.32% to 61.45%. The Commission noted that the proposed combination envisaged amalgamation of
two banking companies which were engaged in provision of banking services such as deposits and loans. The Commission
observed that given the low incremental market shares in various segments of the banking services and presence of other
competitors, the proposed combination was not likely to cause AAEC in any of segments of banking services.
Merger of travel agencies
On 26 October 2016, the Commission received a notice filed by MIH Internet SEA Pte Ltd (MIH Internet/Acquirer), filed
pursuant to the Transaction Agreement executed, inter alia, between MIH Internet and MakeMyTrip Ltd (MMT
Ltd/Target). The proposed combination contemplated acquisition of 100% of Ibibo Group Holdings (Singapore) Pte Ltd
(Ibibo Group Holdings) by MMT Ltd from MIH Internet and the subsequent acquisition of 40% stake in MMT Ltd by the
Acquirer, or MIH Internet.
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Relevant product market (no separate market for offline and online services): The Commission observed:
9... all the Travel Channels operate through both offline and online modes. Some predominantly online players also have an offline
presence and similarly, predominantly offline Travel Channels have an online presence. Thus, from a supply side perspective, it
appears that most of these channels operate on a ‘hybrid model’ wherein a Travel Channel had both online as well as offline
presence to provide convenience to customers with specific online or offline preferences. It was observed that characteristics of
products and services available with the different Travel Channels were similar and therefore, substitutable from consumer’s point
of view. Further, prices offered by different players across the Travel Channels were comparable with each other since they were
for the same product and services and a consumer can switch between these various channels easily. Further, from demand side
perspective, it was easy for a consumer to switch between online and offline modes within and across Travel Channels in the two
main activities related to travel products and services i.e. information gathering and purchase at any point of time without incurring
significant switching cost.
10. In view of the same, the Commission observed that the relevant product market may be defined as the market of ‘sale of travel
and travel related services’.
Relevant geographic market, the Commission noted that the travel consumer is looking for the best price and other
associated features for its specific requirements and there is no switching cost between Travel Channels, regardless of their
geographical location. Also, there are no regulatory or trade barriers between geographical location in India for the Travel
Channels. The Commission therefore, held that these factors made conditions of competition homogeneous throughout
India. Thus, India was considered as the relevant geographical market for the assessment of the proposed combination.
No AAEC: The Commission concluded that the proposed combination was not likely to have any AAEC on the basis of
following factors:
• the combined market share of MMT Ltd and Ibibo was less than 11% in the overall travel market as well as in
narrower sub-segments of air, hotel and bus and car bookings in India.
• Presence of significant competitors in the overall market for travel products and services and sub-segments of air,
hotel, bus and car bookings such as Yatra, Cleartip, Travelguru, Ixigo, Easemytrip, Travelchacha, Travelocity,
Arzoo.com, Thomas Cook, Cox and Kings, Balmer Laurie, TUI, Carnation Holidays, Maharaja Tours and
Travels, direct suppliers such as IRCTC, airlines and bus operators who would continue to pose a significant
competitive constraint to the Acquirer, post combination.
• Even though there existed a vertical relationship between businesses of the Parties since Naspers Group had a
majority investment in PayU Global BV (PayU), an online payment service provider used by both MMT Ltd and
Ibibo Group Holdings to facilitate payments on their respective websites, it was observed that in the segment of
payment gateway services for online travel agencies and airlines, PayU faced competition from players such as
CCAvenue, Billdesk, Techprocess, ICIC, HDFC, Citi, etc. Thus, the said vertical relationship was insignificant to
cause any AAEC in either the upstream or downstream market.
Merger of insurance companies
The combination notice1532 was jointly given by HDFC Ergo General Insurance Co Ltd (HDFC and L&T General
Insurance Co Ltd (LTGI) pursuant to the execution of a Share Sale and Purchase Agreement (SPA) between HDFC Ergo,
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LTGI and Larsen & Toubro Ltd (L&T) relating to the acquisition of 100% equity shareholding of LTGI by HDFC Ergo
from L&T and subsequent merger of HDFC Ergo into its then wholly-owned subsidiary LTGI. The Commission, while
assessing the impact of the proposed combination in the overall market for general insurance services and each of the
general insurance products, decided to leave the delineation of the relevant market open as it was observed that the
proposed combination was not likely to cause an AAEC in any of the possible alternative relevant markets that may be
delineated. The Commission noted that the Parties had a combined market share of less than 5% (in terms of gross
premium earned) in the market for general insurance services and less than 10% in each of the market segments of fire,
marine, motor, health and other insurance. Further, it was noted that LTGI has limited presence in all segments and the
incremental market share resulting from the proposed combination was insignificant. Also, post combination, the Parties
would continue to face competitive constraints on account of the presence of other significant competitors like New India
Assurance Co Ltd, National Insurance Co Ltd, United India Insurance Co Ltd, The Oriental Insurance Co Ltd and ICICI
Lombard General Insurance Co Ltd, etc. Thus, the proposed combination was held to not likely to cause AAEC.
Sony Pictures Networks India proposed to acquire Ten Sports Network owned by Zee Entertainment Enterprises.1533 The
Commission decided to assess the impact of the proposed combination in the following markets in India: (i) Market for
acquisition of rights for broadcasting of sports events; (ii) Market for advertisement on sports channels; and (iii) Market for
wholesale distribution of sports channels to DPOs. The Commission noted that there are three significant players in the
market for acquisition of rights for broadcasting of sports events in India, viz., Sony, Star and Ten. The proposed
combination would have the impact of reducing the number of competitors to two, viz., Sony and Star. The Commission
observed that market for rights for broadcasting of sports events in India is a bidding market as majority of the tenders are
awarded through a tender process. Accordingly, the Commission examined the bidding data submitted by the Parties for
the last five years and observed that Ten Sports was not the closest competitor of Sony considering the overlapping bids
and the analysis of bid prices. The Commission further noted that the other competitor Star India Pvt Ltd (Star) was
definitely not less preferred and has the potential to pose competitive constraints to Sony post the proposed combination.
Further, it was observed that the market for rights for broadcasting of sports events, to some extent, was also characterised
by competition from new bidders. The Commission observed that there are minimum entry requirements to participate in
the market from both the regulatory and the content owner sides and in this regard noted the past instances of bidding and
entry by firms not present in exclusively the sports genre. The CCI analysed the market shares of the parties in terms of
number and value of contract, gross rating points (GRPs) and advertising revenue and concluded that the value of sports
contracts is a better parameter for assessment of size and resources of the players. On the basis of its analysis, the CCI
concluded that Sony and Ten were not close competitors and Star was to be significant competitor post combination.
The Commission observed that TRAI puts a ceiling on the charges to be paid by the subscriber to the local cable operators
(LCOs), LCOs to Multi System Operators (MSOs) and MSOs to broadcasters. Further, for digital cable, channels and
bouquets are required to be offered at not more than 42% of the corresponding rates applicable for analog cable.
Broadcasters are mandated to provide their channel also on a-la-carte basis to the DPOs. TRAI has also imposed
conditions regarding pricing of a-la-carte channels and their bouquets. In view of the absence of Sony in this segment and
aforesaid regulatory provisions, the proposed combination was held to not likely to cause adverse effects on competition in
this market segment.
GUN JUMPING: US
Section 7A of the Clayton Act, 1915 (inserted by section 201 of the Hart-Scott-Rodino Anti-Trust Improvements Act,
1976) regulates the act of gun jumping in the US. The parties to certain proposed transactions must submit pre-merger
notification to the Federal Trade Commission and Department of Justice. Under the pre-merger notification, the parties are
required to submit a “Notification and Report Form for Certain Mergers and Acquisitions,” with information about each
company’s business. The merger cannot be consummated before the expiry of the waiting period, as has been outlined in
the amended section 7A of the Clayton Act, 19151534 or the government has granted early termination of the waiting
period.1535 The revised 2015 threshold was recently released by the Federal Trade Commission.1536
If the parties consummate their deal before the grant of the necessary approval, it may be dealt with under section 1 of the
Sherman Antitrust Act, 1890. There is a preference to settle gun jumping cases by both the parties to the suit. In SEC v
Gemstar-TV guide,1537 an agreement entered between the parties to phase out competing market operations and for
allocation of customers was held to be gun jumping but it was settled later. Again, in US v Titan Wheel International,1538
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the buyer had acquired possession and used the plant which was shut due to a union strike. This was held to constitute
taking control of the plant and thus, gun jumping.
GUN JUMPING IN EUROPEAN UNION
Council Regulation (EC) No. 139/20041539 governs Gun Jumping in the European Union (EU) and was passed after
repealing Council Regulation (EEC) No 4064/89.1540 The latter was based on the “one-stop shop” principle, which gave
the Commission sole control over all major cross-border mergers. This has been changed by the former under which the
same merger is not required to be notified to several competition authorities in the EU. The principle of subsidiarity has
been adopted, whereby a merger is examined by the judicial authority which is best placed to do so.1541
Article 1 of the Merger Regulation specifies that all the concentrations1542 with a community dimension are required to
notify the EU before consummating their deal. Article 2 and 3 elucidate the concentrations which have a community
dimension:
A concentration has a Community dimension where:
(a) the combined aggregate worldwide turnover of all the undertakings concerned is more than EUR 5000 million;
and
(b) the aggregate Community-wide turnover of each of at least two of the undertakings concerned is more than EUR
250 million, unless each of the undertakings concerned achieves more than two-thirds of its aggregate
Community-wide turnover within one and the same Member State.1543
A concentration that does not meet the thresholds laid down in the previous paragraph has a Community dimension where:
(a) the combined aggregate worldwide turnover of all the undertakings concerned is more than EUR 2500 million;
(b) in each of at least three Member States, the combined aggregate turnover of all the undertakings concerned is
more than EUR 100 million;
(c) in each of at least three Member States included for the purpose of point (b), the aggregate turnover of each of at
least two of the undertakings concerned is more than EUR 25 million; and
(d) the aggregate Community-wide turnover of each of at least two of the undertakings concerned is more than EUR
100 million,
unless each of the undertakings concerned achieves more than two-thirds of its aggregate Community-wide
turnover within one and the same Member State.1544
Pre-payment of consideration and gun-jumping
Pre-payment of consideration, in part or full, amounts to consummation of a part of a combination and amounts to
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contravention of the obligations contained in section 6(2) read with section 6(2A) of the Competition Act, 2002.1545 The
Commission has observed:1546
6.9 ... The Commission noted that pre-payment of price (whether refundable/nonrefundable) may have a number of competition
distorting effects viz., (i) it may lead to a strategic advantage for the Acquirer; (ii) it may reduce the incentive and will of ‘target’ to
compete; and (iii) it may become a reason/basis to access the confidential information of the ‘target’. On an overall basis, it may be
said that pre-payment of consideration may have the impact of creating a tacit collusion which may cause an adverse effect on
competition even before consummation of the combination. Thus, the Commission is of the opinion that what is important is pre-
payment of consideration and solely the fact of the same being refundable or otherwise is not relevant ...
The Competition Act, 2002 mandates the Commission to examine combinations ex ante and therefore, the issues such as
whether the Parties actually benefitted or not from the impugned conduct or whether there were any commercial exigencies
behind a particular conduct may not be relevant to the determination of provisions of sections 6(2) and 6(2A) of the
Competition Act, 2002.
The Commission in the Adani Transmissions notice had to decide whether the advancement of loan to Reliance
Infrastructure Limited (RInfra) and adjustment of the same against the consideration payable for the proposed acquisition
amounted to a contravention of the standstill obligation contained in section 6(2A) read with section 6(2) of the
Competition Act, 2002. The notice related to acquisition by Adani of 100% of the equity shares of Reliance Electric
Generation and Supply Limited (ReGSL) from RInfra. During the assessment of the combination, the Commission noted
that even before the proposed combination, ATL had advanced loans to RInfra, who was the seller of the target asset, i.e.,
100% of the equity shares held by it in ReGSL. Further, as a part of the proposed combination, SPA envisaged
advancement of additional loan by ATL to RInfra. Thus, under the circumstances, a creditor had proposed to acquire assets
of the debtor/seller, and the consideration payable for the acquisition is adjustable with the loan advanced. The
Commission held that the loans were in the nature of advance consideration as ATL was not ordinarily engaged in the
business of advancing loans and its business activities were horizontally and/or vertically relatable to the target businesses
acquired. The Commission, therefore, held the same to be in contravention of section 6(2) of the Competition Act,
2002.1547
The proposed combination application filed by Chhatwal Group Trust, Shrem Infraventure Private Limited (SIPL) and
Shrem Roadways Private Limited (SRPL) related to the acquisition of entire share capital of 23 special purpose vehicles
and wholly-owned subsidiaries of Dilip Buildcon Limited (DBL) by CTG through SIPL and/or SRPL pursuant to the
Master Agreement (MA), dated 18 December 2017. The MA was entered in two parts, viz., Part A executed by and
between SIPL, SRPL and DBL and Part B executed by and between SIPL and DBL. The Commission noted that prior to
execution of the MA, CGT and DBL had entered into two indicative Term Sheets each dated 24 August 2017 for the
purpose of the Combination and after entering into the aforesaid Term Sheets, SIPL and SRPL made the payment of
Transaction Advance to DBL respectively amounting to INR 70 Crore on 27 September 2017 and INR 50 Crore on 24
October 2017. The Commission held that such pre-payment of consideration by the Acquirers amounted to consummating
a part of the combination before filing notice of the combination with the Commission amounting to consummating a part
of the combination in contravention of section 6(2) read with section 6(2A) of the Competition Act, 2002.
1380 Came into force on 1 June 2011, vide S.O. 479(E), dated 4 March 2011.
1381 Subs. by Competition (Amendment) Act, 2007, section 5 for the words “may,
at his or its option” (w.e.f. 1 June 2011).
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1382 Competition Commission of India (Procedure in regard to the transaction of
Business relating to Combinations) Regulations, 2011 vide Notification No. 1-1/Combination Regulations/2011-12/CCI, dated 11
May 2011 (w.e.f. 1 June 2011).
1383 Subs. by Competition (Amendment) Act, 2007, section 5 for the words “seven
days” (w.e.f. 1 June 2011).
1384 Ins. by Competition (Amendment) Act, 2007, section 5 (w.e.f. 1 June 2011).
1385 Wal-Mart International Holdings, Inc, Combination
Registration No. C-2018/05/571, dated 8 August 2018.
1386 Wal-Mart International Holdings, Inc, Combination
Registration No. C-2018/05/571, dated 8 August 2018.
1387 Bharti Airtel Combination, Combination Registration No.
C-2017/10/531, dated 27 August 2018.
1388 SCM Soilfert Ltd v Competition
Commission of India, [Civil Appeal No(S). 10678 of 2016].
1389 Regulation 9, Combination Regulations, 2011.
1390 Section 2(72) of the Companies Act, 2013, now.
1391 Now Securities and Exchange Board of
India (Foreign Portfolio Investors) Regulations, 2014.
1392 Now see Securities and Exchange Board
of India (Foreign Portfolio Investors) Regulations, 2014.
1393 Regulation 5 of the Competition Commission of India
(Procedure in regard to the transaction of Business relating to Combinations) Regulations, 2011 (Combination Regulations) [In
exercise of the powers conferred by sub-section (1) and clauses (b), (c) and (f) of sub-section (2) of section 64 read with sub-
sections (2) and (5) of section 6 of the Competition Act, 2002 (12 of 2003), the Commission framed these regulations. Published in
the Gazette of India, Extraordinary, Part III, section 4, dated 11 May 2011].
1394 Section 2(45) of the Companies Act,
2013, now.
1395 Subs. by the Competition Commission
of India (Procedure in regard to the transaction of Business relating to Combinations) Amendment Regulations, 2016 for:
Provided further that where such a document has not been executed but the intention to
acquire is communicated to a Statutory Authority, the date of such communication shall be deemed to be the date of execution of
the other document for acquisition.
Page 62 of 73
[s 6] Regulation of combinations
1396 Tesco Combination, Combination Registration No. C-
2014/03/162.
1397 Prime Focus Ltd (PFL)/Reliance MediaWorks Ltd
(Reliance Media) Combination, Combination Registration No. C-2014/08/198.
1398 Alstom SA, Combination Registration No. C-2015/01/241.
1399 Regulation 9, Combination Regulations, 2011.
1400 Subs. by the Competition Commission
of India (Procedure in regard to the transaction of Business relating to Combinations) Amendment Regulations, 2016 for: “board of
directors of the company for the said purpose”.
1401 Subs. by the Competition Commission
of India (Procedure in regard to the transaction of Business relating to Combinations) Amendment Regulations, 2016 for: “board of
directors of the company for the said purpose”.
1402 Words “or inter-dependent on each
other” omitted by the Competition Commission of India (Procedure in regard to the transaction of Business relating to
Combinations) Amendment Regulations, 2016.
1403 Regulation 7, Combination Regulations, 2011.
1404 Regulation 8, Combination Regulations, 2011.
1405 Dewan Housing Finance Corporation Ltd (DHFL),
Combination Registration No. C-2012//11/92.
1406 Jet-Etihad Deal, Combination Registration No. C-
2013/05/122.
1407 Titan International, Inc (Titan International or Acquirer)
and Titan Europe PLC (Titan Europe), Combination Registration No. C-2013/02/109.
1408 Combination Registration No. C-2013/06/124.
1409 Tesco Overseas Investment Ltd (TOIL) and Trent
Hypermarket Ltd (THL), Combination Registration No. C-2014/03/162.
1410 The trigger event in case of an acquisition is the execution
of any binding agreement or “other document” and in the case of a merger or amalgamation is the final board resolution passed by
the BOD of the enterprise concerned.
1411 Combination Registration No. C-2015/01/241.
Page 63 of 73
[s 6] Regulation of combinations
1412 Piramal Enterprises Ltd v Competition Commission of
India, Appeal No. 37/2016 [COMPAT], decided on 16 November 2016.
1413 Notification S.O. 2039(E), dated 29 June 2017.
1414 Regulations 10–11, Combination Regulations, 2011.
1415 Fee to be paid either by tendering demand draft or pay
order or banker’s cheque, payable in favour of the Competition Commission of India (Competition Fund), New Delhi or through
Electronic Clearance Service (ECS) by direct remittance to the Competition Commission of India (Competition Fund), Account No.
1988002100187687 with “Punjab National Bank, Bhikaji Cama Place, New Delhi-110066”.
1416 Regulation 13, Combination Regulations, 2011.
1417 Words “and verified” omitted by the
Competition Commission of India (Procedure in regard to the transaction of Business relating to Combinations) Amendment
Regulations, 2016.
1418 Regulation 18, Combination Regulations, 2011.
1419 Regulation 14, Combination Regulations, 2011.
1420 Inserted by the Competition Commission of India
(Procedure in regard to the transaction of Business relating to Combinations) Amendment Regulations, 2016.
1421 Inserted by the Competition Commission of India
(Procedure in regard to the transaction of Business relating to Combinations) Amendment Regulations, 2016.
1422 Regulation 16, Combination Regulations, 2011.
1423 Regulation 19, Combination Regulations, 2011.
1424 Regulation 20, Combination Regulations, 2011.
1425 Regulation 21, Combination Regulations, 2011.
1426 Regulation 22, Combination Regulations, 2011.
1427 Regulation 23, Combination Regulations, 2011.
1428 Regulation 25, Combination Regulations, 2011.
Page 64 of 73
[s 6] Regulation of combinations
1429 Regulation 26, Combination Regulations, 2011.
1430 Regulation 27, Combination Regulations, 2011.
1431 Competition Commission of India (Procedure in regard to
the transaction of Business relating to Combinations) Amendment Regulations, 2018.
1432 Re Holcim Ltd, Combination Registration No. c-
2014/07/190, decided on 30 March 2015.
1433 Herfindahl Hirschman Index (HHI) is one of the indices
used to assess the level of market concentration and the changes in the concentration due to a combination.
1434 A divestiture remedy involves two concurrent steps.
Firstly, to ascertain the extent of divestiture (of assets) required and secondly, to determine the specific assets required to be
divested. Certain factors may govern the decision as to extent of divestiture and the identity of the assets. Plants selected for
divestiture should constitute a complete ecosystem in terms of operational requirements. Further, the proposed divestiture should
result in reducing the overall level of concentration in the relevant market, have a pan relevant market impact and should address
the adverse impact of structural changes in the market resulting from the proposed combination.
1435 Note: On account of amendment in the Mines and
Minerals (Development and Regulation) Act, 1957, parties, in order to ensure compliance with the Order, submitted an alternative
proposal envisaging sale of 100% of the share capital of Lafarge India as opposed to sale of assets. The Commission approved the
Alternative Proposal in form of a share sale option which contemplated sale of 100% of the share capital of Lafarge India to one
strategic and/or one or more financial investors, subject to the purchaser(s) meeting the Purchaser Requirements as laid down in
para 52 of the Order. Accordingly, Supplementary Order was passed by the Commission. [Combination Registration No. C-
2014/07/190.]
1436 Also see UltraTech Cement Ltd, Combination
Registration No. C-2015/02/246.
1437 Sun Pharmaceutical Industries Ltd and Ranbaxy
Laboratories Ltd, Combination Registration No. C-2014/05/170; See also Beige Ltd and Link Investment Trust, Combination
Registration No. C-2018/04/565, decided on 9 May 2018.
1438 TAMSULOSIN + TOLTERODINE | G4C13 | G4C13;
ROSUVASTATIN + EZETIMIBE | C10G6; LEUPRORELIN | H1C6; TERLIPRESSIN | H4D7; OLANZAPINE + FLUOXETINE
| N5A6; LEVOSULPIRIDE + ESOMEPRAZOLE | A3F49; OLMESARTAN + AMLODIPINE + HYDROCLORTHIAZIDE |
C9E22.
1439 OLANZAPINE | N5A5; CLOPIDOGREL | B1C5;
ATORVASTATIN | C10A1; LOSARTAN | C9D3; ALFUZOSIN + DUTASTERIDE | G4C12; DARIFENACIN | G4D7;
TROSPIUM | G4D8; FLUVOXAMINE | N6A9; VENLAFAXINE | N6A19; TOLTERODINE | G4D4; ATENOLOL +
LOSARTAN | C7G2; PRASUGREL | B1C23; QUETIAPINE | N5A8; LACOSAMIDE | N3A25; RANOLAZINE | C12A1;
OXCARBAZEPINE | N3A9; AMISULPRIDE | N5A1; LEVETIRACETAM | N3A8; OLMESARTAN + METOPROLOL | C7G3;
BAMBUTEROL + MONTELUKAST | R3A41; SERTRALINE | N6A16; BICALUTAMIDE | L2B15; PIOGLITAZONE |
A10B18’ ESOMEPRAZOLE | A2C2; ETORICOXIB | M1A28; DOMPERIDONE + ESOMEPRAZOLE | A3F10;
MONTELUKAST | R3A46; VOGLIBOSE | A10B22; DIVALPROEX | N3A4; ROSUVASTATIN + FENOFIBRATES | C10F6;
ROSUVASTATIN | C10A6; PIOGLITAZONE + GLIMEPIRIDE | A10B51; ATORVASTATIN + EZETIMIBE | C10G1;
EDARAVONE | N7X5; THIOCOLCHICOSIDE + DICLOFENAC | M1A92; ETORICOXIB + THIOCOLCHICOSIDE | M1A109.
Page 65 of 73
[s 6] Regulation of combinations
1440 Ibandronate | M5A5, Olopatadine | R6A47, Lactitol |
V6E4, Lubiprostone | A6F5 and Cyclobenzaprine | M3B7.
1441 Re Orchid Chemicals & Pharmaceuticals Ltd,
[2013] 115 CLA 406 (CCI) :
[2014] 125 SCL 27 (CCI).
1442 Also see Advent International Corporation and
MacRitchie Investments Pte Ltd, Combination Registration No. C-2015/05/270.
1443 Linde Aktiengesellschaft and Praxair, Inc, Combination
Registration No. C-2018/01/545, dated 6 September 2018. [Linde Aktiengesellschaft and Praxair merger under a newly-
incorporated holding company Linde Plc.]
1444 Bayer AG, Combination Registration No. C-2017/08/523,
dated 14 June 2018.
1445 Available at: http://cci.gov.in/sites/default/files/Non-
Compete/Introductory_%20para_on_Noncompete.pdf (Accessed in February 2019).
1446 HP Inc, (Combination Registration No. – C-
2016/10/444), order dated 27 April 2017.
1447 HDFC Ergo General Insurance Co Ltd and L&T General
Insurance Co Ltd, (Combination Registration No. C-2016/06/407), order dated 1 August 2016.
1448 Power and Energy International (Mauritius) Ltd,
(Combination Registration No.C-2016/06/404), order dated 27 July 2016.
1449 Re Orchid Chemicals & Pharmaceuticals Ltd,
Combination Registration No. C-2012/09/79, decided on 21 December 2012.
1450 Torrent Pharmaceuticals Ltd (Torrent) and Elder
Pharmaceuticals Ltd (Elder), Combination Registration No. C-2014/01/148.
1451 The Non-Compete Obligations provided that Elder,
Semit, certain promoters of Elder and their affiliates shall not engage in: (a) specified business activities in relation to products
categorised under certain therapeutic area subgroups, referred to as “Identified Therapeutic Areas” in the Non-Compete
Obligations, for a period of three years; (b) specified business activities in relation to products categorised under therapeutic area
subgroups for Chymoral and Shelcal, referred to as “Primary Therapeutic Areas”, in the Non-Compete Obligations, for a period of
five years; and (c) the products containing any of the anti-oxidants, vitamins, minerals, proteins, hematinics, bone supplements,
omega fatty acids or nutrition products that form part of the composition of the acquired products and the vitamins, minerals and
nutrition market (hereinafter referred as “VMN Market”) for a period of three years.
1452 (a) Deletion of 11 therapeutic area subgroups from
Exhibit A of sch 13 of the BTA and Exhibit A of the Schedules to the Promoter Non-Compete Agreement and the Semit Non-
Compete Agreement; (b) Creation of a carve out of 36 existing products of Elder from the product scope of the Non-Compete
Obligations, implying that Elder will continue to manufacture, market, distribute and sell each of these 36 products that are
Page 66 of 73
[s 6] Regulation of combinations
proposed to be carved out from product scope of the Non-Compete Obligations; (c) Reduction of the duration of the Non-Compete
Obligations for the Primary Therapeutic Areas from five years, as specified in clauses 10.1.2 and 10.1.5 of the BTA and clauses
2.1(ii) and 2.1(v) in each of the Promoter Non-Compete Agreement and the Semit Non-Compete Agreement, to four years; and (d)
Deletion of clause 10-1-4 from the BTA and clause 2.1(iv) of each of the Promoter Non-Compete Agreement and Semit Non-
Compete Agreement.
1453 Mylan Inc, Combination Registration No. C-2013/04/116.
1454 Combination Registration No. C-2014/04/164.
1455 The Commission had in the earlier case
of Carnival Cinemas/Big Cinemas, (C-2015/01/236), made a distinction between single screen theatres and multiplex theatres, on
the basis of cost, use of modern technology, ambience and related services of good quality.
1456 Markets with post-merger HHI of more
than 2000 are considered as highly concentrated and markets with post-merger HHI between 1000 and 2000 as moderately
concentrated, with the indication of concern of an adverse effect on competition in the market, if: (a) the post-merger HHI is above
2000 and increase in HHI is 150 or more; or (b) the post-merger HHI is between 1000 and 2000 and increase in HHI is 250 or
more.
1457 It was observed that the pre-
combination market share of 43.5% would increase to 53.6% post combination, the incremental market share being 10.1%.
Accordingly, pre-combination HHI of 2510 would increase to 3392.1 post combination, with increment of 882.1, which was
indicative of a highly concentrated market.
1458 It was observed that the Acquirer’s pre-
combination market share of 42.1% would increase to 63.2% post combination, with incremental market share being 21.1%.
Accordingly, pre-combination HHI of 2562.3 would increase to 4335.2 post combination, with an increment of 1772.9, which was
indicative of a highly concentrated market.
1459 It was observed that
the Acquirer’s pre-combination market share of 38.2% would increase to 79.4% post combination, with an increment of 41.2%.
Accordingly, pre-combination HHI of 3391 would increase to 6539.8 post combination, with an increment of 3148.8, which was
indicative of a highly concentrated market.
1460 The Commission noted and accepted the
commitment offered by the Acquirer with respect to co-operation agreement; for reducing the term of the non-compete clause from
five years to three years and reducing the geographical scope of non-compete clause from India to only Delhi-NCR and Chandigarh
subject to compliance with the requirements stated in Annexure A.
1461 The minority view held that the
commitments offered by the Acquirer were adequate as they retain the competitive outcomes, particularly the pre-combination
prices and quality. The minority view held that the divestiture of 11 screens in South Delhi, though not impossible, would be
burdensome without corresponding gains. Further, the dissenting Members agreed with the submission of the Acquirer that the
divesture is costly.
1462 Regulation 28, Combination Regulations, 2011.
1463 Regulation 30, Combination Regulations, 2011.
Page 67 of 73
[s 6] Regulation of combinations
1464 CCI v Tata Chemicals Ltd, 2012 Comp LR 361 (CCI).
1465 Also see CCI v Magma Fincorp Ltd, Combination
Registration No. C-2011/11/10; CCI v Taco Composites Ltd, Combination Registration No. C-2012/01/18.
1466 CCI v SCB India, 2012 Comp LR 350 (CCI).
1467 Also see CCI v Kalyan Jewellers Salem Pvt Ltd,
Combination Registration No. C-2012/04/49; CCI v Orchid Research Laboratories Ltd, Combination Registration No.C-
2012/02/31; CCI v IVRCL Ltd, Combination Registration No.C-2011/12/13; CCI v DLF Construction Ltd, Combination
Registration No.C-2012/02/35; CCI v Electromags Automotive Products Pvt Ltd, Combination Registration No. C-2011/12/16;
AICA Kogyo Co Ltd v Aica Laminates India Pvt Ltd, Combination Registration No. C-2011/09/04.
1468 Capgemini SA, Combination Registration No. C-
2015/05/274.
1469 Sutlej Textiles and Industries Ltd, Combination
Registration No. C-2015/04/266.
1470 Maturity of Relevant Market: CCI v G&K Baby Care Pvt
Ltd and Danone Asia Pacific Holdings Pte Ltd, CCI v Shriram Holdings (Madras) Pvt Ltd, Combination Registration No. C-
2012/01/20.
1471 Re Baxalta Incorporated, Combination Registration No.
C-2015/07/297.
1472 Also see Piramal Enterprises Ltd, Combination
Registration No. C-2015/02/249; Sion Investment Holdings Pte. Ltd, Combination Registration No. C-2015/03/253; Ordain Health
Care Global Pvt Ltd, Combination Registration No. C-2015/03/259; Reliance Defence Systems Pvt Ltd, Combination Registration
No. C-2015/04/261; Hahn & Co Auto Holdings Co, Ltd, and Hankook Tire Co, Ltd, Combination Registration No. C-2015/01/242;
Quality Investment Holdings, Combination Registration No.C-2014/12/227; Wipro GE Healthcare Pvt Ltd, Combination
Registration No. C-2014/11/222; Dewan Housing Finance Corporation Ltd, Combination Registration No. C-2014/11/226; TPG
Asia VI SF Pvt Ltd and Manipal Health Enterprises Pvt Ltd, Combination Registration No. C-2014/12/234; New Moon BV,
Combination Registration No. C-2014/08/202; Airbus Services Asia Pacific Pte Ltd and Singapore Airlines Ltd, Combination
Registration No. C-2014/09/209; Highdell Investment Ltd, Combination Registration No. C-2014/09/207; L&T Technology
Services Ltd and Dell International Services India Pvt Ltd, Combination Registration No. C-2014/08/203; INEOS Styrolution
Holding Gmbh, Combination Registration No. C-2014/07/196; Juweel Investors Ltd and Qatar Holding LLC, Combination
Registration No. C-2014/04/165; COFCO (Hong Kong) Ltd, Combination Registration No. C-2014/05/169.
1473 Nippon Life Insurance Co, Combination Registration No.
C-2014/12/233.
1474 Bradken Operations Pty Ltd, Combination Registration
No. C-2014/12/229.
1475 Caladium Investment Pte Ltd, Combination Registration
No. C-2015/05/278.
Page 68 of 73
[s 6] Regulation of combinations
1476 Also see Cairnhill CIPEF Ltd (CCL) and Cairnhill CGPE
Ltd (CGL), Combination Registration No.C-2015/05/276; Capital Ltd and Omega TC Holdings Pte Ltd, (Combination Registration
No. C-2015/04/265; The Coca-Cola Co and New Laser Corporation, Combination Registration No. C-2014/09/210.
1477 CCI v Tetra Laval BV, Combination Registration No. C-
2012/02/40.
1478 Also see Siemens Ltd and Siemens Power Engineering
Pvt Ltd, Combination Registration No. C-2012/03/43.
1479 See General Motors (Hong Kong) Co Ltd, (Combination
Registration No. C-2016/12/468), order dated 18 January 2017; Reliance Aerostructure Ltd and Dassault Aviation, (Combination
Registration No. C-2016/12/467), order dated 18 January 2017; Yanmar Investment Partnership (Singapore) Pte Ltd, (Combination
Registration No. C-2017/01/473), order dated 13 February 2017; FSRPL CCPS Trust acting through its trustee, Beacon Trusteeship
Ltd and Future Lifestyle Fashions Ltd, (Combination Registration No. C-2017/01/476), order dated 16 March 2017; Rapid
Holdings 2 Pte Ltd, (Combination Registration No. C-2017/01/475), order dated 16 March 2017; Koch Industries Inc and Guardian
Industries Corp, (Combination Registration No. C-2016/11/461), order dated 4 January 2017; P5 Asia Holding Investments
(Mauritius) Ltd, (Combination Registration No. C-2016/10/452), order dated 7 December 2016; CDPQ Private Equity Asia Pte Ltd,
(Combination Registration No. C-2016/11/453), order dated 29 December 2016; Madison India Opportunities Trust Fund,
(Combination Registration No. C-2016/11/455), order dated 20 December 2016; ICU Medical Inc, (Combination Registration
No.C-2016/10/450), order dated 20 December 2016; Parjanya Wind Power Pvt Ltd, (Combination Registration No. C-
2016/10/449), order dated 30 November 2016; Aspen Global Incorporated, (Combination Registration No. C-2016/10/442), order
dated 13 January 2017; TDK Corporation and Toshiba Corporation, (Combination Registration No. C-2016/09/437), order dated
13 December 2016; Coffee Day Enterprises Ltd and Coffee Day Overseas Pvt Ltd, (Combination Registration No. C-2016/08/422),
order dated 27 September 2016; Cortes NP Acquisition Corporation and ASCO Power GP, LLC, (Combination Registration No. C-
2016/08/426), order dated 5 October 2016; CDC Group Plc, (Combination Registration No. C-2016/07/417), order dated 21
September 2016; Deere & Co, (Combination Registration No. C-2017/06/517), order dated 28 June 2017; ITC Ltd, (Combination
Registration No. C-2017/02/485), order dated 22 March 2017; Melrose Industries PLC, Combination Registration No. C-
2018/01/554, dated 12 March 2018; Rajputana Properties Pvt Ltd, Combination Registration No. C-2018/02/557, dated 7 March
2018.
1480 Re Terra Transmission and Distribution India Pvt Ltd,
[2014] 124 SCL 138 (CCI).
1481 Re JSW Steel Ltd,
[2014] 125 SCL 37 (CCI).
1482 Thomas Cook (India) Ltd v Competition Commission of
India, 2015 Comp LR 953 (COMPAT). Also see Shree Cement Ltd, Combination Registration No. C-2014/09/211.
1483 Thomas Cook (India) Ltd v Competition Commission of
India, 2015 Comp LR 953 (COMPAT).
1484 Thomas Cook (India) Ltd v Competition
Commission of India, 2015 Comp LR 953 (CompAT).
1485 Competition Commission of India v Thomas Cook (India)
Ltd, (2018) 6 SCC 549 .
1486 Also see Piramal Enterprises Ltd, Combination
Registration No. C-2015/02/249; Sion Investment Holdings Pte Ltd, Combination Registration No. C-2015/03/253; Ordain Health
Care Global Pvt Ltd, Combination Registration No. C-2015/03/259; Reliance Defence Systems Pvt Ltd, Combination Registration
Page 69 of 73
[s 6] Regulation of combinations
No. C-2015/04/261; Hahn & Co Auto Holdings Co, Ltd, and Hankook Tire Co, Ltd, Combination Registration No. C-2015/01/242;
Quality Investment Holdings, Combination Registration No.C-2014/12/227; Wipro GE Healthcare Pvt Ltd, Combination
Registration No. C-2014/11/222; Dewan Housing Finance Corporation Ltd, Combination Registration No. C-2014/11/226; TPG
Asia VI SF Pvt Ltd and Manipal Health Enterprises Pvt Ltd, Combination Registration No. C-2014/12/234; New Moon BV,
Combination Registration No.C-2014/08/202; Airbus Services Asia Pacific Pte Ltd and Singapore Airlines Ltd, Combination
Registration No. C-2014/09/209; Highdell Investment Ltd, Combination Registration No. C-2014/09/207; L&T Technology
Services Ltd and Dell International Services India Pvt Ltd, Combination Registration No. C-2014/08/203, INEOS Styrolution
Holding GmbH, Combination Registration No.C-2014/07/196; InterGlobe Aviation Ltd and Caelum Investment LLC, (Combination
Registration No. C-2014/06/185; Bluewater Investment Ltd, Combination Registration No. C-2014/05/179; Cargill International
Luxembourg S À R L and Copersucar SA, Combination Registration No.C-2014/04/168; Alison Bidco SARL & Alison Property
SARL, Combination Registration No. C-2014/04/167; Mahindra and Mahindra Ltd, Participatie Maatschappij Buitenland BV and
HZPC Holland BV, Combination Registration No. C-2014/05/178.
1487 Re Alstom Bharat Forge Power Ltd (KBFPL),
[2014] 125 SCL 34 (CCI).
1488 Everstone Capital Partners II LLC,
Combination Registration No. C-2015/01/237.
1489 Also see CSTT Co Holdings Pte Ltd,
Combination Registration No.C-2015/01/240; Mead Westvaco Corporation and Rock-Tenn Co, Combination Registration No. C-
2015/02/250; NBCC (India) Ltd, Combination Registration No. C-2018/09/602, dated 18 October 2018.
1490 HBL Global Pvt Ltd, Combination
Registration No. C-2014/12/228.
1491 Glaxo Smith Kline Plc (GSK) and
Novartis AG, Combination Registration No. C-2014/07/188.
1492 The primary competition concern due to
any vertical integration post-merger is whether the proposed combination leads to input foreclosure (i.e., the merged entity raises
downstream rivals’ costs by restricting their access to an important input) or to customer foreclosure (i.e., the merged entity
forecloses upstream rivals’ access to their downstream customers).
1493 CCI v Res Rei Finance Pvt Ltd,
Combination Registration No. C-2012/02/33.
1494 Alpha TC Holdings Pte Ltd and Tata
Capital Growth Fund I, Combination Registration No. C-2014/07/192.
1495 Sanofi-Synthelabo (India) Ltd,
Combination Registration No. C-2014/07/194.
1496 Bombay Stock Exchange Ltd and United
Stock Exchange of India Ltd, Combination Registration No. C-2014/06/183.
1497 Re India Power Corporation Ltd and DPSC Ltd,
Combination Registration No. C-2012/03/41.
Page 70 of 73
[s 6] Regulation of combinations
1498 CCI v Sundaram Clayton Ltd, Combination Registration
No. C-2012/01/23.
1499 Form III Registration No. C-L/2011/12/03.
1500 Cinepolis India Pvt Ltd, (Combination
Registration No. C-2016/07/414), order dated 9 August 2016.
1501 FIH Mobile Ltd and HMD Global OY,
(Combination Registration No. C-2016/06/410), order dated 30 August 2016.
1502 See also Combination Registration No. C-
2017/05/508, order dated 29 June 2017. See also Havells India Ltd, Combination Registration No. C-2017/03/490, order dated 30
March 2017; Canada Pension Plan Investment Board, Combination Registration No. C-2017/11/536, decided on 9 January 2018;
Octavia Holdco Inc, Octavia Merger Sub Inc, Aricent, and KKR Octavia LLC, Combination Registration No. C-2017/12/542, dated
7 March 2018; Procter and Gamble Overseas India BV, Combination Registration No. C-2018/06/579, dated 24 July 2018
1503 Combination Registration No. C-
2017/09/528, dated 29 November 2017.
1504 IndusInd Bank Ltd and Bharat Financial
Inclusion Ltd, Combination Registration No. C-2017/11/535, dated 19 December 2017.
1505 Wal-Mart International Holdings, Inc,
Combination Registration No. C-2018/05/571, dated 8 August 2018.
1506 Combination Registration No. C-2017/03/497, order
dated 24 May 2017.
1507 Combination Registration No. C-2017/05/513, order
dated 15 June 2017.
1508 See also Highdell Investment Ltd, Combination
Registration No. C-2017/04/499, order dated 2 May 2017; Sundaram Finance Ltd, Combination Registration No. C-2017/03/492,
order dated 27 April 2017; Bank of Baroda, Combination Registration No. C-2018/02/559, dated 9 April 2018
1509 Combination Registration No. C-2017/08/526, dated 28
September 2017.
1510 Life Insurance Corporation of India, Combination
Registration No. C-2018/10/605, dated 22 November 2018.
1511 Combination Registration No. C-
2017/05/509, order dated 21 June 2017.
Page 71 of 73
[s 6] Regulation of combinations
1512 Combination Registration No. C-
2017/05/510, order dated 21 June 2017.
1513 See also Combination Registration No. C-
2017/05/509, order dated 21 June 2017.
1514 Combination Registration No. C-
2017/03/494, order dated 30 May 2017.
1515 Combination Registration No. C-2017/03/496, order
dated 2 May 2017.
1516 See also Combination Registration No. C-2017/05/511,
order dated 29 June 2017.
1517 Capital First Ltd, Capital First Home Finance Ltd,
Capital First Securities Ltd and IDFC Bank Ltd, Combination Registration No. C-2018/02/555, dated 7 March 2018; See also KPIT
Technologies Ltd, KPIT Engineering Ltd, KPIT promoters, Birlasoft (India) Ltd and Birlasoft Promoters, Combination Registration
No. C-2018/02/556, decided on 3 April 2018; Vedanta Ltd, Combination Registration No. C-2018/04/563, decided on 11 May
2018.
1518 Combination Registration No. C-
2017/03/495, order dated 12 May 2017.
1519 Combination Registration No. C-2017/02/486, order
dated 5 May 2017.
1520 Combination Registration No. C-2016/12/464), order
dated 31 January 2017.
1521 See Indian Potash Ltd, (Combination Registration No. C-
2016/12/466), order dated 31 January 2017; Amundi SA, (Combination Registration No. C-2017/01/472), order dated 13 February
2017; Corona Remedies Pvt Ltd, (Combination Registration No. C-2017/01/477), order dated 1 March 2017; Mitsui & Co Ltd and
GESTAMP 2020, SL, (Combination Registration No. C-2016/10/447), order dated 20 December 2016; Emerson Electric Co,
(Combination Registration No. C-2016/09/434), order dated 29 December 2016; JSW Energy Ltd, (Combination Registration No.
C-2016/08/420), order dated 14 September 2016; RPG Life Sciences Ltd, (Combination Registration No. C-2016/08/419), order
dated 5 October 2016; JSW Energy Ltd, (Combination Registration No. C-2016/05/399), dated 1 July 2016; Marble II Pte Ltd,
(Combination Registration No. C-2016/04/391), order dated 13 June 2016; Yokohama Rubber Co Ltd, (Combination Registration
No. C-2016/04/390), order dated 25 May 2016; Chubb Alba Control Systems Ltd, (Combination Registration No. C-2016/12/465),
order dated 31 January 2017.
1522 Schneider Electric South East Asia (HQ) PTE/Y Ltd,
(Combination Registration No. C-2016/11/457), order dated 13 January 2017; NLC India Ltd and Damodar Valley Corporation,
(Combination Registration No. C-2016/09/431), order dated 14 October 2016; Ashok Leyland Ltd and Nissan Motors Ltd,
(Combination Registration No. C-2016/09/432), order dated 2 November 2016; Siemens Aktiengesellschaft and Gamesa
Corporacion Tecnologica, SA, (Combination Registration No. C-2016/07/416), order dated 27 September 2016; Aadhar Housing
Finance Ltd and DHFL Vysya Housing Finance Ltd, (Combination Registration No. C-2016/07/415), order dated 17 August 2016;
Quintiles Transnational Holdings Inc and IMS Health Holdings, Inc, (Combination Registration No. C-2016/06/403), order dated
17 August 2016; GTL Infrastructure Ltd and Chennai Network Infrastructure Ltd, (Combination Registration No., C-2017/05/512),
order dated 15 June 2017.
Page 72 of 73
[s 6] Regulation of combinations
1523 Aircel Ltd, Dishnet Wireless Ltd,
Reliance Communications Ltd and Reliance Telecom Ltd, (Combination Registration No. C-2017/01/471), order dated 16 March
2017.
1524 See also Heritage Foods Ltd,
Combination Registration No. C-2017/02/479, order dated 30 March 2017.
1525 Bharti Airtel, Combination Registration
No. C-2017/10/531, dated 27 August 2018.
1526 Kotak Mahindra Bank Ltd and ING Vysya Bank Ltd,
Combination Registration No. C-2014/12/231.
1527 Jet Airways (India) Ltd (Jet) and Etihad Airways PJSC
(Etihad), Combination Registration No. C-2013/05/122.
1528 According to this approach, every combination of a point
of origin and a point of destination is considered to be a separate market from the consumers. The O&D approach to market
definition is an appropriate starting point for the competition analysis in air transport cases. The O&D approach is essentially a
demand-based approach to market definition. It has the advantage of being capable of taking into account several relevant
competition aspects in the airline sector, if not all. The O&D approach is applied by the European Commission as well as by many
other competition authorities. [Report of the ECA Air Traffic Working Group–Mergers and alliances in Civil Aviation] This
approach of defining the relevant market is also in consonance with the definition of the relevant market as given in section 2(t) of
the Competition Act, 2002, where a group of products or services lie in the same relevant market if they are regarded as
interchangeable or substitutable by the consumer, by reason of characteristics of the products or services, their prices or intended
use.
1529 Combination Registration No. C-2013/05/122.
1530 The minority ruling in this case, holding that there would
be AAEC in the international air passenger transportation market, was based upon the observation that: 1. Incorporation of frequent
flyer participation (FFP) policy will tie down the consumers and thereby are likely to create entry/expansion barriers, making it
difficult for competitors/new entrants to shift the parties’ customers to their network. 2. The substitutability approach with reference
to airports, that has been observed by CCI and asserted by the parties, is found on wrong principles. As air services to the different
airports in India-UAE sector are not treated as substitutable products by the consumers, and even by the airlines themselves. 3. The
presence of competitors has been on all routes, however, it is observed that Jet and Etihad are the only remaining competitors in the
Delhi-Abu Dhabi direct route; and the proposed combination will eliminate the competition between Jet and Etihad as they are
likely to effectively operate as one airline pursuant to the proposed combination. 4. Also, airlines providing one-stop services can
only be considered as remote competitors neither exerting nor likely to exert any significant competitive constraint on the parties.
Therefore, it was concluded by minority order that the proposed combination is likely to cause an AAEC within the market of
international air passenger transportation from and to India, and investigation was necessary to be called upon.
1531 State Bank of India and Bharatiya
Mahila Bank Ltd, (Combination Registration No. C-2016/11/458), order dated 29 November 2016.
1532 HDFC Ergo General Insurance Co Ltd
and L&T General Insurance Co Ltd, (Combination Registration No. C-2016/06/407), order dated 1 August 2016.
1533 Sony Pictures Networks India Pvt Ltd
and Aqua Holding Investment Pvt Ltd, Combination Registration No. C-2016/09/436, dated 13 January 2017.
Page 73 of 73
[s 6] Regulation of combinations
1534 Section 7A(b)(1)(A) of the Clayton Act, 1915.
1535 Section 7A(b)(2) of the Clayton Act, 1915.
1536 Notice, Federal Register/Vol. 80, No. 13/Wednesday,
January 21, 2015/Notices. Available at:
http://www.ftc.gov/system/files/documents/federal_register_notices/2015/01/150121hsrthresholds7a.pdf Accessed in February
2019.
1537 SEC v Gemstar-TV guide, (2005) 401 F.3d 1031.
1538 No. 96-01040, 1996 WL 351143 (D.D.C. 10 May 1996).
1539 Council Regulation, (EC) No. 139/2004 on the control of
concentrations between undertakings, (the EC Merger Regulation), Official Journal of the European Union, 2004.
1540 Council Regulation (EEC) No. 4064/89 on the control of
concentrations between undertakings, 1989, Official Journal of the European Communities, 1989.
1541 Council Regulation (EC) No. 139/2004 on the control of
concentrations between undertakings (the EC Merger Regulation), 2004.
1542 Under Article 3, concentration refers to merger +
acquisition of control + creation of full functional JV.
1543 Article 2 of the EU Merger Regulations.
1544 Article 3 of the EU Merger Regulations.
1545 Re Hindustan Colas Pvt Ltd, Combination Registration
No. C-2015/08/299, dated 14 September 2016; Re UltraTech Cement Ltd, Combination Registration No. C-2015/02/246, dated 12
March 2018; Re Adani Transmission Ltd, Combination Registration No. C-2018/01/547, dated 30 July 2018.
1546 Combination Registration No. C-2015/08/299, dated 14
September 2016.
1547 See also Re Hindustan Colas Pvt Ltd, Combination
Registration No. C-2015/08/299, dated 14 September 2016; Re UltraTech Cement Ltd, Combination Registration No. C-
2015/02/246, dated 12 March 2018.
End of Document
[s 7] Establishment of Commission
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > CHAPTER
III COMPETITION COMMISSION OF INDIA
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
CHAPTER III COMPETITION COMMISSION OF INDIA
1[s 7] Establishment of Commission
(1) With effect from such date* as the Central Government may, by notification, appoint, there shall be established,
for the purposes of this Act, a Commission to be called the “Competition Commission of India”.
(2) The Commission shall be a body corporate by the name aforesaid having perpetual succession and a common
seal with power, subject to the provisions of this Act, to acquire, hold and dispose of property, both movable and
immovable, and to contract and shall, by the said name, sue or be sued.
(3) The head office of the Commission shall be at such place* as the Central Government may decide from time to
time.
(4) The Commission may establish offices at other places in India.
HISTORICAL BACKGROUND
Provisions under the Monopolies and Restrictive Trade Practices Act, 1969, (MRTP Act, 1969)
Section 5 of the MRTP Act, 1969, since repealed, provided for the establishment of MRTP Commission, as under:
S. 5 Establishment and constitution of the Commission.—(1) For the purposes of this Act, the Central Government shall establish,
by notification, a Commission to be known as the Monopolies and Restrictive Trade Practices Commission which shall consist of a
Chairman and not less than two and not more than eight other members, to be appointed by the Central Government.
(2) The Chairman of the Commission shall be a person who is, or has been, or is qualified to be, a Judge of the Supreme Court or
of a High Court and the members thereof shall be persons of ability, integrity and standing who have adequate knowledge or
experience of, or have shown capacity in dealing with, problems, relating to economics, law, commerce, accountancy, industry,
public affairs or administration.
Page 2 of 9
[s 7] Establishment of Commission
(3) Before appointing any person as a member of the Commission, the Central Government shall satisfy itself that the person does
not, and will not, have, any such financial or other interest as is likely to affect prejudicially his functions as such member.
Raghavan Committee Report—Recommendations of
The provisions of the section are based on recommendations of Raghavan Committee. The relevant extracts of the Report
are reproduced below:
6.1.1 Administration and enforcement of the Competition Law requires an administrative set up. This administrative set up should
be more proactive than reactive for the administration of the Competition Policy. This is not a mere law enforcement agency. This
administrative set up should take a proactive stand to be specified and adopted to promote competition by not only proceeding
against those who violate the provisions of the Competition Law, but also by proceeding against institutional arrangements and
public policies that interfere with the fair and free functioning of the markets. It is in this context that a Competition Law Authority
should have the following two basic functions:
(a) Administration and enforcement of Competition Law and Competition Policy to foster economic efficiency and consumer
welfare.
(b) Involvement proactively in Governmental policy formulation to ensure that markets remain fair, free, open, flexible and
adaptable.
6.1.2 Specialised Courts.—In many countries, enforcement of Competition Law is entrusted to the judiciary. The Competition Law
Authority makes an application to the appropriate law courts seeking orders to implement its decisions. In most statutes, appeals
against the Competition Law Authority’s decisions may lie to the judicial courts at the highest or near highest level. The parties
involved will have the right for preferring such appeals. In many Competition Laws, private parties and victims of prohibited trade
practices have the right to institute competition cases before the Competition Law Authority or a law court.
6.1.3 In many developed countries and economies in transition, the judiciary therein may be inexperienced in dealing with free
market problems. Such problems relating to free and fair trade and relating to restrictive and other prohibited trade practices like
abuse of dominance, require a certain level of specialised knowledge in economics, trade and the relevant law for adjudication.
Even if the judiciary has the reputation and exposure to commerce and market-related matters, the Competition Law administration
will be better handled, if a specialised agency is set up for the purpose. With due respect to the judiciary around the world and in
particular India, it needs to be underscored that, in the era of specialisation, Competition Law would be better administered and
consumer welfare better subserved, if placed in the hands of a specialised agency.
6.1.4 It is therefore, recommended that for the administration and enforcement of Competition Law in India, a Specialised
Court/Tribunal which can be christened ‘Competition Commission of India’ may be established. The Competition Commission of
India (CCI) will hear competition cases and also play the role of competition advocacy. The composition of the CCI needs to be
tailored to the requirements of the Competition Policy and the Competition Law. CCI should be empowered to adopt procedures
and rules of evidence specifically suited to competition cases.”
6.3.9 Benches.—Instead of being an unitary Tribunal, as is the case with the MRTP Commission it is suggested that the CCI should
have Benches in the metropolitan cities of the country. The Committee suggests that the Headquarters of the CCI may be located in
a city outside Delhi. Permanent Benches may be constituted at Delhi, Calcutta, Mumbai and Chennai and further Benches in other
metropolitan centers may be decided by the Government from time to time based on the workload and experience. For important
Page 3 of 9
[s 7] Establishment of Commission
cases and review matters, the Chairperson should have the power to constitute Benches larger than two Members and list them at
the Headquarters or any metropolitan centre.
Competition Act, 2002
Notes on clauses of the Bill stated, thus:
Notes on clauses.—This clause provides for the establishment of the Competition Commission of India. The Commission shall be
a body corporate by the aforesaid name having perpetual succession and a common seal with power to acquire, hold and dispose of
property. The place of head office of the Commission shall be decided by the Central Government. However, the Commission can
establish offices at other places in India. [Clause 7 of the Competition Bill, 2001].
Financial Memorandum.—Sub-clause (1) of clause 7 of the Bill provides for the establishment of a Commission to be known as the
Competition Commission of India with effect from such date as the Central Government may, by notification, appoint in this
behalf. Sub-clause (3) provides that the head office of the Commission shall be at such place as the Central Government may
decide. Sub-clause (4) enables the Commission to establish offices at other places in India. [Competition Bill, 2001].
SCOPE OF THE SECTION
The Central Government has been empowered to establish a quasi-judicial tribunal, the Competition Commission of India.
The Commission shall be a body corporate having perpetual succession and common seal. The head office of the
commission shall be at such a place as may be decided by the Central Government. The Commission is, however,
empowered to establish offices at other places in India.
The Raghavan Committee recommended that the headquarters of the Commission be located in a city outside Delhi and
permanent benches be constituted at Delhi, Calcutta, Mumbai and Chennai and further benches in other centres based on
the workload and experience.
Competition Commission of India has been established w.e.f. 14 October 2003, vide Notification No. S.O. 1198(E), dated
14 October 2003, with its Head Office at New Delhi.
COMPETITION COMMISSION OF INDIA—A BODY CORPORATE
As per sub-section (2), the Commission shall be a body corporate by name:—
(a) having perpetual succession;
(b) having a common seal;
(c) power to acquire, hold and dispose of property, both movable and immovable;
Page 4 of 9
[s 7] Establishment of Commission
(d) power to contract, and
(e) may sue or be used by its corporate name.
The erstwhile regulatory body, viz., the Monopolies and Restrictive Trade Practices Commission, it may be added, was not
constituted as a body corporate; it was a part and parcel of the Government of India. The National Company Law Tribunal
established under section 408 of the Companies Act, 2013, is also a Government set up and not a body corporate. None of
the other regulatory authorities set up under the Income-Tax
Act, the Custom and Excise Act, the Foreign Exchange Management Act or the Reserve Bank of India Act, or those set up
under labour laws, like the Industrial Disputes Act, or the ESI Act, have been constituted as body corporate.
Attention may be invited to the words “subject to the provisions of this Act” in sub-section (2) of this section. The
provisions of the Act relating to the powers and functions of the Commission are contained in section 7. None of the other
sections of the Act seems to have any nexus with the provisions of sub-section (2), namely, to acquire, hold and dispose of
property, to contract and to sue or be sued.
The background relating to this provision namely, the establishment of the Commission as a body corporate is not
contained in the Raghavan Committee Report. It, however, appears that the wordings of this provision are similar to that of
the provisions of section 3 of the erstwhile Unit Trust of India (UTI) Act.
Unit Trust of India Act2
[s 3] Establishment and incorporation of Unit Trust of India.—(1) The Central Government shall, by notification in the official
Gazette, establish a corporation by the name of the Unit Trust of India which shall be a body corporate having perpetual succession
and a common seal with power, subject to the provisions of this Act, to acquire, hold or dispose of property and to contract, and
may, by the said name, sue or be sued.
*****
Powers and functions of the Unit Trust of India (UTI) as are contained in sections 19 to 21 which would make the UTI’s
establishment as a body corporate relevant with power to hold property, to contract and the right to sue and to be sued in its
own name. None of the functions of the Commission are business-like, the powers and functions of the Commission as
indicated above are entirely regulatory.
In contrast, one may note that the duties, powers and functions of the Commission are contained in sections 18 to 40 under
chapter IV. These are reproduced below for the sake of convenient comparison with that of the provisions of the UTI Act:
Duties, Powers and Functions of Competition Commission
Sections
Page 5 of 9
[s 7] Establishment of Commission
18. Duties of Commission
19. Inquiry into certain agreements and dominant position of enterprise
20. Inquiry into combination by Commission
21. Reference by statutory authority
21A.Reference by Commission
22. Meetings of Commission3
23. Distribution of business of Commission amongst Benches4
24. Procedure for deciding a case where Members of a Bench differ in opinion5
25. Jurisdiction of Bench6
26. Procedure for inquiry under section 197
27. Orders by Commission after inquiry into agreements or abuse of dominant position
28. Division of enterprise enjoying dominant position
29. Procedure for investigation of combinations
30. Procedure in case of notice under sub-section (2) of section 68
31. Orders of Commission on certain combinations
32. Acts taking place outside India but having an effect on competition in India
33. Power to issue interim orders9
34. Power to award compensation10
35. Appearance before Commission
36. Power of Commission to regulate its own procedure
37. Review of orders of Commission11
38. Rectification of orders
39. Execution of orders of Commission imposing monetary penalty12
40. Appeal13
As held in CCI v SAIL,14 the CCI under the scheme of the Competition Act, 2002, is vested with inquisitorial,
investigative, regulatory, adjudicatory and to a limited extent even advisory jurisdiction.
Section 36(2) of the Competition Act, 2002 expressly enacts that the CCI will have the same powers as are vested in a Civil
Court under the Code of Civil Procedure, 1908 while trying a suit. Section 58 of the Act confers the status of public
servants within the meaning of section 21 of Indian Penal Code, 1860 on the officers/employees of the CCI. The
provisions of the Act have an overriding effect over any other law, e.g., SEBI Act, the Companies Act and the decisions
taken by SEBI and NCLT thereunder particularly in regard to combination, e.g., mergers and acquisitions. The orders
passed by CCI are to be enforced like decree or orders made by a High Court vide section 39. Under sections 42 to 45 of
the Act, the CCI itself is vested with the power to impose heavy fines on the defaulters including the power for their
detention in civil prison for a term upto three years (which was not the case with the MRTP Commission under the
erstwhile MRTP Act, 1969). Under section 56 of the said Act, any offence under the said Act was to be tried by a Session
Page 6 of 9
[s 7] Establishment of Commission
Court. These provisions of the Act are somewhat incongruous with its establishment as a body corporate distinct with the
other Regulatory Authorities under other laws.
Perhaps, the provision for constituting the CCI as a body corporate has been made in the light of the recommendation of
the Raghavan Committee in para 6.2.2 of its report which is reproduced below:
6.2.2 Central to effective implementation and enforcement of Competition Policy and Competition Law is an appropriate
competent and effective adjudicative body, in the instant case, the Competition Commission of India. CCI will have to be a quasi
judicial body with autonomy and administrative powers. It should be an independent statutory body without any political or
budgetary control of the Government. Like the Supreme Court of India, the CCI should be free to control its budget, after the
Parliament votes its budgetary subvention. The remuneration of the Chairperson and Members of the CCI and all other expenditure
should be a charge on the Consolidated Fund of India.
The precise purpose of establishment of CCI as a body corporate with perpetual succession and its own common seal with
power to acquire, hold property, to contract, to sue, be sued in its own name, is not clear, is indeed a question worth
deliberating upon.
Right to Appeal
CCI which is a body corporate in terms of section 7(2) of the Competition Act, 2002, having perpetual succession and a
common seal with power to sue and be sued in its name, has a right of representation in any appeal before the tribunal as
has been specifically mentioned under section 53-S(3) and it even has a right of appeal under section 53-T before the
Supreme Court.
SCENARIO ABROAD
Australia
Australian Trade Practices Act, 1974 provides in section 6A thereof that:
The Commission:
(a) as a body corporate, with perpetual succession;
(b) shall have an official seal;
(c) may acquire, hold and dispose of real and personal property, and
(d) may sue or be sued in its corporate name.
The Competition and Consumer Act (CCA), 2010
Page 7 of 9
[s 7] Establishment of Commission
In 2010, the Australian Parliament passed a new legislation to replace the Trade Practices Act, 1974. The competition law
provisions are contained in Part IV of the CCA. The Australian Competition and Consumer Commission (ACCC) is an
independent Commonwealth statutory authority whose role is to enforce the Competition and Consumer Act, 2010 and a
range of additional legislation, promoting competition, fair trading and regulating national infrastructure for the benefit of
all Australians. The major role of ACCC is to:
• maintain and promote competition and remedy market failure;
• protect the interests and safety of consumers and support fair trading in markets;
• promote the economically efficient operation of, use of and investment in monopoly infrastructure;
• increase the engagement with the broad range of groups affected by what the ACCC does;
• promote consumer education in regional and rural areas and with indigenous communities.
Apart from private enforcement, the ACCC, a semi-judicial body, may commence proceedings for pecuniary penalties,
injunctions, divestiture in the case of mergers and it may accept understandings (section 87B) designed to alleviate
competition concerns. It has powers to obtain evidence pursuant to section 155 and, subject to obtaining a search warrant,
has search and seizure powers to assist in its investigations. The ACCC has the power to grant “authorisation” of conduct
that would otherwise contravene Part IV (other than for mergers in which it plays an advisory role) on public benefit
grounds.
United Kingdom
The UK Enterprises Act, 2002 in section 1 thereof, inter alia, provides that:
(i) There shall be a body corporate to be known as the Office of Fair Trading (the OFT);
(ii) The functions of the OFT are carried out on behalf of the crown;
(iii) In managing its affairs the OFT shall have regard, in addition to any relevant general guidance as to governance
of public bodies, to such generally accepted principles of good corporate governance as it is reasonable to regard
as applicable to the OFT.
The OFT as a corporate body authority replaces the former statutory office of Director General of Fair Trading (DGFT)
which was established by the Fair Trading Act, 1973. As a non-Ministerial Government Department, the OFT will be a
crown body and its staff will be civil servants and transfers the DGTD’s functions property, rights and liabilities to OFT.
On 15 March 2012, the UK Government’s Department for Business, Innovation and Skills (BIS) announced proposals for
strengthening competition in the UK by merging the Office of Fair Trading and the Competition Commission to create a
new single Competition and Markets Authority (CMA). The formation of the CMA was enacted in Part 3 of the Enterprise
and Regulatory Reform Act, 2013, which received the royal assent on 25 April 2013. The Competition and Markets
Authority (CMA) is a non-ministerial government department in the UK, responsible for strengthening business
competition and preventing and reducing anti-competitive activities. The CMA launched in shadow form on 1 October
Page 8 of 9
[s 7] Establishment of Commission
2013 and began operating fully on 1 April 2014, when it assumed many of the functions of the previously existing
Competition Commission and Office of Fair Trading, which were abolished.
Canada
In Canada, under the Competition Act, 1986, the Director of Investigation and Research is the head of the Competition
Bureau (the Bureau), part of Industry Canada. The Director is responsible for the administration and enforcement of the
Competition Act, 2002. He is appointed by the Governor in council.
USA
In USA, the Federal Trade Commission, which enforces the Federal Trade Commission Act (FTC Act), is an independent
law enforcement agency that reports to US Congress on its actions. It is headed by five Commissioners, nominated by the
President and confirmed by the Senate, each serving staggered seven-year terms. The President selects one commissioner
to act as Chairman. It has both consumer protection function and competition jurisdiction over broad sectors of economy.
Its role is in the two areas mentioned below, viz.:
(1) prevent fraud, deception, and unfair business practices in the market place; and
(2) prevent anti-competitive mergers and other anti-competitive business practices in the market place.
The anti-trust investigations and enforcement, as they are known in US, are thus managed jointly by two
agencies, the Anti-trust Division of US Justice Department and the independent of FTC often, one or the
other agency takes the lead in a merger evaluation or anti-trust investigation because it has more experience
in all areas
Because the two agencies have parallel jurisdiction to investigate mergers and conduct that may be called anti-competitive,
a clearance procedure has been developed to promptly allocate individual matters between the two agencies.
1 Came into force on 19 June 2003 vide Notification No. S.O. 715(E), dated 19 June 2003.
* The Central Government established, with effect from 14 October 2003, the Competition
Commission of India having its Head Office at New Delhi.
* The Central Government established, with effect from 14 October 2003, the Competition
Commission of India having its Head Office at New Delhi.
2 The UTI Act has been repealed and the institution has been
bifurcated into two parts vide Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002 (58 of 2002).
Page 9 of 9
[s 7] Establishment of Commission
3 “Benches of Commission” has been substituted by
“Meetings of Commission” by Act 39 of 2007.
4 Repealed by the Competition (Amendment) Act,
2007 (39 of 2007), section 18 (w.e.f. 12 October 2007).
5 Repealed by the Competition (Amendment) Act,
2007 (39 of 2007), section 18 (w.e.f. 12 October 2007).
6 Repealed by the Competition (Amendment) Act,
2007 (39 of 2007), section 18 (w.e.f. 12 October 2007).
7 Substituted by Act 39 of 2007, section 19, for
section 26 (w.e.f. 20 May 2009).
8 Substituted by Act 39 of 2007, section 23, for
section 30 (w.e.f. 1 June 2011).
9 Substituted by Act 39 of 2007, section 26, for
section 33 (w.e.f. 20 May 2009).
10 Repealed by the Competition (Amendment) Act,
2007 (39 of 2007), section 27 (w.e.f. 12 October 2007).
11 Repealed by the Competition (Amendment) Act,
2007 (39 of 2007), section 30 (w.e.f. 12 October 2007).
12 Substituted by Act 39 of 2007, section 31, for
section 39 (w.e.f. 20 May 2009).
13 Repealed by the Competition (Amendment) Act,
2007 (39 of 2007), section 32 (w.e.f. 12 October 2007).
14 CCI v SAIL, (2010) 10 SCC 744
.
End of Document
[s 8] Composition of Commission
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > CHAPTER
III COMPETITION COMMISSION OF INDIA
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
CHAPTER III COMPETITION COMMISSION OF INDIA
15[s 8] Composition of Commission
(1) The Commission shall consist of a Chairperson and not less than two and not more than six other Members to be
appointed by the Central Government.
(2) The Chairperson and every other Member shall be a person of ability, integrity and standing and who has special
knowledge of, and such professional experience of not less than fifteen years in, international trade, economics,
business, commerce, law, finance, accountancy, management, industry, public affairs or competition matters,
including competition law and policy, which, in the opinion of the Central Government, may be useful to the
Commission.
(3) The Chairperson and other Members shall be whole-time Members].
HISTORICAL BACKGROUND
Raghavan Committee Report—Recommendations of
The provisions of this section are based on the following recommendations of the Raghavan Committee:
6.1.5 CCI should be a multi-member body comprised of eminent and erudite persons of integrity and objectivity from the fields of
Judiciary, Economics, Law, International Trade, Commerce, Industry, Accountancy, Public Affairs and Administration.
6.2.6 Each Bench must have a judicial member, as it will have the power of imposing sentences of imprisonment, in addition to
levying fines. A judicial member will be one who is a sitting or retired Supreme/High Court judge or one who is qualified to be a
Supreme/High Court Judge.
Competition Act, 2002
Notes on clauses of the Bill stated thus:
Page 2 of 3
[s 8] Composition of Commission
Notes on clauses.—This clause provides for the composition of the Commission. The Commission shall consist of the Chairperson
and not less than two and not more than ten other Members, as may be specified by the Central Government. However, the Central
Government shall appoint the Chairperson and a member during first year of the establishment of the Commission. This clause also
lays down that the Chairperson and other Members shall be persons of ability, integrity and standing. A person who is or has been
or is qualified to be a Judge of a High Court or is having special knowledge of, and professional experience in, not less than fifteen
years in international trade, economics, business, commerce, law, finance, accountancy, management, industry, public affairs,
administration or in any other matter which, in the opinion of the Central Government, be useful to the Commission, shall be
eligible for appointment as the Chairperson or as a Member. [Clause 8 of the Competition Bill, 2001].
This section came into force w.e.f. 31 March 2003 vide Notification No. S.O. 340(E), dated 31 March 2003.
Financial Memorandum.—Sub-clause (1) of clause 8 of the Bill provides that the Commission shall consist of a
Chairperson and not less than two and not more than 10 other Members to be appointed by the Central Government.
During first year of its establishment, the Commission shall consist of a Chairperson and one Member. The Chairperson
and other Members shall be the whole-time Members. [Competition Bill, 2001]
Competition (Amendment) Act, 2007
Notes on clauses.—This clause seeks to substitute section 8 of the Competition Act, 2002 relating to composition of Competition
Commission of India.
The new clause provides that the Commission shall consist of a Chairperson and not less than two and not more than six other
Members instead of ten Members as provided for under the existing provisions of section 8, to be appointed by the Central
Government. It also proposes to remove from the eligibility requirement that the person who has been or is qualified to be a Judge
of a High Court, and to omit the special knowledge of, and professional experience of administration or in any other matter from
the qualifications for appointment as Chairperson or any other Member. [Clause 6 of the Competition (Amendment) Bill, 2007].
SCOPE OF THE SECTION
The Competition Commission of India (CCI) shall consist of a chairperson and not less than two and not more than six other
members. Initially, the Central Government may appoint the Chairperson and a Member to assess the need for appointment of
further members. The Chairperson and Members shall be whole time members. The Supreme Court in the case of Brahm Dutt v
UOI,16 while considering the constitutional validity of section 8 of the Competition Act, 2002 observed that the Commission is an
expert body which had been created in consonance with international practice. The Court observed that it might be appropriate if
two bodies are created for performing two kinds of functions, one, advisory and regulatory and the other, adjudicatory. Though the
Tribunal has been constituted by the Competition (Amendment) Act, 2007, the Commission continues to perform both the
functions stated by this Court in the above case.
Page 3 of 3
[s 8] Composition of Commission
15 Substituted by Act 39 of 2007, section 6 (w.e.f. 12 October 2007). Prior to its substitution
section 8 stood as under:
S. 8. Composition of Commission
(1) The Commission shall consist of a Chairperson and not less than two and not more than ten other Members to be appointed by
the Central Government :
Provided that the Central Government shall appoint the Chairperson and a Member during the first year of the
establishment of the Commission.
(2) The Chairperson and every other Member shall be a person of ability, integrity and standing and who has been, or is qualified
to be, a Judge of a High Court or has special knowledge of, and professional experience in, not less than fifteen years in
international trade, economics, business, commerce, law, finance, accountancy, management, industry, public affairs,
administration or in any other matter which, in the opinion of the Central Government, may be useful to the Commission.
(3) The Chairperson and other Members shall be whole-time Members.
16 Brahm Dutt v UOI, AIR 2005
SC 730 : (2005) 2 SCC 431 :
JT 2005 (1) SC 421 .
End of Document
[s 9] Selection Committee for Chairperson and Members of Commission
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > CHAPTER
III COMPETITION COMMISSION OF INDIA
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
CHAPTER III COMPETITION COMMISSION OF INDIA
17[s 9] Selection Committee for Chairperson and Members of Commission
(1) The Chairperson and other Members of the Commission shall be appointed by the Central Government from a
panel of names recommended by a Selection Committee consisting of—
(a) the Chief Justice of India or his nominee..... Chairperson;
(b) the Secretary in the Ministry of Corporate Affairs..... Member;
(c) the Secretary in the Ministry of Law and Justice..... Member.
(d) two experts of repute who have special knowledge of, and professional experience in international trade,
economics, business, commerce, law, finance, accountancy, management, industry, public affairs or
competition matters including competition law and
policy……………………………………………Members.
(2) The term of the Selection Committee and the manner of selection of panel of names shall be such as may be
prescribed.*]
HISTORICAL BACKGROUND
Raghavan Committee Report—Recommendations
The provisions of the section are based on the following recommendation of the Raghavan Committee:
S. 9 Selection of Chairperson and other Members
The Chairperson and other Members shall be selected in the manner as may be prescribed. * For Competition Commission of India
(Terms of the Selection Committee & the Manner of Selection of Panel of Names) Rules, 2008” See Notification No. GSR 111(E),
dated 27 February 2008, published in the Gazette of India, Extraordinary, Pt. II, section 3(i).
6.3.3 Selection of Chairperson and Members of CCI.—In order to ensure competent and effective implementation of Competition
Page 2 of 4
[s 9] Selection Committee for Chairperson and Members of Commission
Policy and Competition Law, it is important and imperative to select suitable persons, suitability having been described in the
earlier paragraphs. Stress has been made of the need for the CCI to be free of political control. While, it is practically difficult to
eliminate political favouritism, it can be minimised to a great extent by resorting to what may be described as a “Collegium
Selection Process”. An appropriate Collegium needs to be stipulated which will collectively undertake and discharge the task and
responsibility of choosing a suitable person for the posts of Chairperson and Members of the CCI.
6.3.4 The Collegium for choosing the Chairperson and Members may consist of the following:
1. Chief Justice of India
2. Speaker of the Lok Sabha
3. Finance Minister
4. Concerned Minister (of the administrative Ministry dealing with CCI)
5. Governor of the Reserve Bank of India.
The decisions and choice of the Collegium will be binding on the Government.
Competition Act, 2002
Notes on clauses of the Bill stated thus:
Notes on clauses.—This clause, inter alia, provides for the appointment of the Chairperson and Members of the Commission. The
appointment shall be made by the Central Government on the recommendation of the Selection Committee consisting of the Chief
Justice of India or his nominee, the Union Minister-in-charge of the Ministry of Finance, the Union Minister-in-charge of the
Ministry or Department of the Central Government dealing with the proposed legislation, the Governor of the Reserve Bank of
India and the Cabinet Secretary. However, an appointment made to the office of the Chairperson or a Member shall not be invalid
merely on the ground that there is any defect in the constitution of the Selection Committee or any vacancy therein. [Clause 9 of
the Competition Bill, 2001].
Competition (Amendment) Act, 2007
This clause seeks to substitute section 9 of the Competition Act, 2002 relating to selection of Chairperson and other
Members of the Competition Commission of India.
Under the existing provisions, the Chairperson and other Members shall be selected in the manner as may be prescribed by
the rules made by the Central Government. The Competition Commission of India (Selection of Chairperson and other
Members of the Commission) Rules, 2003 made under this section provide for selection of the Chairperson and other
Members by a Selection Committee consisting of: (a) a person who has been a retired judge of the Supreme Court or a
High Court or a retired Chairperson of a Tribunal established or constituted under an Act of Parliament or a distinguished
jurist or a Senior Advocate for five years or more—as Member, (b) a person who has special knowledge of, and
Page 3 of 4
[s 9] Selection Committee for Chairperson and Members of Commission
professional experience of 25 years or more in international trade, economics, business, commerce or industry—as
Member, (c) a person who has special knowledge of, and professional experience of 25 years or more in accountancy,
management, finance, public affairs or administration—as Member, nominated by the Central Government.
The new clause provides that the Chairperson and other Members of the Competition Commission of India shall be
appointed by the Central Government from a panel of names recommended by a Selection Committee consisting of: (a) the
Chief Justice of India or his nominee—as Chairperson, (b) the Secretary in the Ministry of Corporate Affairs—as Member,
(c) the Secretary in the Ministry of Law and Justice as Member and (d) two experts of repute having special knowledge in
specified fields—as Member.
It also provides that the term of the Selection Committee and the manner of selection of panel of names shall be such as
may be prescribed. [Clause 7 of the Competition (Amendment) Bill, 2007].
SCOPE OF THE SECTION
The Chairperson and members of CCI shall be appointed by the Central Government from the panel of names
recommended by the Selection Committee.
The composition of the Selection Committee has been set out in section 9. The Raghavan Committee had suggested that
the Speaker of Lok Sabha should be one of the Members of the Selection Committee besides the Finance Minister,
concerned Minister of Administrative Ministry and the Governor, RBI. These recommendations were not accepted by the
Government.
In exercise of the powers conferred by clause (a) of sub-section (2) of section 63 read with section 9, of the Competition
Act, 2002, the Central Government framed the Competition Commission of India (Selection of Chairperson and other
Members of the Commission) Rules, 2003.18
Rule 3. Constitution of committee.—(1) The Central Government shall constitute a committee for the selection of
Chairperson and other Members of the Commission.
(2) The committee shall consist of;—
(a) a person, who has been a retired judge of the Supreme Court or a High Court or a retired Chairperson of a
Tribunal established or constituted under an Act of Parliament or a distinguished jurist or a Senior Advocate for
five years or more; Member,
(b) a person who has special knowledge of, and professional experience of twenty-five years or more in international
trade, economics, business, commerce or industry; Member,
(c) a person who has special knowledge of, and professional experience of twenty-five years or more in accountancy,
management, finance, public affairs or administration; Member, to be nominated by the Central Government.
(3) The Central Government shall nominate one of the Members of the committee to act as the Chairperson of the
committee.
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[s 9] Selection Committee for Chairperson and Members of Commission
(4) The Joint Secretary in the Ministry of Finance and Company Affairs (Department of Company Affairs) dealing with
the Competition Act, 2002 (12 of 2003) shall be the Convenor of the committee.
(5)The term of the committee constituted under sub-rule (1) shall be for a period of one hundred and twenty days from the
date of its constitution.
Rule 4. Functions of committee.—(1) As and when vacancies of Chairperson or a Member in the Commission exist or
arise, or are likely to arise, the Central Government may make a reference to the committee in respect of the vacancies to
be filled.
(2) The committee shall devise its own procedure for purpose of the selection of the Chairperson or a Member of the
Commission.
(3) The committee shall recommend a person, or a panel of not more than three persons in order of priority, as the
committee may think fit, in respect of each vacancy that has been referred to the committee.
(4) The committee shall make its recommendations to the Central Government, within a period not exceeding ninety days.
(5) If the members of the committee differ in making its recommendation, the recommendation of selection of the
Chairperson or a member of the Competition Commission of India shall be decided by the majority of the members of the
committee.
Rule 5. Vacancy etc., not to invalidate proceedings of the committee.—No act or procedure of the committee shall be
invalid merely by reason of any vacancy in the committee.
17 Substituted by Act 39 of 2007, section 7 (w.e.f. 12 October 2007). Prior to its substitution,
it stood as under:
18 The Central Government framed the Competition Commission of
India (Selection of Chairperson and other Members of the Commission) Rules, 2003. Available at:
http://www.cci.gov.in/sites/default/files/rules_pdf/R1.pdf (last accessed in February 2019).
End of Document
[s 10] Term of office of Chairperson and other Members
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The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > CHAPTER
III COMPETITION COMMISSION OF INDIA
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
CHAPTER III COMPETITION COMMISSION OF INDIA
19[s 10] Term of office of Chairperson and other Members
(1) The Chairperson and every other Member shall hold office as such for a term of five years from the date on
which he enters upon his office and shall be eligible for reappointment:
20[Provided that the Chairperson or other Members shall not hold office as such after he has attained the age
of sixty-five years].
(2) A vacancy caused by the resignation or removal of the Chairperson or any other Member under section 11 or by
death or otherwise shall be filled by fresh appointment in accordance with the provisions of section 9.
(3) The Chairperson and every other Member shall, before entering upon his office, make and subscribe to an oath of
office and of secrecy in such form, manner and before such authority, as may be prescribed.
(4) In the event of the occurrence of a vacancy in the office of the Chairperson by reason of his death, resignation or
otherwise, the senior-most Member shall act as the Chairperson, until the date on which a new Chairperson,
appointed in accordance with the provisions of this Act to fill such vacancy, enters upon his office.
(5) When the Chairperson is unable to discharge his functions owing to absence, illness or any other cause, the
senior-most Member shall discharge the functions of the Chairperson until the date on which the Chairperson
resumes the charge of his functions.
HISTORICAL BACKGROUND
Raghavan Committee Report—Recommendations of
The provisions of this section are based on the following recommendations of the Raghavan Committee:
6.3.5 Status of the Chairperson & Members of CCI.—The Chairperson of CCI will hold the rank and be entitled to the pay and
perquisites of a Judge of the Supreme Court. Similarly, the Members of the CCI will hold the rank and be entitled to the pay and
perquisites of a Judge of the High Court. The term of the Chairperson and Members of CCI may be five years at a time. The
Committee feels that for the Chairperson the maximum age limit may be fixed at 70 years and 65 years for the Members. The
Chairperson of the CCI can be from any of the fields/disciplines listed earlier in this Chapter, as the Competition Law is a socio-
economic legislation and is not just a judicial body to try adversarial cases. In other words, it should not be mandatory that the
Chairperson should be only from the judiciary. As the Chairperson should be one who has considerable exposure and knowledge in
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[s 10] Term of office of Chairperson and other Members
International Trade, Commerce and complicated issues relating to Trade, the net needs to be cast very wide in order that an
appropriate person is selected for this post.
Competition Act, 2002
Notes on clauses of the Bill, stated, thus:
Notes on clauses.—This clause, inter alia, provides for the term of office of the Chairperson and other Members. Such term of the
office shall be five years. However, no Chairperson shall hold office after he attains the age of seventy years and no other Member
shall hold office after he attains the age of sixty-five years. This clause also provides for discharge of functions of the Chairperson
by the senior-most Member in case the Chairperson is unable to discharge his functions. [Clause 10 of the Competition Bill, 2001].
Competition (Amendment) Act, 2007
Notes on clauses.—This clause seeks to amend section 10 of the Competition Act, 2002 relating to term of office of Chairperson
and other Members of the Competition Commission of India.
Under the existing provisions contained in section 10, no Chairperson of the Competition Commission of India shall hold office as
such after he has attained the age of sixty-seven years and no other Member shall hold office as such after he has attained the age
of sixty-five years.
It is proposed to amend the said section 10 to provide that the Chairperson or other Member shall not hold office as such after he
has attained the age of sixty-five years. [Clause 3 of the Competition (Amendment) Bill, 2007].
SCOPE OF THE SECTION
The term of chairperson and every member of CCI shall be five years at a time not exceeding 65 years. A casual vacancy
caused by removal or by death, shall be filled by fresh appointment. In the absence of chairperson, the senior-most member
may discharge the functions of chairperson.
19 Came into force on 31 March 2003 vide Notification No. S.O. 340(E), dated 31 March
2003.
20 Substituted by Act 39 of 2007, section 8 (w.e.f. 12 October 2007). Prior to its substitution
it stood as under: Provided that no Chairperson or other Member shall hold office as such after he has attained,—
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[s 10] Term of office of Chairperson and other Members
(a) in the case of the Chairperson, the age of sixty-seven years;
(b) in the case of any other Member, the age of sixty-five years.
End of Document
[s 11] Resignation, removal and suspension of Chairperson and other Members
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > CHAPTER
III COMPETITION COMMISSION OF INDIA
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
CHAPTER III COMPETITION COMMISSION OF INDIA
21[s 11] Resignation, removal and suspension of Chairperson and other Members
(1) The Chairperson or any other Member may, by notice in writing under his hand addressed to the Central
Government, resign his office:
Provided that the Chairperson or a Member shall, unless he is permitted by the Central Government to
relinquish his office sooner, continue to hold office until the expiry of three months from the date of receipt
of such notice or until a person duly appointed as his successor enters upon his office or until the expiry of
his term of office, whichever is the earliest.
(2) Notwithstanding anything contained in sub-section (1) or sub-section (2), the Central Government may, by order,
remove the Chairperson or any other Member from his office if such Chairperson or Member, as the case may
be,—
(a) is, or at any time has been, adjudged as an insolvent; or
(b) has engaged at any time, during his term of office, in any paid employment; or
(c) has been convicted of an offence which, in the opinion of the Central Government, involves moral turpitude;
or
(d) has acquired such financial or other interest as is likely to affect prejudicially his functions as a Member; or
(e) has so abused his position as to render his continuance in office prejudicial to the public interest; or
(f) has become physically or mentally incapable of acting as a Member.
(3) Notwithstanding anything contained in sub-section (2), no Member shall be removed from his office on the
ground specified in clause (d) or clause (e) of that sub-section unless the Supreme Court, on a reference being
made to it in this behalf by the Central Government, has, on an inquiry, held by it in accordance with such
procedure as may be prescribed in this behalf by the Supreme Court, reported that the Member, ought on such
ground or grounds to be removed.
HISTORICAL BACKGROUND
Raghavan Committee Report—Recommendation of
This section is based on the following recommendations of the Raghavan Committee:
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[s 11] Resignation, removal and suspension of Chairperson and other Members
6.3.6 The Chairperson and Members of the CCI may be removed from office by the Government only with the concurrence of the
Supreme Court, if he/she—
(a) has been adjudged an insolvent,
(b) has been convicted of an offence involving moral turpitude,
(c) has acquired financial or other interest, as is likely to affect prejudicially his her functions,
(d) has become physically or mentally incapable of discharging his/her functions.
Competition Act, 2002
Notes on clauses of the Bill stated thus:
Notes on clauses.—This clause, inter alia, contains provisions relating to resignation, removal and suspension of the Chairperson
and other Members. Sub-clause (1) of this clause provides for the manner of resignation of the Chairperson or any Member. Sub-
clause (2) provides that the Chairperson or a Member shall not be removed from his office except by an order made by the Central
Government on the ground of proved misbehaviour after an inquiry made by the Supreme Court in accordance with the procedure
prescribed in this behalf by it. Sub-clause (3) confers power upon the Central Government to suspend the Chairperson or a Member
in respect of whom a reference has been made to the Supreme Court. Sub-clause (4) provides for other circumstances under which
the Chairperson or any Member can be removed from office by the Central Government. [Clause 11 of the Competition Bill,
2001].
SCOPE OF THE SECTION
The chairperson or any Member of CCI may resign from his office by notice in writing.
The Central Government is the appointing authority for the Chairperson and members of the Commission. The
Government has also the power to remove any member on the grounds of insolvency, conviction involving moral
turpitude, physical or mental incapacity. “Moral turpitude”, generally speaking, means anything done contrary to justice,
honesty, modesty or good morals, and implied depravity and wickedness of character. On this, see the cases mentioned.22
A member may also be removed on grounds of acquiring financial or other interest as to affect prejudicially his functions
as a member and for abuse of his position this will need evaluation of the acquiring of the event. The removal on the two
grounds mentioned in the clauses (d) and (e) of sub-section (2) requires a reference to the Supreme Court and its findings
that the member ought to be removed. This safeguard is intended to ensure the independence of the Commission. In terms
of sub-section (3), the Supreme Court may prescribe the procedure in this behalf.
Earlier, in terms of section 7(2) of the MRTP Act, 1969, the Supreme Court laid down the procedure to be adopted on such
a reference made by the Central Government in O XXXVIII-B of the Supreme Court Rules, 1969. Under the said procedure,
the court has to give a notice to the member concerned who may file a written statement and he is entitled to cross-examine
the witnesses. The court may pass orders after hearing the member concerned and the Attorney-General of India.
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[s 11] Resignation, removal and suspension of Chairperson and other Members
21 Came into force on 19 June 2003 vide Notification No. S.O. 715(E), dated 19 June 2003.
22 Pollman’s Palace Car Co v Central Transport Co, 65 Fed 158, 161;
Chandgi Ram v Election Tribunal, AIR 1965 P&H 433 , 434 :
(1965) ILR 2 P&H 160; Prem Kumar v State of HP,
AIR 1980 HP 45 , 46 : ILR (1980) HP 265
; Baleshwar Singh v District Magistrate, AIR 1959 All 71
, 74; Mangali v Chakki Lal, AIR 1963 All 527 , 528 :
AIR 1963 All 527 ; Durga Prasad Singh v State of Punjab,
AIR 1957 P&H 97 , 98; Kuldeep Singh v State of Punjab,
AIR 1994 P&H 242 : 1994 (3) SCT 15
(P & H).
End of Document
[s 12] Restriction on employment of Chairperson and other Members in certain cases
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > CHAPTER
III COMPETITION COMMISSION OF INDIA
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
CHAPTER III COMPETITION COMMISSION OF INDIA
23[s 12] Restriction on employment of Chairperson and other Members in certain
cases
The Chairperson and other Members shall not, for a period of24 [two years] from the date on which they cease to hold
office, accept any employment in, or connected with the management or administration of, any enterprise which has been a
party to a proceeding before the Commission under this Act:
Provided that nothing contained in this section shall apply to any employment under the Central Government or a State
Government or local authority or in any statutory authority or any corporation established by or under any Central, State or
Provincial Act or a Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956).
HISTORICAL BACKGROUND
Raghavan Committee Report—Recommendation of
This section is based on the following recommendations of the Raghavan Committee:
6.3.7 In order to protect the Chairperson and Members of CCI from prosecutions and claims, full immunity needs to be given to
them when carrying out their functions. A bar may be created for the Chairperson and Members of the CCI from holding any
appointment in or being connected with the management or administration of any industry or undertaking for a period of three
years after their demitting office.
6.3.8 A code of ethics needs to be stipulated for observance by the Chairperson and the Members of the CCI on lines similar to the
one that governs the higher judiciary. The Chairperson of the CCI may be empowered to lay down an appropriate code of ethics for
this purpose.
Page 2 of 3
[s 12] Restriction on employment of Chairperson and other Members in certain cases
Competition Act, 2002
Notes on clauses of the Bill stated thus:
Notes on clauses.—This clause provides that the Chairperson or a Member shall not, for a period of one year (six months) from the
date on which they cease to hold office, accept any employment in or connected with the management or administration of any
enterprise which has been a party to a proceeding before the Commission. However, such a restriction of employment shall not
apply in case of any employment under the Central Government or a State Government or a local authority or a statutory authority
or corporation established by a Central, State or Provincial Act, or in a Government company. [Clause 12 of the Competition Bill,
2001].
Competition (Amendment) Act, 2007
Notes on clauses.—This clause seeks to amend section 12 of the Competition Act, 2002 relating to restriction on employment of
Chairperson and other Members of the Competition Commission of India in certain cases.
Under the existing provisions contained in the said section, the Chairperson and other Members shall not, for a period of one year
from the date on which they cease to hold office, accept any employment in, or connected with the management or administration
of, any enterprise which has been a party to a proceeding before the Commission under this Act. However, this provision does not
apply to any employment under the Central Government or a State Government or local authority or in any statutory authority or
any corporation established by or under any Central, State or Provincial Act or a Government company as defined in section 617 of
the Companies Act, 1956 [Now, section 2(45) of the Companies Act, 2013]
It is proposed to amend said section so as to increase the said period of restriction on employment of Chairperson and other
Members of the Competition Commission of India from one year to two years. [Clause 9 of the Competition (Amendment) Bill,
2007].
SCOPE OF THE SECTION
The Chairperson and Members of the CCI are prohibited to accept any employment for two years from the date they cease
to hold office in any enterprise which has been a part to the proceedings before the Commission. The prohibition does not
extend to employment under the Central or State Government or any local or statutory authority or a Government
Company.
A similar provision was contained in section 6(8) of the MRTP Act, 1969. It, however, provided for prohibition to hold
employment for five years from the date of ceasing to hold office of chairman or member. Further, under the MRTP Act,
1969, the exemption provided in the proviso to section 12 of the Competition Act, 2002 was not available.
Page 3 of 3
[s 12] Restriction on employment of Chairperson and other Members in certain cases
23 Came into force on 19 June 2003 vide Notification No. S.O. 715(E), dated 19 June 2003.
24 Substituted by Act 39 of 2007, section 9, for “one year” (w.e.f. 12 October 2007).
End of Document
[s 13] Administrative powers of Chairperson
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S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > CHAPTER
III COMPETITION COMMISSION OF INDIA
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
CHAPTER III COMPETITION COMMISSION OF INDIA
25[s 13] Administrative powers of Chairperson
The Chairperson shall have the powers of general superintendence, direction and control in respect of all administrative
matters of the Commission:
Provided that the Chairperson may delegate such of his powers relating to administrative matters of the Commission, as he
may think fit, to any other Member or officer of the Commission.]
LEGISLATIVE BACKGROUND
Competition Act, 2002
Notes on clauses of the Bill stated, thus:
Notes on clauses.—This clause empowers the Chairperson to have general superintendence, direction and control in respect of all
administrative matters of the Commission. [Clause 13 of the Competition Bill, 2001]. This section came into force w.e.f. 19 June
2003 vide Notification No. S.O. 715(E), dated 19 June 2003.
Competition (Amendment) Act, 2007
Notes on clauses.—This clause seeks to substitute section 13 of the Competition Act, 2002 relating to financial and administrative
powers of Member Administration.
Page 2 of 2
[s 13] Administrative powers of Chairperson
Under the existing provisions contained in the said section, the Central Government is to designate any Member as Member
Administration who shall exercise such financial and administrative powers as are vested in him under the rules.
It is proposed to substitute the said section 13 by a new section to provide that the Chairperson shall have the powers of general
superintendence, direction and control in respect of all administrative matters of the Commission. However, the Chairperson may
delegate such of his powers relating to administrative matters of the Commission, as he may think fit to any other Member or
officer of the Commission. [Clause 10 of the Competition (Amendment) Bill, 2007].
SCOPE OF THE SECTION
It is provided in this section that the Chairman shall exercise financial and Administrative powers. He may delegate
administrative powers to any other Member or Office of the Commission.
25 Substituted by Act 39 of 2007, section 10 (w.e.f. 20 May 2009). Prior to its substitution it
stood as under:
[s 13] Financial and administrative powers of Member Administration
The Central Government shall designate any Member as Member Administration who shall exercise such
financial and administrative powers as may be vested in him under the rules made by the Central Government:
Provided that the Member Administration shall have authority to delegate such of his financial and
administrative powers as he may think fit to any other officer of the Commission subject to the condition that such officer shall,
while exercising such delegated powers continue to act under the direction, superintendence and control of the Member
Administration.
End of Document
[s 14] Salary and allowances and other terms and conditions of service of Chairperson
and other Members
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SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > CHAPTER
III COMPETITION COMMISSION OF INDIA
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
CHAPTER III COMPETITION COMMISSION OF INDIA
26[s
14] Salary and allowances and other terms and conditions of service of
Chairperson and other Members
(1) The salary, and the other terms and conditions of service of the Chairperson and other Members including
travelling expenses, house rent allowance and conveyance facilities sumptuary allowance and medical facilities
shall be such as may be prescribed.
(2) The salary, allowances and other terms and conditions of service of the Chairperson or a Member shall not be
varied to his disadvantage after appointment.
LEGISLATIVE BACKGROUND
Competition Act, 2002
Notes on clauses of the Bill, stated, thus:
Notes on clauses.—This clause deals with the salary and allowances and other terms and conditions of service of the Chairperson
and other Members of the Commission. The salary of the Chairperson shall be equal to that of a Judge of the Supreme Court and
the salary of a Member shall be equal to that of a Judge of a High Court. The salary and allowances and other terms and conditions
of service of the Chairperson and other Members shall not be varied to their disadvantage after their appointment. [Clause 14 of the
Competition Bill, 2001].
Financial Memorandum.—Sub-clause (1) of clause 14 of the Bill provides that the Chairperson shall be entitled to a salary
equal to the salary of a Judge of the Supreme Court. Sub-clause (2) provides that a Member shall be paid salary equal to
that of a Judge of a High Court. Sub-clause (3) provides that the other conditions of service relating to travelling expenses,
provision of house rent allowance and conveyance facilities, sumptuary allowance and medical facilities shall be such as
may be specified by rules made by the Central Government. [Competition Bill, 2001]
Page 2 of 2
[s 14] Salary and allowances and other terms and conditions of service of Chairperson and other Members
SCOPE OF THE SECTION
The salary and other terms and conditions of service of the Chairperson and Members of CCI shall by prescribed by the
Central Government. Under section 51, the salaries and allowances payable to the Chairperson and Members shall be paid
out of the Competition Fund and not out of the Consolidated Fund of India as was provided in section 9 of the MRTP Act,
1969.
In exercise of the powers conferred by clause (d) of sub-section (2) of section 63 read with sub-section (1) of section 14, of
the Competition Act, 2002, the Central Government framed the Competition Commission of India (Salary, Allowances and
other Terms and Conditions of Service of Chairperson and other Members) Rules, 2003.27
26 Came into force on 31 March 2003 vide Notification No. S.O. 340(E), dated 31 March
2003.
27 Competition Commission of India (Salary, Allowances and other
Terms and Conditions of Service of Chairperson and other Members) Rules, 2003. Available at:
http://www.cci.gov.in/sites/default/files/rules_pdf/R7.pdf (last accessed in February 2019).
End of Document
[s 15] Vacancy, etc., not to invalidate proceedings of Commission
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > CHAPTER
III COMPETITION COMMISSION OF INDIA
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
CHAPTER III COMPETITION COMMISSION OF INDIA
28[s 15] Vacancy, etc., not to invalidate proceedings of Commission
No act or proceeding of the Commission shall be invalid merely by reason of—
(a) any vacancy in, or any defect in the constitution of, the Commission; or
(b) any defect in the appointment of a person acting as a Chairperson or as a Member; or
(c) any irregularity in the procedure of the Commission not affecting the merits of the case.
LEGISLATIVE BACKGROUND
Competition Act, 2002
Notes on clauses of the Bill stated, thus:
Notes on clauses.—This clause provides that any act or proceeding of the Commission shall not be invalidated merely on the
ground of existence of any vacancy in or any defect in the constitution of the Commission or defect in any appointment or any
irregularity in the procedure of the Commission not affecting the merits of the case. [Clause 15 of the Competition Bill, 2001].
SCOPE OF THE SECTION
This section seeks to protect the acts and proceedings before CCI due to any vacancy or defect in its constitution.
Sub-section (4) of section 6 of the MRTP Act, 1969 provided that the MRTP Commission can function even when there
may be any vacancy among its members or any defect in its constitution. In a number of orders passed by the MRTP
Commission during 1975 to 1977 and in 1990, the Commission invoked this provision along with section 16(2) of the
MRTP Act, 1969 to justify its competence to pass orders when there was no Chairman or when there was only one
member. The MRTP Commission’s view was upheld by the Calcutta High Court Re Allied Distributors Pvt Ltd29 This
Page 2 of 2
[s 15] Vacancy, etc., not to invalidate proceedings of Commission
matter also came up for observations by the Supreme Court in the case of Mahindra & Mahindra Ltd v MRTP
Commission.30 By way of obiter dicta, it was observed:
It is obvious from these two sub-sections (1) and (2) of section 5 that the Legislature clearly contemplated that the Commission
must have a Chairman who would provide the judicial element, and there must be at least two members who would provide
expertise in subjects like economics, law, commerce, accountancy, industry, public affairs or administration, so that there could be
a really high-powered expert Commission competent and adequate to deal with the various problems which come before it. It
appears that the Central Government paid scant attention to this legislative requirement and though the office of the Chairman fell
vacant as far back as 9 August 1976, it failed to make appointment of the Chairman until 24 February 1978....the Commission
continued with only one member for a period of about 18 months. This was a most unfortunate state of affairs, for it betrayed total
lack of concern for the proper constitution and functioning of the Commission and complete neglect of its statutory obligation by
the Central Government. We fail to see any reason why the Central Government could not make the necessary appointments and
properly constitute the Commission in accordance with the requirements of the Act.
The issue, however, remained undecided at the Supreme Court level as to whether the Commission will be competent to
discharge its statutory functions only when it consists of a Chairman and at least two members. However, by the MRTP
(Amendment) Act, 1984, it was clarified that when casual vacancy occurs in the Office of Chairman or when the Chairman
is not able to discharge his functions, the senior-most member may act for the Chairman.
28 Came into force on 19 June 2003 vide Notification No. S.O. 715(E), dated 19 June 2003.
29 Re Allied Distributors Pvt Ltd,
1975 (2) Cal LJ 401 .
30 Mahindra & Mahindra Ltd v MRTP Commission,
AIR 1979 SC 798 : (1979) 49 Comp Cases 419 (SC) : 1979 2 SCC 529 :
1979 2 SCR 1038 : 1979 Tax LR 2064
.
End of Document
[s 16] Appointment of Director-General, etc.
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > CHAPTER
III COMPETITION COMMISSION OF INDIA
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
CHAPTER III COMPETITION COMMISSION OF INDIA
[s 16] Appointment of Director-General, etc.
31[(1) The Central Government may, by notification, appoint a Director-General for the purposes of assisting the
Commission in conducting inquiry into contravention of any of the provisions of this Act and for performing
such other functions as are, or may be, provided by or under this Act.
(1A) The number of other Additional, Joint, Deputy or Assistant Directors General or such officers or other employees
in the office of Director-General and the manner of appointment of such Additional, Joint, Deputy or Assistant
Directors-General or such officers or other employees shall be such as may be prescribed].
(2) Every Additional, Joint, Deputy and Assistant Directors-General or 32[such officers or other employees,] shall
exercise his powers, and discharge his functions, subject to the general control, supervision and direction of the
Director-General.
(3) The salary, allowances and other terms and conditions of service of the Director-General and Additional, Joint,
Deputy and Assistant Directors-General or 33[such officers or other employees,] shall be such as may be
prescribed.
(4) The Director-General, and Additional, Joint, Deputy and Assistant Directors-General or 34[such officers or other
employees,] shall be appointed from amongst persons of integrity and outstanding ability and who have
experience in investigation, and knowledge of accountancy, management, business, public administration,
international trade, law or economics and such other qualifications as may be prescribed.
HISTORICAL BACKGROUND
Provisions under the Monopolies and Restrictive Trade Practices Act, 1969
Section 8 of the MRTP Act, 1969, since repealed, provided for the appointment of Director-General, etc. and staff of the
Commission as under:
S. 8 Appointment of Director-General, etc., and staff of the Commission.—(1) The Central Government may, by notification,
appoint a Director-General of Investigation and Registration, and as many Additional, Joint, Deputy or Assistant Directors-General
of Investigation and Registration, as it may think fit, for making investigation for the purposes of this Act and for maintaining a
Register of agreements subject to registration under this Act and for performing such other functions as are, or may be provided by,
or under this Act.
Page 2 of 8
[s 16] Appointment of Director-General, etc.
(2) The Director-General may, by written order, authorise one of the Additional, Joint, Deputy or Assistant-Directors General to
function as the Registrar of agreements subject to registration under this Act.
(3) Every person authorised to function as the Registrar of agreements and every Additional, Joint, Deputy or Assistant Director-
General shall exercise his powers, and discharge his functions, subject to the general control, supervision and direction of the
Director-General.
(4) The Central Government may provide the staff of the Commission and may, in addition, make provisions for the conditions of
service of the Director-General, Additional, Joint, Deputy or Assistant Director-General and of the member of the staff of the
Commission.
(5) The conditions of service of the Director-General or any Additional, Joint, Deputy or Assistant Director-General or of any
member of the staff of the Commission shall not be varied to his disadvantage after his appointment.
Raghavan Committee Report—Recommendations of
The provisions of this section are based on the following recommendations of the Raghavan Committee:
6.1.8 Investigation, Prosecution, Adjudication, Mergers Commission and Competition Advocacy
(A) Investigation and Prosecution.—Prosecutorial wing should be separated from the investigative wing. At the apex level of the
investigative and prosecutorial wings, there may be only one official who may be designated as Director General (Investigation &
Prosecution). The Director General will not have suo moto powers of investigation. He will only look into the complaints received
by the Competition Commission of India. But the two wings under this functionary’ should be independent so that each wing is not
burdened with the functions and responsibilities of the other wing. For instance, investigators should be solely responsible for
making enquiries, for examining documents, for making investigations into complaints and for effecting interface with other
investigative agencies of the Government including Ministries and Departments. The investigators should not be burdened with
prosecuting the cases in the CCI after investigation, which means attending the Tribunal’s hearings, constructing pleadings,
counter pleadings etc. and advancing arguments before the Benches of the CCI. Likewise, the prosecuting agency should be solely
responsible for conducting prosecutions in the CCI, which implies court work and attending the Tribunal’s hearings.
6.1.9 The investigation staff need to be chosen from among those, who have expertise in investigation and who have deductive and
exploratory skills and are known for their integrity and objectivity. They should not be drawn routinely from those working in the
Department of Company Affairs. The prosecutorial wing, similarly, should comprise of advocates, chartered accountants, cost
accountants and company secretaries who are well experienced in Competition Law matters and International Trade and who are
known for their integrity and objectivity. The prosecutorial wing need not be a permanent staff based unit but should consist of a
panel of prosecutors drawn as mentioned above. As and when cases come up for prosecution, the prosecutors may be assigned
briefs. The Director General (Investigation and Prosecution), by virtue of his unified command, can very well co-ordinate the
functioning of the two wings.
6.2.0 Depending on the load, the committee recommends that the Government should create Deputy Director Generals in all the
cities where Benches of CCI are situated. They will investigate the cases referred to them from the regional Benches and submit
their findings to the regional Benches direct without necessarily routing it through Director General at Headquarters.
Page 3 of 8
[s 16] Appointment of Director-General, etc.
6.2.1 It is desirable to prepare guidance manuals spelling out the nature, scope and manner of investigation. By and large, these
manuals should be followed by the investigation staff and any departure therefrom, must have the prior approval of the Director
General (Investigation and Prosecution). This is to ensure that there are no “fishing and rowing” enquiries designed to threaten and
harass corporates. The Committee recommends that every company through its Board of Directors should nominate a “Compliance
Officer” who should be responsible for ensuring compliance with the requirements of Competition Law. He/she will face the
consequences for its breach, if any. The Whole-time Directors including the Managing Director/Chief Executive Officer will also
be responsible for breach of Competition Law. Directors-simplicitors or part-time Directors should not ordinarily be prosecuted,
unless their liability is clearly established on record.
Competition Act, 2002
Notes on clauses of the Bill stated thus:
Notes on clauses.—This clause provides for the appointment of Director General, Additional, Joint, Deputy and Assistant Directors
General for the purpose of assisting the Commission in conducting inquiry into the contravention of the provisions of the proposed
legislation, for conduct of cases before the Commission and performing such other functions as are or may be provided by or under
the proposed legislation. It also empowers the Central Government to specify, by rules, their qualifications, the salary and
allowances payable to them and the other conditions of their service. [Clause 16 of the Competition Bill, 2001].
This section came into force w.e.f. 31 March 2003 vide Notification No. S.O. 340(E), dated 31 March 2003.
Financial Memorandum.—Clause 16 of the Bill provides for appointment of a Director General and as many Additional, Joint,
Deputy or Assistant Director Generals as the Central Government may think fit for assisting the Commission in conducting inquiry
into contravention of the provisions of the proposed legislation and for performing such other functions as may be provided by or
under the proposed legislation. Sub-clause (3) provides that the salary, allowances and other conditions of service of the Director
General, Additional, Joint, Deputy or Assistant Director Generals shall be such as may be prescribed by the Central Government.
[Competition Bill, 2001].
Competition (Amendment) Act, 2007
Notes on clauses.—This clause seeks to amend section 16 of the Competition Act, 2002 relating to appointment of Director
General, etc.
Under the existing provisions contained in the said section, the Central Government can appoint a Director General and as many
Additional, Joint, Deputy or Assistant Director General or such other advisers, consultants or officers, as it may think fit, for the
purposes of assisting the Commission in conducting inquiry into contravention of any of the provisions of the Act and for the
conduct of cases before the Commission and for performing such other functions as are, or may be, provided by or under the Act.
It is proposed to amend the said section so as to, inter alia, omit the “advisers” and “consultants” from the scope of section 16 and
Page 4 of 8
[s 16] Appointment of Director-General, etc.
therefore the Central Government would not appoint “advisers” and “consultants” in the Competition Commission of India. The
power to engage the “advisers”, and “consultants” is proposed to be conferred upon the Competition Commission of India. [Clause
11 of the Competition (Amendment) Bill, 2007].
SCOPE OF THE SECTION
The Director General appointed under section 16(1) of the Competition Act, 2002 was a specialised investigating wing of
the Commission.35 It was the duty of the Director General to assist the Commission to fulfill its obligation under section
18 of the Act. The Central Government had been empowered to appoint a Director General and as many Additional, Joint,
Deputy and Assistant Director Generals or other advisers, consultants, officers as may be necessary for the purpose. The
qualification, experience, salary allowances, etc., shall be prescribed by the Central Government.
The Director General was the senior-most functionary under the Commission for conducting inquiry into contravention of
any of the provisions of this Competition Act, 2002 and for performing such other functions. He did not have any suo moto
powers of investigation. The Director General (DG) appointed under section 16(1) of the Act was a specialised
investigating wing of the Commission.36 It was the duty of the Director General to assist the Commission to fulfill its
obligation under section 18 of the Act. It was not for the Commission to sit in judgment over the findings of the DG. If the
DG has not carried out proper investigation, the Commission can direct the DG to investigate the case on the issues to be
directed by the DG. It can inquire itself also. This was the scheme under section 26(7) of the Act.37
Appointment refused.—
Petitioner applied to CCI for appointment under OBC/SC category but was refused appointment. Consequently, he filed a
writ petition impugning CCI’s selection procedure and sought relief of appointment. The Delhi High Court noted that the
selection criteria evolved by CCI for the appointment had been uniformly applied to all concerned being 65% aggregate
marks in written test of 80 marks and interview of 20 marks. The Court further noted that the Petitioner failed to meet the
same requirement criteria and it is not that the petitioner was not considered. Petitioner was considered and he was found
to be not making the minimum standard, therefore it was held that he could not seek a mandamus for such appointment.38
Shortlisting of candidate permissible.—
Non-selection of a candidate for the post of Deputy Director (Law) was challenged in a writ petition on the ground that
fixation of benchmark amounted to changing the selection procedure mid-way and therefore it was illegal. The Court held
that the decision taken on the basis of fixed benchmarks amounting to short listing of candidates for purpose of
selection/appointment is always permissible. Short listing done by fixing benchmark to recruit the best candidate on
rational and reasonable basis, was held to be permissible under law.39 Yogesh v UOI.40
Competition Commission of India (Director General) Recruitment Rules, 2009
Section 16 of the Competition Act, 2002 envisages appointment of a Director General for the purpose of assisting the
Commission in conducting inquiry into contravention of the provisions of the Act. In exercise of the powers conferred by
clause (f) of sub-section (2) of section 63 read with sub-section (4) of section 16 of the Competition Act, 2002 (12 of 2003),
the Central Government framed the Competition Commission of India (Director General) Recruitment Rules, 2009.41
Rule 2 Number of posts, classification and pay band with grade pay or pay scale.— The number of posts, their classification and
the pay band with grade pay or pay scale attached thereto shall be as specified in columns (2) to (4) of the Schedule, annexed to
rules.42
Page 5 of 8
[s 16] Appointment of Director-General, etc.
Rule 3 Method of recruitment, eligibility, etc.—The method of recruitment, eligibility and other matters relating thereto shall be as
specified in columns (5) to (14) of the said Schedule.
Rule 4 Disqualification.—No person,—
(a) who has entered into or contracted a marriage with a person having a spouse living, or
(b) who, having a spouse living, has entered into or contracted a marriage with any person shall be eligible for appointment to the
said post:
Provided that the Central Government may, if satisfied that such marriage is permissible under the personal law applicable to such
person and the other party to the marriage and that there are other grounds for so doing, exempt any person from the operation of
this rule.
Rule 5 Power to relax.—Where the Central Government is of the opinion that it is necessary or expedient so to do, it may, by order
and for reasons to be recorded in writing, relax any of the provisions of these rules with respect to any class or category of persons.
In exercise of the powers conferred by clauses (da), (e) and (f) of sub-section (2) of section 63 read with sub-sections (1A), (3) and
(4) of section 16 of the Competition Act, 2002, the Central Government framed the Competition Commission of India (Number of
Additional, Joint, Deputy or Assistant Director-General other officers and employees, their manner of appointment, qualification,
salary, allowances and other terms and conditions of service) Rules, 2009.43
Rule 3 Salary and allowances of the Director-General, Additional, Joint, Deputy or Assistant Director-General and officers and
other employees of the office of Director-General and their number.—The salary and allowances of the Director General,
Additional, Joint, Deputy or Assistant Director-General and officers and other employees of the office of Director-General and the
number of Additional, Joint, Deputy or Assistant Director-General and officers and other employees of the office of Director-
General shall be as specified in Schedule-I.
Rule 4 Conditions of service.—(1) The conditions of service of the Director-General, Additional, Joint, Deputy or Assistant
Director-General and officers and other employees of the office of Director-General and any other category of employees in the
matter of leave, joining time, joining time pay, age of superannuation, traveling allowance and leave travel concession shall be
regulated in accordance with such rules and regulations as are, from time to time, applicable to officers and employees of the
Central Government drawing similar pay scales.
(2) The Director General, Additional, Joint, Deputy or Assistant Director General and officers and other employees of the office of
Director General shall be eligible for general pool accommodation till a separate office and residential complex for the
Commission is constructed.
(3) The Director General, Additional, Joint, Deputy or Assistant Director General and officers and other employees of the office of
Director General on deputation, who are Government employees and have been allotted residential accommodation under General
Pool shall be eligible to retain the facility of Government residential accommodation.
(4) The Director General, Additional, Joint, Deputy or Assistant Director General and officers and other employees of the office of
Director General not allotted accommodation shall be eligible for House Rent Allowance as admissible to officers and employees
of the Central Government drawing similar pay scales.
Page 6 of 8
[s 16] Appointment of Director-General, etc.
(5) The Director-General, Additional, Joint, Deputy or Assistant Director General and officers and other employees of the office of
Director-General including those on deputation while in service with the Commission shall be entitled to medical facilities as
specified in Schedule II.
(6) (i) The Director-General, Additional, Joint, Deputy or Assistant Director General and officers and other employees of the office
of Director General appointed on deputation, shall continue to be governed by Provident Fund Schemes as are applicable to them
in their parent Ministry or Department or organisation.
(ii) The Commission shall recover contribution towards provident fund from such Director-General, Additional, Joint, Deputy or
Assistant Director-General and officers and other employees of the office of Director General and remit the amount immediately to
the lending Ministry or Department or organisation.
(iii) Any loss of interest on account of late remittance shall be borne by the Commission.
(7) The Director-General, Additional, Joint, Deputy or Assistant Director General and officers and other employees of the office of
Director-General other than those on deputation shall be entitled Group Insurance as per the scheme to be formulated by the
Commission in consultation with the Central Government:
Provided that in the case of the Director-General, Additional, Joint, Deputy or Assistant Director-General and officers and other
employees of the office of Director-General appointed on deputation, shall continue to be governed by the Group Insurance
Schemes as are applicable to them in their parent Ministry or Department or organisation.
(8) (i) The Commission shall recover contribution towards the insurance schemes from such Director-General, Additional, Joint,
Deputy or Assistant Director-General and officers and other employees of the office of Director General and remit the amount
immediately to the lending Ministry or Department or organisation.
(ii) Any loss of interest on account of late remittance shall be borne by the Commission.
(9) The Director-General, Additional, Joint, Deputy or Assistant Director General and officers and other employees of the office of
Director-General who are not on deputation shall be governed by the new pension scheme.
(10) The Director-General, Additional, Joint, Deputy or Assistant Director General and officers and other employees of the office
of Director-General who are on deputation shall be eligible for pension and retirement benefits, if any, as are available to them in
their parent organisation.
Rule 5 Official visits abroad.—Official visits abroad by Director-General, Additional, Joint, Deputy or Assistant Director-General
and officers and other employees of the office of Director General shall be undertaken with the prior approval of the Chairperson
or any other Member or officer of the Commission authorised by the Chairperson.
(2) Foreign visits of Additional Secretary and above level officers will be regulated as per guidelines or instructions issued by
Central Government from time to time.
(3) Per Diem and other allowances will be admissible as per Ministry of External Affair’s existing instructions.
Page 7 of 8
[s 16] Appointment of Director-General, etc.
Rule 6 Deputation allowance.—The persons selected on deputation basis shall be given an option to either opt for the pay scale and
other service benefits of the borrowing organisation or to retain their own pay scales and get deputation allowance, as per the
existing instructions of the Government of India on the subject.
Rule 7 Procedure for recruitment.—The recruitment of Additional, Joint, Deputy or Assistant Director-General and officers and
other employees of the office of Director-General shall be made by the Central Government in the manner as specified in schedule-
III.
Rule 8 Qualification.—The person to be appointed as Director-General, Additional, Joint, Deputy or Assistant Director-General
and officers and other employees should be a person of integrity and outstanding ability and who have experience in investigation,
and knowledge of accountancy, management, business, public administration, international trade, law or economics.
Rule 9 Residuary provision.—Matters relating to the terms and conditions of service of the Director-General, Additional, Joint,
Deputy or Assistant Director-General and officers and other employees of the office of Director-General with respect to which no
express provision has been made in these rules, shall be referred by the Commission to the Central Government for its decision.
Rule 10 Powers to relax.—The Central Government shall have power to relax the provisions of any of these rules in respect of any
class or category of persons.
31 Substituted by Act 39 of 2007, section 11 (w.e.f. 12 October 2007). Prior to its
substitution, it stood as under:
(1) The Central Government may, by notification, appoint a Director General and as many Additional, Joint, Deputy or Assistant
Directors General, or such other advisers, consultants or officers, as it may think fit, for the purposes of assisting the
Commission in conducting inquiry into contravention of any of the provisions of this Act and for the conduct of cases before
the Commission and for performing such other functions as are, or may be, provided by or under this Act.
32 Substituted by Act 39 of 2007, section 11, for the words “such other advisers, consultants
and officers”, (w.e.f. 12 October 2007).
33 Substituted by Act 39 of 2007, section 11, for the words “such other advisers, consultants
or officers”, (w.e.f. 12 October 2007).
34 Substituted by Act 39 of 2007, section 11, for the words “such other advisers, consultants
or officers”, (w.e.f. 12 October 2007).
35 CCI v Steel Authority of India Ltd,
(2010) 10 SCC 744 .
Page 8 of 8
[s 16] Appointment of Director-General, etc.
36 CCI v Steel Authority of India Ltd,
(2010) 10 SCC 744 : [2010] 11 SCR 112
: [2010] 103 SCL 269 (SC) : (2011) 2 Mad LJ 271 (SC) :
2010(5) ALL MR(SC) 934 : 2010 Comp LR 61(SC) : (2010) 4 Comp LJ 1
(SC) : JT 2010 (10) SC 26 :
2010 (9) Scale 291 : 2010 (8) UJ 4093
.
37 Neeraj Malhotra, Advocate v Deustche Post Bank Home Finance Ltd
(Deustche Bank), [2011] 102 CLA 181 (CCI) :
[2011] 106 SCL 108 (CCI).
38 Yogesh Yadav v UOI, [2011]
108 SCL 12 (Del).
39 Yogesh Yadav v UOI, AIR 2013
SC 3372 : [2013] 122 SCL 91
.
40 Yogesh Yadav v UOI, AIR 2013
SC 3372 : [2013] 122 SCL 91
(SC).
41 Available at:
http://www.cci.gov.in/sites/default/files/rules_pdf/R13.pdf (last accessed in February 2019).
42 Id.
43 Available at:
http://www.cci.gov.in/sites/default/files/rules_pdf/R11.pdf (last accessed in February 2019).
End of Document
[s 17] Appointment of Secretary, experts, professionals and officers and other
employees of Commission
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > CHAPTER
III COMPETITION COMMISSION OF INDIA
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
CHAPTER III COMPETITION COMMISSION OF INDIA
44[s
17] Appointment of Secretary, experts, professionals and officers and other
employees of Commission
(1) The Commission may appoint a Secretary and such officers and other employees as it considers necessary for the
efficient performance of its functions under this Act.
(2) The salaries and allowances payable to and other terms and conditions of service of the Secretary and officers and
other employees of the Commission and the number of such officers and other employees shall be such as may be
prescribed.
(3) The Commission may engage, in accordance with the procedure specified by regulations, such number of experts
and professionals of integrity and outstanding ability, who have special knowledge of, and experience in
economics, law, business or such other disciplines related to competition, as it deems necessary to assist the
Commission in the discharge of its functions under this Act]
LEGISLATIVE BACKGROUND
Competition Act, 2002
Notes on clauses of the Bill stated, thus:
Notes on clauses.—This clause empowers the Commission to appoint Registrar and other officers and employees necessary for the
efficient performance of its functions under the proposed legislation. The salary and allowances payable to such officers and
employees and other terms and conditions of their service shall be determined by rules made by the Central Government. [Clause
17 of the Competition Bill, 2001].
Financial Memorandum.—Sub-clause (1) of clause 17 of the Bill enables the Commission to appoint a Registrar and such officers
and employees of the Commission as it considers necessary for the efficient performance of its functions under the proposed
legislation. Sub-clause (2) provides that the salary and allowances payable and other terms and conditions of service of the
Registrar, other officers and employees of the Commission shall be such as may be prescribed by the Central Government.
[Competition Bill, 2001].
Page 2 of 7
[s 17] Appointment of Secretary, experts, professionals and officers and other employees of Commission
Competition (Amendment) Act, 2007
Notes on clauses.—This clause seeks to substitute section 17 of the Competition Act, 2002 relating to Registrar and officers and
other employees of the Competition Commission of India by a new section.
Under the existing provisions contained in the said section, the Commission may appoint a Registrar and such officers and other
employees as it considers necessary for the efficient performance of its functions under this Act.
It is proposed to substitute said section so as to confer power upon the Commission to appoint a Secretary instead of Registrar in
addition to officers and other employees in the discharge of its function under the said Act and also proposed to confer power on
the Commission to engage such experts and professionals of integrity and outstanding ability who have special knowledge of, and
experience in, economics, law, business or such other disciplines related to competition, as it deems necessary to assist the
Commission. [Clause 12 of the Competition (Amendment) Bill, 2007].
SCOPE OF THE SECTION
The Commission was originally empowered to appoint a Registrar and other employees of the Commission and the
salaries and allowances payable to them shall be prescribed by the rules made by the Central Government. As per change
made by the Amendment Act, 2007, in place of Registrar, Commission is now empowered to appoint a secretary. This will
serve as a Registry of the Commission.
Engagement of experts and professionals under sub-section (3)
The Commission may engage to services of experts and professionals to assist the Commission in the discharge of its
functions.
In exercise of the powers conferred by clause (d) sub-section (2) of section 64, read with sub-section (3) of section 17 of
the Competition Act, 2002, the Competition Commission of India framed the Competition Commission of India (Procedure
for Engagement of Experts and Professionals) Regulations, 2009.45
Rule 2(e) – “expert or professional including research associates” for the purpose of these regulations means a person of integrity
and outstanding ability having special knowledge of, and experience in, economics, law, business or such other discipline related to
competition as the Commission deems necessary to assist it in discharge of its functions under the Act;
*****
Rule 3 Engagement of experts and professionals.—The Commission may engage such number of experts and professionals in the
fields of economics, law, business or such other disciplines related to competition, as it may deem fit.
Page 3 of 7
[s 17] Appointment of Secretary, experts, professionals and officers and other employees of Commission
Rule 4 Functions of experts and professionals.—The experts and professionals engaged by the Commission shall discharge such
functions as directed by the Chairperson, in assisting the Commission.
Rule 5 Qualifications, experience and classification of experts and professionals.— (1) The experts and professionals to be
engaged shall be classified on the basis of their qualifications and experience in the respective fields of specialisation and/or the
eminence in their professions as given in Schedule I:
Provided that the Commission may also engage experts and professionals from any other discipline as deemed necessary to assist
the Commission in the discharge of its functions under the Act.
(2) Subject to sub-regulation (1) and depending upon the qualification, specialisation and experience in respective disciplines, the
experts shall be categorised into five levels as given in Schedule II.
Rule 6 Remuneration payable to experts and professionals.—The remuneration to be paid by the Commission to different
categories of experts and professionals shall be in accordance with Schedule III:
Provided that as and when the remuneration to be paid by the Commission to different categories of experts and professionals
including research associates is increased by an amount through amendment in Schedule III, the remuneration of existing experts
and professionals including research associates shall also be increased by such amount (amount of increase in remuneration
category-wise). Remuneration of existing experts and professionals including research associates shall mean the lump sum monthly
remuneration received by such existing experts and professionals including research associates [including increment(s) upon
renewal of contract(s), if any:
Provided further that the Commission may, for reasons to be recorded in writing, agree to pay higher remuneration than those
given in Schedule III, in specially deserving cases.
Rule 7 Evaluation of performance.—The performance of each expert and professional engaged under these regulations, with
reference to the tasks assigned and output delivered, shall be reviewed periodically, within such time and manner, as may be
specified by the Commission.
Rule 8 Procedure of selection of experts and professionals.—(1) The “experts or professionals including research associates” shall
ordinarily be engaged by the Commission on contractual basis for not less than one year and not more than three years.
(2) The Commission may decide, from time to time, the number of the experts and professionals to be engaged.
(3) After the number of the experts and professionals to be engaged is decided, as mentioned in sub-regulation (2), the Secretary
shall publish the number of the experts and professionals to be engaged with details of qualifications, experience needed and the
remuneration payable on the official website of the Commission and invite applications for each category and level of expert and
professional giving a stipulated last date for the receipt of the applications for each category and level:
Provided that the Secretary may also invite the applications by suitable public notice, for each category and level of expert and
professional.
Page 4 of 7
[s 17] Appointment of Secretary, experts, professionals and officers and other employees of Commission
(4) The Commission shall constitute a selection board for each category of expert and professional. The Commission may invite
eminent experts having special knowledge and experience in the relevant field to join the selection boards.
(5) The Secretary shall scrutinise the applications in accordance with these regulations and prepare lists of eligible candidates for
each category to be called for interview and submit a report to the Commission.
(6) The selection boards mentioned in sub-regulation (4) shall be convened with the approval of the Chairperson for each category
and the Secretary shall notify the date and the venue of the interview to the short listed eligible candidates sufficiently in advance.
(7) The recommendations of each selection board regarding engagement for each category shall be placed by the Secretary before
the Commission for decision.
(8) On approval of the engagements by the Commission as mentioned in sub-regulation (7), the Secretary shall inform each
candidate in writing by an offer letter of engagement giving not less than ten days time to accept the offer of engagement.
(9) After receipt of acceptance from the selected candidates as per sub-regulation (8), the Secretary shall issue letter of engagement
to each candidate giving not less than thirty days time to join:
Provided that the joining time may be extended by the Secretary on being satisfied that extension is sought on circumstances
beyond the control of the individual candidate.
(10) The Secretary shall inform the number of selected candidates who have joined in the next meeting of the Commission and
obtain approval of the Commission to restart the process of selection to fill up the shortfalls, if any, in the total number of experts
and professionals decided to be engaged as per sub-regulation (2).
Rule 9 Terms and condition of engagement of experts and professionals.—(1) The expert and professionals on having accepted the
offer of engagement, shall enter into a contract, also having the confidentiality clause, with the Secretary, acting on behalf of the
Commission, detailing the terms and conditions of engagement, before being assigned any work.
(2) The terms and conditions of engagement may be modified, in a specific case, where the Commission deems it necessary.
(3) Without prejudice and in addition to the legal remedies available to the Commission, the breach of agreement executed under
sub-regulation (1) by or on behalf of any expert or professional including research associate shall be considered a sufficient ground
for termination of the engagement made under contract and may further debar such expert or professional including research
associate from future engagement by the Commission.
Rule 10 Power to relax.—The Commission may relax such restrictions imposed in these regulations as may be deemed necessary
in the discharge of its functions under the Act.
Rule 11 Removal of difficulties.—In the matter of implementation of these regulations, if any doubt or difficulty arises, the same
shall be placed before the Commission and the decision of the Commission shall be final.
In exercise of the powers conferred by clause (g) of sub-section (2) of section 63 of the Competition Act, 2002, the Central
Page 5 of 7
[s 17] Appointment of Secretary, experts, professionals and officers and other employees of Commission
Government framed the Competition Commission of India (Salary, Allowances, other terms and conditions of service of the
Secretary and officers and other employees of the Commission and the number of such officers and other employees) Rules,
2009.46
Rule 3 Salary and allowances of the Secretary and officers and other employees of the Commission and the number of such
officers and other employees.—The salary and allowances of the Secretary and officers and other employees of the Commission
and the number of such officers and other employees and their method of recruitment shall be as specified in Schedule-I.
Rule 4 Conditions of service.—(1) The conditions of service of the Secretary, officers and other employees of the Commission in
the matter of leave, joining time, joining time pay, age of superannuation, traveling allowance and leave travel concession shall be
regulated in accordance with such rules and regulations as are applicable to officers and employees of the Central Government
belonging to corresponding category and scale of pay.
(2) The Secretary, officers and employees of the Commission shall be eligible for general pool accommodation till a separate office
and residential complex for the Commission is constructed.
(3) The Secretary, officers and employees of the Commission including those on deputation, who are Government employees and
have been allotted residential accommodation under General Pool shall be eligible to retain the facility of Government residential
accommodation.
(4) The Secretary, officers and employees of the Commission not allotted accommodation shall be eligible for House Rent
Allowance as admissible to officers and employees of the Central Government drawing similar pay scales.
(5) The Secretary, officers and employees of the Commission including those on deputation while in service with the Commission
shall be entitled to medical facilities as specified in Schedule-II.
(6) (i) The Secretary, officers and employees of the Commission appointed on deputation, shall continue to be governed lay
Provident Fund Schemes as are applicable to them in their parent Ministry or Department or organisation.
(ii) The Commission shall recover contribution towards provident fund from such Secretary, officers and employees and remit the
amount immediately to the lending Ministry or Department or organisation.
(iii) Any loss of interest on account of late remittance shall be borne by the Commission.
(7) The Secretary, officers and employees of the Commission other than those on deputation shall be entitled Group Insurance as
per the scheme to be formulated by the Commission in consultation with the Central Government:
Provided that in the case of the Secretary, officers and employees of the Commission appointed on deputation shall continue to be
governed by the Group Insurance Schemes as are applicable to them in their parent Ministry or Department or organisation.
(8) (i) The Commission shall recover contribution towards the insurance schemes from such Secretary, officers and employees and
remit the amount immediately to the lending Ministry or Department or organisation.
(ii) Any loss of interest on account of late remittance shall be borne by the Commission.
Page 6 of 7
[s 17] Appointment of Secretary, experts, professionals and officers and other employees of Commission
(9) The Secretary, officers and employees of the Commission who are not on deputation shall be governed by the new pension
scheme.
(10) The Secretary, officers and employees of the Commission who are on deputation shall be eligible for pension and retirement
benefits, if any, as are available to them in their parent Ministry or Department or organisation.
Rule 5 Official visits abroad.—(1) Official visits abroad by Secretary, officers and other employees of the Commission shall be
undertaken with the prior approval of the Chairperson of the Commission or any other Member or officer of the Commission
authorised by the Chairperson.
(2) Instructions issued by Ministry of External Affairs and Ministry of Finance as amended from time to time shall be applicable.
Rule 6 Deputation allowance.—The persons selected on deputation basis shall be given an option to either opt for the pay scale and
other service benefits of the borrowing organisation or to retain their own pay scales and get deputation allowance, as per the
existing instructions of the Government of India on the subject.
Rule 7 Residuary provision.—Matters relating to the terms and conditions of service of the Secretary, officers and employees of the
Commission with respect to which no express provision has been made in these rules, shall be referred by the Commission to the
Central Government for its decision.
Rule 8 Powers to relax.—Where the Central Government is of the opinion that it is necessary or expedient so to do, it may, by
order and for reasons to be recorded in writing, release any of the provisions of these rules with respect to any class or category of
persons.
44 Substituted by Act 39 of 2007, section 12 (w.e.f. 12 October 2007). Prior to its
substitution, it stood as under:
[s 17]. Registrar and officers and other employees of Commission
(1) The Commission may appoint a Registrar and such officers and other employees, as it considers necessary for the efficient
performance of its functions under this Act.
(2) The salaries and allowances payable to and other terms and conditions of service of the Registrar and officers and other
employees of the Commission and the number of such officers and employees shall be such as may be prescribed.
45 Available at:
http://www.cci.gov.in/sites/default/files/regulation_pdf/engagement.pdf (last accessed in February 2019).
46 Available at:
http://www.cci.gov.in/sites/default/files/rules_pdf/R16.pdf (last accessed in February 2019).
Page 7 of 7
[s 17] Appointment of Secretary, experts, professionals and officers and other employees of Commission
End of Document
[s 18] Duties of Commission
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > CHAPTER
IV DUTIES, POWERS AND FUNCTIONS OF COMMISSION
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
CHAPTER IV DUTIES, POWERS AND FUNCTIONS OF COMMISSION
1[s 18] Duties of Commission
Subject to the provisions of this Act, it shall be the duty of the Commission to eliminate practices having adverse effect on
competition, promote and sustain competition, protect the interests of consumers, and ensure freedom of trade carried on
by other participants, in markets in India:
Provided that the Commission may, for the purpose of discharging its duties or performing its 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.
LEGISLATIVE BACKGROUND
Competition Act, 2002
Notes on clauses of the Bill stated thus:
Notes on clauses.—This clause deals with the duties of the Commission. It provides that it shall be the duty of the Commission to
eliminate practices having adverse effect on competition, to promote and sustain competition in markets in India, to protect the
interests of consumers and to ensure freedom of trade carried on by other participants in markets in India. [Clause 18 of the
Competition Bill, 2001].
SCOPE OF THE SECTION
The duty of the Commission is to eliminate the practices which have adverse effect on competition in markets in India and
Page 2 of 2
[s 18] Duties of Commission
to protect the interest of the consumers and to ensure freedom of trade. The Commission will discharge its duty by
exercising its powers and functions under Chapter IV. It is also empowered to impose penalties under Chapter VI.
International Collaboration
The Commission has been proactively engaging with various international organisations, such as, International
Competition Network (ICN), Organisation for Economic Cooperation and Development (OECD), United Nations
Conference on Trade and Development (UNCTAD) as well as other competition authorities. As per the mandate under
section 18 of the Competition Act, 2002, the Commission has entered into Memoranda of Understanding (MOU) with five
competition authorities till 2015 [Federal Trade Commission (FTC)/Department of Justice (DOJ), USA, Director General
Competition, European Union (EU), Federal Antimonopoly Service (FAS), Russia, Australian Competition and Consumer
Commission (ACCC), and Competition Bureau (CB) Canada]. During 2015/16, it processed two more MOUs – one with
Japan and the other with BRICS competition authorities.2
The Competition Commission of India (CCI) has an observer status in the Competition Committee of OECD. The CCI has
been making regular contributions at various round tables during the conferences/meetings of OECD.3
1 Came into force on 20 May 2009 vide Notification No. S.O. 1241(E), dated 15 May 2009.
2 CCI Annual Report 2015/16, available at Available at:
http://www.cci.gov.in/sites/default/files/annual%20 reports/annual%20report%202015-16.pdf, p 9 (last accessed in February 2019).
3 Id.
End of Document
[s 19] Inquiry into certain agreements and dominant position of enterprise
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > CHAPTER
IV DUTIES, POWERS AND FUNCTIONS OF COMMISSION
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
CHAPTER IV DUTIES, POWERS AND FUNCTIONS OF COMMISSION
4[s 19] Inquiry into certain agreements and dominant position of enterprise
(1) The Commission may inquire into any alleged contravention of the provisions contained in subsection (1) of
section 3 or sub-section (1) of section 4 either on its own motion or on—
(a) 5[receipt of any information, in such manner and], accompanied by such fee as may be determined by
regulations, from any person, consumer or their association or trade association; or
(b) a reference made to it by the Central Government or a State Government or a statutory authority.
(2) Without prejudice to the provisions contained in sub-section (1), the powers and functions of the Commission
shall include the powers and functions specified in sub-sections (3) to (7).
(3) The Commission shall, while determining whether an agreement has an appreciable adverse effect on
competition under section 3, have due regard to all or any of the following factors, namely:—
(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) improvements 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.
(4) The Commission shall, while inquiring whether an enterprise enjoys a dominant position or not under section 4,
have due regard to all or any of the following factors, namely:—
(a) market share of the enterprise;
(b) size and resources of the enterprise;
(c) size and importance of the competitors;
(d) economic power of the enterprise including commercial advantages over competitors;
(e) vertical integration of the enterprises or sale or service network of such enterprises;
(f) dependence of consumers on the enterprise;
(g) monopoly or dominant position whether acquired as a result of any statute or by virtue of being a
Government company or a public sector undertaking or otherwise;
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[s 19] Inquiry into certain agreements and dominant position of enterprise
(h) entry barriers including barriers such as regulatory barriers, financial risk, high capital cost of entry,
marketing entry barriers, technical entry barriers, economies of scale, high cost of substitutable goods or
service for consumers;
(i) countervailing buying power;
(j) market structure and size of market;
(k) social obligations and social costs;
(l) relative advantage, by way of the contribution to the economic development, by the enterprise enjoying a
dominant position having or likely to have appreciable adverse effect on competition;
(m) any other factor which the Commission may consider relevant for the inquiry.
(5) For determining whether a market constitutes a “relevant market” for the purposes of this Act, the Commission
shall have due regard to the “relevant geographic market” and “relevant product market”.
(6) The Commission shall, while determining the “relevant geographic market”, have due regard to all or any of the
following factors, namely:—
(a) regulatory trade barriers;
(b) local specification requirements;
(c) national procurement policies;
(d) adequate distribution facilities;
(e) transport costs;
(f) language;
(g) consumer preferences;
(h) need for secure or regular supplies or rapid after-sales services.
(7) The Commission shall, while determining the “relevant product market”, have due regard to all or any of the
following factors, namely:—
(a) physical characteristics or end-use of goods;
(b) price of goods or service;
(c) consumer preferences;
(d) exclusion of in-house production;
(e) existence of specialised producers;
(f) classification of industrial products.
LEGISLATIVE BACKGROUND
This section is based on the provisions of sections 10, 31 and 38 of MRTP Act, 1969 relating to inquiry into alleged
Monopolistic and Restrictive Trade Practices, which are prejudicial to public interest.
Competition Act, 2002
Notes on clauses of the Bill stated thus:
Notes on clauses.—This clause empowers the Commission to inquire into violation of provisions of sub-clause (1) of clause 3 or
sub-clause (1) of clause 4 of the Bill either on its own motion or on receipt of a complaint from any person, consumer or their
association or trade association or on a reference made to it by the Central Government or a State Government or a statutory
Page 3 of 26
[s 19] Inquiry into certain agreements and dominant position of enterprise
authority alleging violation of any of those provisions. This clause further lays down the factors which shall be considered by the
Commission for the purpose of determining whether an agreement has an appreciable adverse effect on competition, whether an
enterprise enjoys the dominant position, or whether a market constitutes a relevant market for the purposes of the proposed
legislation. [Clause 19 of the Competition Bill, 2001].
Competition (Amendment) Act, 2007
Notes on clauses.—This clause seeks to amend section 19 of the Competition Act, 2002 relating to inquiry into certain agreements
and dominant position of enterprise.
Under the existing provisions contained in clause (a) of sub-section (1) of said section, the Commission may inquire into any
alleged contravention of the provisions contained in sub-section (1) of section 3 or sub-section (1) of section 4 either on its own
motion or on receipt of a complaint.
It is proposed to amend said section so as to substitute “receipt of a complaint”, by the words “receipt of any information, in such
manner” to enable the Commission to inquire into any alleged contravention on receipt of any information instead of receipt of a
complaint. [Clause 13 of the Competition (Amendment) Bill, 2007].
SCOPE OF THE SECTION
This section deals with the inquiry of alleged contravention of sub-section (1) of sections 3 and 4 relating to anti-
competition agreements and abuse of dominant position before the Commission as also the factors for determining
“appreciable adverse effect on Competition” (AAEC) and “relevant market”.
Locus of the Informant
The proceedings before the Commission are inquisitorial in nature and as such, the locus of the Informant is not as relevant
in deciding whether the case filed before the Commission should be entertained or not. As long as the matter reported to
the Commission involves anti-competitive issues falling within the ambit of the Act, the Commission is mandated to
proceed with the matter. As per the scheme of the Act, it is not necessary that there must be an informant to initiate an
inquiry or investigation. The Commission is entitled to even proceed suo motu or on any reference being made by the
Central Government or State Government or any Statutory Authority. Thus, the Commission is more concerned with the
facts and allegations highlighted in the information, rather than the locus of the person who provided such information.
The Commission is more concerned with the fair functioning of the market and the motives with which the informant has
come to the Commission is subservient to that objective.6
The Commission does not adjudicate a dispute between the Informant and the opposite party against whom the case is
filed; rather, it addresses the competition issues brought to its notice and restores fair competition in the market. Such
proceedings before the Commission are not adversarial but inquisitorial. This is why section 19 does not use the words
“complaint”, “plaint” or “suit” but instead, uses the terms “information” and “reference”.7
Jurisdiction of the Commission [sub-section (1)]
Page 4 of 26
[s 19] Inquiry into certain agreements and dominant position of enterprise
Sub-section (1) of the section confers jurisdiction on the Commission to inquire into any anti-competitive agreement or
abuse of dominant position covered by section 3 or section 4. The allegations for inquiry by the Commission may emanate
from any of the following sources:
(i) receipt of any information from any person, as defined in section 2(l), any consumer, as defined in section 2(f),
any consumer’s association or any trade association;
(ii) reference by the Central or State Government or statutory authority, as defined in section 2(w);
(iii) own motion of the Commission.
The informant or complainant in case of (i) ibid is also required to deposit the prescribed fee. In other case, no fee is
payable to the Commission.
The informant or complainant may or may not be the aggrieved person. The complaint must narrate the facts. Since the
authenticity of the complaint and complainant is to be confirmed, the Commission may cause its investigation by Director
General under section 26 to satisfy itself as to whether or not the complaint requires to be enquired into.
In the absence of any definition of consumers’ or trade association, the complaint may be made by any registered or
unregistered association having membership. An association is normally understood to mean a body which brings together
people with a common interest or purpose.
In VOICE v Delhi Bottling Co Pvt Ltd,8 the MRTPC held that a complainant, whether, individual consumer or a registered
consumer association or a trade association, who files a complaint under section 10(a)(i) or section 36B(a) of the MRTP
Act, 1969 is entitled to pursue the complaint, fully participate in the proceedings by way of producing evidence, cross-
examining the witnesses of respondent, administering interrogatories and making application for discovery of documents,
etc. The Director General is entitled to take part in the said proceedings also but not to the exclusion of the complainant
until and unless the complainant, for any reason whatsoever, ceases to pursue the enquiry at any stage, in which case the
Director General is entitled to take full charge of the proceedings.
In exercise of the powers conferred by section 64 of the Competition Act, 2002, the CCI framed the Competition
Commission of India (General) Regulations, 2009. Relevant clauses with respect to giving information or making
reference have been reproduced below:
Rule 10. Contents of information or the reference.—(1) The information or reference (except a reference under sub-section
(1) of section 49 of the Act) shall, inter alia, separately and categorically state the following seriatim-
(a) legal name of the person or the enterprise giving the information or the reference;
(b) complete postal address in India for delivery of summons or notice by the Commission, with Postal Index
Number (PIN) code;
(c) telephone number, fax number and also electronic mail address, if available;
(d) mode of service of notice or documents preferred;
Page 5 of 26
[s 19] Inquiry into certain agreements and dominant position of enterprise
(e) legal name and address(es) of the enterprise(s) alleged to have contravened the provisions of the Act; and
(f) legal name and address of the counsel or other authorised representative, if any;
(2) The information or reference referred to in sub-regulation (1) shall contain—
(a) a statement of facts;
(b) details of the alleged contraventions of the Act together with a list enlisting all documents, affidavits and
evidence, as the case may be, in support of each of the alleged contraventions;
(c) a succinct narrative in support of the alleged contraventions;
(d) relief sought, if any;
(e) such other particulars as may be required by the Commission.
(3) The contents of the information or the reference mentioned under sub-regulations (1) and (2), alongwith the appendices
and attachments thereto, shall be complete and duly verified by the person submitting it.
Rule 11. Signing of information or reference.—(1) An information or a reference or a reply to a notice or direction issued
by the Commission shall be signed by–
(a) the individual himself or herself, including a sole proprietor of a proprietorship firm;
(b) the Karta in the case of a Hindu Undivided Family (HUF);
(c) the Managing Director and in his or her absence, any Director, duly authorised by the board of directors in the
case of a company;
(d) the President or the Secretary in the case of an association or society or similar body or the person so authorised
by the legal instrument that created the association or the society or the body;
(e) a partner in the case of a partnership firm;
(f) the chief executive officer in the case of a co-operative society or local authority;
(g) in the case of any other person, by that person or by some person duly authorised to act on his behalf.
(2) A reference shall be signed and authenticated by an officer not below the rank of a Joint Secretary to the Government
of India or equivalent in the State Government or the Chief Executive Officer of the Statutory Authority if the same has
been received from the Central Government or State Government or Statutory Authority.
(3) Without prejudice to the provisions of this regulation, the counsel may also append his or her signature to the
information or reference as the case may be.
Page 6 of 26
[s 19] Inquiry into certain agreements and dominant position of enterprise
Rule. 12. Procedure for filing of information or reference.—(1) Information or reference or responses thereto to the
Commission shall be presented to the Secretary or to an officer authorised in this behalf by the Secretary, in person or sent
by registered post or courier service or facsimile transmission addressed to the Secretary or to such authorised officer.
(2) Any separate or additional document(s) that a party to the proceedings wishes to rely upon in support of it’s
information, or reference shall be filed in the form of a “Paper Book”, at least seven days prior to the date of the ordinary
meeting, after serving the copies of the said document(s) on the other parties to the proceedings, with documentary proof
of such service. Such documents shall be serially numbered, prefaced by an index and shall be supported by a verification.
(3) An information(s) or reference sent by post or courier service or facsimile transmission under sub-regulation (1) shall
be deemed to have been presented to the Secretary or to the officer authorised by the Secretary, on the day on which it is
received in the office of the Secretary or the authorised officer, as the case may be.
Rule. 13. Procedure for filing of information or reference in electronic form.—Subject to the provisions of regulation 12,
information or a reference to the Commission may be sent by a person or an enterprise to the Secretary in an electronic
form duly authenticated with digital signature by the subscriber as and when so desired by the Commission through a
public notice.
Explanation.—For the purpose of this regulation,—
(a) “digital signature” means the digital signature as defined under clause (p) of section 2 of the Information
Technology Act, 2000 (21 0f 2000);
(b) “electronic form” with reference to an information or a document means the electronic form as defined under
clause (r) of section 2 of the Information Technology Act, 2000 (21 0f 2000);
(c) “subscriber” means the subscriber as defined under clause (zg) of section 2 of the Information Technology Act,
2000 (21 of 2000).
*****
Rule. 15. Procedure for scrutiny of information or reference.—(1) Each information or reference received in the
Commission shall be scrutinised by the Secretary to check whether it conforms to these regulations and the defects, if any,
shall be communicated to the party within a reasonable time not exceeding:–
(a) fifteen days in case of an information or reference received under clause (b) of sub-section (1) of section 19 of the
Act; or
(b) seven days in case of a reference received under section 21 or sub-section (1) of section 49 of the Act.
(2) The information provider referred to in clause (a) of sub-section (1) of section 19 of the Act or the Central Government
or the State Government or the statutory authority referred under clause (b) of sub-section (1) of section 19 or in sub-
Page 7 of 26
[s 19] Inquiry into certain agreements and dominant position of enterprise
section (1) of section 49 of the Act, as the case may be, shall, on receipt of the communication about the defects under sub-
regulation (1), remove the defects within:—
(a) thirty days of receiving the intimation in case of an information or reference under clause (b) of sub-section (1) of
section 19 of the Act; or
(b) fifteen days of receiving the intimation in case of a reference under section 21 or sub-section (1) of section 49 of
the Act.
(3) In case the defects are not removed by the Central Government or the State Government or the statutory authority or
the concerned party, as the case may be, as per the provision of sub-regulation (2), the information or the reference or the
application connected therewith shall be treated as invalid:
Provided that the Central Government or the State Government or the Statutory Authority or the concerned party shall be
entitled to file fresh information, reference or application for consideration by the Commission together with applicable
fees.
(4) In the event of the information having been treated as invalid under sub-regulation (3), the fee paid on such information
shall stand forfeited.
(5) Nothing contained herein above shall preclude the Commission from using the contents of such information or
reference in any manner as may be deemed fit, for inquiring into any possible contravention of any provision of the Act:
Provided that the time taken in removing the defects in such references shall not count towards the period of sixty days
provided for giving of opinion by the Commission in sub-section (2) of section 21 or sub-section (1) of section 49 of the
Act, as the case may be.
*****
Rule. 27. Power of Commission to join multiple information.—(1) At any time after receipt of an information or a
reference or an application, the Commission, if satisfied that the matter raised in any information or reference or
application received subsequently is directly and substantially similar, may consolidate two or more similar information or
references or applications, as the case may be, for consideration.
(2) At any time after receipt of an information or a reference for investigation from the Commission under sub-section (1)
of section 26 of the Act, the Director General, if satisfied, that the matter raised in any information or reference received
subsequently for investigation from the Commission is directly and substantially similar, may request the Commission to
consolidate such similar information or references, as the case may be, for common investigation.
(3) Where the Commission consolidates two or more information references or applications, in accordance with sub-
regulation (1) and sub-regulation (2), –
Page 8 of 26
[s 19] Inquiry into certain agreements and dominant position of enterprise
(a) each such information or references, as the case may be, shall continue to be separately identified by its own
docket number;
(b) pending consolidation of information or references by the Commission, the Director General may continue to
investigate the matters.
Rule. 28. Amendment of information.—The Commission may permit amendment of any information, upon an application
made in this regard but such amendment shall not be allowed if it substantially changes the nature and scope of the
information.
*****
Rule. 35. Confidentiality.—(1) The Commission shall maintain confidentiality of the identity of an informant on a request
made to it in writing.
(2) Any party may submit a request in writing to the Commission or the Director General, as the case may be, that a
document or documents, or a part or parts thereof, be treated confidential.
(3) A request under sub-regulation (2) may be made only if making the document or documents or a part or parts thereof
public will result in disclosure of trade secrets or destruction or appreciable diminution of the commercial value of any
information or can be reasonably expected to cause serious injury.
(4) A request under sub-regulation (2) shall be accompanied with a statement setting out cogent reasons for such treatment
and to the extent possible the date on which such confidential treatment shall expire.
(5) Where such document or documents, or a part or parts thereof, form part of the party’s written submissions, the party
shall file a complete version with the words “restriction of publication claimed” in red ink on top of the first page and the
word “confidential” clearly and legibly marked in red ink near the top on each page together with a public version, which
shall not contain such document or documents or part or parts thereof.
(6) The public version of such written submissions shall be an exact copy of the confidential version with the omissions of
the confidential information being indicated in a conspicuous manner, as stipulated in sub-regulation (5).
(7) [***]
(8) On receipt of a request under sub-regulation (2), the Commission or the Director General, as the case may be, if
satisfied, shall direct that the document or documents or a part or parts thereof shall be kept confidential for the time period
to be specified:
Provided that the Commission or the Director General, as the case may be, if satisfied, may give such confidential
treatment to any other information or document or part thereof also in respect of which no request has been made by the
party which has furnished such information or the document.
(9) The Commission or the Director General, as the case may be, may also consider the following while arriving at a
decision regarding confidentiality:—
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[s 19] Inquiry into certain agreements and dominant position of enterprise
(a) the extent to which the information is known to outside public;
(b) the extent to which the information is known to the employees, suppliers, distributors and others involved in the
party’s business;
(c) the measures taken by the party to guard the secrecy of the information;
(d) the ease or difficulty with which the information could be acquired or duplicated by others.
(10) In case the Director General has rejected the request of the party made under sub-regulation (2), the party may
approach the Commission for a decision regarding confidential treatment.
(11) Where the Director General or the Commission has rejected the request for confidential treatment of a document or
documents or a part or parts thereof and has informed the party of its intention, such document or documents or part or
parts thereof shall, subject to sub-regulation (13), not be treated as confidential.
(12) [***]
(13) The document or documents or a part or parts thereof that have been granted confidential treatment under this
regulation shall be segregated from the public record and secured in a sealed envelope or any other appropriate container,
bearing the title, the docket number of the proceeding, the notation “confidential record under regulation 35” and the date
on which confidential treatment expires.
(14) If the Commission includes in any order or decision or opinion, information that has been granted confidential
treatment under this regulation, the Commission shall file two versions of the order or decision or opinion. The public
version shall omit the confidential information that appears in the complete version, be marked “subject to confidentiality
requirements under regulation 35” on the first page, shall be served upon the parties, and shall be included in the public
record of the proceeding. The complete version shall be placed in the confidential record of the proceeding as provided in
sub-regulation (13).
(15) Any person or party, including any officer or employee appointed by the Commission under sub-section (1) of section
17 of the Act and any expert or professional engaged by the Commission under sub -section (3) of section 17 of the Act or
any expert called upon to assist the Commission under sub-section (3) of section 36 of the Act privy to the contents of the
document or documents or a part or parts thereof that have been granted confidential treatment under this regulation shall
maintain confidentiality of the same and shall not use or disclose or deal with such confidential information for any other
purpose other than the purposes of the Act or any other law for the time being in force:
Provided that breach of confidentiality by any officer or employee of the Commission appointed under sub-section (1) of
section 17 of the Act shall constitute a ground for initiation of disciplinary proceedings under the relevant rules or
regulations, as the case may be:
Provided further that breach of confidentiality by any expert or professional engaged by the Commission under sub-section
(3) of section 17 of the Act or any expert called upon to assist the Commission under sub-section (3) of section 36 of the
Act shall be sufficient ground for termination of the engagement or contract, as the case may be.
*****
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[s 19] Inquiry into certain agreements and dominant position of enterprise
Rule. 49. Fee under clause (a) of sub-section (1) of section 19 of the Act.—(1)Each information received under clause (a)
of sub-section (1) of section 19 of the Act from any person shall be accompanied by proof of having paid the fee as
under,—
(a) rupees 5,000 (five thousand) in case of individual or Hindu undivided family (HUF), or Non-Government
Organisation (NGO), or Consumer Association, or a Co-operative Society, or Trust, or
(b) rupees 20,000 (twenty thousand) in case of firm or company having turnover in the preceding year up to rupees
one crore, or
(c) rupees 50,000 (fifty thousand) in the cases not covered under clause (a) or (b).
(2) The fee may be increased or decreased on the basis of annual notification of Cost Inflation Index by the Central Board
of Direct Taxes, Department of Revenue, Ministry of Finance by an order of the Commission.
(3) The fee can be paid either by tendering demand draft or pay order or banker’s cheque, payable in favour of
Competition Commission of India (Competition Fund), New Delhi or through Electronic Clearance Service (ECS) by
direct remittance to the Competition Commission of India (Competition Fund), Account No. 1988002100187687 with
“Punjab National Bank, Bhikaji Cama Place, New Delhi-110066”.
COMPLAINT, REFERENCE OR APPLICATION TO BE BASED ON FACTS
Any complaint or reference is required to contain relevant facts which constitute alleged contravention of sub-section (1)
of sections 3 and 4. When such information is received, the Commission is expected to satisfy itself and express its opinion
that a prima facie case exists, from the record produced before it and then to pass a direction to the Director General to
cause an investigation to be made into the matter. This direction, normally, could be issued by the Commission with or
without assistance from other quarters including experts of eminence. The provisions of section 19 do not suggest that any
notice is required to be given to the informant, affected party or any other person at that stage. Such parties cannot claim
the right to notice or hearing but it is always open to the Commission to call any “such person”, for rendering assistance or
produce such records, as the Commission may consider appropriate.9
The Commission, wherever, is of the opinion that no prima facie case exists justifying issuance of a direction under section
26(1) of the Competition Act, 2002, can close the case and send a copy of that order to the Central Government, State
Government, Statutory Authority or the parties concerned in terms of section 26(2) of the Act. It may be noticed that this
course of action can be adopted by the Commission in cases of receipt of reference from sources other than of its own
knowledge and without calling for the report from Director General.
The direction under section 26(1) after formation of a prima facie opinion is a direction simpliciter to cause an
investigation into the matter. Issuance of such a direction, at the face of it, is an administrative direction to one of its own
wings departmentally and is without entering upon any adjudicatory process. It does not effectively determine any right or
obligation of the parties to the lis. Closure of the case causes determination of rights and affects a party, ie, the informant;
resultantly, the said party has a right to appeal against such closure of case under section 26(2) of the Competition Act,
2002. On the other hand, mere direction for investigation to one of the wings of the Commission is akin to a departmental
proceeding which does not entail civil consequences for any person, particularly, in light of the strict confidentiality that is
expected to be maintained by the Commission in terms of section 57 of the Act and regulation 35 of the Regulations.
In terms of section 26(3), the Director General is supposed to take up the investigation and submit the report in accordance
with law and within the time stated by the Commission in the directive issued under section 26(1). After the report is
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[s 19] Inquiry into certain agreements and dominant position of enterprise
submitted, there is a requirement and in fact specific duty on the Commission to issue notice to the affected parties to reply
with regard to the details of the information and the report submitted by the Director General and thereafter permit the
parties to submit objections and suggestions to such documents. After consideration of objections and suggestions, if the
Commission agrees with the recommendations of the Director General that there is no offence disclosed, it shall close the
matter forthwith, communicating the said order to the person/authority as specified in terms of section 26(6) of the Act. If
there is contravention of any of the provisions of the Act and in the opinion of the Commission, further inquiry is needed,
then it shall conduct such further inquiry into the matter itself or direct the Director General to do so in accordance with the
provisions of the Act.
In terms of section 26(7), the Commission is vested with the power to refer the matter to the Director General for further
investigation, or even conduct further inquiry itself, if it so chooses. The Commission, depending upon the nature of the
contravention, shall, after inquiry, adopt the course specified under sections 27 and 28 of the Act in the case of abuse of
dominant position and the procedure under sections 29 to 31 of the Act in the case of combinations. The Commission is
vested with powers of wide magnitude and serious repercussions as is evident from the provisions of sections 27(d), 28 and
31(3) of the Act. The Commission is empowered to direct modification of agreements insofar as they are in contravention
of section 3, division of an enterprise enjoying dominant position, modification of combinations wherever it deems
necessary and to ensure that there is no abuse or contravention of the statutory provisions.
For conducting inquiry and passing orders, as contemplated under the provisions of the Act, the Commission is entitled to
evolve its own procedure under section 36(1) of the Act. However, the Commission is also vested with the powers of a
Civil Court in terms of section 36(2) of the Act, though for a limited purpose. After completing the inquiry in accordance
with law, the Commission is required to pass such orders as it may deem appropriate in the facts and circumstances of a
given case in terms of sections 26 to 31 of the Act.
SUO MOTU INQUIRIES
Under sub-section (1), Commission can institute inquiry on its own motion, ie, upon its own knowledge or information.
The important question which, however, arises is, as to the nature of the Commission’s own knowledge or information on
the basis of which the Commission can initiate suo motu inquiry. One view is that knowledge or information must be such
as is available on the Commission’s record. That is to say, one inquiry may yield knowledge or information about another
inquiry. The other view is that the Commission can derive information or knowledge from any available source. Thus, a
complaint, which does not satisfy the conditions of clause (a) of sub-section (1), may still give material to the Commission
for its knowledge or information. The knowledge or information must be about facts constituting restrictive trade practice.
Neither section 19 nor sections 26 and 27, however, permit fishing or roving inquiry. There must be knowledge or
information regarding facts, and these facts must have a bearing on, relevance to, or rational nexus with, alleged anti-
competitive agreement, etc inferred.
In ITC v MRTPC,10 Calcutta High Court held that:
Provisions of section 10(a) of MRTP Act are mutually exclusive, but that does not mean that any information derived from any
source or even from an invalid complaint cannot be used by the Commission as its own knowledge and information under clause
(iv); only limitation is that there could not be any simultaneous inquiry on different alternatives enumerated in section 10(a).
The court also observed that the Commission’s jurisdiction is not restricted only to the information derived from a
proceeding under section 12(3) of the Competition Act, 2002. It is competent to exercise its jurisdiction under section
10(a)(iv) of the Act, upon information derived from an invalid or irregular complaint or even from an anonymous letter. In
Re Graphite India Ltd,11 it was held that to put fetters on the source of information of the Commission under sub-clause
(iv) of clause (a) by linking it to sub-clause (i) would not be justified on a true interpretation of section 10. In Excel
Industries Ltd,12 it was held that the respondent was not entitled to know in what manner the Commission satisfied itself
that the matter required to be inquired into, nor about the sufficiency of the material for such satisfaction.
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[s 19] Inquiry into certain agreements and dominant position of enterprise
The Competition Commission has been vested with the power to suo moto take cognizance of any alleged contravention of
section 3 or section 4 of the Act and hold an inquiry. This necessarily implies that the Commission is not required to wait
for receipt of a reference from the Central or the State Government or a statutory authority or a formal information by
someone for exercising power under section 19(1) read with section 26(1) of the Act. In a given case, the Commission may
not act upon an information filed under section 19(1)(a) but may suo moto take cognisance of the facts constituting
violation of section 3 or section 4 of the Act and direct an investigation. The Commission may also take cognisance of the
reports appearing in print or electronic media or even anonymous complaint/representation suggesting violation of sections
3 and 4 of the Act and issue direction for investigation under section 26(1). The only limitation on the exercise of that
power is that the Commission should feel prima facie satisfied that there exists a prima facie case for ordering into the
allegation of violation of section 3(1) or 4(1) of the Act.13
In the proceedings, which are initiated by the Commission suo moto, it shall be dominus litis of such proceedings while in
other cases, the Commission being a regulatory body would be a proper party discharging inquisitorial, regulatory as well
as adjudicatory functions. The purpose is always to achieve complete, expeditious and effective adjudication.
Case against Re Bengal Chemist and Druggist Association (BCDA)14 was initiated on the basis of an e-mail dated 28
August 2012 from one Shri Arun Kumar Singh wherein attention of the Commission was drawn to the alleged anti-
competitive practices adopted by BCDA. It was alleged that BCDA was engaged in anti-competitive practice of directly or
indirectly determining the sale price of drugs and controlling the supply of drugs in a concerted manner in violation of
section 3 the Competition Act, 2002. Based on the information received from Shri Singh and other relevant information
available in the public domain, the Commission decided to undertake a suo moto enquiry into the matter under section
19(1) of the Act.
In Re suo motu case against LPG Cylinder Manufacturers,15 the cognizance was taken by the Commission suo motu
under section 19(1) of the Act consequent upon the submission of investigation report of the Director General in Pankaj
Gas Cylinders Ltd v Indian Oil Corp Ltd.16 In that case it was reported by the Director General that in tender No LPG-
0/M/PT-03/09-10 floated by Indian Oil Corporation Ltd for the supply of 105 lakh, 14.2 kg capacity LPG cylinders with
SC valves, the manufacturers of LPG cylinders had manipulated the bids and quoted identical rates in groups through an
understanding and collusive action.
REFERENCE FROM STATUTORY AUTHORITY
To come within the definition of the expression “Statutory Authority”, the following criteria should be fulfilled:17
1. the Authority should be a Board, Corporation, Council, Institute, University or any other body corporate;
2. should have been established by or under any State or Central or Provincial Act;
3. It should have been so established for the purpose of regulating production or supply of goods or provision of any
services or markets therefor; and
4. It should have been established at least for any matter indicated therewith or incidental thereto.
— Re Manufacturers of Asbestos Cement Products18 originated from the reference made by Enforcement
Directorate, SFIO (Serious Fraud Investigation Office) on the basis of a complaint received by them. The
Commission on suo moto basis under section 19(1) of the Act conducted a preliminary inquiry into the major
players in the manufacturing of asbestos cement sheets for cartelised conduct.
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[s 19] Inquiry into certain agreements and dominant position of enterprise
— In Re Sheth & Co,19 the Commission took suo moto cognisance on the basis of a report of the Comptroller and
Auditor General on Defence Sector, against allegations of suspected cartelisation by 13 manufacturers/suppliers
of “CN container” ie, “containers with disc required for 81 mm bomb” to the three ordnance factories namely,
Ammunition Factory, Khadki, Pune; Ordinance Factory Dehu Road, Pune; and Ordinance Factory, Chanda,
Chandrapur, Maharashtra.
— In BP Khare, Principal Chief Engineer, South Eastern Railway v Orissa Concrete and Allied Industries Ltd,20
reference was made by Shri B P Khare, Principal Chief Engineer, South Eastern Railway, Kolkata alleging inter
alia contravention of the provisions of section 3 of the Competition Act, 2002. It was averred that due to
increased theft and sabotage in various parts of rail lines, a tender notice was floated by South Eastern Railway
for procurement of anti-theft elastic rail clips with circlips from Research Designs & Standards Organisation
(RDSO) approved firms. In response thereto, 29 approved firms submitted offers. The rate quoted by most of the
firms was at 66.50 (all inclusive). The quantity quoted by each of the firms was far less than 50% of the total
tender quantity. It is also alleged that the quoted rate was about 10% higher than the neighboring railways’ last
purchase rate. Suspecting cartelisation by the bidders in fixing the price and distributing the tender quantity of the
materials amongst themselves, the instant reference was filed by Principal Chief Engineer, South Eastern
Railway.
— In Chief Materials Manager-I v Milton Industries Ltd,21 the information in the case was filed under section
19(1)(b) by Chief Materials Manager-I, North Western Railway, against M/s Milton Industries Ltd, M/s Premier
Polyfilm Ltd, M/s Rado Industries Ltd, M/s Responsive Industries Ltd and M/s RMG Polyvinyl India Ltd for
allegedly creating a cartel amongst themselves so that only M/s Responsive Industries Ltd participated in the
tender process for supply of fire retardant vinyl upholstery fabric leather conforming to RDSO Spec No
RDSO/2008/CG-07 (“FRF CG-07”), for use in non-AC coaches of width size 127 to 132 cms to the Indian
Railways.
— In Deputy Chief Materials Manager, Rail Coach Factory v Faiveley Transport India Ltd,22 reference was made
by the Deputy Chief Materials Manager, Rail Coach Factory (RCF), Kapurthala against M/s Faiveley Transport
India Ltd and others alleging collusion to quote identical prices in various tenders floated by the Informant for
supply of axle mounted disc brake system (AMDBS) required for Linke-Hofmann-Busch (LHB) design AC and
non-AC coaches and power cars.
Whether Director General can be considered as a Statutory Authority?23
There are four places in the Act where a reference is made to a Statutory Authority. Section 2(w) defines the expression
“Statutory Authority”. Section 19(1)(b) speaks about the initiation of inquiry pursuant to a reference made to the
Commission by a Statutory Authority. Apart from these two places, section 21 of the Competition Act, 2002 also refers to
Statutory Authority. Under section 21(1), any Statutory Authority may make a reference of an issue to the Commission,
when, in the course of a proceeding before it, an issue is raised by any party that any decision, which such Statutory
Authority proposes to take, would be contrary to any of the provisions of the Act. The fourth place in which a reference is
made to a Statutory Authority is section 21A inserted by the Competition (Amendment) Act, 2007. A careful look at
sections 21 and 21A would show that one is the mirror image of the other.
The Statutory Authorities referred to in sections 21 and 21A should naturally be those other than the Authorities
functioning under the Competition Act, 2002. Otherwise, sub-section (2) of sections 21 and 21A cannot be given a
meaningful interpretation. If we have a careful look at section 21(2), it will be clear that the Statutory Authority referred to
in section 21 is a Statutory Authority which is vested with a power to record findings on the basis of the opinion of the
Commission. If the expression “Statutory Authority” appearing in section 21 includes the Director General also, then the
Director General should have the authority to give findings. But that is not a scope of the Act. The Director General is an
authority constituted to assist the Commission. But the Statutory Authority referred to in section 21 is one which can
derive assistance from the Competition Commission.
Similarly, the Statutory Authority contemplated in section 21A is one from whom the Commission itself can seek an
opinion. The Director General under the Act is not competent to give any opinion except conducting an investigation and
assisting the Commission in the enquiry initiated under section 19.
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[s 19] Inquiry into certain agreements and dominant position of enterprise
Therefore, section 19(1)(b) may have to be read and understood in the context of sections 21 and 21A of the Competition
Act, 2002. If so done, it will be very clear that the word “Statutory Authority” found in sections 19(1)(b), 21 and 21A
cannot include the Director General.
Also, the Proviso to section 21(1) empowers a Statutory Authority to make a reference suo motu to the Commission. But
the Director General is not empowered to initiate an investigation suo motu. Therefore, the Director General cannot come
within the definition of the expression “Statutory Authority”.
Reference from State Government
— Re Case No 01 of 2013, reference was filed by Dr Chintamoni Ghosh, Director, Directorate of Drugs Control,
West Bengal under section 19(1)(b) of the Act against BCDA alleging inter alia that it is engaged in issuing anti-
competitive circulars directing the retailers not to give any discount to the consumers, which is in contravention
of the provisions of section 3 of the Act.
— In Gujarat Textile Processors Association, Surat, Gujarat v Gujarat Gas Co Ltd, Ahmedabad, Gujarat,24
reference was made by the Government of Gujarat under section 19(1)(b) of the Competition Act, 2002 alleging
abuse of dominant position by the Opposite Party in increasing the price of CNG and natural gas supplied by it in
the district Surat of Gujarat.
Reference from Central Government
— In Re Domestic Air Lines25 the order related to a reference dated 6 May 2011 received by the Commission from
Ministry of Corporate Affairs, Government of India under section 19(1)(b) of the Act. In the reference it was
stated that due to the strike called by the pilots of Air India with effect from the midnight of 26 April 2011,
different airlines had started charging exorbitant fares for the tickets. It was also mentioned in the said reference
that in normal course also one could not buy tickets online, even though seats were available and tickets had to be
bought at higher prices near to the date of departure. The Commission was also asked to consider the possibility
of passing an order under section 33 of the Act.
— In Director General (Supplies & Disposals) v Puja Enterprises Basti,26 the reference was made by Director
General (Supplies & Disposals), Directorate General of Supplies & Disposals (DG S&D), Department of
Commerce, Ministry of Commerce & Industry, Government of India, New Delhi under section 19(1)(b) of the
Act alleging inter alia bid rigging and market allocation in contravention of the provisions of section 3 of the Act
while bidding against the Tender Enquiry dated 14 June 2011 floated by Director General S&D for concluding
Rate Contracts/RC of product (polyester blended duck ankle boot rubber sole) for the period from 1 December
2011 to 30 November 2012.27
CONSUMER PROTECTION ACT, 1986 VIS-A-VIS COMPETITION ACT, 2002
An enquiry under section 19 of the Competition Act, 2002 can be initiated, inter alia, upon receipt of any information by
the Commission from any person or trade association or from any consumer or consumer’s association; also, enquiry may
be initiated suo motu by the Commission on its own motion. In contrast, under the Consumer Protection Act, 1986 the
complainant, inter alia, has to be a consumer (or one or more consumers having the same interest) other than the one who
buys goods for commercial purpose or a voluntary Consumers Association. Thus, a consumer who buys goods for
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[s 19] Inquiry into certain agreements and dominant position of enterprise
commercial purpose or a trade association cannot be a complainant before the Consumer Redressal Authority; also, the
Consumer Redressal Authority cannot suo motu initiate an enquiry under the Consumer Protection Act, 1986.
Jurisdiction of Competition Commission
The commission has on multiple occasions noted that the existence of sectoral regulators cannot exclude the jurisdiction of
the Commission. Thus, while sectoral regulators focus on the dynamics of the specific sectors and they do have the
necessary technical expertise to determine access, maintain standard, ensure safety, determine tariff and have direct control
on prices, quantity and quality, the Competition Commission focuses on functioning of the markets by way of increasing
efficiency through competition. Thus, the role of the Commission complements and supplements the sectoral regulators.
They have a common objective of working towards benefits of the consumers.
Competition Act, 2002 versus Electricity Act, 2003/Petroleum and Natural Gas Regulatory
Board Act, 2006
In the matter28 related to allegation of bid rigging in the tender floated by UP Power Corporation Ltd for purchasing
power, the Commission reiterated its earlier stand on the issue of jurisdiction in light of another special statute, viz,
Electricity Act, 2003. Reference was made to the ruling of the Apex Court in Ashoka Marketing Ltd v Punjab National
Bank,29 wherein it was held that in the case of inconsistency between the provisions of two enactments, both of which can
be regarded as special in nature, the conflict has to be resolved by reference to the purpose and policy underlying the two
enactments and the clear intendment conveyed by the language of the relevant provisions therein. The Commission
therefore observed that there was no conflict between the two statutes as both the statutes have their respective and
mutually exclusive regulatory regimes.30
While Sectoral regulators focus on the dynamics of specific sectors, the Commission focuses on functioning of the markets by way
of increasing efficiency through competition; their roles being complementary and supplementary as per the common objective of
obtaining maximum benefit for the consumers.31
On similar lines, the Commission has held that even though the Petroleum and Natural Gas Regulatory Board (PNGRB)
Act, 2006 confers wider powers upon PNGRB, and is a special statute in matters relating to petroleum, natural gas and
other crude oil products, the Competition Act, 2002 is a special statute aimed at regulation of competition in the market.
Thus, in matters related to fair functioning of the markets, the Commission has primacy over sectoral regulators.32
DETERMINATION OF APPRECIABLE ADVERSE EFFECT ON COMPETITION
The Commission shall, while determining whether an agreement has an AAEC under section 3, have due regard to all or
any of the following factors, namely:—
(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;
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[s 19] Inquiry into certain agreements and dominant position of enterprise
(e) improvements 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.
Various factors have been identified in sub-sections (3) and (4) to determine “appreciable adverse effect on competition”.
For the purpose of section 3(3) of the Competition Act, 2002, if onus cast on the parties is not discharged, then AAEC is
presumed. In such a case, it is not necessary to consider the factors mentioned in section 19(3) of the Act. These are
circumstances which may be weighed by the Commission in arriving at any decision and are in the nature of gateways
which can be pleaded by the enterprise concerned to suggest that having regard to these factors, there is no AAEC.
The existence of first three factors under section 19(3) would normally indicate AAEC while the absence would normally
indicate no AAEC (negative factors). The presence of the remaining three factors would normally indicate no AAEC as
they are in nature of efficiency justifications. The absence of the last three factors alone can neither determine AAEC nor
establish efficiency justifications (positive factors). In most cases, therefore, it is more prudent to examine all the above
factors together to arrive at a net impact on competition.33 For example, an agreement which creates barriers to entry may
also induce improvements in promotion or distribution of goods or vice versa. Thus, whether an agreement restricts the
competitive process is always an analysis of the balance between the positive and the negative factors listed under section
19(a)–(f).34
BARRIERS TO ENTRY OF NEW ENTRANTS [SUB-SECTION 3(A)]
The following factors could be considered in the above context as to whether agreement has an AAEC:
(1) Legal provisions
(2) Technological advantage
(3) Financial resources
(4) Economies of scale
(5) Vertical integration
(6) Product differentiation
(7) Conduct of the undertaking in question
Instances of use of factors to determine AAEC – cases
— In the India Bulls case, the practice of levying of pre-payment penalty and foreclosure charges by the banks and
financial institutions was held to be in violation of section 3 as it acted as an exit load which restricted or limited
the borrower in availing the best market rate of interest which in turn impeded competition among the lending
institutions. The Commission noted that the existing borrowers had to incur additional cost in the form of pre-
payment penalty and foreclosure charges which acted as a deterrence in early repayment or refinancing of loan
and thus was anti-competitive and violated section 3(3) (b) read with section 19(3) (a), (c) and (d) of the
Competition Act, 2002.35
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[s 19] Inquiry into certain agreements and dominant position of enterprise
— In the case of Technology Products v Bangalore Electricity Supply Co Ltd,36 the Commission relied on the
Supreme Court decision in the case of Nagar Nigam v Al Faheem Meat Exports Pvt Ltd37 to emphasise that all
Government procurement should be by a tender process. Further, it was noted that public procurement cannot be
equated with private procurement. Further, public procurement being large leads to employment and industrial
development and competition in public procurement leads to lesser cost to Government and its agencies and gives
equal opportunity to persons as envisaged under Article 14 of the Constitution. Further, when a tender process is
adopted, it ultimately leads to an arrangement or an understanding between the parties, which under section 2(b)
is an agreement which leads to the issue of a purchase order. If in every tender document only one person gets an
order and the others do not get it, it amounts to a foreclosure of competition by hindering entry into the market
[section 19(3) of the Competition Act, 2002]. But when the whole process is transparent and fair, it cannot
foreclose the market. If the tender document is so designed to create a barrier to new entrants in the market, then
in view of section 19(3)(a) of the Act it would be anti-competitive.
— In the case of Kerala Film Exhibitors Association v CCI,38 it was held that the agreement and the practices of
restricting fresh releases to the approved centers and (thus theatres) of Kerala Film Exhibitors Federation was
having AAEC because of the following reasons:
(a) New entrants could not hope to survive in this market as they would not get fresh releases because of
cartelisation of Opposite Party (OP1) and compliance to it by OP2. [Creation of barriers to the new entrant in
the markets: section 19(3)(a).]
(b) The theatres of Kerala Film Exhibitors Association (KFEA) (IP) were not getting fresh releases. As such
their revenue was very less as compared to KFEF members. As a result, many such theatres had closed
down. [Driving existing Competitors out of the market: section 19(3)(b).]
(c) The competitor theatres, viz., members of KFEA were not given fresh releases, which was the main source
of revenue of these theatres. [Foreclosure of competition by hindering entry into the market: section
19(3)(C).]
(d) The consumers, in non-release centers, particularly in rural and semi-urban areas were adversely effected by
the said agreement and practice as they did not get to watch new movies or they had to travel far distances to
watch them. [Accrual of benefits to consumers: section 19(3)(d).]
(e) The distribution of new movies in the State of Kerala was adversely affected as accepted by President of
Film Distributors Association FDA (K) in his sworn affidavit. [Improvement in production or distribution of
goods or provisions of services: section 19(3)(e).]
— In the case of Reliance Big Entertainment Ltd v Karnataka Film Chamber of Commerce,39 the Director General
concluded that the clauses of the Articles of Association/Constitution of Karnataka Film Chamber of Commerce
clearly showed that it contained certain conditions which were restrictive in nature. The Director General noted
that the clauses could result in foreclosure of competition by hindering entry into the market. Further, the clauses
were also said to have an impact of driving existing competitors out of the market. The clauses in question were:
(a) Prohibiting its members to deal with non-members
(b) Forcing the provision of mandatory registration of each film in its territory
(c) Enforcing the restrictions on the number of cinema halls for non-Kannada film
(d) Enforcing restriction on number of multiplexes for a non-Kannada film
(e) Enforcing restriction of five maximum shows daily of all non-Kannada films
(f) Not allowing dubbing in Kannada language of other language movies.
(g) Imposing ban/boycott against the producers, distributors and exhibitors
(h) Issuing letters to the theatres to withhold the share amounts of the producers/distributors.
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[s 19] Inquiry into certain agreements and dominant position of enterprise
— In the case of Eastern India Motion Picture Association (EIMPA),40 the Director General concluded that EIMPA
was creating barriers to new entrants in the market through its memorandum and articles of association and bye
laws by which it was mandatory for all its existing members not to deal with any person who was not affiliated
with the association or with the films which were not registered with the association. EIMPA was also driving
existing competitors out of the market by way of issuing circulars/letters to the producers/distributors for
violating the rules or terms of declaration signed by them at the time of registration of the film. The members of
EIMPA who were producers, distributors, sub-distributors and exhibitors were not allowed to deal with non-
members which resulted into foreclosure of competition. The imposition of restrictions by EIMPA on the release
of films also impacted the consumers.
— In the case of Builders Association of India v Cement Manufacturers’ Association,41 it was held that the
coordinated act on the part of the cement companies neither caused any improvement in production or
distribution of goods or provision of services nor any promotion of technical, scientific and economic
development by means of production or distribution of goods or provision of services. On the contrary, the
capacity utilisation had gone down in 2009-10 and 2010-11 over the last few years. Thus, there was no efficiency
defence brought in by the Opposite Parties as mentioned in section 19(3)(e) and (f) of the Act. Further, it could
not be said that there was any accrual of benefit to the consumers since the prices of cement had gone up
considerably in recent years. In addition, artificial shortages were also created in form of reduced capacity
utilisation and thereby reduced supply of cement in the market to the detriment of the consumers. While there
was no accrual of benefit to the consumers, the Opposite Parties earned huge profit margins by acting together on
prices, production and supplies. Considerably high profit margin in the backdrop of parallel behavior in
movement of prices, dispatch, and production of cement and reduced capacity utilisation over the years indicated
that the cement companies had acted in their own self-interest to maximise the profit depriving both the
consumers and economy from the possible benefits of optimal capacity utilisation and reduced prices. In view of
analysis of factors mentioned in sections 19(d), 19(e) and 19(f) of the Competition Act, 2002, it was established
that the cement companies had contravened the provisions of sections 3(3)(a) and 3(3)(b) read with section 3(1)
of the Act by fixing the prices and limiting and controlling the production and supplies in the market.
FACTORS TO BE CONSIDERED WHILE ESTABLISHING WHETHER OR NOT AN
ENTERPRISE ENJOYS A DOMINANT POSITION [SUB-SECTION (4)]
The Commission shall, while inquiring whether an enterprise enjoys a dominant position or not under section 4, have due
regard to all or any of the following factors, namely:—
(a) Market share of the enterprise: An indirect assessment of dominance is through the market share of the enterprise
in the relevant market. Though the importance of market share may vary from market to market, nevertheless,
market share indicates the position of strength of the enterprise to some extent.
Market share is not the single predominant factor and often a host of other factors have to be considered.
Also, if sufficient and undisputed data is not available to determine market share in a credible manner, it
becomes even more important to draw on other corroborating data and analyse the other factors in even
greater depth to off-set the difficulties in working out sharply specified market shares on account of data
constraints, and/or to complement the market share when margins between competitors are not wide enough
in determining the strength of the enterprise in terms of affecting market forces as set out in the explanation
(a) to section 4.42
Normally, the competition in the different level of production-supply chain may possibly be adversely
affected when both entities to the agreement possess some market power in their respective spheres of
market. This is probably the reason that in EU, vertical agreements are not given much of a thought unless
both parties possess at least 30% market share in respective markets.43
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[s 19] Inquiry into certain agreements and dominant position of enterprise
(b) Size and resources of the enterprise: The capital stock, equity capital and other financial resources of an
enterprise, especially to hold a convenience of access to the financial markets like loanable and capital markets,
gives it a liberty to make a decision and to behave easily.44
(c) Size and importance of the competitors: When considering the market share of the enterprise under scrutiny, it is
also necessary to consider the market share of the competitors. The market power of an undertaking with a
market share of 51% will be considerably different depending on whether, for example, it simply has one
competitor with a 49% market share, there competitors, which have 16, 16 and 17% of market, respectively or 49
competitors each with 1% of the market. For instance, in the case of Shivam Enterprises,45 the relevant market
taken was “provision of services of goods transportation by trucks in and around Kiratpur area in Punjab”. It was
noted that Kiratpur Sahib Truck Operators Co-operative Transport Society Ltd was the only enterprise that
operated within the Kiratpur region and there were no other competitors. The consumers were totally dependent
on the Society for transportation of goods from Kiratpur area as other non-members truck owners were not
allowed to operate within the area thereby enabling the Society to operate independently of competitive forces
prevailing in the relevant market and affect its competitors/consumers/the relevant market in its favour.
Accordingly, Kiratpur Sahib Truck Operators Co-operative Transport Society Ltd was held to be dominant in the
relevant market.
(d) Economic power of the enterprise including commercial advantages over competitors: Various economic
advantages have been considered to be barriers to entry like economies of scale, control of an essential facility,
technological superiority, access to international capital, highly developed sales network, etc. Market power can
be directly measured by estimating the price elasticity of demand of the undertaking in question. Price elasticity
is the percentage by which the output sold by the undertaking decreases in relation to an increase in its price. The
lower price elasticity of demand, the higher the market power.
Factors like a high market share and comparatively bigger economic power should be interpreted as factors
that establish dominance. However, if the competitors are larger in size and importance, the dominance
stands diluted. Similarly, if an enterprise is performing some social obligation and bearing high social costs,
then its dominance is diluted because it would be operating independent of market laws. For example, if an
enterprise is buying and distributing a product or providing some service to the poor and needy for free due
to social obligations, it should not be charged with predatory pricing even if it is a dominant distributor of
that product or provider of that service. To do so would reduce overall economic development and welfare.
Furthermore, if there is a single consumer having great deal of economic power, the countervailing buying
power will be too big for the selling enterprise to exercise its dominance in its own favour or against the
consumer. That is why the Act provides the array of factors for ascertaining dominance.46
(e) Vertical integration of the enterprises or sale or service network of such enterprises: An indirect assessment of
dominance is through the market share of the enterprise in the relevant market. Though the importance of market
share may vary from market to market, nevertheless, market share indicates the position of strength of the
enterprise to some extent.
For instance, in the case of Arshiya Rail Infrastructure Ltd,47 Director General reported there was a vertical
integration of the various activities being performed by the Ministry of Railways (MOR) Group in the
relevant market. It was reported that Indian Railways (IR) was in wagon rail transport while the Container
Corporation of India Ltd was in container freight business and apart from it, IR was also into the business of
providing a gamut of related essential infrastructure support and services such as the locomotives, goods
sheds, signalling, wiring, maintenance of tracks, wagons, etc. Further, MOR also had a supervisory role
through Railway Board, looking after all train operations including container trains operated by private
CTOs on IR Network.
In the case of M/s Atos Worldline India Pvt Ltd,48 Verifone was regarded as the dominant player in the
market for POS Terminals (relevant product market). It was observed that there were mainly two players in
the relevant market at that time with M/s Verifone India Sales Pvt Ltd having a market share of 57% and
Ingenico having a market share of 43% in terms of the number sale of POS Terminals. It was noted that
Verifone was in an advantageous position compared to its competitors in the relevant market in terms of size,
resources and economic strength and due to its presence across the country, capabilities in terms of hardware
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[s 19] Inquiry into certain agreements and dominant position of enterprise
and software and the number of machines presently in use made the consumers dependent on it. Also, the
existence of entry barriers in the relevant market and vertical integration of upstream POS Terminal market
with the downstream service provider market enabled Verifone to act independent of its competitors.
(f) Dependence of consumers on the enterprise: The enterprise would have some advantages related to the products
produced by him. For example, producing more species than his competitor, the need for a product by consumers
or interagents, etc ensures advantage to the related enterprises for dominant position.
In the Coalfield case49 it was noted by the Director General that the consumers had huge dependency upon
the opposite parties as they did not have any other option in the market except the import. The import of coal
was noted to be not substitutable with domestic coal because: (a) Imported coal is used in small measure to
blend with domestic coal so as to achieve the appropriate calorific value; (b) Design requirements of the
boilers (there are some boilers which cannot use imported coal); (c) Handling capacity of the ports and
timing of imported (month) heavily burdened railway network. There is no railway infrastructure to handle
imported coal directly.50
(g) Monopoly or dominant position whether acquired as a result of any statute or by virtue of being a Government
company or a public sector undertaking or otherwise: State or Regulatory measures which subject a market to
say licensing requirements, or grant to a particular undertaking a statutory monopoly, an exclusive concession are
obvious barriers to entry. IPRs are a particular type of legal right granted by law which confers dominance on the
undertaking. It enables the holder to prevent effective competition.51,52
(h) Entry barriers including barriers such as regulatory barriers, financial risk, high capital cost of entry, marketing
entry barriers, technical entry barriers, economies of scale, high cost of substitutable goods or service for
consumers: Barriers to entry and expansion are important because where they exist competitors cannot enter or
expand on the market and erode the incumbent’s existing market share. The criteria of technological superiority
and being ensured the vertical integrity are generally confused with each other. In fact, the reason of being
accepted either criterion as a criterion of dominant position is that they make market entries difficult. However, it
has to be said that all of the enterprises which have technological superiority, do not mean that they have ensured
vertical integration.53,54,55
(i) Countervailing buying power: Competitive constraints may be exerted not only by actual or potential competitors
but also by customers. Even an undertaking with a high market share may not be able to act to an appreciable
extent independently of customers with sufficient bargaining strength. Such countervailing buying power may
result from the customers’ size or their commercial significance for the dominant undertaking, and their ability to
switch quickly to competing suppliers, to promote new entry or to vertically integrate, and to credibly threaten to
do so. If countervailing power is of a sufficient magnitude, it may deter or defeat an attempt by the undertaking to
profitably increase prices. Buyer power may not, however, be considered a sufficiently effective constraint if it
only ensures that a particular or limited segment of customers is shielded from the market power of the dominant
undertaking.56
(j) Market structure and size of market: Market structure which is characterised by a sole supplier of goods/services
either on standalone basis or by virtue of common ownership, makes conditions conducive to exercise market
power affecting competition, consumers or market.
(k) Social obligations and social costs: This factor gives flexibility to Commission to take into account social
obligations performed by an entity. There is greater realisation more than ever before that a business house is a
trustee of society. For example, while looking at the dominance of the Indian Railways, its important role in
ensuring connectivity between the various places in the country inter se at affordable fares need to be taken
favorably by the Commission.
(l) Relative advantage, by way of the contribution to the economic development, by the enterprise enjoying a
dominant position having or likely to have an appreciable adverse effect on competition;
(m) Any other factor which the Commission may consider relevant for the inquiry.
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[s 19] Inquiry into certain agreements and dominant position of enterprise
The Competition Act, 2002 provides flexibility to the Commission to also look at factors that are not covered explicitly in
section 19(4), but are relevant for determining dominance in the relevant market. The Commission has to assess various
relevant factors in an objective fashion and come to a determination regarding position of dominance of in the relevant
market. The objective is to identify the ability of the enterprise concerned to operate independently of competitive forces
prevailing in the relevant market or to affect its competitors or consumers or the relevant market in its favour. The
importance attached to the various factors by the Commission would differ depending on the facts of each case and also
depending on the specificity of each information and the sector of economic activity involved.
For more discussion and cases, refer to section 4.
RELEVANT MARKET [SUB-SECTION (5)]
The term “relevant market” has been defined in section 2(r) to mean the market to be determined by the Commission with
reference to the relevant product market or geographic market or with reference to both the markets. Market place is the
place of operation between the parties in trade with each other.57 A market means freedom of bargain where the buyers
and sellers have access to each other. Relevant market is the area of effective competition within which the defendant
resides.58 It is an economic concept.59 In order to define the relevant market, it is necessary to identify the particular
goods or services in a particular geographical area.
A method which is used to discover the relevant market is whether products are interchangeable – an economic test of
examining cross-elasticity of demand. The physical characteristics of a product will obviously be vital in deciding if
products are interchangeable. Then, the price of a product can affect the relevant market. The intended use of the product
is, as well, a very important consideration. The aforesaid are demand-based factors; but the supply side can also affect the
relevant market. The possible alternative supply, known as potential competition, can exert a competitive pressure on the
current supplier.
The purpose of defining “relevant market” is to examine the competitive constraints that undertakings face when operating
in a market. This is to ascertain if the undertakings are competitors or potential competitors. Relevant market implies that
there could be an effective competition between the products, which form part of it and pre-supposes that there is a
sufficient degree of substitution between all the products forming part of the same market insofar as specific use of such
product is concerned.60
RELEVANT GEOGRAPHIC MARKET [SUB-SECTION (6)]
This term has been defined in section 2(s) to mean a market comprising the area in which the conditions of competition for
supply of goods or services or demand of goods or services are distinctly homogeneous and can be distinguished from the
conditions prevailing in the neighbouring areas. The relevant geographic market may be local, national, international or
global depending upon the facts of each case.
The main consideration in determining whether a monopolist violates the law is whether the defendant controls the prices
and competition in the market. Where there are market alternatives, the buyers may use the same. Illegal monopoly does
not exist merely because the product said to be monopolised differs from others. In considering what is a relevant market
for determining the control of price and competition, no more definite rule can be declared than that commodities
reasonably interchangeable by the consumers for the same purposes make up that part of trade or commerce.61
There may be legal, technical or practical reasons why a product competes within a limited area of the country. In United
Brands,62 the court limited the geographical market to “an area where the objective conditions of competition applying to
the product in question must be the same for all traders.” Geographic markets may also be limited by transport restrictions
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[s 19] Inquiry into certain agreements and dominant position of enterprise
on the product. If the unit transport cost of the product is high, it is less likely that product will have a country-wide
market.
RELEVANT PRODUCT MARKET [SUB-SECTION (7)]
This term has been defined in section 2(t) to mean a market comprising of all those products or services which are regarded
interchangeable or substitutable by the consumer by reason of characteristics of the product or services, their prices and
intended use. The test to determine relevant product market is of interchangeability of use and the cross-elasticity of the
demand.
For more discussion on relevant market, refer to chapter I.
PROVISIONS OF MRTP ACT, 1969 VIS-A-VIS COMPETITION ACT, 2002
Under the scheme of MRTP Act, 1969, restrictive and monopolistic trade practices were deemed to be prejudicial to public
interest unless the Commission was satisfied in one or more of the circumstances specified in section 32 (in relation to
monopolistic trade practices) and 38 (in relation to restrictive trade practices). Sub-sections (3) and (4) of the Competition
Act, 2002 broadly refer to the various gateways specified in sections 32 and 38 of MRTP Act, 1969.
4 Came into force on 20 May 2009 vide Notification No SO 1241(E), dated 15 May 2009.
5 Subs. by Act 39 of 2007, section 13, for the words “receipt of a complaint” (w.e.f. 20
May 2009).
6 Reliance Agency v Chemists and Druggists Association of Baroda,
Case No 97 of 2013 [CCI], decided on 4 January 2018.
7 Western Coalfields Ltd v SSV Coal Carriers Pvt Ltd, Case No 34 of
2015 [CCI], decided on 14 September 2017.
8 VOICE v Delhi Bottling Co Pvt Ltd, UTP Enquiry No 151/1986,
order dated 16 January 1989, [1990] 68 Com Cas 532 (MRTPC).
9 CCI v Steel Authority of India Ltd, 2010 (5) All MR (SC) 934 : 2010
Comp LR 61 (SC) : (2010) 4 Comp LJ 1 (SC) :
JT 2010 (10) SC 26 : (2011) 2 Mad LJ 271 (SC) : 2010 (9) Scale
291 : (2010) 10 SCC 744 : [2010] 103
SCL 269 (SC) : [2010] 11 SCR 112 :
2010 (8) UJ 4093 .
10 ITC v MRTPC, (1976) 46 Com Cas
619 (Cal).
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[s 19] Inquiry into certain agreements and dominant position of enterprise
11 Re Graphite India Ltd, (1976) 46
Com Cas 422 (MRTPC) upheld by Calcutta High Court.
12 Excel Industries Ltd, RTPE No 24/1975, order dated 1 October 1975.
13 Surendra Prasad v CCI, Appeal No 43 of 2014.
14 Re Bengal Chemist and Druggist Association and Dr Chintamoni
Ghosh, suo moto Case No 02 of 2012 and Ref Case No 01 of 2013, [2014] 121 CLA 196
(CCI) : 2014 Comp LR 221 (CCI).
15 Re LPG Cylinder Manufacturers, 2012 Comp LR 197 (CCI).
16 Pankaj Gas Cylinders Ltd v Indian Oil Corp Ltd, Case No 10 of 2010.
17 Section 2(w), Competition Act, 2002.
18 Re Manufacturers of Asbestos Cement Products,
suo moto Case No 01 of 2012, 2014 Comp LR 272 (CCI).
19 Re Sheth & Co, suo moto Case No 04 of 2013, 2015
Comp LR 715 (CCI).
20 BP Khare, Principal Chief Engineer, South Eastern
Railway v Orissa Concrete and Allied Industries Ltd, [2013] 114 CLA 280
(CCI) : [2013] 119 SCL 1
(CCI).
21 Chief Materials Manager-I v Milton Industries Ltd,
[2015] 132 SCL 138 (CCI).
22 Deputy Chief Materials Manager, Rail Coach
Factory v Faiveley Transport India Ltd, Reference Case No 06 of 2013. Appeal made and decided on 17 February 2016 by Comp
AT.
23 Hyundai Motor India Ltd v CCI,
[2015] 127 CLA 46 : 2015 (3) CTC 290 : (2015) 2 Mad LJ 560 (Mad).
24 Gujarat Textile Processors Association, Surat,
Gujarat v Gujarat Gas Co Ltd, Ahmedabad, Gujarat, Case No 2/2011, Case No 50/2011.
25 Re Domestic Air Lines, Reference Case No
01/2011, [2012] 107 CLA 382 : 2012 Comp LR
154 (CCI).
Page 24 of 26
[s 19] Inquiry into certain agreements and dominant position of enterprise
26 Director General (Supplies & Disposals) v Puja
Enterprises Basti, [2013] 116 CLA 126 : 2013
Comp LR 714 (CCI).
27 Note: The COMPAT on 12 April 2016 has set the
Commission’s order against the 11 shoe manufacturers who were fined Rs 6.25 crore by the regulator for alleged collusive bidding
in a government tender. Setting aside the ruling, the Tribunal in an order dated April 12 said, “The Commission committed grave
error by imposing penalty on the appellants at 5% of their total turnover in respect of all the products manufactured by them,
including the Jungle Boots”. The Tribunal observed that some of these companies are producers of multiple products and cited a
previous order where it was held that the turnover of only the product in question should have been taken into consideration for
imposing penalty. COMPAT also directed the concerned authority to refund the penalty amount within a period of three months,
failing which, the appellants (the firms) would be entitled to interest at the rate of 12% per annum.
28 Arun Mishra v State of UP, Case No 43 of 2017 [CCI], decided on 24
January 2018.
29 Ashoka Marketing Ltd v Punjab National Bank,
1991 AIR 855 : (1990) 4 SCC 406
.
30 See also Open Access Users Association v Tata Power Delhi
Distribution Ltd, Case No 91 of 2014, decided on 29 September 2015; Telefonaktiebolaget LM Ericsson (Publ) v CCI,
2016 (66) PTC 58 (Del).
31 See also Re HPCL-Mittal Pipelines Ltd and Gujarat Energy
Transmission Corp Ltd, Case No 39 of 2017 [CCI], decided on 31 January 2018.
32 XYZ v Indian Oil Corp Ltd, Case No 5 of 2018 [CCI], decided on 4
July 2018.
33 Automobiles Dealers Association, Hathras, UP v Global Automobiles
Ltd and Pooja Expo India Pvt Ltd, 2012 Comp LR 827 (CCI).
34 Shamsher Kataria Informant v Honda Siel Cars India Ltd, 2014 Comp
LR 1 (CCI).
35 Yashoda Hospital and Research Centre Ltd v
India Bulls Financial Services Ltd (IFSL), 2011 Comp LR 324 (CCI). Although the Director General concluded in his report that
the practice of imposing prepayment penalty charges on borrower is anti-competitive and is hit by the provisions of section 3(3)(b)
of the Act but the Commission held that there was nothing on record which could show that IFSL had been imposing prepayment
penalty and foreclosure charges in pursuance of some agreement entered into by it with any enterprise engaged in similar trade or
business, thus, making section 3(3) un-applicable.
36 Technology Products v Bangalore Electricity
Supply Co Ltd, Case No 58/2011 decided on 22 November 2011.
37 Nagar Nigam v Al Faheem Meat Exports Pvt Ltd,
SLP (Civil) No 10174 of 2006, (2006) 13 SCC 382
: (2007) 1 Scale 88 :
JT 2007 (1) SC 484 .
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[s 19] Inquiry into certain agreements and dominant position of enterprise
38 Kerala Film Exhibitors Association v CCI, Appeal
No 100 of 2015 decided on 4 February 2016.
39 Reliance Big Entertainment Ltd v Karnataka Film
Chamber of Commerce, [2012] 108 CLA 116
: 2012 Comp LR 269 (CCI).
40 Manju Tharad, Proprietress and Manoranjan
Films, Kolkata v Eastern India Motion Picture Association (EIMPA), Kolkata and The Censor Board of Film Certification,
Kolkata, [2012] 110 CLA 136 (CCI) : 2012
Comp LR 1178 (CCI) : [2012] 114 SCL 20 (CCI).
41 Builders Association of India v Cement
Manufacturers’ Association, 2012 Comp LR 629 (CCI).
42 Belaire Owner’s Association v DLF Ltd Haryana
Urban Development Authority Dept of Town and Country Planning, State of Haryana, [2011]
104 CLA 398 : 2011 Comp LR 239 : [2011] 109 SCL
655 (CCI).
43 Automobiles Dealers Association, Hathras, UP v
Global Automobiles Ltd and Pooja Expo India Pvt Ltd, 2012 Comp LR 827 (CCI).
44 See HT Media Ltd v Super Cassettes Industries Ltd,
2014 Comp LR 129 (CCI).
45 Shivam Enterprises v Kiratpur Sahib Truck
Operators Co-operative Transport Society Ltd, 2015 Comp LR 232 (CCI).
46 Jindal Steel and Power Ltd v Steel Authority of
India Ltd, [2012] 107 CLA 278 (CCI).
47 Arshiya Rail Infrastructure Ltd (ARIL) v Ministry of
Railways (MoR) through the Chairman, Railway Board (KB) and Container Corp of India Ltd (CONCOR),
[2013] 112 CLA 297 (CCI) : 2012 Comp LR 937 (CCI) :
[2012] 116 SCL 417 (CCI).
48 Atos Worldline India Pvt Ltd v Verifone India Sales
Pvt Ltd, 2015 Comp LR 327 (CCI).
49 M/s Maharashtra State Power Generation Co Ltd v
M/s Mahanadi Coalfields Ltd and M/s Coal India Ltd and M/s Gujarat State Electricity Corp Ltd v M/s South Eastern Coalfields
Ltd and M/s Coal India Ltd, 2013 Comp LR 910 (CCI).
50 Also see Shivam Enterprises v Kiratpur Sahib
Truck Operators Co-op Transport Society Ltd, 2015 Comp LR 232 (CCI); Shamsher Kataria Informant v Honda Siel Cars India
Ltd, 2014 Comp LR 1 (CCI).
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[s 19] Inquiry into certain agreements and dominant position of enterprise
51 See GHCL Ltd v Coal India Ltd, 2015 Comp LR
357 : [2015] 131 SCL 408 (CCI).
52 See Sharad Kumar Jhunjunwala v UOI, 2015
Comp LR 859 : (2015) 4 Comp LJ 457 (CCI).
53 “Notion and the Criteria for Dominant position”,
prepared by Attorney At Law Eda Hilalogullari – Bursa Bar Association – Bahcesehir University law Faculty – EU Public Law and
EU Integration Master Program – 2007. Available at: http://onurhukuk.com/2018/05/14/the-notion-and-the-criteria-of-dominant-
position/(accessed in February 2019).
54 See Atos Worldline India Pvt Ltd v Verifone India
Sales Pvt Ltd, 2015 Comp LR 327 (CCI).
55 See Shamsher Kataria Informant v Honda Siel Cars
India Ltd, 2014 Comp LR 1 (CCI).
56 Guidance on the Commission’s enforcement
priorities in applying Article 82 of the EC Treaty to abusive exclusionary conduct by dominant undertakings. Available at:
http://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX:52009XC0224(01) (accessed in February 2019).
57 Kailash Suneja v Appropriate Authority,
(1998) 231 ITR 318 (Del).
58 Standard Oil Co of California and Standard Stations Inc v United
States, 337 US 293.
59 CCI v Co-ordination Committee of Artists and Technicians of WB
Film and Television, AIR 2017 SC 1449 :
(2017) 5 SCC 17 : 2017 (2) SCJ 655
: [2017] 140 SCL 655 (SC).
60 CCI v Co-ordination Committee of Artists and Technicians of WB
Film and Television, AIR 2017 SC 1449 :
(2017) 5 SCC 17 : 2017 (2) SCJ 655
: [2017] 140 SCL 655 (SC)
61 United States v EL Du Pont De Nemours & Co, 351 US 377.
62 See Case 27/76 United Brands Continental BV v Commission,
(1978) ECR 207 : (1978) 1 CMLR 429
.
End of Document
[s 20] Inquiry into combination by Commission
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > CHAPTER
IV DUTIES, POWERS AND FUNCTIONS OF COMMISSION
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
CHAPTER IV DUTIES, POWERS AND FUNCTIONS OF COMMISSION
63[s 20] Inquiry into combination by Commission
(1) The Commission may, upon its own knowledge or information relating to acquisition referred to in clause (a) of
section 5 or acquiring of control referred to in clause (b) of section 5 or merger or amalgamation referred in
clause (c) of that section, inquire into whether such a combination has caused or is likely to cause an appreciable
adverse effect on competition in India:
Provided that the Commission shall not initiate any inquiry under this sub-section after the expiry of one
year from the date on which such combination has taken effect.
(2) The Commission shall, on receipt of a notice under sub-section(2) of section 6 64[* * *], inquire whether a
combination referred to in that notice or reference has caused or is likely to cause an appreciable adverse effect
on competition in India.
(3) Notwithstanding anything contained in section 5, the Central Government shall, on the expiry of a period of two
years from the date of commencement of this Act and thereafter every two years, in consultation with the
Commission, by notification, enhance or reduce, on the basis of the wholesale price index or fluctuations in
exchange rate of rupee or foreign currencies, the value of assets or the value of turnover, for the purposes of that
section.
(4) For the purposes of determining whether a combination would have the effect of or is likely to have an
appreciable adverse effect on competition in the relevant market, the Commission shall have due regard to all or
any of the following factors, namely:—
(a) actual and potential level of competition through imports in the market;
(b) extent of barriers to entry to the market;
(c) level of combination in the market;
(d) degree of countervailing power in the market;
(e) likelihood that the combination would result in the parties to the combination being able to significantly and
sustainably increase prices or profit margins;
(f) extent of effective competition likely to sustain in a market;
(g) extent to which substitutes are available or are likely to be available in the market;
(h) market share, in the relevant market, of the persons or enterprise in a combination, individually and as a
combination;
Page 2 of 8
[s 20] Inquiry into combination by Commission
(i) likelihood that the combination would result in the removal of a vigorous and effective competitor or
competitors in the market;
(j) nature and extent of vertical integration in the market;
(k) possibility of a failing business;
(l) nature and extent of innovation;
(m) relative advantage, by way of the contribution to the economic development, by any combination having or
likely to have appreciable adverse effect on competition;
(n) whether the benefits of the combination outweigh the adverse impact of the combination, if any.
LEGISLATIVE BACKGROUND
Competition Act, 2002
Notes on clauses of the Bill stated, thus:
Notes on clauses.—This clause, inter alia, empowers the Commission to make inquiry as to whether a combination causes or is
likely to cause an AAEC in India. It also lays down the limitation of time for initiation of inquiry as one year from the date on
which the combination has taken effect when such inquiry is conducted by the Commission upon its own knowledge or
information. This clause further lays down the factors which the Commission would take into account for determining whether the
combinations have AAEC in the relevant market. [Clause 20 of the Competition Bill, 2001].
Memorandum regarding delegated legislation
Sub-clause (3) of clause 20 of the Bill confers power upon the Central Government to enhance or reduce the value of assets
or the value of turnover for the purposes of combination under the proposed legislation. [Competition Bill, 2001]
Competition (Amendment) Act, 2007
Notes on clauses.—This clause seeks to amend sub-section (2) of section 20 of the Competition Act, 2002 relating to inquiry into
combination by the Commission.
Under the existing provisions contained in sub-section (2) of section 20, the Commission shall, upon receipt of a reference under
sub-section (1) of section 21, inquire whether the combination referred to in the reference is likely to cause an appreciable adverse
effect on competition in India.
It is proposed to amend the said sub-section (2) so as to delete the provision of inquiry on a reference from a statutory authority as
the reference has been made on an issue which is under consideration of the statutory authority. [Clause 14 of the Competition
(Amendment) Bill, 2007].
Page 3 of 8
[s 20] Inquiry into combination by Commission
SCOPE OF THE SECTION
This section prescribes the procedure for inquiry into combinations by the Commission. Guiding factors have been
specified in sub-section (4) to determine whether the particular combination would have an AAEC in the relevant market
or not.
JURISDICTION OF THE COMMISSION [SUB-SECTION (1)/(2)]
This section confers jurisdiction to the Commission to inquire into any case of combination under section 5. The inquiry
before the Commission may emanate from any of the following sources:
(i) own knowledge or information of the Commission; or
(ii) notice under section 6(2) given to the Commission to enter into a combination; or
(iii) show cause notice issued by the Commission under section 29.
It has been clarified that no enquiry shall be made by the Commission in respect of any combination given effect to one
year back.
VALUE OF ASSETS OR TURNOVER [SUB-SECTION (3)]
After every two years, the Central Government has been empowered to enhance or reduce the threshold limit of assets
and/or turnover specified in section 5 in consultation with the Commission. The Central Government will take into
consideration the wholesale price index or fluctuations in exchange rate of rupee or foreign currency in this regard.
APPRECIABLE ADVERSE EFFECT ON COMPETITION [SUB-SECTION (4)]
The Commission is required to consider effect of the Combination concerned in the relevant market having regard to the
various factors identified in sub-section (4).
CASES UNDER COMPETITION ACT, 2002
In Re Holcim Ltd,65 the Commission received a notice under sub-section (2) of section 6 of the Competition Act, 2002 of
the proposed combination structured as an acquisition of shares and falls under section 5(a) of the Act. In pursuance to the
proposed combination, Holcim Ltd (Holcim) would file a public offer for all outstanding shares of Lafarge SA (Lafarge).
Each Lafarge shareholder tendering Lafarge shares to the contemplated public exchange offer initiated by Holcim would
receive nine Holcim shares for 10 Lafarge shares. Therefore, pursuant to the proposed combination, Lafarge would become
a subsidiary of Holcim. The offer would be subject to Holcim holding at least 2/3rd of the share capital and voting rights of
Lafarge on a fully diluted basis. The new entity would be named as “Lafarge Holcim” and will be listed on SIX Swiss
Exchange and Euro next, Paris. The Commission formed a prima facie opinion that the proposed combination was likely to
cause an AAEC within the relevant markets in India and therefore decided to issue a show-cause notice to the Parties in
terms of sub-section (1) of section 29 of the Act.
Page 4 of 8
[s 20] Inquiry into combination by Commission
Relevant Market: For the purpose of competition assessment, the Commission identified two product segments on the basis
of product overlaps between the Parties in India, viz., cement and ready mix concrete. The Commission observed that
white cement and grey cement differ in terms of their physical characteristics and intended use and, therefore, constituted
separate relevant product markets and that different varieties of grey cement were considered to be largely interchangeable.
The Commission further noted that in India, the Parties operated in the grey cement segment only. Accordingly, the
Commission decided that the relevant product market for the purpose of competition assessment of the proposed
combination would be market for grey cement.
The Commission noted that cement being a bulk commodity involved significant transportation costs and, therefore, the
consumption of cement was generally centered around the production clusters which were located in the vicinity of
limestone resources. From the perspective of demand and supply, these self-contained areas, having homogeneous
conditions of competition, constituted the relevant geographic market from the point of view of the competition
assessment.
Applying the Elzinga Hogarty Test, the Commission decided that the relevant geographic market for the Eastern region
may be defined in terms of area comprised by the states of Chhattisgarh, Odisha, West Bengal, Bihar and Jharkhand.
AAEC: The Commission was of the opinion that the proposed combination was likely to have an AAEC in India in the
relevant market for grey cement in the eastern region because of the following factors:
Level of concentration: the change in HHI66 in terms of both current installed capacity and the installed capacity likely to
be in operation by the end of 2015 was substantial and the proposed combination had the impact of significantly increasing
concentration in the relevant market.
Countervailing buying power: a substantial part of the market comprised of small consumers who generally did not have
countervailing buying power.
Constraints exerted by competitors: the second biggest player in the relevant market was Ultratech, with a market share of
17% in terms of installed capacity. The other players were relatively small and, therefore, had limited reach both in terms
of capacity and area.
Entry barriers: There were significant entry barriers in the cement industry. These may take the form of high costs of
installation of a production line, logistics relating to location of a cement plant, availability of limestone and energy
requirements and distribution networks, etc.
Pre-combination degree of competition between the Parties: both the Parties were premium players and close competitors
in the relevant market. Their ability to charge high prices together with their control over substantial installed capacity in
the region suggested the possibility of AAEC, post the proposed combination.
Prevailing market structure: Cement industry in India was oligopolistic in nature. Factors such as homogeneous product,
relatively small sale transactions and entry barriers make the cement industry in India prone to collusion, and under such
circumstances, the likelihood of coordinated effects assumes significance. The Commission noted that CR 4 in the relevant
market would increase from pre-combination level of 65% to 72%. This is indicative of the possibility of strengthening the
likelihood of coordinated effects, leading to AAEC.
Efficiencies: The Parties had stated that the proposed combination would allow pooling of their skills, resources and
establishing synergistic operational practices leading to a better consumer experience, increased availability of cement with
minimum turn-around time, increased consumer choice and would have a downward impact on distribution and other
costs. The Commission observed that the efficiencies were not combination specific and the submissions of the Parties
Page 5 of 8
[s 20] Inquiry into combination by Commission
lacked quantification and verifiability and no specific suggestion has been made or evidence provided as regards the
efficiencies translating into lower prices for customers.
Modification to address AAEC concerns: The Commission noted that in accordance with the provisions of the Act, it may
either direct that the combination shall not take effect in accordance with sub-section (2) of section 31 of the Competition
Act, 2002 or may propose a modification to the combination in accordance with sub-section (3) of section 31 of the Act.
The Commission was of the opinion that the likely AAEC of the proposed combination could be eliminated by suitable
modification to the combination and thereby proposed divestiture as a remedy to eliminate the competition concerns.67
The Commission considered various combinations of plants located in states of Jharkhand, West Bengal and Chhattisgarh
forming part of the relevant market and decided on the basis of location of plants, pan relevant market impact, impact on
concentration; self-contained divestiture package and impact on market structure, that a divestiture of Lafarge’s Jojobera
plant located in Jharkhand with a cement grinding capacity of 4.6 million tonnes per annum (MTPA) and Lafarge’s
integrated unit located at Sonadih in Chhattisgarh with a cement grinding capacity of 0.55 MTPA and clinker capacity of
3.10 MTPA would be most effective in eliminating the concerns of AAEC in the relevant market. Accordingly, the
Commission proposed modification to the combination, to the Parties, in terms of sub-section (3) of section 31 of the
Competition Act, 2002. Pursuant to the agreement of the parties on the terms and conditions imposed by the Commission,
it approved the proposed combination under sub-section (7) of section 31 of the Act, subject to the Parties carrying out the
modification to the proposed combination as provided below:68,69
In Sun Pharmaceutical Industries Ltd and Ranbaxy Laboratories Ltd,70 the Commission received a notice under sub-
section (2) section 6 of the Act of the proposed combination relating to the merger of Ranbaxy into Sun Pharma pursuant
to the scheme of arrangement. Post combination, the existing shareholders of Ranbaxy would hold approximately 14% of
the equity share capital of the Merged Entity on a pro forma basis. Further, the promoter group of Sun Pharma was
expected to own approximately 54.7% equity share capital of the Merged Entity. Further, as Ranbaxy held 46.79% equity
share capital of Zenotech, the proposed combination would result in acquisition of this 46.79% equity share capital of
Zenotech by Sun Pharma from Ranbaxy. As Zenotech was a listed company and as per the details given in the Notice, in
terms of SAST Regulations, 2011, Sun Pharma had announced an open offer for 28.10% equity share capital of Zenotech
through the public announcement to be commenced after the merger of Ranbaxy into Sun Pharma. The Commission
considered the facts on record and formed a prima facie opinion that the proposed combination was likely to cause an
AAEC in the relevant markets in India. Accordingly, a show-cause notice was issued to the Parties in terms of sub-section
(1) of section 29 of the Act.
Relevant market: The Commission found it appropriate to define the relevant product market at the molecule level, i.e.,
medicines/formulations based on the same active pharmaceutical ingredients (API) to be considered to constitute a separate
relevant product market. Since the products of the Parties were available across India, the relevant geographic market was
considered to be the territory of India.
Horizontal overlap: On the basis of combined market share of the Parties, incremental market share as a result of the
proposed combination, market share of the competitors, number of significant players in the relevant market, etc., the
Commission focused its investigation on 49 relevant markets where the proposed combination was likely to have AAEC in
the relevant market in India along with two other relevant markets for formulations wherein Sun Pharma was already
marketing and selling its products, whereas Ranbaxy had pipeline products to be launched in the near future. Based on its
assessment of the relevant markets, the Commission was of the view that the proposed combination was likely to result in
appreciable adverse effect on competition.
In some of the defined relevant markets, the Commission noted that as a result of the proposed combination, the number of
significant players will be reduced which would eliminate a significant competitor from the market and will likely have an
AAEC in the relevant market. The other players in the relevant market were noted to have a negligible market share and
thus may not be in a position to exert significant competitive constraint on the merged entity.71
Assessment of AAEC in other relevant markets was made on the basis of their collective market share. In all of them, it
was held that AAEC was not likely due to stiff competition prevalent in those markets.72 In relation to five relevant
markets of formulations containing,73 the Parties had submitted that Ranbaxy had discontinued its product and
accordingly, there was no horizontal overlap between the products of the Parties. Further, in relation to relevant market of
Page 6 of 8
[s 20] Inquiry into combination by Commission
Somatostatin | H1D3, it was submitted by the Parties that the products of Sun Pharma and Ranbaxy were entirely different
and it was only due to an error that they had been classified in a single category in the All India Organisation of Chemists
and Druggists database.
Market for APIs–horizontal overlap: It was noted that both the Parties sold APIs to third parties. However, it was observed
that the horizontal overlap in APIs was insignificant to raise any competition concern.
Vertical integration post-merger: It was observed that post combination, there was a possibility of vertical integration
between the Parties as the APIs manufactured and sold by one Party could be used as raw material for the formulations
produced by the other. However, in light of marginal share of API to the revenue of the parties and the fact that there were
a number of suppliers, both within and outside India, which supplied APIs to the formulation manufacturers, the
Commission held that the proposed combination was not likely to result in vertical foreclosure.
Modifications recommended: The Commission was of the opinion that the adverse effect of the proposed combination on
competition could be eliminated by suitable modification. Accordingly, the Commission approved the proposed
combination under sub-section (7) of section 31 of the Competition Act, 2002, subject to the Parties carrying out the
modification to the proposed combination as provided below:
(i) Sun Pharma shall divest all products containing Tamsulosin + Tolterodine which are currently marketed and
supplied under the Tamlet brand name.
(ii) Ranbaxy shall divest:
(i) All products containing Leuprorelin which are currently marketed and supplied under the Eligard brand
name. In the event the Divestiture of distribution rights of Eligard is not achieved within the First Divestiture
Period, Sun Pharma shall divest its products containing Leuprorelin currently marketed and supplied under
Sun Pharma’s brand name Lupride, as provided in Appendix B.
(ii) All products containing Terlipresslin which are currently marketed and supplied under the brand name of
Terlibax or Triolvance.
(iii) All products containing Rosuvastatin + Ezetimibe which are currently marketed and supplied under the
Rosuvas EZ brand name.
(iv) All products containing Olanzapine + Fluoxetine which are currently marketed and supplied under the
Olanex F brand name.
(v) All products containing Levosulpiride + Esomeprazole which are currently marketed and supplied under the
Raciper L brand name.
(vi) All products containing Olmesartan + Amlodipine + Hydroclorthiazide which are currently marketed and
supplied under the Triolvance brand name.74
For more cases on Combinations, refer to section 6.
Page 7 of 8
[s 20] Inquiry into combination by Commission
63 Came into force on 1 June 2011 vide Notification No. S.O. 479(E) dated 4 March 2011.
64 The words “or upon receipt of a reference under sub-section 2 of section 21” omitted by
Act 39 of 2007, section 14 (w.e.f. 1 June 2011).
65 Re Holcim Ltd, Combination Registration No C-2014/07/190.
66 Herfindahl-Hirschman Index (HHI) is one of the indices used to assess
the level of market concentration and the changes in the concentration due to a combination.
67 A divestiture remedy involves two concurrent steps. Firstly, to
ascertain the extent of divestiture (of assets) required and secondly, to determine the specific assets required to be divested. Certain
factors may govern the decision as to the extent of divestiture and the identity of the assets. Plants selected for divestiture should
constitute a complete ecosystem in terms of operational requirements. Further, the proposed divestiture should result in reducing
the overall level of concentration in the relevant market, have a pan relevant market impact and should address the adverse impact
of structural changes in the market resulting from the proposed combination.
68 Note: On account of amendment in the Mines and Minerals
(Development and Regulation) Act, 1957, parties, in order to ensure compliance with the order, submitted an alternative proposal
envisaging sale of 100% of the share capital of Lafarge India as opposed to sale of assets. The Commission approved the
Alternative Proposal in form of a share sale option which contemplated sale of 100% of the share capital of Lafarge India to one
strategic and/or one or more financial investors, subject to the purchaser(s) meeting the Purchaser Requirements as laid down in
para 52 of the order. Accordingly, Supplementary Order was passed by the Commission. [Combination Registration No C-
2014/07/190].
69 Also see UltraTech Cement Ltd, Combination Registration No C-
2015/02/246. [Note: The Commission passed a supplementary order directing sale of entire of Lafarge’s business, rather than just
two cement plants due to certain difficulties in transfer of mining leases under the mining law. (The Mines and Mineral
(Development and Regulation) (MMDR) Act, 1957 does not permit the transfer of mines at the time of the sale of a cement asset.)
This order was challenged by Dalmia Cement (a third party) before COMPAT and the operation of the supplementary order has
been stayed by the COMPAT. The COMPAT also pointed out that the Commission had no jurisdiction to entertain an alternative
proposal submitted by the parties or pass the order dated 2 February 2016.]
70 Sun Pharmaceutical Industries Ltd and Ranbaxy Laboratories Ltd,
Combination Registration No C-2014/05/170.
71 TAMSULOSIN + TOLTERODINE | G4C13 | G4C13;
ROSUVASTATIN + EZETIMIBE | C10G6; LEUPRORELIN | H1C6; TERLIPRESSIN | H4D7; OLANZAPINE + FLUOXETINE
| N5A6; LEVOSULPIRIDE + ESOMEPRAZOLE | A3F49; OLMESARTAN + AMLODIPINE + HYDROCLORTHIAZIDE |
C9E22
72 OLANZAPINE | N5A5; CLOPIDOGREL | B1C5; ATORVASTATIN
| C10A1; LOSARTAN | C9D3; ALFUZOSIN + DUTASTERIDE | G4C12; DARIFENACIN | G4D7; TROSPIUM | G4D8;
FLUVOXAMINE | N6A9; VENLAFAXINE | N6A19; TOLTERODINE | G4D4; ATENOLOL + LOSARTAN | C7G2;
PRASUGREL | B1C23; QUETIAPINE | N5A8; LACOSAMIDE | N3A25; RANOLAZINE | C12A1; OXCARBAZEPINE | N3A9;
AMISULPRIDE | N5A1; LEVETIRACETAM | N3A8; OLMESARTAN + METOPROLOL | C7G3; BAMBUTEROL +
MONTELUKAST | R3A41; SERTRALINE | N6A16; BICALUTAMIDE | L2B15; PIOGLITAZONE | A10B18’
ESOMEPRAZOLE | A2C2; ETORICOXIB | M1A28; DOMPERIDONE + ESOMEPRAZOLE | A3F10; MONTELUKAST |
R3A46; VOGLIBOSE | A10B22; DIVALPROEX | N3A4; ROSUVASTATIN + FENOFIBRATES | C10F6; ROSUVASTATIN |
C10A6; PIOGLITAZONE + GLIMEPIRIDE | A10B51; ATORVASTATIN + EZETIMIBE | C10G1; EDARAVONE | N7X5;
THIOCOLCHICOSIDE + DICLOFENAC | M1A92; ETORICOXIB + THIOCOLCHICOSIDE | M1A109.
Page 8 of 8
[s 20] Inquiry into combination by Commission
73 Ibandronate | M5A5, Olopatadine | R6A47, Lactitol | V6E4,
Lubiprostone | A6F5 and Cyclobenzaprine | M3B7.
74 [Note: The Commission in March 2015 gave its
consent to divest seven brands by Sun Pharmaceutical Industries and Ranbaxy Laboratories to Pune-based Emcure
Pharmaceuticals. With this, Sun Pharma and Ranbaxy have reached the finishing line for the proposed $4 billion merger deal. The
Commission approved Emcure as the approved purchaser of the divestment products as Emcure was found to be a company active
in the sales and marketing of pharmaceutical products in India having the financial resources, proven expertise, manufacturing
capability or ability to outsource manufacturing and incentive to maintain and develop the divestment products, as a viable and
active competitor to the parties in the relevant market.]
End of Document
[s 21] Reference by statutory authority
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > CHAPTER
IV DUTIES, POWERS AND FUNCTIONS OF COMMISSION
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
CHAPTER IV DUTIES, POWERS AND FUNCTIONS OF COMMISSION
75[s 21] Reference by statutory authority
(1) Where in the course of a proceeding before any statutory authority an issue is raised by any party that any
decision which such statutory authority has taken or proposes to take, is or would be, contrary to any of the
provisions of this Act, then such statutory authority may make a reference in respect of such issue to the
Commission:
76[Provided that any statutory authority, may, suo motu, make such a reference to the Commission].
77[(2) On receipt of a reference under sub-section (1), the Commission shall give its opinion, within sixty days of
receipt of such reference, to such statutory authority which shall consider the opinion of the Commission and
thereafter, give its findings recording reasons therefore on the issues referred to in the said opinion].
LEGISLATIVE BACKGROUND
Competition Act, 2002
Notes on clauses of the Bill stated, thus:
Notes on clauses.—This clause contains provisions relating to the circumstances under which a reference can be made to
the Commission by statutory authorities. It provides that if in the course of a proceeding before any statutory authority,
entrusted with the responsibility of regulating any goods or service or market therefor, a party has raised an issue that the
decision taken by the statutory authority would be contrary to the provisions of the Bill, then the statutory authority shall
be bound to make a reference to the Commission. The Commission will, after hearing parties to the proceedings, shall,
give to the statutory authority its opinion and the statutory authority shall thereafter pass its orders. [Clause 21 of the
Competition Bill, 2001].
Competition (Amendment) Act, 2007
Page 2 of 3
[s 21] Reference by statutory authority
Notes on clauses.—This clause seeks to amend sub-sections (1) and (2) of section 21 of the Competition Act, 2002 relating to
reference by statutory authority.
Under the existing provisions contained in sub-section (1) of said section where in the course of a proceedings before any statutory
authority an issue is raised by any party that any decision which such statutory authority has taken or proposes to take, is or would
be, contrary to any of the provisions of the Act, then such statutory authority may make a reference in respect of such issue to the
Commission. Under the existing sub-section (2), on receipt of a reference from a statutory authority, the Commission shall, after
hearing the parties to the proceedings, give its opinion to such statutory authority which shall thereafter pass such order on the
issues referred to in that sub-section as it deems fit.
It is proposed to add a proviso to said sub-section (1) so as to provide that any statutory authority may suo motu make a reference
to the Commission. It is also proposed to amend sub-section (2) so as to provide that the statutory authority on the opinion of the
Commission shall give its findings recording reasons therefor. [Clause 15 of the Competition (Amendment) Bill, 2007].
SCOPE OF THE SECTION
A provision has been made in the section for a reference being made by any statutory authority to the Commission for its
opinion on any issue raised by any party before such authority that any decision taken or proposed to be taken by the said
authority is, or would be, in contravention of the provisions of this Act. The reference will obviously relate to the
provisions of sections 3, 4 or 5 of the Competition Act, 2002.
On receipt of reference, the Commission shall give its opinion within 60 days to the statutory authority concerned.
Statutory authority has been defined in section 2(w) of the Act.
In the case of Hyundai Motor India Ltd v CCI,78 the Madras High Court held that the Statutory Authorities referred to in
sections 21 and 21A should naturally be those other than the Authorities functioning under the Competition Act, 2002.
Otherwise, sub-section (2) of sections 21 and 21A cannot be given a meaningful interpretation. The Statutory Authority
referred to in section 21 is a Statutory Authority which is vested with a power to record findings on the basis of the opinion
of the Commission. If the expression “Statutory Authority” appearing in section 21 includes the Director General also,
then the Director General should have the authority to give findings. However, that is not a scope of the Act and the
Director General is an authority constituted to assist the Commission. The Statutory Authority referred to in section 21 is
one which can derive assistance from the Competition Commission.
Similarly, the Statutory Authority contemplated in section 21A is one from whom the Commission itself can seek an
opinion. The Director General under the Act is not competent to give any opinion except conducting an investigation and
assisting the Commission in the enquiry initiated under section 19. The word “Statutory Authority” found in sections
19(1)(b), 21 and 21A, therefore, cannot include the Director General.
75 Came into force on 20 May 2009 vide Notification No. S.O. 1241(E), dated 15 May 2009.
76 Ins. by Act 39 of 2007, section 15(a) (w.e.f. 20 May 2009).
Page 3 of 3
[s 21] Reference by statutory authority
77 Subs. by Act 39 of 2007, section 15(b) (w.e.f. 20 May 2009). Prior to its substitution, it
stood as under: (2) On receipt of a reference under sub-section (1), the Commission shall, after hearing the parties to the
proceedings, give its opinion to such statutory authority which shall thereafter pass such order on the issues referred to in that sub-
section as it deems fit. Provided that the Commission shall give its opinion under this section within sixty days of receipt of such
reference.
78 Hyundai Motor India Ltd v CCI,
[2015] 127 CLA 46 : 2015 (3) CTC 290 : (2015) 2 Mad LJ 560 (Mad).
End of Document
[s 21A] Reference by Commission
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > CHAPTER
IV DUTIES, POWERS AND FUNCTIONS OF COMMISSION
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
CHAPTER IV DUTIES, POWERS AND FUNCTIONS OF COMMISSION
79[s 21A] Reference by Commission
(1) Where in the course of a proceeding before the Commission an issue is raised by any party that any decision
which, the Commission has taken during such proceeding or proposes to take, is or would be contrary to any
provision of this Act whose implementation is entrusted to a statutory authority, then the Commission may make
a reference in respect of such issue of the statutory authority.
Provided that the Commission, may, suo motu, make such a reference to the statutory authority.
(2) On receipt of a reference under sub-section (1), the statutory authority shall give its opinion, within sixty days of
receipt of such reference, to the Commission which shall consider the opinion of the statutory authority, and
thereafter give its findings recording reasons therefor on the issues referred to in the said opinion].
LEGISLATIVE BACKGROUND
Competition (Amendment) Act, 2007
Notes on clauses.—This clause seeks to insert a new section 21A regarding reference by Commission.
This new section provides for making of a reference by the Commission to statutory authorities on an issue raised in any matter
before it or suo motu. The statutory authority shall be duty bound to give its opinion within sixty days to the Commission and the
Commission shall consider the opinion of the statutory authority and give its findings recording reasons therefor. [Clause 16 of the
Competition (Amendment) Bill, 2007].
SCOPE OF THE SECTION
This section has been inserted by the Amendment Act, 2007 providing for making a reference by the Commission to the
statutory authority in case an issue is raised in the proceedings before the Commission that any decision which the
Page 2 of 2
[s 21A] Reference by Commission
Commission has taken or proposes to take would be contrary to any provision of this Act, whose implementation is
entrusted to a statutory authority. On receipt of such a reference, the statutory authority concerned shall give its opinion
within 60 days to the Commission which shall consider the same and give its findings on the said issue.
Sections 21 and 21A
The provisions of sections 21 and 21A of the Competition Act, read in the aforesaid context, indicated that the intention of the
Parliament was not to abrogate any other law but to ensure that even in cases where CCI or other statutory authorities contemplated
passing orders, which may be inconsistent with other statutes, the opinion of the concerned authority was taken into account while
passing such orders. The plain intention being that none of the statutory provisions were abrogated but only bi-passed in certain
cases. These provisions - sections 21 and 21A of the Competition Act - clearly indicates that the intention of the Parliament was
that the Competition Act co-exist with other regulatory statues and be harmoniously worked in tandem with those statues and as far
as possible, statutory orders be passed which were consistent with the concerned statutory enactments including the Competition
Act.80
79 Ins. by Amendment Act, 2007 (39 of 2007), section 16 (w.e.f. 20 May 2009).
80 Telefonaktiebolaget LM Ericsson (PURL) v CCI, 2016 Comp LR
497 (Delhi).
End of Document
[s 22] Meetings of Commission
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > CHAPTER
IV DUTIES, POWERS AND FUNCTIONS OF COMMISSION
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
CHAPTER IV DUTIES, POWERS AND FUNCTIONS OF COMMISSION
81[s 22] Meetings of Commission
(1) The Commission shall meet at such times and such places, and shall observe such rules of procedure in regard to
the transaction of business at its meetings as may be provided by regulations.82
(2) The Chairperson, if for any reason, is unable to attend a meeting of the Commission, the senior-most Member
present at the meeting, shall preside at the meeting.
(3) All questions which come up before any meeting of the Commission shall be decided by a majority of the
Members present and voting, and in the event of an equality of votes, the Chairperson or in his absence, the
Member presiding, shall have a second or casting vote:
Provided that the quorum for such meeting shall be three Members].
LEGISLATIVE BACKGROUND
Competition Act, 2002
Notes on clauses of the Bill stated, thus:
Notes on clauses.—This clause contains provisions relating to constitution of Benches of the Commission and exercise of the
jurisdiction, powers and authority of the Commission by such Benches. Sub-clauses (2) and (3) stipulate that each Bench shall
consist of two Members of which at least one Member shall be Judicial Member. A Judicial Member shall be a Member who is or
has been or is qualified to be a Judge of a High Court. Sub-clause (4) provides that the Bench over which the Chairperson presides
shall be the Principal Bench and the other Benches shall be known as Additional Benches. Sub-clause (5) empowers the
Chairperson to constitute one or more Benches to be called Mergers Benches which will exclusively deal with matters referred to
in clauses 5 and 6 of the Bill. Sub-clause (6) empowers the Central Government to specify, by notification, the places at which the
Principal Bench and other Benches shall sit. [Clause 22 of the Competition Bill, 2001].
Financial Memorandum
Page 2 of 4
[s 22] Meetings of Commission
Clause 22 of the Bill provides that the jurisdiction, powers and authority of the Commission may be exercised by Benches
thereof. The Chairperson may constitute one or more Bench including Mergers Benches. [Competition Bill, 2001]
Competition (Amendment) Act, 2007
Notes on clauses.—This clause seeks to substitute section 22 of the Competition Act, 2002 relating to Benches of the Competition
Commission of India.
Under the existing provisions contained in the said section, the jurisdiction, powers and authority of the Commissioner may be
exercised by Benches thereof.
It is proposed to substitute the said section for the meetings of the Competition Commission of India. It, inter alia, provides that
the Commission shall meet at such times and places, and shall observe such rules of procedure in regard to the transaction of
business at its meetings as may be provided by the regulations. It also provides that all questions which come up before any
meeting of the Commission shall be decided by a majority of the members present and voting, and in the event of an equality of
votes, the Chairperson or in his absence, the Member presiding, shall have a second or casting vote. It also provides that the
quorum for such meeting shall be three members. [Clause 17 of the Competition (Amendment) Bill, 2007].
SCOPE OF THE SECTION
Substantial changes have been made in this section. Originally, it was provided that Chairperson is empowered to
constitute benches of the Commission to hear matters arising out of the Competition Act, 2002. Every Bench shall have at
least two members, including a Judicial Member. It was also provided that there will be a Principal Bench which will be
presided over by the Chairman. Other Benches constituted by the Chairperson shall be known as Additional Benches. The
Chairperson will also constitute one or more Merger Benches to exclusively deal with matters relating to combinations
under sections 5 and 6.
As per changes made by the Amendment Act, 2007 the concept of Constitution of Benches of the Commission has been
replaced by meeting of commission. The Commission shall meet at such time and places and shall observe rules of
procedure in this regard. All questions will be decided by majority of members present and chairman shall have a casting
vote. There shall be a quorum of three members for such meetings.
For the text of CCI (Meeting for Transaction of Business) Regulations, 2009, refer to Appendix 4.
In the case of Lafarge India v CCI,83 stay was sought on the Commission’s 2012 order84 imposing penalty on the cement
companies on grounds of violation of principles of natural justice. It was argued that the Commission’s order was signed
by the Chairman of the Commission even though he had not attended the meeting in which oral arguments were made. It
was further argued that since the Commission was exercising adjudicatory powers, it was bound by the principles of
natural justice, i.e., “he who hears should decide”. The interlocutory applications filed by the appellants were disposed of
by the Tribunal vide order dated 17 May 2013 and penalty imposed by the Commission was stayed subject to the condition
that the appellants would deposit 10% thereof. The Tribunal in its 2013 order observed that though the Supreme Court in
the case of Brahm Dutt85 and Steel Authority of India86 noted that the Competition Commission has adjudicatory
functions in addition to regulatory and advisory functions, the adjudicatory role was taken away by subsequent
amendments. The Tribunal noted that as per the Amending Act No 39 of 2007, sections 22, 23, 24 and 25 with effect from
12 October 2007 came to be amended while sections 23, 24 and 25 came to be deleted altogether. Further, the Tribunal
noted that section 22 as it existed prior to the amendment, stressed on the adjudicatory role of the Commission as it
provided for the Benches consisting of at least one “Judicial Member”. Such Judicial member, as per the section, would
have to be a Judge of a High Court or qualified to be a Judge of a High Court. It was held that once section 22 was
Page 3 of 4
[s 22] Meetings of Commission
amended and it was provided in new section 22 that the Commission would transact its business in the meetings and that
all the questions in the meeting would be decided by a majority vote where Chairperson would have a casting vote in case
of an equality of votes, the message was loud and clear that inspite of the specific observation of the Hon’ble Supreme
Court, the adjudicatory role was done away with.
The Tribunal also took note that the Statement of Objects and Reasons in the Competition (Amendment) Bill, 2006, Bill
No 18, (earlier to 2007 Bill) mentioned in para 3(b) and (c) about omitting the provisions relating to adjudication of
disputes between two or more parties by the Commission and to provide for investigation through the Director General in
case there existed a prima facie case and conferring power upon the Commission to pass orders on completion of an
inquiry and impose monetary penalties and in doing so, the Commission to work as a collegium and its decisions would be
based on simple majority. Para (c) related to the establishment of the Competition Appellate Tribunal (COMPAT), to be
headed by a retired judge of the Supreme Court or the Chief Justice of a High Court. In the Statement of Objects and
Reasons of 24 February 2006, sections 23, 24 and 25 were also sought to be omitted while section 22 was sought to be
amended by omitting the reference to the Benches of the CCI to provide that in place of the Benches, the Commission
would transact its business in the meetings. The Tribunal noted that curiously enough in the Statement of Objects and
Reasons dated 9 August 2007, which was a Statement of Objects and Reasons for Competition (Amendment) Bill, 2007
being Bill No. 70 of 2007, a significant change took place, where the earlier mentioned para 3 (b) was deleted. However,
section 22 as was proposed in the earlier Bill remained the same. As per the Tribunal, though the Statement of Objects and
Reasons of Act No 39 of 2007 did not speak about omitting the adjudicatory role, the said adjudicatory role stands deleted
because of substitution of the old section 22 by a new one, introduced by that Amendment Act No 39 of 2007. The
Tribunal observed that the amendment to section 22 will have to be tested against the observations of the Hon’ble Supreme
Court in Brahm Dutt’s case, which was prior to the amendment and Steel Authority of India’s judgment, which was
subsequent to the amendment and that being a “very complex question, would require not only the consideration of section
22, but also section 15 and the General Regulations, which also were amended.”
The Tribunal, however, in its 2015 final order87 observed that a survey of various provisions of the Act and the
Regulations shows that even while amending the Act by Act 39 of 2007 and Act 39 of 2009, the Parliament consciously
decided to retain provisions relating to adjudicatory functions of the Commission in their full vigour and the mere fact that
by virtue of substituted section 22, the business of the Commission is required to be transacted in its meetings and the
business would necessarily include exercise of adjudicatory functions/powers, cannot lead to an inference that while
deciding the allegations contained in the information filed or reference made under section 19(1) (a) and passing orders
under sections 27, 33, 39, 42, 42A, 43, 43A, 44 and 45, the Commission exercises purely administrative power or
discharges administrative functions or that while passing orders under those sections and also under section 28, which can
have far-reaching impact on the rights of the parties, the Commission is not required to act as per the accepted standard of
fairness and render just decision after complying with the principles of natural justice as expounded by the courts across
the globe, including the Supreme Court of India. The Tribunal therefore, set aside the Commission’s order and remitted it
back to the Commission for fresh adjudication on grounds of violation of principles of natural justice.
81 Subs. by Amendment Act, 2007 (39 of 2007), section 17 (w.e.f. 12 October 2007). Prior to
its substitution, it stood as under:
[s 22] Benches of Commission
(1) The jurisdiction, powers and authority of the Commission may be exercised by Benches thereof.
(2) The Benches shall be constituted by the Chairperson and each Bench shall consist of not less than two Members.
(3) Every Bench shall consist of at least one Judicial Member.
Explanation.—For the purposes of this sub-section, “Judicial Member” means a Member who is, or has been, or is
qualified to be, a Judge of a High Court.
Page 4 of 4
[s 22] Meetings of Commission
(4) The Bench over which the Chairperson presides shall be the Principal Bench and the other Benches shall be known as the
Additional Benches.
(5) There shall be constituted by the Chairperson one or more Benches to be called the Mergers Bench or Mergers Benches, as
the case may be, exclusively to deal with matters referred to in sections 5 and 6.
(6) The places at which the Principal Bench, other Additional Bench or Mergers Bench shall ordinarily sit shall be such as the
Central Government may, by notification, specify.
82 Competition Commission of India (Meeting for Transaction of Business) Regulations,
2009 vide Notification No R-40007/6/Reg-Meeting/Noti/04-CCI dated 21 May 2009.
83 Lafarge India v CCI, Appeal No 105 of 2012 with IA No 224/2012
and IA No 270/2012, decided on 17 May 2013.
84 RTP Enquiry No 52 of 2006,
[2013] 112 CLA 387 (CCI).
85 Brahm Dutt v UOI, AIR 2005
SC 730 : (2005) 2 SCC 431 :
JT 2005 (1) SC 421 .
86 CCI v Steel Authority of India Ltd, 2010 (5) All MR (SC) 934 : 2010
Comp LR 61 (SC) : (2010) 4 Comp LJ 1 (SC) :
JT 2010 (10) SC 26 : (2011) 2 Mad LJ 271 (SC) : 2010 (9) Scale
291 : (2010) 10 SCC 744 : [2010] 103
SCL 269 (SC) : [2010] 11 SCR 112 :
2010 (8) UJ 4093 (SC).
87 Lafarge India Ltd v CCI, Appeal No 105 of 2012 and IA No 36/2013,
Appeal Nos 103 of 2012, 104, 106, 107, 108, 109, 110, 111, 112, 113, 122, 123, 124, 125, 126, 127, 128, 129, 132, 133 and 134/12,
decided on 11 December 2015.
End of Document
[s 23] [* * *]
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > CHAPTER
IV DUTIES, POWERS AND FUNCTIONS OF COMMISSION
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
CHAPTER IV DUTIES, POWERS AND FUNCTIONS OF COMMISSION
[s 23] 88[* * *]
LEGISLATIVE BACKGROUND
Competition Act, 2002
Notes on Clauses of the Bill stated, thus:
Notes on clauses.—This clause deals with distribution of business of the Commission amongst its Benches. It also empowers the
Chairperson to transfer a Member from one Bench to another and also to authorise a Member of one Bench to discharge the
functions as a Member of any other Bench with the prior approval of the Central Government. [Clause 23 of the Competition Bill,
2001].
This section has been omitted by the Amendment Act, 2007 in view of changes made in section 22.
Competition (Amendment) Act, 2007
Notes on clauses.—This clause seeks to omit sections 23, 24 and 25 of the Competition Act, 2002 relating to distribution of
business of the Competition Commission of India amongst Benches, procedure for deciding a case where Members of a Bench
differ in opinion and jurisdiction of Bench. [Clause 18 of the Competition (Amendment) Bill, 2007].
Page 2 of 2
[s 23] [* * *]
88 Section 23 omitted by Amendment Act, 2007 (39 of 2007), section 18 (w.e.f. 12 October
2007). Prior to its omission, it stood as under:
[s 23] Distribution of business of Commission amongst Benches
(1) Where any Benches are constituted, the Chairperson may, from time to time, by order, make provisions as to the distribution
of the business of the Commission amongst the Benches and specify the matters, which may be dealt with by each Bench.
(2) If any question arises as to whether any matter falls within the purview of the business allocated to a Bench, the decision of
the Chairperson thereon shall be final.
(3) The Chairperson, may—
(i) transfer a Member from one Bench to another Bench; or
(ii) authorise the Members of one Bench to discharge also the functions of the Members of other Bench.
Provided that the Chairperson shall transfer, with the prior approval of the Central Government, a Member from one Bench
situated in one city to another Bench situated in another city.
(4) The Chairperson may, for the purpose of securing that any case or matter which, having regard to the nature of the questions
involved, requires or is required in his opinion or under the rules made by the Central Government in this behalf, to be
decided by a Bench composed of more than two Members, issue such general or special orders as he may deem fit.
End of Document
[s 24] [* * *]
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > CHAPTER
IV DUTIES, POWERS AND FUNCTIONS OF COMMISSION
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
CHAPTER IV DUTIES, POWERS AND FUNCTIONS OF COMMISSION
[s 24] 89[* * *]
LEGISLATIVE BACKGROUND
Competition Act, 2002
Notes on clauses of the Bill stated, thus:
Notes on clauses.—This clause deals with the procedure for deciding a case where the Members of a Bench differ in opinion. It
provides that if Members of a Bench differ in their opinion on any point or points, they shall state such point or points on which
they differ and make a reference to the Chairperson. The Chairperson may hear such point or points himself or refer the case for
hearing on such point or points by one or more of the other Members. The point or points as decided, according to the opinion of
the majority of the Members who have heard the case including those who had first heard it, shall be the decision of the
Commission. [Clause 24 of the Competition Bill, 2001].
SCOPE OF THE SECTION
This section has been omitted by the Amendment Act, 2007 in view of changes made in section 22.
Page 2 of 2
[s 24] [* * *]
89 Section 24 omitted by Amendment Act, 2007 (39 of 2007), section 18 (w.e.f. 12 October
2007). Prior to its omission, it stood as under:
[s 24] Procedure for deciding a case where Members of a Bench differ in opinion
If the Members of a Bench differ in opinion on any point, they shall state the point or points on which they
differ, and make a reference to the Chairperson who shall either hear the point or points himself or refer the case for hearing on
such point or points by one or more of the other Members and such point or points shall be decided according to the opinion of the
majority of the Members who have heard the case, including those who first heard it.
End of Document
[s 25] [* * *]
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > CHAPTER
IV DUTIES, POWERS AND FUNCTIONS OF COMMISSION
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
CHAPTER IV DUTIES, POWERS AND FUNCTIONS OF COMMISSION
[s 25] 90[* * *]
LEGISLATIVE BACKGROUND
Competition Act, 2002
Notes on clauses of the Bill stated, thus:
Notes on clauses.—This clause lays down the jurisdiction of a Bench of the Commission. It provides that an inquiry shall be
initiated or a complaint be instituted or a reference be made under the proposed legislation before a Bench within the local limits of
jurisdiction of which the respondent or each of the respondents, actually and voluntarily resides or carries on business or personally
works for gain or the cause of action, wholly or in part, has arisen. The Explanation to this clause specifies the category of
respondents in whose case the registered or principal office or subordinate office shall be the place of his business. [Clause 25 of
the Competition Bill, 2001].
SCOPE OF THE SECTION
This section has been omitted by the Competition (Amendment) Act, 2007 in view of changes made in section 22. The
Commission shall have jurisdiction in respect of all matters arising out of the Competition Act, 2002.
90 Section 25 omitted by Amendment Act, 2007 (39 of 2007), section 18 (w.e.f. 12 October
2007). Prior to its omission, it stood as under:
[s 25] Jurisdiction of Bench
Page 2 of 2
[s 25] [* * *]
An inquiry shall be initiated or a complaint be instituted or a reference be made under this Act before a Bench
within the local limits of whose jurisdiction—
(a) the respondent, or each of the respondents, where there are more than one, at the time of the initiation of inquiry or institution
of the complaint or making of reference, as the case may be, actually and voluntarily resides, or carries on business, or
personally works for gain; or
(b) any of the respondents, where there are more than one, at the time of the initiation of the inquiry
or institution of complaint or making of reference, as the case may be, actually and voluntarily resides or carries on
business or personally works for gain provided that in such case either the leave of the Bench is given, or the respondents
who do not reside, or carry on business, or personally works for gain, as aforesaid, acquiesce in such institution; or
(c) the cause of action, wholly or in part, arises.
Explanation.—A respondent, being a person referred to in sub-clause (iii) or sub-clause (vi) or sub-clause (vii) or sub-
clause (viii) of clause (l) of section 2, shall be deemed to carry on business at its sole or principal place of business in
India or at its registered office in India or where it has also a subordinate office at such place.
End of Document
[s 26] Procedure for inquiry under section 19
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > CHAPTER
IV DUTIES, POWERS AND FUNCTIONS OF COMMISSION
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
CHAPTER IV DUTIES, POWERS AND FUNCTIONS OF COMMISSION
91[s 26] Procedure for inquiry under section 19
(1) On receipt of a reference from the Central Government or a State Government or a statutory authority or on its
own knowledge or information received under section 19, if the Commission is of the opinion that there exists a
prima facie case, it shall direct the Director General to cause an investigation to be made into the matter:
Provided that if the subject-matter of an information received is, in the opinion of the Commission,
substantially the same as or has been covered by any previous information received, then the new
information may be clubbed with the previous information.
(2) Where on receipt of a reference from the Central Government or a State Government or a statutory authority or
information received under section 19, the Commission is of the opinion that there exists no prima facie case, it
shall close the matter forthwith and pass such orders as it deems fit and send a copy of its order to the Central
Government or the State Government or the statutory authority or the parties concerned, as the case may be.
(3) The Director General shall, on receipt of direction under sub-section (1), submit a report on his findings within
such period as may be specified by the Commission.
(4) The Commission may forward a copy of the report referred to in sub-section (3) to the parties concerned:
Provided that in case the investigation is caused to be made based on a reference received from the Central
Government or the State Government or the statutory authority, the Commission shall forward a copy of the
report referred to in sub-section (3) to the Central Government or the State Government or the statutory
authority, as the case may be.
(5) If the report of the Director General referred to in sub-section (3) recommends that there is no contravention of
the provisions of this Act, the Commission shall invite objections or suggestions from the Central Government or
the State Government or the statutory authority or the parties concerned, as the case may be, on such report of the
Director General.
(6) If, after consideration of the objections or suggestions referred to in sub-section (5), if any, the Commission
agrees with the recommendation of the Director General, it shall close the matter forthwith and pass such orders
as it deems fit and communicate its order to the Central Government or the State Government or the statutory
authority or the parties concerned, as the case may be.
(7) If, after consideration of the objections or suggestions referred to in sub-section (5), if any, the Commission is of
the opinion that further investigations are called for, it may direct further investigations in the matter by the
Director General or cause further inquiry to be made in the matter or itself proceed with further inquiry in the
matter in accordance with the provisions of this Act.
Page 2 of 24
[s 26] Procedure for inquiry under section 19
(8) If the report of the Director General referred to in sub-section (3) recommends that there is contravention of any
of the provisions of this Act, and the Commission is of the opinion that further inquiry is called for, it shall
inquire into such contravention in accordance with the provisions of this Act.]
HISTORICAL BACKGROUND
Competition Act, 2002
Notes on clauses of the Bill stated, thus:
Notes on clauses.—This clause lays down the detailed procedure for any inquiry initiated suo motu by the Commission and various
complaints and references referred to in clause 19 of the Bill. In case the Commission is of the opinion in respect of any complaint
referred to in item (a) of sub-clause (1) of clause 19 of the Bill that no prima facie case is existing, it shall dismiss the complaint
and pass such orders as it may deem fit including imposition of costs, if any. If the Commission is of the opinion that there exists a
prima facie case, it shall direct the Director General to cause an investigation to be made into the alleged matter. The Director
General is required to submit a report on his findings on such allegation to the Commission within the period allowed by the
Commission. On receipt of the report of the Director General in respect of the said matter, the Commission shall forward a copy of
the same to the parties concerned or to the Central Government or the State Government, as the case may be. In case the report of
the Director General recommends that there is no contravention of the provisions of the Bill, the complainant shall be given an
opportunity to rebut the findings of the Director General. If, after hearing the complainant, the Commission agrees with the
recommendations of the Director General, the Commission shall dismiss the complaint. In case, the Commission, after hearing the
complainant, is of the opinion that further inquiry is required to be conducted, it shall direct the complainant to proceed with the
complaint. If the report of the Director General relates to a reference and such report recommends that there is contravention of any
of the provisions of the Bill, the Commission shall invite the comments from the Central Government or the State Government or
the statutory authority, as the case may be, and it shall return the reference if there is no prima facie case or the Commission may
proceed with the reference as a complaint if there is a prima facie case. [Clause 26 of the Competition Bill, 2001].
Competition (Amendment) Act, 2007
Notes on clauses.—This clause seeks to substitute section 26 of the Competition Act, 2002 relating to procedure for inquiry
on complaints under section 19.
It is proposed to provide that on receipt of a reference from the Central Government or a State Government or a statutory authority
or on its own knowledge or information received under section 19, if the Commission is of the opinion that there exists a prima
facie case, it shall direct the Director General to cause an investigation to be made into the matter. It also provides that on receipt of
reference under the above provision, if the Commission is of the opinion that there exists no prima facie case, it shall close the
matter forthwith and pass such orders as it deems fit and send a copy of its order to the Central Government or the State
Government or the statutory authority or the parties concerned, as the case may be. The Director General on receipt of direction
under the above provision shall submit a report on his findings within such period as may be specified by the Commission. The
Commission may forward a copy of the report to the parties concerned. It also provides that if the report of the Director General
recommends that there is no contravention of the provisions of this Act, the Commission shall invite objections or suggestions
from the Central Government or the State Government or the statutory authority or the parties concerned, as the case may be, on
such report of the Director General. It provides that if the Commission agrees to the recommendations of the Director General, it
shall close the matter and pass such order as it deems fit and communicate its order to the authorities mentioned. It further provides
that after consideration of the objections or suggestions referred to above, if any, the Commission is of the opinion that further
investigations are called for, it may direct for further investigation. It further provides that if the report of the Director General
recommends that there is contravention of any of the provisions of the Act and the Commission is of the opinion that further
inquiry is called for, it shall inquire into such contravention in accordance with the provisions of the Act. It is also proposed to
Page 3 of 24
[s 26] Procedure for inquiry under section 19
provide that if the subject-matter of an information received is, in the opinion of the Commission, substantially the same as or has
been covered by any previous information received, then the new information may be clubbed with the previous information.
[Clause 19 of the Competition (Amendment) Bill, 2007].
MRTP Act, 1969
MRTP Act, 1969.—Section 11 of the MRTP Act, 1969, since repealed, provided for investigation by Director General as
under:
[s11] Investigation by Director-General before issue of process in certain cases.— (1) The Commission may, before issuing any
process requiring the attendance of the person against whom an inquiry (other than an inquiry upon an application by the Director
General) may be made under section 10, by an order, require the Director-General to make, or cause to be made, a preliminary
investigation in such manner as it may direct and submit a report to the Commission to enable it to satisfy itself as to whether or
not the matter requires to be inquired into.
(2) The Director General may, upon his own knowledge or information or on a complaint made to him, make, or cause to be made,
a preliminary investigation in such manner as he may think fit to enable him to satisfy himself as to whether or not an application
should be made by him to the Commission under section 10.
(3) For the purpose of conducting the preliminary investigation under sub-section (1), or sub-section (2), as the case may be, the
Director-General or any other person making the investigation shall have the same powers as may be exercised by an Inspector
under sub-section (2) of section 44.
(4) Any order or requisition made by a person making an investigation under sub-section (1), or sub-section (2), shall be enforced
in the same manner as if it were an order or requisition made by an Inspector appointed under section 240 or section 204A of the
Companies Act, 1956 (1 of 1956), and any contravention of such order or requisition shall be punishable in the same manner as if it
were an order or requisition made by an Inspector appointed under the said section 240 or section 240A.
Raghavan Committee—Recommendations of
This section is based on the recommendations of the Raghavan Committee which suggested appointment of Director
General (Investigation & Prosecution) having separate prosecutorial and investigative wings. It was also suggested that the
Director General will not have suo moto powers of investigation. See para 6.1.8 of the Report.
SCOPE OF THE SECTION
This section has been recast by the Amendment Act, 2007.
The Commission is empowered to direct the Director General to make investigation in respect of reference made by
Central/State Government/statutory authority or on its own knowledge or information with a view to satisfy itself, whether
or not the same may be inquired into by the Commission. In case, no prima facie case is made out on the basis of the facts
available in the complaint, it is not necessary for the Commission to refer the same to the Director General for
investigation as the same will be an exercise in futility. The Commission may close the matter, in case no prima facie case
exists.
Page 4 of 24
[s 26] Procedure for inquiry under section 19
A copy of the report of the Director General shall be sent to the informant or the Central/State Government/Statutory
Authority, as the case may be, and the commission will invite objections or suggestions from the parties concerned on the
Report. After consideration of objections/suggestions, the Commission may close the matter or may direct further
investigation by the Director General. In case the report of the Director General recommends contravention of any
provision of this Act, it may enquire into such contravention.
The report of the Director General is neither a decision nor an administrative order which affects judicially the rights of the
concerned party(ies). There is no implied obligation on the part of Director General to disclose the entire contents of the
complaint to the person against whom the complaint has been made, or to allow the said party the opportunity to refute the
allegations made in the complaint, at the stage of preliminary investigation. Though the Director General is not required to
act judicially (as is expected of a quasi-judicial authority), at the same time he must act with justice and fair play. In ITC v
MRTPC,92 it was held, that:
the preliminary investigation conducted by the Director of Investigation under section 11 of the Act is in the nature of a fact-
finding investigation. Materials collected by him are for the consideration and satisfaction of the Commission to come to a prima
facie conclusion in determining whether or not an enquiry under section 37 should be instituted. The relevant materials gathered in
the preliminary investigation would be examined by the Commission in open court during the course of enquiry under section 37
of the Act and at that time the petitioner shall have every opportunity to controvert each and every information, document or
material that might be brought on record and which might be used by the Commission against the petitioner during the course of
the enquiry for arriving at the conclusion as to whether or not the petitioner-company is indulging in any restrictive trade practices
or whether such trade practices are prejudicial to the interest of the public.
Hon’ble Supreme Court of India in Excel Crop Care Ltd v CCI has held that while examining the conduct of the parties,
the Director General can well look into the past and subsequent conduct of the parties to ascertain the trends in behaviour
even though the findings will be confined to a period post-notification of the relevant provisions of the Act.93
Investigation Report is only a report made by the Investigating Officer on the basis of the facts asserted by him and the
conclusion drawn by him from such facts. In case the Commission does not agree with the recommendations made in the
report, it is well within its right to issue the Notice of Enquiry (NOE) contrary to such recommendations. The facts as
mentioned in the NOE giving rise to an inference of unfair trade practice on the part of the Respondents were sufficient
and hence it cannot be said that the issue of NOE was against the principle of natural justice.94
A plain reading of Section 26(1) shows that at the opinion formation stage regarding existence of a prima facie case
needing investigation, the CCI should consider the contents of, inter alia, information supplied under section 19(1)(a) and
the documents, if any, received with the reference or information. This is a sine qua non for a direction to the Director
General to investigate into the matter. Consequently, while exercising power under section 26(1), the CCI cannot
adjudicate upon the merits and de-merits of the allegations in the information.
At the stage of forming a prima facie view, as required under Section 26(1) of the Act, the Commission may not really record
detailed reasons, but must express its mind in no uncertain terms that it is of the view that prima facie case exists, requiring
issuance of direction for investigation to the Director General. Such view should be recorded with reference to the information
furnished to the Commission. Such opinion should be formed on the basis of the records, including the information furnished and
reference made to the Commission under the various provisions of the Act, as afore-referred.95
If after examining the contents of the reference or information, the Commission finds that the material produced along with
it is not sufficient for forming an opinion about the existence or otherwise of a prima facie case or it wants some
Page 5 of 24
[s 26] Procedure for inquiry under section 19
clarification on any particular aspect of the matter/issue, it seeks a preliminary conference and invites the
complainant/information or other person as is considered necessary for the preliminary conference (Regulation 17 of the
2009 regulations). Thereafter, the CCI can pass an order under section 26(1) briefly stating the reasons for forming an
opinion regarding existence of a prima facie case warranting the Director General’s investigation.96
Order from Appellate Tribunal
Order of investigation from Appellate Tribunal does not require the Commission to pass a subsequent order under section
26(1) recording reasons why the investigation should be conducted. Commission cannot sit in appeal over the direction of
the Appellate Tribunal and pass its own order recording its own reasons.97
Procedure to be followed by the Commission
Information/reference and preliminary scrutiny: The inquiry envisaged by section 19(1) into any alleged contravention of
section 3(1) or section 4(1) can be initiated by the Commission either on its own motion or on receipt of any information
from any person, consumer, their association, trade association, a reference made by the Central or State Government or a
statutory authority. After the information or reference received in the office of the Commission is scrutinised by the
Secretary of the Commission and if the same is found to be fulfilling all the requirements of the regulation98 14, then the
same is placed before the Commission for consideration whether a prima facie case has been made out for investigation. In
terms of regulation 17, the Commission can hold preliminary conference for that purpose. The Commission can invite the
information provider and such other person, as may be considered necessary for the preliminary conference.
Prima facie opinion: Section 26(1) read with regulation 18 provides that if the Commission forms an opinion that there
exists a prima facie case, then it is required to issue direction to the Director General to cause an investigation to be made
into the matter.
The elements so provided under Sections 3, 4 read with Section 19(3) of the Act are required to be noted and/or kept in mind by
the Commission at the time of passing “prima facie opinion” for directing the inquiry, as contemplated under Section 19 read with
Section 26(1) of the Competition Act. The Section nowhere contemplates to give personal hearing to the informant or to the
affected person and/or any other person. However, the scheme of the Act and the regulations so read, including the Rules, the
Commission in its discretion may call any such person for rendering assistance and/or to produce the record/material for arriving
at, even the prima facie opinion. Therefore, there is no prohibition/restriction on the Commission from not calling material
documents and assistance from any person. The Commission, therefore, has discretionary power and/or power to call for material
documents, affidavits, even by permitting them to file amended information, materials, data and details. The Commission also has
power, in view of the Regulations to hold conferences with the concerned person/parties including their advocates/authorized
person.99
Investigation by Director General: The detailed procedure for conducting investigation is contained in section 41 read with
section 36 and regulations 20, 21, 35, 41, 42 and 45. In terms of regulation 41, the Director General can determine the
manner in which the evidence may be adduced. In the proceedings before him in terms of regulation 41(2), the Director
General can admit evidence taken in the form of verifiable transcripts of tape recordings, unedited versions of video
recording, electronic mail, telephone records including authenticated mobile telephone records, written signed unsworn
statements of individuals or signed responses to written questionnaires or interviews or comments or opinions or analyses
of experts based upon market surveys or economic studies or other authoritative texts or otherwise, as material evidence;
admit on record every document purporting to be a certificate, certified copy or other document, which is by law declared
to be admissible as evidence of any particular fact provided it is duly certified by a Gazetted Officer of the Central
Government or by a State Government or a statutory authority, as the case may be or a Magistrate or a Notary appointed
under the Notaries Act, 1952 or the Secretary of the Commission; admit the entries in the books of account, including those
maintained in an electronic form, regularly kept in the course of business, including entries in any public or other official
book, register or record or an electronic record, made by a public servant in the discharge of his official duty, or by any
other person in performance of a duty specially enjoined by the law of the country in which such book, register or record
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or an electronic record is kept, as documentary evidence; admit the opinion of any person acquainted with the handwriting
of the person by whom a document is supposed to have been written or signed, as relevant fact to prove the handwriting of
the person by whom the document was written or signed; admit the opinion of the handwriting experts or the experts in
identifying finger impressions or the persons specially skilled in interpretation of foreign law or of science or art; take
notice of the facts of which notice can be taken by a court of law under section 57 of the Indian Evidence Act, 1872; accept
the facts, which parties to the proceedings admit or agree in writing as proved; presume that any document purporting to be
a certified copy of any record of any authority, court or government of any country not forming part of India as genuine
and accurate, if the document purports to be certified in any manner which is certified by any representative of the National
Government of such country including certification by the Embassy or the High Commission of that country in India and
admit such documents including electronic records in evidence as may be considered relevant and material for the
proceedings. Clause (3) of regulation 41 makes sections 22A, 47A, 65B, 67A, 73A, 81A, 85A 85B, 85C, 88A, 89 and 90A
of the Indian Evidence Act, 1872 applicable for the purpose of investigation by the Director General, subject, of course, to
clause (2) of Regulation.
In terms of clause (4), the Director General can call for the parties to lead evidence by way of affidavit or lead oral
evidence in the matter. In terms of clause (5), the Director General can give an opportunity to the other party or parties to
cross-examine the person giving the evidence. Clause (6) empowers the Director General to entrust the task of recording
evidence to any officer or person designated for the said purpose. Regulation 42 provides that the Director General can, for
sufficient reasons, order that any particular fact or facts may be supported by an affidavit. Various clauses of this
Regulation prescribe
Cross-examination of oral evidence: Under the scheme of the Act read with Regulation 41(5) of the Competition
Commission of India (General) Regulations, 2009 (General Regulations), the Commission and/or the Director General, as
the case may be, has the discretion to receive evidence either by way of Affidavit or by directing any person to lead oral
evidence in the matter. If the Commission and/or the Director General, as the case may be, directs such evidence to be led
by way of oral submissions, the Commission and/or the Director General, as the case may be, may, if considers
“necessary” or “expedient”, grant an opportunity to the party against whom such oral submissions are sought to be relied
upon, an opportunity to cross-examine such witness. Hence, the power to allow cross-examination is solely a discretionary
power and the same cannot be claimed as a matter of right as is the case under the Indian Evidence Act, 1872, all
provisions of which have specifically not been made applicable to the proceedings under the Act. At the same time, it is to
be kept in mind that such discretion cannot be exercised by the Commission and/or the Director General, as the case may
be, arbitrarily, but has to be exercised on sound judicial principles. If the Director General relies upon any material against
any party in its report, it will have to confront the said material to the party concerned, one way of which is through giving
an opportunity of cross-examination.100
The discretion vested with the CCI to permit or refuse cross-examination of a witness is to be exercised judiciously. The
Delhi High Court in Cadila accepted Cadila’s disposition by saying that though there is a discretion vested with the CCI
with regard to accept or refuse the plea of cross-examine of a person within the ambit of Regulation 41(5)5 of the
Competition Commission of India (General) Regulations, 2009, but the reason given by CCI for not accepting the request
of cross-examination, ie, “dissatisfaction” does not imply judicious exercise of discretion. Therefore, it was held that the
CCI erred in rejecting Cadila’s plea of cross-examination of the witness.101
Submission of report by Director General: On completion of investigation, the Director General is required to submit his
report to the Commission. Clause (4) of regulation 20 provides that the report shall contain his findings on each of the
allegations made in the information or reference, as the case may be, together with all evidences or documents or
statements or analyses collected during the investigation. Proviso to this clause empowers the Director General to grant
partial or total confidentiality to the commercially sensitive information and documents.
Forwarding of the Report to the parties and invitation for objections: Once the report of the Director General is received,
the Commission is required to act in accordance with the procedure enshrined in sub-sections (4) to (8) of section 26,
which provide for forwarding a copy of the record to the parties concerned including the Central or the State Government
or the statutory body, as the case may be. Sub-sections (5) and (6) of section 26 deal with the situation in which the report
of the Director General recommends that there is no contravention of the provisions of the Competition Act, 2002. In that
event, the Commission is required to invite objections or suggestions from the Central Government or the State
Government or the statutory authority or parties concerned, as the case may be.
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Action by the Commission: If after considering the objections/suggestions filed in terms of sub-section (5), the
Commission agrees with the recommendations of the Director General, and then it is required to close the matter and pass
orders, which may be communicated to the Central or State Government or statutory authority or the concerned parties. If
after considering the objections/suggestions referred to in sub-section (5), the Commission forms an opinion that further
investigation is to be made, or cause further inquiry to be made in the matter or itself proceed with further inquiry in
accordance with the provisions of the Act [regulation 26(7)].
If the report of the Director General recommends that there is contravention of any of the provisions of the Act and the
Commission forms the view that further inquiry is called for, then it shall inquire into such contravention in accordance
with the provisions of the Act [regulation 26(8)]. Regulations 21 to 27 and regulations 41 to 44 contain the procedure for
conducting inquiry by the Commission. Under regulation 35, the Commission can make a reference to any statutory
authority for opinion under section 21A. Regulation 35 empowers the Commission to grant confidentiality in certain
situations. Regulation 43 empowers the Commission to take additional evidence. Regulation 46 postulates representation
of the parties by their representatives before the Commission. Regulation 52 empowers the Commission to invite experts
of eminence to assist the Commission in discharging of its functions under the Act. Section 36(2) lays down that the
Commission shall have, for the purposes of discharging its functions under the Act, the same powers as are vested in a
Civil Court under the Code of Civil Procedure, 1908 (CPC, 1908) in respect of the matters relating to summoning and
enforcing the attendance of any person and examining him on oath; requiring the discovery and production of documents;
receiving evidence on affidavit; issuing commissions for the examination of witnesses or documents and requisitioning any
public record or document or copy of such record or document from any office. Under section 36(3), the Commission is
empowered to call upon experts, from the fields of economics, commerce and accountancy. Under section 36(4), the
Commission can issue direction to any person to produce books of accounts or other documents in his custody or under the
control before the Director General and to furnish to him or Secretary of the Commission such other information as may be
in his possession in relation to trade carried on by such person as may be required for the purposes of the Competion Act,
2002. At the end of this exercise, the Commission can pass appropriate orders under section 27, including an order for
imposing penalty in cases involving contravention of section 3 and/or section 4.
Powers of the Director General: By virtue of section 41(2), Director General is entitled to exercise the powers conferred
upon the Commission under section 36(2). Section 42(2) provides for imposition of fine for contravention of orders or
directions issued under sections 27, 28, 31, 32, 33, 42A and 43A. The quantum of fine may extend to Rs 1 lakh per day,
subject to a maximum of Rs 10 crores. If any person fails to comply with the orders or directions issued by the
Commission or fails to pay the fine imposed under section 42(2), then he can be punished with imprisonment for a term
which may extend to three years or with fine upto Rs 25 crores or with both, as the Chief Judicial Magistrate may
determine. Section 42A postulates award of compensation for contravention of decision or order of the Commission issued
under section 27, 28, 31, 32 and 33 or any condition or restriction subject to which any approval, sanction, direction or
exemption has been granted or for delay in carrying out such orders or directions. Section 43 provides for imposition of
fine for non-compliance of direction by the Commission under section 36(2) and (4) or by the Director General under
section 41(2). The amount of fine may extend to Rs 1 lakh per day during the period of continuance of such failure subject
to a maximum of Rs 1 crore. Section 43A provides for imposition of penalty for non-furnishing of information under
section 6(2). The extent of such penalty may be upto 10% of the total turnover or the assets of the wrongdoer, whichever is
higher. Section 44 provides for imposition of penalty for making a false statement or omission to furnish material
information in combination case. Section 45 contains a general provisions for imposition of fine upto rs 1 crore for making
false statement or omission to state any material fact knowing it to be a material or willful alteration, suppression or
destruction of any document, which is required to be furnished.
The procedure required to be followed by the Director General for conducting investigation and by the Commission is a
prelude to the passing of orders/issue directions under section 27 and/or the various provisions contained in Chapter VI of
the Act and corresponding regulations is akin to the procedure required to be followed by the Civil Court for deciding a
suit except that the Director General and the Commission are not bound by the technicalities of the procedure contained in
the Code of Civil Procedure, 1908 and rules embodied in the Indian Evidence Act, 1872 except to the extent indicated in
the Act.
POWER TO RECALL/REVIEW AN ORDER PASSED BY COMMISSION UNDER SECTION
26(1) OF ACT
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The Delhi High Court in Google Inc v CCI,102 concluded that order of the Commission/direction to the Director General,
in exercise of power under section 26(1) of the Competion Act, 2002, to cause investigation, is capable of review/recall.
The High Court made the following observations:
Director General cannot conduct investigation on his own: The Commission, before it passes an order under section 26(1)
of the Act directing the Director General to cause an investigation to be made into the matter, is required to, on the basis of
the reference received from the Central or the State Government or a statutory authority or on the basis of the
information/complaint under section 19 or on the basis of its own knowledge, form an opinion that there exists a prima
facie case of contravention of section 3(1) or section 4(1) of the Act. Without forming such an opinion, no investigation by
the Director General can be ordered to be made. However, while forming such an opinion, as per SAIL,103 Commission is
not mandated to hear the person/enterprise referred/informed against it.
No appeal against order under section 26(1): The statute does not provide any remedy to a person/enterprise, who/which
without being afforded any opportunity, has by an order/direction under section 26(1) been ordered/directed to be
investigated against/into. Though COMPAT has been created as an appellate forum against the orders of CCI but its
appellate jurisdiction is circumscribed by section 53A of the Competition Act, 2002 and no appeal is prescribed against the
order of CCI under section 26(1) of the Act. The said person/enterprise, in the absence of any remedy, has but to allow
itself to be subjected to and participate in the investigation.
Powers of Director General are similar to those of a civil court: The Director General, during the course of such
investigation, by virtue of section 41(2) read with section 36(2) of the Act has the same powers as are vested in a Civil
Court under the Code of Civil Procedure, 1908, while trying a suit in respect of, (i) summoning and enforcing the
attendance of any person and examining him on oath, (ii) requiring the discovery and production of documents, (iii)
receiving evidence on affidavit, (iv) issuing commissions for the examination of witnesses and documents, and (v)
requisitioning public records or documents from any public office. The Director General is further empowered by section
41(3) read with sections 240 and 240A of the Companies Act, 1956 to keep in its custody any books and papers of the
person/enterprise investigated against/into for a period of six months and to examine any person on oath relating to the
affairs of the person/enterprise being investigated against/into and all officers, employees and agents of such
person/enterprise are also obliged to preserve all books and papers which are in their custody and power.
Failure to comply, without reasonable cause, with any direction of the Director General, under section 43 of the Act has
been made punishable with fine extending to Rs 1 lakh for each day of failure, subject to a maximum of Rs 1 crore.
Powers of Director General (comparative assessment): The powers of the Director General during such investigation are
far more sweeping and wider than the power of investigation conferred on the Police under the CrPC, 1973.
(a) While the Police have no power to record evidence on oath, Director General has been vested with such a power.
Not only statement on oath of witnesses summoned during the course of investigation is recorded but the said
witnesses are also permitted to be cross-examined including by the informant/claimant and which evidence as
part of the report of the Director General forms the basis of further proceedings before the Commission. Thus,
while in investigation by Police under the CrPC, 1973, the rule of audi alteram partem does not apply, there is no
such embargo on the Director General, Commission. Thus, investigation by Director General, Commission
tantamount to commencement of trial/inquiry on the basis of an ex parte prima facie opinion.
(b) The investigation by the Director General ordered by the Commission stands on a different pedestal from a show
cause notice, the scope of judicial review whereof, though lies, is very limited and from investigation/inquiry
pursuant to an FIR by the Police which in some cases has been held to be not causing any prejudice and thus
furnishing no cause of action for a challenge thereto.
(c) Before registration of an FIR the concerned Police Officer is not to embark upon an inquiry and is statutorily
obliged (under section 154(1) of the CrPC, 1973) to register a case and then, if has reason to suspect (within the
meaning of section 157(1), CrPC, 1973) to proceed with the investigation against such person. Per contra,
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[s 26] Procedure for inquiry under section 19
investigation by the Director General under the Competition Act, 2002 commences not merely on the receipt of
reference/information but only after Commission has formed a prima facie opinion of violation of the provisions
of the Act having been committed.
(d) In the absence of any statutory remedy against investigation commenced on the basis of a mere reason to suspect
in the mind of the Police, writ petition under Article 226 of the Constitution of India for quashing of FIR has been
held to be maintainable albeit on limited grounds. Supreme Court, in para 87 of SAIL104 has held that the
function discharged by Commission while forming a prima facie opinion under section 26(1) is
inquisitorial/regulatory in nature.
(e) Once petitions under Article 226 for quashing of investigation under the CrPC, 1973 have been held to be
maintainable, on the same parity a petition under Article 226 would also be maintainable against an
order/direction of the Commission of investigation under section 26(1) of the Competition Act, 2002 particularly
when the powers of the Director General, Commission of investigation are far wider than the powers of Police of
investigation under the CrPC, 1973 However, a petition under Article 226 of the Constitution of India against an
order under section 26(1) of the Competion Act, 2002 would lie on the same parameters as prescribed by the
Supreme Court in Bhajan Lal,105 ie, where treating the allegations in the reference/information/complaint to be
correct, still no case of contravention of section 3(1) or section 4(1) of the Act would be made out or where the
said allegations are absurd and inherently improbable or where there is an express legal bar to the institution and
continuance of the investigation or where the information/reference/complaint is manifestly attended with mala
fide and has been made/filed with ulterior motive or the like.
(f) Just like an investigation by the Police has been held in Bhajan Lal106 to be affecting the rights of the person
being investigated against and not immune from interference, similarly an investigation by the Director General,
Commission, if falling in any of the aforesaid categories, cannot be permitted and it is no answer that no
prejudice would be caused to the person/enterprise being investigated into/against or that such person/enterprise,
in the event of the report of investigation being against him/it, will have an opportunity to defend.
Remedy under Article 226: When the effect of, an order of investigation under section 26(1) of the Competition Act, 2002
can be so drastic, availability of an opportunity during the course of proceedings before the Commission after the report of
the Director General, to defend itself cannot always be a ground to deny the remedy under Article 226 of the Constitution
of India against the order of investigation.
Though the Supreme Court in para 30 of SAIL has observed that an order of investigation does not entail civil
consequences for any but had no occasion to consider the effect of such an order or the aspect of challenge under Article
226 of the Constitution to an order under section 26(1) of the Competition Act, 2002. The reason which prevailed in SAIL
(supra) for holding that a person/enterprise sought to be investigated into has no right to be heard at the stage of section
26(1) of the Competition Act, 2002 as is evident from paras 92 and 125 of the judgment, was that an order of investigation
when called for is required to be passed expeditiously and without spending undue time. Moreover, if there is found to be a
right to approach the High Court under Article 226, the said right cannot be defeated on the ground of the same causing
delay; human failings cannot be a ground for defeating substantive rights.
Prima facie opinion is a pre-requisite to direct investigation: The Commission can order/direct investigation only if it
forms a prima facie opinion of violation of provisions of the Act having been committed. Investigation, which, the
Commission orders/directs investigation without forming and expressing a prima facie opinion or where the prima facie
opinion though purportedly is formed and expressed is palpably unsustainable goes against constitutional values and
judicial principles and the remedy of Article 226 would be available in such case.
The bar in section 61 of the Competition Act, 2002 to the jurisdiction of Civil Courts in respect of any matter which the
Commission or COMPAT is empowered to determine does not apply to the jurisdiction of the High Court under Article
226 of the Constitution and which has been held to be part of the basic structure.107 One of the modes in which an inquiry
under section 19 read with section 26 can be set into motion is on receipt of reference from the Central Government or
State Government or a statutory authority. A Division Bench of the Delhi High Court in Colgate Palmolive India Pvt Ltd v
UOI108 held that the Government before making such a reference was not required to give an opportunity of hearing to the
party against whom reference was made but also held that it did not mean that reference could be made on any whimsical
ground and will be immune from challenge. It was held that if it can be shown that there was no material before the
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Government on the basis of which it could appear that a monopolistic trade practice was being practiced, the order of
reference would be bad.
Rather than this Court in exercise of jurisdiction under Article 226 of the Constitution of India in the first instance
investigating whether an Ex parte order under section 26(1) of investigation can be sustained or not, without any findings
of the Commission in this respect in the absence of the person/enterprise complained/referred against being present before
the Commission at the time of making of the order under section 26(1), it would be better if the said exercise is undertaken
in the first instance by the Commission and this Court even if approached under Article 226, having the views of
Commission before it.
Power of the Commission to review/recall its orders: Deletion of section 37 of the Competition Act, 2002 as it stood prior
to the amendment with effect from 12 October, 2007 cannot be a conclusive indication of the legislature having intended to
divest the CCI of the power of review or an argument to contend that the power of review if found to be existing in the
Commission dehors section 37 has been taken away by deletion of section 37. It is well nigh possible that the legislature
deleted section 37 finding the same to be superfluous in view of the inherent power of the Commission to review/recall its
orders. The Supreme Court in KK Velusamy v N Palanisamy109 negatived such a contention in the context of deletion from
the Civil Procedure Code, 1908 of O XVIII rule 17A for production of evidence not previously known or evidence which
could not be produced despite due diligence. It was held that the deletion of the said provision does not mean that no
evidence can be received at all after a party closes evidence and that it only means that the amended Civil Procedure Code,
1908 found no need for such a provision.
There exists any specific bar in the Act or the Regulations framed thereunder to preclude the invocation of the inherent
power to recall/review.
Two-sided enquiry: There is nothing in the scheme of the Competition Act, 2002 to suggest that the Commission, after
ordering investigation is functus officio; on the contrary the order of investigation is on a prima facie one-sided view of the
matter and even if report of the investigation finds contravention of provisions of the Act, the Commission under section
26(8) of the Act is to give an opportunity of hearing to the person/enterprise against whom such report has been made and
to at that stage conduct a two-sided inquiry.
Report of the Director General is not binding: The report of the Director General, Commission is not binding on the
Commission. The decision of whether there is contravention or not is admittedly to be taken after notice and it is well nigh
possible that the CCI may finally reject the report of the Director General, Commission.
The Director General, Commission under section 16 of the Competition Act, 2002, is only investigative arm of the
Commission with the decision, whether there is any contravention of the provisions of the Competion Act, 2002 being
required to be taken under section 27 of the Act by the Commission.
Limitation to investigative powers of the Director General: It is also not as if the investigative powers of the Director
General are unlimited. The Director General, Commission in conducting the investigation is bound by the confines of
investigation set out in the order of the CCI under section 26(1) of the Act and is not empowered to conduct a roving and
fishing inquiry. This is also evident from section 26(7) of the Act empowering the CCI to direct the Director General to
cause further investigation into the matter and from regulation 20(6) of the Competition Commission of India (General)
Regulations, 2009, empowering the CCI to direct the Director General to make further investigation. It is thus not as if
once an order under section 26(1) of the Act of investigation has been made, the investigation goes outside the domain of
Commission.
Power of recall/review and right to be heard by the Commission: SAIL (supra) is a judgment only on the right of hearing
of the person/enterprise complained/referred against at the stage of section 26(1) of the Act. What it lays down is that
Commission at that stage is not required to issue notice to such a person/enterprise. The question of whether the CCI is
entitled to recall/review the order so made did not arise for consideration therein. It is settled principle of law110 that a
judgment is a precedent on what falls for adjudication and not what can be logically deduced or inferred therefrom. The
fact that said judgment holds that CCI is not required to hear the person complained/referred against before ordering
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[s 26] Procedure for inquiry under section 19
investigation cannot lead to an inference that such a person even if approaches the Commission for recall/review of such an
order is not to be heard. The jurisdiction of the Commission, if so, deems necessary to give notice to the person/enterprise
complained/referred against and hear him also before ordering investigation. It is thus not as if there is any lack of power
or jurisdiction in the Commission to hear the person/enterprise complained/referred against at the stage of section 26(1) of
the Act.
Section 29 of the Act providing procedure for investigation of combinations and which requires the Commission to before
causing investigation by the Director General, issue a notice to show cause to the parties to the combination as to why
investigation should not be conducted. We have not been able to fathom any difference in the violations of section 3(1) or
4(1) for inquiring into which procedure is provided under section 26 and violations under section 5 for inquiring into
which procedure of inquiry under section 29 is provided or to understand as to why a notice to show cause before
investigation has been provided in section 29 and not even an opportunity of hearing before investigation has been
interpreted in section 26. Unfortunately, section 29 remained to be noticed in this context in SAIL (supra).
It is in the discretion of the Commission to hear or not to hear the person/enterprise complained/referred against at the
stage of section 26(1) of the Competition Act, 2002, Commission cannot be held to be without jurisdiction to recall/review
the order.
Notice in this regard may also be taken of section 36 which empowers the Commission to in the discharge of its functions
regulate its own procedure. The same also permits Commission, even if were to be held to be in spite of exercising
administrative power under section 26(1) having no inherent power of review/recall, to if so deems it necessary, entertain
an application for review/recall.
A mere filing of an application for review/recall would not stall the investigation by the director General, Commission
already ordered. Ordinarily, the said application should be disposed of on the very first date when it is taken up for
consideration, without calling even for a reply and without elaborate hearing inasmuch as the grounds on which the
application for recall/review is permissible as aforesaid are limited and have to be apparent on the face of the material
before the Commission. Even if Commission is of the opinion that the application for recall/review requires reply/further
hearing, it is for the CCI to, depending upon the facts order whether the investigation by the Director General,
Commission, is to in the interregnum proceed or not.
The existence of a provision in the Competition Act, 2002 for penalising the complainant/informant for making a
misdealing/false statement leading to investigation being ordered cannot take away the right of the person/enterprise
ordered to be investigated against/into to apply for review/recall of the order of investigation, if in law found to be entitled
thereto.
However, it is not to be understood as conveying that in every case in which Commission has ordered investigation
without hearing the person/enterprise complained/referred against, such person/enterprise would have a right to apply for
review/recall of that order. Such a power though found to exist has to be sparingly exercised and ensuring that the reasons
which prevailed with the Supreme Court in SAIL (supra) for negating a right of hearing to a person are not subverted.
Such a power has to be exercised on the well-recognised parameters of the power of review/recall and without lengthy
arguments and without the investigation already ordered being stalled indefinitely. In fact, it is up to the Commission to
also upon being so called upon to recall/review its order under section 26(1) of the Act to decide whether to, pending the
said decision, stall the investigation or not, as observed hereinabove also. The jurisdiction of review/recall would be
exercised only if without entering into any factual controversy, Commission finds no merit in the complaint/reference on
which investigation had been ordered. The application for review/recall of the order under section 26(1) of the Act is not to
become the section 26(8) stage of the Act.
Whether the directions passed by the Commission in exercise of its powers under section 26(8) of
the Act where the Director General recommends a contravention of the Act but the Commission disagrees and closes
the case would be appealable in terms of section 53A(1) of the Act?
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Relying on the Supreme Court decision in SAIL,111 the Tribunal in Jindal Steel & Power Ltd112 observed that the only
orders which are appealable are those mentioned in section 53A(l)(a) of the Competion Act, 2002. Further, section 26(2) is
only meant for where the Commission does not find a prima facie case. Thus, there is no question of any report by the
Director General as the Commission does not find a prima facie case at all on the information supplied. While section
26(6) pertains to a situation where the Commission had directed the Director General to enquire into the matter and the
Director General gives a report that there is “no contravention” of the provisions of the Act, once such report is received,
the Commission has to invite the objections and suggestions from the concerned parties and after the consideration of the
objections and suggestions as referred to in sub-section (5) if the Commission agrees with the recommendation of the
Director General, it orders for closure of the matter. This situation is also not available in case where the Director General
has sent a recommendation that there was a contravention of some of the provisions of this Act. All that the Commission is
empowered to do under such situation is to proceed under section 26(8) of the Act for inquiring into such contravention in
accordance with the provisions of the Act. In this case, it went on to inquire under that provision and came to the
conclusion that there was no contravention. Again, an order is passed under section 26(8) of the Act which is specifically
excluded in section 53A(l)(a). Thus, with the law having been stated in the clearest possible terms by the Apex Court,
these appeals are not maintainable in law.113
No Adjudication under section 26
The exercise required to be undertaken by the Commission for forming an opinion whether or not there existed a prima
facie case which requires investigation, the Commission is required to take cognisance of the averments contained in the
reference or information and the documents supplied with the reference or information. In an appropriate case, the
Commission may also hold preliminary conference and ask the informant or the person against whom allegation of anti-
competitive conduct has been levelled to produce the relevant documents. In a given case, the Commission might, after
examining the contents of the reference or information and/or holding preliminary conference, opine that there existed a
prima facie case for investigation. In that event, the Commission is required to pass an order under section 26(1) of the
Act. In another case, the Commission may, after undertaking the exercise of examining the contents of the reference or the
information and holding preliminary conference, if any, opine that no prima facie case has been made out warranting an
investigation. In that event, the Commission may pass an order under section 26(2) and close the case. However, in either
case the Commission cannot make detailed examination of the allegations contained in the information or reference,
evaluate/analyse the evidence produced with the reference or information in the form of documents and record its findings
on the merits of the issue relating to violation of section 3 and/or 4 of the Act because that exercise can be done only after
receiving the investigation report. If the reference or the information contains an allegation relating to violation of the
provisions of section 3 and the Commission does not feel satisfied that the material placed before it gives a prima facie
indication of violation of that provision, then it may close the case under section 26(2). Likewise, if the reference or
information contains an allegation of abuse of dominant position within the meaning of section 4(2) and its various clauses
and the Commission finds that the material produced with the reference or information does not prima facie show the
dominance of the person against whom allegation of abuse of dominance has been levelled, then too it may close the case
under section 26(2) of the Competion Act, 2002. However, as mentioned above, the Commission cannot make an
adjudication on violation of section 3 and/or 4 of the Act.114
Multiple Allegations and Limitation to the Scope of Director General’s Investigation
If an information filed under section 19(1)(a) or a reference made under section 19(1) (b) of Act contains multiple
allegations of violation of section 3 and/or section 4, the Commission can, on a consideration thereof and after holding
preliminary conference, in terms of regulation 17, form an opinion that there exists a prima facie case of violation of
section 3 and/or section 4 and issue necessary direction to Director General. Commission may also form an opinion that
prima facie case exists about violation of only one of the provisions and no case is made out for investigation into
allegations regarding violation of other provision. In that event, Commission may issue direction to Director General to
cause an investigation to be made only in respect of allegations constituting violation of particular provision. On receipt of
order passed by Commission under section 26(1) of Act, the Director General was required to conduct investigation in
accordance with provisions of section 41 read with relevant provisions of Regulations and submit report under section
26(3) read with regulation 20(4), which postulates that report of Director General shall contain his findings on each of
allegations made in information or reference, as the case may be, together with all evidences or documents or statements or
analyses collected during investigation. Where Commission rejected allegation constituting violation of particular
provision of Act and directed investigation into violation of other provision, then Director General had no option but to
confine the investigation only to such allegation. However, if Commission did not specifically reject an allegation
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constituting violation of a particular provision of Act and issued omnibus direction for investigation into allegation of
violation of provisions of Act, as had been done in this case, then Director General was duty bound to record findings on
each of allegations made in information or reference. In absence of express negation by Commission of any particular
allegation made in information/reference, the Director General was under a statutory obligation to conduct investigation
into all allegations contained in information or reference and record findings on each allegation.115
The Tribunal in the IATA case116 set aside the order of the Commission on ground of incomplete investigation. As per the
Tribunal, Director General committed serious illegality by not recording a finding on allegation of abuse of dominant
position and consequential violation of section 4 of Competion Act, 2002 and therefore, the impugned order was liable to
be set aside because Commission failed to take cognisance and decide plea raised by Appellant in context of said illegality
committed by Director General.
No absolute right to claim notice under section 26(1)
The direction under section 26(1) after formation of a prima facie opinion is a direction simplicitor to cause an
investigation into the matter. Issuance of such a direction is an administrative direction to one of its own wings
departmentally and is without entering upon any adjudicatory process. It does not effectively determine any right or
obligation of the parties to the lis. Wherever, in the course of the proceedings before the Commission, the Commission
passes a direction or interim order which is at the preliminary stage and of preparatory nature without recording findings
which will bind the parties and where such order will only pave the way to the final decision, it would not make that
direction as an order or decision which affects the rights of the parties and therefore is not appealable.
A statutory notice or an absolute right to claim notice and hearing cannot be read into the provisions of section 26(1).
Discretion to invite has been vested in the Commission by virtue of the Regulations which the Courts have held to be
construed in their plain language and without giving any undue expansion.117 The contesting parties cannot seek such
notice as a matter of right. Consequently, the question of violation of principles of natural justice does not arise.118
The High Court in the TN Power Producers Association case119 referred to SAIL case to observe:
30. The legal principles deducible from the decision of the Hon’ble Supreme Court in the case of
Competition Commission of India v SAIL (supra), are manifold and for the purposes of the instance case, it is suffice to note that at
the stage of forming of prima facie view as required under section 26(1) of the Act, the Commission may not be required to record
detailed reasons, but must express its mind in no uncertain terms that it is of the view that prima facie case exits requiring issuance
of directions for investigation to the DG and such view should be recorded with reference to the information furnished to the
Commission, opinion be formed on the basis of the records including information furnished and while doing so, the Commission
should not be entering into any adjudicatory or determinative process and record minimum reasons substantiating the formation of
such opinion. The function performed by the Commission under section 26 (1) are preparatory measures in contrast to the
decisions making process and this is clear from the word “direction” to be issued to the DG for investigation. Drawing a
comparison to departmental proceedings, it was pointed out that the Commission is not expected to give notice to the parties, i.e.,
informant or affected parties and hear them at length before forming its opinion, as the function is of a very preliminary in nature
and it is a departmental function and formation of a prima facie opinion departmentally does not amount to an adjudicatory
function, but it is merely administrative nature. The Hon’ble Supreme Court pointed out that keeping in mind the nature of the
functions required to be performed by the Commission in terms of Section 26(1), the right of notice or hearing is not contemplated
under the said provision.
31. In this regard, it would be beneficial to refer to the Competition Commission of India (General)
Regulations, 2009, framed in exercise of powers conferred by section 64 of the Act. In terms of regulation 16(2), in case of alleged
anti-competitive agreements and/or abuse of dominant position, the Commission shall, as far as possible, record its opinion on
existence of a prima facie case within sixty days; The Commission, under regulation 17(1), may if it deems necessary, call for a
preliminary conference to form an opinion whether a prima facie case exists; regulation 20 deals with ‘Investigation by Director
General’ and timelines are fixed in this regard. The procedure for enquiry under section 26 of the Act on receipt of report by DG is
stipulated in regulation 21; In terms of regulation 35(1), the Commission shall maintain confidentiality of the identity of an
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informant on a request made to it in writing. Regulation 41 is about ‘taking of evidence’ by the Commission or the DG; Regulation
45 empowers Commission or DG to issue commissions for examination of witnesses or documents. Thus, the demarcation of the
powers and functions of the Commission and the DG has been clearly spelt out under the regulations, and at the stage of section
26(1) all that the Commission is required to do is record its opinion on existence of a prima facie case and nothing more. The
impugned order records reasons in support of its opinion.
32. Thus, the petitioners could have never insisted upon issuance of notice based on the
information furnished by the second respondent nor an elaborate hearing, nevertheless the Commission in its discretion thought fit
to issue notice to the petitioner, the second and third respondents received their responses/reply, heard them during the meeting
and has recorded reasons as to why it is of the prima facie opinion to direct the DG to assist the Commission by investigating into
the matter, who has been appointed by the Central Government to assist and is one of the wings of the Commission. Neither the
petitioner nor the third respondent has raised a plea of violation of principles of natural justice or any other plea, which would
entitle them to invoke the extraordinary jurisdiction of this Court under Article 226 of the Constitution.
Practice of Preliminary Conference
In terms of section 26(1) of the Competition Act, 2002 read with regulation 17 of the Competition Commission of India
(General) Regulations, 2009 (General Regulations), before forming a prima facie opinion and ordering for investigation by
the Director General, the CCI may call for a preliminary conference with the informants and such other persons if it deems
necessary. The preliminary conference is not a mandatory requirement and there are no set or standard procedures
followed by the CCI for conducting such meeting and in practice the CCI seems to have preliminary conferences with the
parties concerned on case-to-case basis and such meetings are ad hoc in nature.
Expansion in the scope of Investigation
It was contended by Toyota in the automobile case120 that the Commission acted ultra vires its powers under the scheme
of section 26 of the Act by permitting the Director General to expand the scope of the investigation beyond the three
original equipment manufacturers mentioned in the Commission’s initiation order dated 24 February 2011 by including 14
other car manufacturers. The Commission justifying the expansion of scope of investigation had held that the nature of the
powers vested in it were inquisitorial, investigative, regulatory, adjudicatory and advisory. Further, it was held by the
Commission that the direction under section 26(1) of the Competion Act, 2002 is an administrative direction without
entering upon any adjudicatory or determinative purpose. Also, the Commission is not required to confine the scope of
enquiry to the parties whose names figured in the information.
The purpose of filing information before the Commission is only to set the ball rolling as per the provisions of the Competition Act,
2002. The scope of enquiry is much broader and the Commission is not restricted in its enquiry to consider the material placed by
parties only. The Commission also had before it the additional information filed by the informant on 27 January 2011 alleging
certain restrictive practices by the opposite parties named in the information and by other vehicle manufacturers in violation of the
provisions of the Act. The directions issued by the Commission in its order under section 26 (1) of the Act were not qua the three
parties but against alleged anti competitive practices in the industry in general.
The Tribunal in appeal approved this stand of the Commission.
The Supreme Court in the Excel Crop matter broadened the powers of the DG and observed that:
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if other facts also get revealed and are brought to light, revealing that the “persons” or “enterprises” had entered into an
agreement that is prohibited by Section 3 which had appreciable adverse effect on the competition, the DG would be well within
his powers to include those as well in his report. ... If the investigation process is to be restricted in the manner projected by the
Appellants, it would defeat the very purpose of the Act which is to prevent practices having appreciable adverse effect on the
competition.
The Delhi High court recently relying on Excel Crop held that the investigation done by Director General without CCI’s
recording prima facie opinion against Cadila was acceptable.
38. Cadila’s argument, that in Excel Crop Care the issue was inclusion of more than one instance or incident within the ambit of
investigation (given that the complaint was in respect of one tender only) is distinguishable, is in this court’s opinion, insubstantial
and needs to be rejected. Its reliance on Grasim Industries, is no longer apt. At the stage when the CCI takes cognizance of
information, based on a complaint, and requires investigation, it does not necessarily have complete information or facts relating to
the pattern of behaviour that infects the marketplace. Its only window is the information given to it. Based on it, the DG is asked to
look into the matter. During the course of that inquiry, based on that solitary complaint or information, facts leading to pervasive
practices that amount to abuse of dominant position on the part of one or more individuals or entities might unfold. At this stage,
the investigation is quasi inquisitorial, to the extent that the report given is inconclusive of the rights of the parties; however, to the
extent that evidence is gathered, the material can be final. Neither is the DG’s power limited by a remand or restricted to the
matters that fall within the complaint and nothing else. Or else, the Excel Crop Care would not have explained the DG’s powers in
broad terms.121
Right of hearing under section 26(2)
The COMPAT in the case of Anand Parkash Agarwal v Dakshin Haryana Bijli Vitran Nigam122 held that neither section 4
nor section 19 of the Competion Act, 2002 contain any requirement of inviting the informant to assist the Commission
before forming an opinion in terms of section 26(2) of the Act. Regulation 17 of the General Regulations did give the
Commission discretion to invite the information provider or such other person as it considered necessary, for a preliminary
conference but the discretion was with the Commission. Issue of notice at the stage of prima facie opinion was also not
necessary considering that the obligation of the Commission was to form an opinion about existence or non-existence of a
prima facie case. If the Commission did not feel satisfied that the material placed before it gave a prima facie indication of
violation of the Act the Commission could close the case and the Commission was not required to make adjudication on
violation of the Act or to evaluate the evidence or invite experts to assist in its decision making. The experts were to assist
the Commission in terms of section 36(3) of the Act in the “conduct of any inquiry”. In terms of section 26(2) of the Act,
no inquiry was conducted. The stage of inquiry was only after the Commission formed an opinion about the existence of a
prima facie case and directed the Director General to cause an investigation.
The Supreme Court in the case of SAIL (supra) had explained as to what is required to be done by the Commission while
forming a prima facie opinion and the relevant extract is as follows:
The jurisdiction of the Commission, to act under this provision, does not contemplate any adjudicatory function. The Commission
is not expected to give notice to the parties, i.e., the informant or the affected parties and hear them at length, before forming its
opinion. The function is of a very preliminary nature and in fact, in common parlance, it is a departmental function. At that stage, it
does not condemn any person and therefore, application of audi alteram partem is not called for. Formation of a prima facie
opinion departmentally (Director General, being appointed by the Central Government to assist the Commission, is one of the
wings of the Commission itself) does not amount to an adjudicatory function but is merely of administrative nature. At best, it can
direct the investigation to be conducted and report to be submitted to the Commission itself or close the case in terms of section
26(2) of the Act, which order itself is appealable before the Tribunal and only after this stage, there is a specific right of notice and
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hearing available to the aggrieved/affected party. Thus, keeping in mind the nature of the functions required to be performed by the
Commission in terms of section 26(1), we are of the considered view that the right of notice of hearing is not contemplated under
the provisions of section 26(1) of the Act. However, regulation 17(2) gives right to Commission for seeking information, or in
other words, the Commission is vested with the power of inviting such persons, as it may deem necessary, to render required
assistance or produce requisite information or documents as per the direction of the Commission. This discretion is exclusively
vested in the Commission by the legislature. The investigation is directed with dual purpose; (a) to collect material and verify the
information, as may be, directed by the Commission, (b) to enable the Commission to examine the report upon its submission by
the Director General and to pass appropriate orders after hearing the parties concerned. No inquiry commences prior to the
direction issued to the Director General for conducting the investigation. Therefore, even from the practical point of view, it will be
required that undue time is not spent at the preliminary stage of formation of prima facie opinion and the matters are dealt with
effectively and expeditiously. (emphasis supplied)
Silence of the Commission over Director General’s conclusions
In a case where the Commission had disagreed with many of the conclusions drawn by the Director General, the
Commission had remained silent on several other conclusions drawn by the Director General wherein he had found clear
violation of the Competion Act, 2002, it was argued before the COMPAT that the decision, therefore, handed out by the
Commission cannot be termed as one under section 26(8), but was actually a decision under section 27 and, therefore,
appealable. It was argued, further, that silence of the Commission with respect to some of the findings of violation in the
Director General’s report should be considered as acceptance of the Director General’s findings and should logically lead
to passing of order under section 27. The COMPAT referred to the jurisprudence developed in cases like Jindal Steel &
Power Ltd v CCI123 and Arshiya Rail Infrastructure Ltd v CCI124 which established the exhaustive nature of the
provisions of section 53A(1)(a) specifically mentioning the sections, violations of which are appealable, rejected the
argument. Although, the Tribunal noted that the scheme of section 26 may be somewhat incomplete and unclear in some
parts, it refused to intervene.125
Natural Justice
While holding an inquiry under section 26(7) or section 26(8), the Commission was required to comply with the rule of
audi alteram partem and give an effective opportunity of hearing to the person against whom a finding was likely to be
recorded on the issue of contravention of the Act not only to controvert the allegation made against him as also the
evidence/material proposed to be used in support of such allegation but also produced evidence to show that he/she/it had
not violated any provision of the Act. If the Commission wanted to rely upon some information/material, which did not
form part of the report of the Director General, then such information/material must be disclosed to the person concerned
and an effective opportunity had to be given to him to controvert the same. The Commission was also required to pass a
speaking order to demonstrate application of mind to the relevant factors/considerations and exclusion of irrelevant and
extraneous factors/considerations.126
Section 26 and issue of confidentiality: subject matter of appeal
As per regulation 35 of the Competition Commission of India (General) Regulations, 2009, the Commission shall maintain
confidentiality of the identity of an informant on a request made to it in writing. Also, any party may submit a request in
writing to the Commission or the Director General, as the case may be, that a document or documents, or a part or parts
thereof, be treated confidential. In the case of where the Commission refused to grant confidentiality to some documents,
appeal was filed to the Tribunal against the refusal to grant confidentiality. Appeal filed against the rejection of its prayer
for total and indefinite confidentiality to the documents furnished by it to the Director General was held to be not
maintainable under section 53A.127
On the question of maintainability of the appeal under section 53A of the Competion Act, 2002, which gives jurisdiction to
the Tribunal to hear and decide appeals only against any direction issued or decision made or order passed by the
Commission under various sections enumerated in sub-section (1)(a) of section 53A, it was argued by the company that the
impugned order should be treated as one made under section 26 because denial of total confidentiality to the documents
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would seriously prejudice the appellant because it had already entered into an agreement with the tyre companies not to
share the information with any party. The Tribunal, however, rejected the argument and held that section 26 which relates
to investigation required to be conducted by the Director General and consideration of the investigation report by the
Commission and further inquiry, if any, by the latter, has no bearing on the issue of confidentiality, which is governed by
various clauses of regulation 35 of the regulations. Further, section 53A(1) which lays down that the Central Government
shall establish an Appellate Tribunal to hear and dispose of appeals against any direction or decision made or order passed
by the Commission under various sections specified therein, does not include regulation 35.128 Therefore, an order passed
by the Director General under regulation 35(8) or by the Commission under regulation 35(10) could not be the subject-
matter of appeal under section 53A of the Act.129
Jurisdiction of Commission under section 26(1) and maintainability of writ petition
In terms of section 26(1) of the Competition Act, 2002, a direction to cause an investigation can be made by Commission
only if it is of the opinion that there exists a prima facie case. Formation of such opinion is sine qua non for the exercise of
jurisdiction under section 26(1). Thus, in cases where the Commission has not formed such an opinion or the opinion
formed is ex-facie perverse in the sense that no reasonable person could possibly form such an opinion on the basis of the
allegations made, any directions issued under section 26(1) of the Competion Act, 2002 would be without jurisdiction and
would be liable to set aside.
Any direction under section 26(1) could also be challenged on the ground that the subject matter is outside the pail of the
Competition Act, 2002. A challenge to the jurisdiction of the Commission to pass such directions under section 26(1) must
be examined on a demurrer. Equally, in cases where the direction passed is found to be mala fide or capricious,
interference by the Court under Article 226 would be warranted.
Taking note of the Supreme Court decision in the SAIL case130, which held that the direction under section 26(1) of the
Act is an administrative direction by the Commission without entering in to any adjudicatory process, the Delhi High
Court in the case of Telefonaktiebolaget LM Ericsson (PUBL) v CCI131 noted that decision in the case of Steel Authority of
India Ltd (supra) cannot be read as an authority for the proposition that a direction passed under section 26(1) of the
Competition Act, 2002 is outside the scope of judicial scrutiny under Article 226 of the Constitution of India. The Delhi
High Court, further, observed:
60. I have reservations as to merits of the contention that a direction under section 26(1) of the Competition Act to conduct an
investigation does not prejudice the party being investigated in any manner, as it does not amount to a final determination of the
allegations made. Indisputably, a direction to conduct an investigation may not involve an adjudicatory process and does not
foreclose or in any manner affect the defence that is available to the party being investigated. But, nonetheless, it does have the
effect of subjecting a party to an inquisitorial process at the hands of DG. The DG is obliged to carry out the directions of CCI and
conduct an investigation into any contravention regarding provisions of the Competition Act. By virtue of section 42(2) of
Competition the Act, the DG has the same powers as conferred upon the CCI under section 36(2) of the Act. Section 36(2) of the
Competition Act expressly enacts that CCI will have the same powers as are vested in a Civil Court under the Code of Civil
Procedure, 1908 while trying a suit, in respect of matters of: (a) summoning and enforcing the attendance of any person and
examining him on oath; (b) requiring discovery and production of documents; (c) receiving evidence on affidavits; (d) issuing
commission for the examination of witnesses or documents; and (e) requisitioning any public record or document or copy of such
record or document from any office. It is apparent that such powers are extensive.
…………….
70. It is also well settled that although, the High Court does not sit as an Appellate Court to correct every error but in cases where
an authority has acted outside the scope of its jurisdiction, the High Court would interfere under exercise of its jurisdiction under
Article 226 of the Constitution of India. It is well recognised that the High Court would interfere in orders passed by any authority
or subordinate court where: “(1) there is an error manifest and apparent on the fact of the proceedings such as when it is based on
clear misreading or utter disregard of the provisions of law and (2) a grave injustice or gross failure of justice has occasioned
thereby.”132
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74. Having stated the above, it is also necessary to state that the scope of judicial review of the directions issued under section
26(1) of the Competition Act is limited and does not extend to examining the merits of the allegations.
…………….
81. As I see it, the decision of Supreme Court in Steel Authority of India Ltd (supra) must be read in reference to its context. In that
case, the Supreme Court was considering the question whether an order passed under section 26(1) of the Competition Act directing
investigation was an appealable order. The Supreme Court explained the scheme of the Competition Act and held that a direction to
the DG to investigate was not appealable at that stage. The party concerned would have to await the final determination - that is, an
order appealable under section 53A(a) of the Act - before filing an appeal before the COMPAT. However, if the CCI refused to
direct an investigation, an appeal would lie against the said order. It is, thus, amply clear that Ericsson does have an alternative
remedy of preferring an appeal but that remedy would be available only on a final determination. However, the fact that an
alternate remedy by way of appeal is available to a party would not denude the jurisdiction of this Court under Article 226 of the
Constitution of India. There are several instances - particularly when the jurisdiction of an authority or a Tribunal to pass any
directions or orders is challenged - where Courts have exercised their jurisdiction under Article 226 of the Constitution of India
despite availability of an alternate remedy.
82. In view of the aforesaid, the fact that Ericsson had an alternative remedy, albeit at a later stage, would not in any manner
disable this court from entertaining the present petition.
In the Vodafone matter,133 the petitioners challenged the order of the Commission under section 26(1) to Director General
to conduct investigation after it framed a prima facie opinion on the allegation of cartelisation by cellular operators to
thwart entry of Reliance Jio Infocomm Limited in the market as they collectively denied the hardware required to make
calls on other networks. The Bombay High Court held that order of the Commission under 26(1) which is based on
analysis of documents and charts filed by rival parties and conferences of the parties called by the Commission cannot be
said to be merely administrative orders or directions as noted in SAIL. It rejected the contention that since the order passed
by the Commission was merely administrative with no civil consequences, writ petition cannot be maintainable. It also
noted that the argument that the prima facie opinion, leading to a direction for investigation does not determine any of the
rights of the parties was untenable. The Bombay High Court has, thus, carved out a new category of orders under 26(1)
apart from the simple “administrative order” as laid down by the Supreme Court in SAIL. This new category includes
orders which are based on documents and statistics. It is humbly submitted that this goes against the scheme of the
Competion Act, 2002 itself and opens doors for multiple challenges. It is worthy to note that the Commission does have
the power to call for information and hold conferences to form a prima facie opinion. [As per the Bombay High Court, the
Commission should have invoked Section 21(1A) of the Competion Act, 2002 where matter can be referred to
experts/authorities for clarification of any issue. Therefore, when the contractual terms and rights and obligations of
service providers governed and regulated by TRAI Act are themselves not clear and are pending before the competent
authority, the Commission should not have proceeded further. The High Court noted that the Commission seems to have
relied on the 2016 TRAI Recommendations which itself is contentious and has not been finally decided. In light of
disputed issues on the obligations of telecom operators and the ambiguity in the definition of important clauses, the
Commission should not have assumed jurisdiction. “The Commission, ought not to have invoked general provisions of law
of cartelisation and anti-competitive law, without waiting for final decision of the TRAI recommendations.”]
The Madras High Court recently observed that the ruling by the Supreme Court in SAIL case only concerned with
maintainability of an Appeal under Section 53(A)(1) before the Tribunal and found that such appeal is not maintainable
against the order passed under Section 26(1). The Court went on to note that there cannot be a complete embargo on the
writ jurisdiction under Article 226. An order passed by the Commission under section 26(1) can be challenged, even
though the statute does not provide for appeal, if the same has been passed without jurisdiction. The Madras High Court
has distinguished the Bom HC decision in Vodafone case on facts and observed that the Vodafone case concerned
maintainability of writ on grounds of lack of jurisdiction of the Commission. The Court held that the act of considering
defective reference or information cannot make out a jurisdictional issue against the Commission and at the best, it could
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be considered as improper procedure. As per the Court, the objection can be raised order before the Director General or the
Commission before the final order. Procedural irregularities, if any which does not result in affecting the rights of parties at
once should not invite immediate judicial scrutiny.134
Principles of natural justice and Confidentiality provision
The requirements of principles of natural justice must depend on the circumstances of the case, the nature of the enquiry,
the rules under which the tribunal is acting, the subject matter to be dealt with and the consequences that may visit a person
after such enquiry from out of the decision pursuant there to. The law is fairly settled that if prejudicial allegations are to be
made against a person, he must be given particulars of that before hearing so that he can prepare his defence. However,
there are various exceptions to this general rule where the disclosure of evidential material might inflict serious harm on
the person directly concerned or other persons or where disclosure would be breach of confidence or might be injurious to
public interest.
In a matter135 related to allegation of bid rigging, the Commission passed an order under section 26(1) of the Act,
directing the Director General to conduct investigation in to the allegations of bid-rigging against the opposite parties. To
reply to the notices sent to the Petitioners, they made an application seeking permission to inspect the record/documents
forming part of the record of the case regarding cartelisation in the conveyor belt sector. Such a request was rejected since
the information based on which the prima facie order was passed was confidential in terms of the provisions of the
Competion Act, 2002 read with relevant regulations. Writ petition was therefore, filed claiming that the action of the
Commission in denying access to documents, evidence, information etc in possession of Commission and the Director
General on the ground of confidentiality was arbitrary and illegal and also violative of principles of natural justice. The
High Court firstly relied on the Supreme Court decision in SAIL136 case to reiterate that formation of a prima facie opinion
departmentally, ie, by the Director General appointed by the Central Government to assist the Commission did not amount
to an adjudicatory function but was merely of administrative nature. Therefore, at that stage, it did not condemn any person
and therefore, application of audi alteram partem was not called for. The court held that the respondents cannot be held to
have committed any error in rejecting the request of the petitioners for inspection of documents. With regard to the
violation of the specific sections, the court observed:
18. It may also be added that section 26 of the Act provides for the procedure for inquiry by CCI under section 19 i.e., inquiry into
anti-competitive agreements and abuse of an enterprise of its dominant position. Section 36, further, empowers CCI to regulate its
own procedure for the purpose of discharging its functions under the Act however, CCI shall be guided by the principles of natural
justice and in respect of the matters specified in sub-section 2 of section 36 relating to recording evidence, CCI is conferred with
the same powers as are vested in a Civil Court under CPC, 1908 while trying a Suit. However, section 57 of the Act makes it clear
that no information relating to any enterprise being information which has been obtained by CCI for the purpose of the Act shall be
disclosed otherwise than in compliance with or for the purposes of the Act or any other law for the time being in force. Further,
regulation 35 of General Regulations, 2009 expressly provides that the commission shall maintain confidentiality of the identity of
an informant, a document or documents or a part thereof on a request made by the informant. Such confidential treatment may be
given by the CCI or DG, on being satisfied, to any other information or document or part thereof also in respect of which no
request has been made by the informant or the party which has furnished such information or document. Though regulation 37
enables a party to the proceedings to inspect the documents or records submitted during proceedings or to obtain copies of the
same by making an application accompanied with the specified fees, the same is subject to the restriction on disclosure of
information as provided under section 57 of the Act. Thus, it is clear that the entitlement of a party to the proceedings to inspect the
documents or to obtain copies of the same is not absolute and it is always open to CCI to reject permission for inspection or
furnishing copies if it is of the view that the documents/information require confidential treatment.
Regarding the validity of the rules, the court stated that the delegated legislation could be struck down as unreasonable
only if it was manifestly arbitrary or so unreasonable that the parliament never intended to confer such power on the
regulator. In the absence of such high standards of unreasonableness, the impugned legislations were not held as arbitrary
or unreasonable.
Page 20 of 24
[s 26] Procedure for inquiry under section 19
MRTP ACT, 1969 VIS-À-VIS COMPETITION ACT, 2002
This section generally corresponds to section 11 of MRTP Act, 1969. Under that Act, Director General also had suo moto
powers of investigation. Under the Competition Act, 2002, elaborate procedure has been prescribed to deal with the
investigation report but Director General has no suo moto powers.
CONSUMER PROTECTION ACT, 1986 VIS-À-VIS COMPETITION ACT, 2002
While the Commission has been provided with the assistance of Director General for investigation, no such provision or
procedure exists in the Consumer Protection Act, 1986.
Also, there is no officer (or office) like the Director General for Investigation under the Consumer Protection Act, 1986.
91 Subs. by Amendment Act, 2007 (39 of 2007), section 19 (w.e.f. 20 May 2009). Prior to its
substitution, it stood as under:
[s 26]. Procedure for inquiry on complaints under section 19.
(1) On receipt of a complaint or a reference from the Central Government or a State Government or a statutory authority or on its
own knowledge or information, under section 19, if the Commission is of the opinion that there exists a prima facie case, it
shall direct the Director General to cause an investigation to be made into the matter.
(2) The Director General shall, on receipt of direction under sub-section (1), submit a report on his findings within such period as
may be specified by the Commission.
(3) Where on receipt of a complaint under clause (a) of sub-section (1) of section 19, the Commission is of the opinion that there
exists no prima facie case, it shall dismiss the complaint and may pass such orders as it deems fit, including imposition of
costs, if necessary.
(4) The Commission shall forward a copy of the report referred to in sub-section (2) to the parties concerned or to the Central
Government or the State Government or the statutory authority, as the case may be.
(5) If the report of the Director General relates on a complaint and such report recommends that there is no contravention of any
of provisions of this Act, the complainant shall be given an opportunity to rebut the findings of the Director General.
(6) If, after hearing the complainant, the Commission agrees with the recommendation of the Director General, it shall dismiss
the complaint.
(7) If, after hearing the complainant, the Commission is of the opinion that further inquiry is called for, it shall direct the
complainant to proceed with the complaint.
(8) If the report of the Director General relates on a reference made under sub-section (1) and such report recommends that there
is no contravention of the provisions of this Act, the Commission shall invite comments of the Central Government or the
State Government or the statutory authority, as the case may be, on such report and on receipt of such comments, the
Commission shall return the reference if there is no prima facie case or proceed with the reference as a complaint if there is a
prima facie case.
(9) If the report of the Director General referred to in sub-section (2) recommends that there is contravention of any of the
provisions of this Act, and the Commission is of the opinion that further inquiry is called for, it shall inquire into such
contravention in accordance with the provisions of this Act.
Page 21 of 24
[s 26] Procedure for inquiry under section 19
92 ITC v MRTPC, (1976) 46 Com Cas
619 (Cal).
93 Excel Crop Care Ltd v CCI, (2017) 8
SCC 47 : 5 Mad LJ 187.
94 Re Rallis India Ltd (UTPE No 219/86 decided on 1 October 1991).
95 CCI v Steel Authority of India Ltd, 2010 (5) All MR (SC) 934 : 2010
Comp LR 61 (SC) : (2010) 4 Comp LJ 1 (SC) :
JT 2010 (10) SC 26 : (2011) 2 Mad LJ 271 (SC) : 2010 (9)
Scale 291 : (2010) 10 SCC 744 :
[2010] 103 SCL 269 (SC) : [2010] 11
SCR 112 : 2010 (8) UJ 4093
(SC).
96 Cadila Healthcare Ltd v CCI,
(2018) 252 DLT 647 .
97 Surendra Prasad v Maharashtra State Power Generation Co Ltd,
Case No 61 of 2013, decided on 10 January 2018 (CCI).
98 The Competition Commission of India (General) Regulations, 2009
(General Regulations).
99 Vodafone India Ltd v CCI,
(2018) 143 CLA 429 : (2017) 144 SCL 580
: 2017 Comp LR 965 (Bom).
100 Surendra Prasad v Maharashtra State Power Generation Co Ltd,
Case No 61 of 2013, decided on 10 January 2018.
101 Cadila Healthcare Ltd v CCI,
(2018) 252 DLT 647 .
102 Google Inc v CCI, [2015] 127
CLA 367 : 2015 Comp LR 391: 2015 (150) DRJ 192
(Del).
103 CCI v Steel Authority of India Ltd, 2010 (5) All MR (SC) 934 : 2010
Comp LR 61 (SC) : (2010) 4 Comp LJ 1 (SC) :
JT 2010 (10) SC 26 : (2011) 2 Mad LJ 271 (SC) : 2010 (9) Scale
291 : (2010) 10 SCC 744 : [2010] 103
SCL 269 (SC) : [2010] 11 SCR 112 :
2010 (8) UJ 4093 (SC).
104 CCI v Steel Authority of India Ltd, 2010 (5) All MR
(SC) 934 : 2010 Comp LR 61 (SC) : (2010) 4 Comp LJ 1
(SC) : JT 2010 (10) SC 26 : (2011) 2 Mad LJ 271 (SC) :
2010 (9) Scale 291 : (2010) 10 SCC 744 :
[2010] 103 SCL 269 (SC) :
Page 22 of 24
[s 26] Procedure for inquiry under section 19
[2010] 11 SCR 112 : 2010 (8) UJ 4093
(SC).
105 State of Haryana v Bhajan Lal,
1992 Supp (1) SCC 335 .
106 State of Haryana v Bhajan Lal,
1992 Supp (1) SCC 335 .
107 Tamil Nadu Film Exhibitors Association v CCI,
AIR 2015 Mad 106 .
108 Colgate Palmolive India Pvt Ltd v UOI,
[1980] 50 Com Cas 456 (Del).
109 KK Velusamy v N Palanisamy,
(2011) 11 SCC 275 : [2011] 4 SCR 31
: 2011 (4) Scale 61 : 2011 (86)
ALR 457 : JT 2011 (4) SC 38 .
110 Bhavnagar University v Palitana Sugar Mill Pvt Ltd,
AIR 2003 SC 511 (9) : (2003) 2 SCC 11
; Bharat Forge Co Ltd v Uttam Manohar Nakate, AIR 2005 SC 947
: (2005) 2 SCC 489 :
[2005] 1 SCR 545 : JT 2005 (1) SC 303
; Inderpreet Singh Kahlon v State of Punjab, AIR 2006 SC 2571 :
(2006) 5 Scale 273 : (2006) 11 SCC 356
: 2006 (5) Scale 273 :
JT 2006 (5) SC 352 .
111 CCI v Steel Authority of India Ltd, 2010 (5) All MR (SC) 934 : 2010
Comp LR 61 (SC) : (2010) 4 Comp LJ 1 (SC) :
JT 2010 (10) SC 26 : (2011) 2 Mad LJ 271 (SC) : 2010 (9) Scale
291 : (2010) 10 SCC 744 : [2010] 103
SCL 269 (SC) : [2010] 11 SCR 112 :
2010 (8) UJ 4093 (SC).
112 Jindal Steel & Power Ltd v CCI and Prints India v Springer (India)
Pvt Ltd, 2013 Comp LR 531 (COMPAT).
113 Also see Arshiya Rail Infrastructure Ltd v CCI,
[2013] 119 SCL 364 (CAT)]. The Competition Amendment Bill, 2012 proposed to clear
the air by making orders under section 26(8) also appealable to the COMPAT under section 53A of the Act. 17. In section 53A of
the principal Act, in sub-section (1), in clause (a), for the words, brackets and figures “sub-sections (2) and (6)”, the words, brackets
and figures “sub-sections (2), (6), (7) and (8)” shall be substituted.
114 Gujarat Industries Power Co Ltd v CCI & GAIL (India) Ltd, Appeal
No 3 of 2016 [COMPAT], decided on 28 November 2016.
115 The Air Cargo Agents Association of India v CCI, International Air
Transport Association (IATA) & International Air Transport Association, COMPAT, order dated 15 November 2016.
Page 23 of 24
[s 26] Procedure for inquiry under section 19
116 Id.
117 CCI v Steel Authority of India Ltd, 2010 (5) All MR (SC) 934 : 2010
Comp LR 61 (SC) : (2010) 4 Comp LJ 1 (SC) :
JT 2010 (10) SC 26 : (2011) 2 Mad LJ 271 (SC) : 2010 (9)
Scale 291 : (2010) 10 SCC 744 :
[2010] 103 SCL 269 (SC) : [2010] 11
SCR 112 : 2010 (8) UJ 4093
(SC). See also Chettinad International Coal Terminal Pvt Ltd v Competition of India; TN Power Producers Association,
Kamarajar Port Ltd, WP No 7233 of 2016.
118 MRF Ltd v Ministry of Corporate Affairs (MCA), 2018 Comp LR 313
(Mad).
119 Id.
120 Toyota Kirloskar Motor Pvt Ltd v CCI, Mr Shamsher Kataria,
Appeal No 60/2014 [COMPAT]; Ford India Pvt Ltd v CCI, Appeal No 61/2014 [COMPAT]; Nissan Motor India Pvt Ltd v CCI,
Appeal No 62/2014 [COMPAT], decided on 9 December 2016.
121 Cadila Healthcare Ltd v CCI,
(2018) 252 DLT 647 .
122 Anand Parkash Agarwal v Dakshin Haryana Bijli Vitran Nigam,
Appeal No 33/2016 [COMPAT], decided on 16 February 2017.
123 Appeal No 45 of 2012, order dated 3 April 2013.
124 Appeal No 136/2012, order dated 4 April 2013.
125 Saurabh Tripathy v CCI, Appeal No 16/2017 [COMPAT], decided
on 15 May 2017.
126 The Board of Control for Cricket in India v the CCI, Appeal No 17
of 2013 [COMPAT].
127 TPM Consultants Pvt Ltd v CCI, Appeal No 35 of 2016 [COMPAT],
decided on 4 July 2016.
128 35(2) Any party may submit a request in writing to the Commission
or the Director-General, as the case may be, that a document or documents, or a part or parts thereof, be treated confidential.
35(8) On receipt of a request under sub-regulation (2), the Commission or the Director-General, as
the case may be, if satisfied, shall direct that the document or documents or a part or parts thereof shall be kept confidential for the
time period to be specified.
****
Page 24 of 24
[s 26] Procedure for inquiry under section 19
35(10) In case the Director-General has rejected the request of the party made under sub-regulation
(2), the party may approach the Commission for a decision regarding confidential treatment.
129 TPM Consultants Pvt Ltd v CCI, Appeal No 35 of 2016 [COMPAT],
decided on 4 July 2016.
130 CCI v Steel Authority of India Ltd, 2010 (5) All MR (SC) 934 : 2010
Comp LR 61 (SC) : (2010) 4 Comp LJ 1 (SC) :
JT 2010 (10) SC 26 : (2011) 2 Mad LJ 271 (SC) : 2010 (9)
Scale 291 : (2010) 10 SCC 744 :
[2010] 103 SCL 269 (SC) : [2010] 11
SCR 112 : 2010 (8) UJ 4093
(SC).
131 Telefonaktiebolaget LM Ericsson (PUBL) v CCI, 2016 Comp LR 497
(Del).
132 See State of Andhra Pradesh v PV Hanumantha Rao (D) thr,
(2003) 10 SCC 121 .
133 Vodafone India Ltd v The CCI, 2017 Comp LR 965 (Bom)
134 MRF Ltd v Ministry of Corporate Affairs (MCA), 2018 Comp LR 313
(Mad).
135 Somi Conveyor Beltings Ltd v UOI, WP (C) 1416/2016 & CM No
6194/2016; Premier Rubber Mills v UOI, WP (C) 1969/2016.
136 CCI v Steel Authority of India Ltd, 2010 (5) All MR (SC) 934 : 2010
Comp LR 61 (SC) : (2010) 4 Comp LJ 1 (SC) :
JT 2010 (10) SC 26 : (2011) 2 Mad LJ 271 (SC) : 2010 (9)
Scale 291 : (2010) 10 SCC 744 :
[2010] 103 SCL 269 (SC) : [2010] 11
SCR 112 : 2010 (8) UJ 4093
(SC)..
End of Document
[s 27] Orders by Commission after inquiry into agreements or abuse of dominant
position
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > CHAPTER
IV DUTIES, POWERS AND FUNCTIONS OF COMMISSION
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
CHAPTER IV DUTIES, POWERS AND FUNCTIONS OF COMMISSION
137[s27] Orders by Commission after inquiry into agreements or abuse of dominant
position
Where after inquiry the Commission finds that any agreement referred to in section 3 or action of an enterprise in a
dominant position, is in contravention of section 3 or section 4, as the case may be, it may pass all or any of the following
orders, namely:—
(a) direct any enterprise or association of enterprises or person or association of persons, as the case may be,
involved in such agreement, or abuse of dominant position, to discontinue and not to re-enter such agreement or
discontinue such abuse of dominant position, as the case may be;
(b) impose such penalty,138 as it may deem fit which shall be not more than ten per cent. of the average of the
turnover for the last three preceding financial years, upon each of such person or enterprises which are parties to
such agreements or abuse:
139[Provided that in case any agreement referred to in section 3 has been entered into by a cartel, the
Commission may impose upon each producer, seller, distributor, trader or service provider included in that
cartel, a penalty of up to three times of its profits for each year of the continuance of such agreement or ten
percent of its turnover for each year of the continuance of such agreement, whichever is higher];
(c) 140[* * *];
(d) direct that the agreements shall stand modified to the extent and in the manner as may be specified in the order by
the Commission;
(e) direct the enterprises concerned to abide by such other orders as the Commission may pass and comply with the
directions, including payment of costs, if any;
(f) 141[* * *];
(g) pass such other 142[order or issue such directions] as it may deem fit:
143[Provided that while passing orders under this section, if the Commission comes to a finding, that an
enterprise in contravention to section 3 or section 4 of the Act is a member of a group as defined in clause (b)
of the Explanation to section 5 of the Act, and other members of such a group are also responsible for, or
have contributed to, such a contravention, then it may pass orders, under this section, against such members
of the group].
Page 2 of 18
[s 27] Orders by Commission after inquiry into agreements or abuse of dominant position
LEGISLATIVE BACKGROUND
MRTP Act, 1969
Order which may be passed by the MRTPC in respect of restrictive trade practices (referred to as anti-competitive
agreements under section 3 of the Competition Act, 2002) were contained in section 37 of the MRTP Act, 1969, since
repealed as under:
[s 37] Investigation into restrictive trade practices by Commission.—(1) The Commission may inquire into any restrictive trade
practice, whether the agreement, if any, relating thereto has been registered under section 35 or not, which may come before it for
inquiry and, if, after such inquiry it is of opinion that the practice is prejudicial to the public interest, the Commission may, by
order, direct that—
(a) the practice shall be discontinued or shall not be repeated;
(b) the agreement relating thereto shall be void in respect of such restrictive trade practice or shall stand modified in respect
thereof in such manner as may be specified in the order.
(2) The Commission may, instead of making any order under this section, permit the party to any restrictive trade practice, if he so
applies to take such steps within the time specified in this behalf by the Commission as may be necessary to ensure that the trade
practice is no longer prejudicial to the public interest, and, in any such case, if the Commission is satisfied that the necessary steps
have been taken within the time specified, it may decide not to make any order under this section in respect of that trade practice.
(3) No order shall be made under sub-section (1) in respect of—
(a) any agreement between buyers relating to goods which are bought by the buyers for consumption and not for ultimate re-
sale whether in the same or different form, type, or specie or as constituent of some other goods;
(b) a trade practice which is expressly authorised by any law for the time being in force.
(4) Notwithstanding anything contained in this Act, if the Commission, during the course of an inquiry under sub-section (1), finds
that the owner of any undertaking is indulging in monopolistic trade practices, it may, after passing such orders under sub-section
(1) or sub-section (2) with respect to the restrictive trade practices as it may consider necessary, submit the case along with its
findings thereon to the Central Government for such action as that Government may take under section 31.
This section, which was based on the recommendation of the Monopolies Inquiry Commission, gave authority to the
MRTPC to inquire into any restrictive trade practice. The Monopolies Inquiry Commission in this behalf recommended
that:
Where the judicial examination results in a finding that no restrictive practice is being pursued or that though such a practice is
being pursued, it is in the interest of the general public, or that it does not work to the common detriment, no further action need be
taken, except that the decision should be given proper publicity in a suitable way. Where, the decision is otherwise, in other words
Page 3 of 18
[s 27] Orders by Commission after inquiry into agreements or abuse of dominant position
where the finding is that one or more enterprises are guilty of pursuing a restrictive practice which is to the common detriment,
something in addition to giving publicity to the finding is called for. We think, the most fruitful line of action would be issue by the
Commission itself of an order to discontinue the practice. We are also of opinion that this should be final, subject only to an appeal
to the Supreme Court and that it should have mandatory force.
Sachar Committee
Sachar Committee while considering the amendments to the MRTP Act, 1969, inter alia, suggested that the Commission
may be empowered to pass orders even when an agreement has been determined, and for clearance of trade practices by
the Commission, in the following words:
In J.K. Synthetics Ltd v Director of Investigation,144 a single Judge of the Allahabad High Court had held that no inquiry can be
held by the Commission in respect of the practice which has been determined prior to the passing of the order by the Commission.
The result of this would be that after the Commission has issued the notice to the party, the latter may take a stand that the
agreement having been determined, the Commission has no jurisdiction to inquire and this would render the Commission
powerless. This is an unsatisfactory state of affairs, apart from the correctness of such a view. The House of Lords in Associated
Newspapers Ltd,145 had not accepted such an interpretation. It was held in that case that all agreements entered in the register
whether subsisting or determined, were referable and justiciable by, the Restrictive Practices Court. The Court had jurisdiction to
hear the references of the agreements and to exercise all its powers in respect of the relevant restrictions comprised in it, including
its most important power of restraining the making of further agreements to the like effect. It was also observed that the fact that
the parties have already terminated the agreement is no guarantee that they will not make another one, and the need for such
remedy may be just as great where they have terminated agreement before the commencement of the proceedings as where they
have terminated their agreement at some time in the course of the proceedings. Under section 37 of the Act, the Commission has
powers, inter alia, to direct by order that the practice shall be “discontinued or shall not be repeated”. The practice which has
already been discontinued would need no direction to discontinue and the only direction in such cases could be that it shall not be
repeated. It is in the interest of all including the trade that it should be known clearly as to which practices are prohibited. This can
happen only if, notwithstanding that the practice may have been discontinued before the issue of notice by the Commission, the
latter was to be held empowered to adjudicate upon it. Recently, on 15 June, 1978, the view of the single Judge referred to above,
has been reversed by a Division Bench of that Court, which has followed the above House of Lords’ decision. Although the
position in this regard has now been clearly propounded by the Court, the Committee considers that it would be better if the law is
amended suitably to provide in the Act specifically that the power of the Commission shall not be affected by the determination of
agreement whether before or after the commencement of the proceedings; and whether any agreement is varied before or after the
commencement of the proceedings, the Commission may make an order as it thinks proper in respect of the said agreement or in
respect of the said variation or in respect of both. We would, therefore, recommend that the law should be amended to provide that,
notwithstanding the determination of the agreement whether before or after the proceedings have been started by the Commission,
the latter should be empowered to proceed to determine the validity of the said practice. At present, the only power with the
Commission in regard to restrictive trade practices is to issue a “cease and desist” order or to permit the party itself to modify the
agreement so that it is no longer prejudicial to public interest. It will be seen that in this manner a party, till it is called before the
Commission, can continue to indulge in any restrictive trade practice without suffering any adverse consequences. At the most,
when a party is so called and restrictive trade practice is established, it may be directed to discontinue it and only if it indulges in it
thereafter that it becomes punishable for contravening an order made under sections 31 and 37 and that too only with a fine of five
thousand rupees and/or imprisonment up to six months and continuing fine of five hundred rupees for every day of default, as
provided in section 50 of the Act. We believe that the need for an effective provision for meeting the challenge of the restrictive
trade practices which pollute the fountain of competition and cause great damage to the consumers and the community is most
necessary and urgent ... Since we are suggesting prohibition of restrictive trade practices subject only to the limited exceptions and
gateways, we feel that there should be provision in the Act for grant of clearance by the Commission. It should, therefore, be
provided that the parties may, on their own volition, apply for and seek the clearance from the Commission if they feel that any
particular practice or practices fall under one or more of the exceptions/defences provided for in the Act. The Commission,
thereupon, would ordinarily be expected to give its decision within a period of three months from the date of application; during
this period, the party concerned will not engage in such practices. However, after the expiry of the said period, and no decision
having been given, the party may, on its own responsibility and risk, proceed with the proposed agreement or arrangement or
practice. But in such a case, the liability of the party for civil action in damages would continue to remain from the date the
Page 4 of 18
[s 27] Orders by Commission after inquiry into agreements or abuse of dominant position
practice was indulged in, if ultimately the Commission refuses clearance. However, the criminal liability, in the event of the
necessary clearance not being given by the Commission, would accrue only from the date of knowledge of the Commission’s final
order and if the party continues to indulge in that particular practice(s) despite the Commission’s decision. We, therefore,
recommend that suitable provisions on the above lines may be made in the Act.
Competition Act, 2002
Notes on clauses of the Bill stated, thus:
Notes on clauses.—This clause deals with various orders which the Commission is competent to pass after an inquiry. If, on
inquiry, the Commission finds that the agreements or the actions of an enterprise in a dominant position are in contravention of the
provisions of clauses 3 and 4, it may pass any order which may, inter alia, include an order directing any enterprise or association
of enterprises or person or association of persons involved in the agreement or abuse of dominant position to discontinue and not to
re-enter into any such agreement or abuse, as the case may be, imposing such penalty as the Commission deems fit which shall not
be more than ten percent of the average of the turnover for the last three years upon each such person or enterprise which is a party
to the agreement or abuse of dominant position, awarding compensation to the parties, directing modification of the agreement,
recommending to the Central Government the division of any such enterprise enjoying dominant position or complying with its
directions including a direction to pay costs. [Clause 27 of the Competition Bill, 2001].
Competition (Amendment) Act, 2007
Notes on clauses.—This clause seeks to amend section 27 of the Competition Act, 2002 relating to orders by the Commission after
inquiry into agreements or abuse of dominant position.
The existing provisions contained in the said section, inter alia, confer power upon the Commission to pass orders awarding
compensation to parties in accordance with the provisions contained in section 34.
The power to award compensation is proposed to be conferred upon the Appellate Tribunal by new section 53N proposed to be
inserted by clause 43 of the Bill. It is, therefore, proposed to omit clauses (c) and (f) of section 27 which confer powers on the
Commission to pass orders awarding compensation.
It is also proposed to add a proviso to this section providing that if the Commission comes to a finding that an enterprise, in
contravention to section 3 or section 4 of the Act, is a member of a group as defined in clause (b) of the Explanation to section 5 of
the Act, and other members of such a group are also responsible for, or have contributed to, such a contravention, then it may pass
any orders against such members of the group. [Clause 20 of the Competition (Amendment) Bill, 2007].
SCOPE OF THE SECTION
The Commission is empowered to pass appropriate orders on the enquiry into the alleged anti-restrictive agreements and
abuse of dominant position in contravention of the provisions of sections 3 and 4. The nature of order which may be passed
by the Commission have been enumerated in section 27. The final orders can be passed only when the Commission has
Page 5 of 18
[s 27] Orders by Commission after inquiry into agreements or abuse of dominant position
arrived at a finding that there is a contravention of the provisions of sections 3 and 4, as the case may be, after enquiry in
case of sections 20 and 26.
CEASE AND DESIST ORDER [CLAUSE (A)]
The Commission may pass “cease and desist” order to discontinue and not to enter such an agreement again or discontinue
such abuse of dominant position.
In the case of Belaire Owner’s Association,146 the Commission considered the provisions of section 27 of the Competion
Act, 2002 which empowered the Commission to pass an appropriate order as mentioned in sections 27(a) to 27(g). The
Commission considered that since the findings of the Director General and the Commission showed a violation of section
4 of the Act by DLF, thus those provisions of section 27 could be applied which pertained to abuse of dominance. As such,
the Commission concluded that it could pass orders under all or any of the provisions contained in sections 27(a), 27(b),
27(e) and 27(g). The Commission was of the opinion that sections 27(a), 27(e) and 27(g) related to contravention of both
sections 3 and 4 while section 27(d) related to contravention of section 3. Having regard to this aspect, the Commission
considered it appropriate to pass an order imposing penalty on DLF and give directions under section 27(a) to DLF. The
Commission therefore gave following directions:- (i) to cease and desist from formulating and imposing such unfair
conditions in its agreement with buyers in Gurgaon; (ii) to suitably modify unfair conditions imposed on its buyers with
regard to above within three months of the date of receipt of the order.
The Commission left it to DLF to suitably modify unfair conditions imposed on its buyers expecting that the modified
agreement would be finalised by DLF in consultation with buyers keeping in view the findings and observations of the
Commission. The exact terms and conditions of the agreement were not formulated as it involved specific contract with
each buyer in respect of service/goods to be provided by the DLF and freedom was given by Commission to the parties to
enter into mutually agreed contract. It was expected that in each such agreement, DLF would properly define the
product/service as it was having exact spaces/carpet areas/common areas/dimensions etc applicable in respect of that buyer
and it would clearly state all requisite clearances which it had obtained at the time of entering agreement. It was also
expected that it would state the cost of the product/service to the buyers with no hidden and indirect charges and it shall
also clearly lay down the delivery schedule stage wise. It was also expected that one-sided clauses would be suitably
modified so as to remove the abuse of dominance. Against the 12 August 2011 decision of the Commission, DLF preferred
an appeal before the Tribunal which vide its order dated 29 March 2012 remitted the matter, along with the draft modified
terms and conditions submitted by the parties, to the Commission directing the Commission to pass an order under section
27(d) specifying the extent and manner in which the terms and conditions of the Agreement need to be modified. Further,
the Tribunal in its order dated 21 May 2012 observed that in order to carry out suitable modifications in terms and
conditions of the agreement, it would be imperative to first determine the manner and extent of such modifications in terms
of the order dated 12 August 2011 and only then such modifications could actually be carried out. It was further observed
that the direction to “suitably” modify the unfair terms and conditions was interminably linked to the question of whether
the terms and conditions were indeed unfair and, therefore, need to be “suitably” modified. The question of correctness of
the findings of the Commission would, therefore, depend on the whole gamut of the conclusions arrived at by the
Commission; the foundation and the basis on which the same had been arrived at, as well as the manner and extent of the
modifications which they have so directed which need to be carried out.147
Other instances of cease and desist orders
In FICCI Multiplex Association of India v United Producers/Distributors Forum,148 the Commission after considering the
cumulative effect of all the mitigating factors in the context of peculiar facts and circumstances of the instant case, was of
the opinion that ends of justice would be met if a penalty of Rs 1,00,000 (rupees one lakh only) was imposed upon each of
the opposite parties under section 27(b) of the Competion Act, 2002 in addition to cease and desist order under section
27(a) of the Act.
In BP Khare, Principal Chief Engineer, South Eastern Railway v M/s Orissa Concrete and Allied Industries Ltd,149 in
view of the facts and the circumstances of the case, the Commission was of the considered opinion that it was a fit case
where imposition of penalty was not warranted and ends of justice would be met if a cease and desist order was issued
under section 27(a) of the Act against the parties, as noted above.
Page 6 of 18
[s 27] Orders by Commission after inquiry into agreements or abuse of dominant position
In Uniglobe Mod Travels Pvt Ltd v Travel Agents Federation of India,150 the Commission was of the opinion that all the
opposite parties may be directed to refrain from indulging in such anticompetitive conduct. Further, the three Opposite
Parties, TAFI, TAAI and IAAI were considered for additional penalty apart from cease and desist, since the gravity of their
anti-competitive conduct was higher. The Commission after considering the combined effect of all the factors in the
context of facts and circumstances of the case, was of the view that the ends of justice would be sufficiently met if a
penalty of Rs 1,00,000 (rupees one lakh only) was imposed upon TAFI, TAAI and IAAI under section 27(b) of the Act, in
addition to cease and desist order under section 27(a) of the Act.
In Pankaj Aggarwal v DLF Gurgaon Home Developers Pvt Ltd,151 in exercise of powers under section 27(a) of the
Competion Act, 2002, the Commission directed the Opposite Party and its group companies operating in the relevant
market to cease and desist from indulging in the conduct which was found to be unfair and abusive in terms of the
provisions of section 4 of the Act in the preceding paras of the order.
IMPOSITION OF PENALTY [CLAUSE (B)]
The twin objectives behind imposition of penalties are: to impose penalties on infringing undertakings which reflect the
seriousness of the infringement; and to ensure that the threat of penalties will deter both the infringing undertakings and
other undertakings that may be considering anti-competitive activities from engaging in them. The imposition of penalty
would depend upon the mitigating and aggravating circumstances of the case.152 Anti-competitive acts and conducts
require to be penalised to cause deterrence in future among the erring entities engaged in such actions. Accordingly, it is
required that the degree of punishment is scaled to the severity of the violation.153
The Commission may impose penalty up to 10% of the average turnover for the last three preceding financial years on
every person or enterprise which are parties to the agreement or abuse.
In case of cartel under section 3(3), a penalty equivalent to three times of its profits for such year of continuance of the
agreement or 10% of its turnover for each year of its continuance, whichever is higher, shall be imposed. However, the
Commission may impose lesser penalty vide section 46 if it is satisfied that full and true disclosure has been made in
respect of the alleged violations.
Proviso
The proviso to section 27(b) (unamended) was couched in a language, which made it mandatory for the Commission to
impose on each producer, seller, distributor, trader or service provider included in a cartel, a penalty equivalent to three
times of the amount of profits made out of such agreement by the cartel or 10% of the average of the turnover of the cartel
for the last preceding three financial years, whichever was higher. If the proviso to section 27(b) had not been amended,
then the Commission had no option but to impose penalty on each producer, seller, distributor, trader or service provider in
cases involving formation of cartel. However, Parliament amended the proviso and substituted the word “shall” with the
word “may”. This amendment was done to bring the proviso in tune with the main section 27, which uses the expression
“it may pass all or any of the following order” and clause (b), which confers discretion upon the Commission to impose
penalty as it may deem fit, subject to the rider that it shall not be more than 10% of the average of the total turnover for the
last three preceding financial years. Clauses (c) and (d) also use the word “may”, which signifies that the Commission has
the discretion to pass the particular order, which it may deem proper in the facts and circumstances of the case.154
“Turnover”
“Turnover” has been defined under section 2(y) to include value of sale of goods or services. However, the Commission
while imposing penalty shall differentiate between average turnover and relevant turnover.
“Total/entire” Turnover v “Relevant” Turnover
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The term, “turnover” used in section 27(b) and its proviso relates to the goods, products or services qua which finding of
violation of section 3 and/or section 4 was recorded and while imposing penalty, the Commission cannot take average of
the turnover of the last three preceding financial years in respect of other products, goods or services of an enterprise or
associations of enterprises or a person or associations of persons. Since the legislature has not laid down any criteria for
imposing penalty, the Commission was duty bound to consider all the relevant factors like – nature of industry, the age of
industry, the nature of goods manufactured by it, the availability of competitors in the market and the financial health of
the industry etc. and also take note of the law laid down by the Supreme Court, the High Courts and the Tribunal.155
Relevant turnover (multi product companies)
Clearing all confusion, the Supreme Court, in the case of Excel Crop Care156 had while approving the stand of the
Tribunal157 laid down the following with respect to imposition of penalty under section 27 on the basis of turnover:
1. There may be a situation that some of such enterprises may be multi-product companies and some may be single product
in respect of which the agreement is arrived at. If the concept of total turnover is introduced it may bring out very
inequitable results.
2. When the agreement leading to contravention of section 3 involves one product, there seems to be no justification for
including other products of an enterprise for the purpose of imposing penalty. This is also clear from the opening words
of section 27 read with section 3 which relate to one or more specified products. It also defies common sense that though
penalty would be imposed in respect of the infringing product, the ‘maximum penalty’ imposed in all cases be
prescribed on the basis of ‘all the products’ and the ‘total turnover’ of the enterprise. It would be more so when total
turnover of an enterprise may involve activities besides production and sale of products, like rendering of services etc. It,
therefore, leads to the conclusion that the turnover has to be of the infringing products and when that is the proper
yardstick, it brings home the concept of ‘relevant turnover’.
3. Doctrine of proportionality: Even the doctrine of ‘proportionality’ would suggest that the Court should lean in favour of
‘relevant turnover’. No doubt the objective contained in the Act, viz., to discourage and stop anti-competitive practices
has to be achieved and those who are perpetrators of such practices need to be indicted and suitably punished. It is for
this reason that the Act contains penal provisions for penalising such offenders. At the same time, the penalty cannot be
disproportionate and it should not lead to shocking results. That is the implication of the doctrine of proportionality
which is based on equity and rationality. It is, in fact, a constitutionally protected right which can be traced to Article 14
as well as Article 21 of the Constitution. The doctrine of proportionality is aimed at bringing out ‘proportional result or
proportionality stricto sensu’. It is a result oriented test as it examines the result of the law in fact the proportionality
achieves balancing between two competing interests: harm caused to the society by the infringer which gives
justification for penalising the infringer on the one hand and the right of the infringer in not suffering the punishment
which may be disproportionate to the seriousness of the Act.
4. No doubt, the aim of the penal provision is also to ensure that it acts as deterrent for others. At the same time, such a
position cannot be countenanced which would deviate from ‘teaching a lesson’ to the violators and lead to the ‘death of
the entity’ itself. If we adopt the criteria of total turnover of a company by including within its sweep the other products
manufactured by the company, which were in no way connected with anti-competitive activity, it would bring about
shocking results not comprehended in a country governed by Rule of Law. Cases at hand itself amply demonstrate that
the CCI’s contention, if accepted, would bring about anomalous results. In the case of M/s Excel Crop Care Ltd, average
of three years’ turnover in respect of APT, in respect whereof anti-competitive agreement was entered into by the
Appellants, was only 32.41 crores. However, as against this, the CCI imposed penalty of Rs. 63.90 crores by adopting
the criteria of total turnover of the said company with the inclusion of turnover of the other products as well. Likewise,
UPL was imposed penalty of 252.44 crores by the CCI as against average of the three years’ turnover of APT of Rs.
77.14 crores. Thus, even when the matter is looked into from this angle, we arrive at a conclusion that it is the relevant
turnover, i.e., turnover of the particular product which is to be taken into consideration and not total turnover of the
violator.
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5. The doctrine of ‘purposive interpretation’ may again lean in favour of ‘relevant turnover’ as the appropriate yardstick for
imposition of penalties. It is for this reason the judgment of Competition Appeal Court of South Africa in the Southern
Pipeline Contractors Conrite Walls, as quoted above, becomes relevant in Indian context as well inasmuch as this Court
has also repeatedly used same principle of interpretation. It needs to be repeated that there is a legislative link between
the damage caused and the profits which accrue from the cartel activity. There has to be a relationship between the
nature of offence and the benefit derived therefrom and once this co-relation is kept in mind, while imposing the penalty,
it is the affected turnover, i.e., ‘relevant turnover’ that becomes the yardstick for imposing such a penalty. In this hue,
doctrine of ‘purposive interpretation’ as well as that of ‘proportionality’ overlaps.
6. In fact, some justifications have already appeared in this behalf while discussing the matter on the application of doctrine
of proportionality. What needs to be repeated is only that the purpose and objective behind the Act is to discourage and
stop anti-competitive practice. Penal provision contained in section 27 of the Act serves this purpose as it is aimed at
achieving the objective of punishing the offender and acts as deterrent to others. Such a purpose can adequately be
served by taking into consideration the relevant turnover. It is in the public interest as well as in the interest of national
economy that industries thrive in this country leading to maximum production. Therefore, it cannot be said that purpose
of the Act is to ‘finish’ those industries altogether by imposing those kinds of penalties which are beyond their means. It
is also the purpose of the Act not to punish the violator even in respect of which there are no anti-competitive practices
and the provisions of the Act are not attracted.
Earlier cases that delved in the question of “turnover”
In the case of MCX Stock Exchange Ltd,158 the Commission held that neither section 2(y) nor section 27(b)159 gave a
leeway for the Commission to interpret that turnover meant turnover in the context of only the relevant product or
geographic market and such an interpretation would not be in consonance with the underlying intent of the provisions of
the Competion Act, 2002, particularly in instances of contravention of section 4(e) where the market entered or protected
may have a very small turnover but the market from where the market power was transposed has a much larger turnover.
The imposition of monetary penalty under section 27(b) of the Act must serve the dual purpose of deterrence as well as
punishment. In the Indian context, if an enterprise or group is held in contravention of the Act, the law does not stipulate or
allow the Commission to restrict the monetary penalty by artificially truncating the turnover of the enterprise or group and
confining it to relevant market. As long as the entity that is guilty of contravention is a single entity, its entire turnover is
the relevant turnover for the purpose of section 27(b). The only fetter which has been placed by section 27(b) of the Act on
the power of the Commission to impose penalty in cases of infringement of section 4, is the cap of 10% of the average of
turnover for the last three preceding financial years.
The COMPAT,160 while upholding the penalty imposed by the Commission, differentiated the present case with that of
Excel Crop. The Tribunal held that the judgment in the case of M/s Excel Crop v CCI,161 was pressed into service to
suggest that the relevant turnover should alone be considered for the sake of penalty was for multi-commodity companies.
The relevant market in this case was the services of stock exchange in all the segments. It was pointed out that the National
Stock Exchange was making tons of profits from the relevant market on account of its services in the other segments.
Therefore, there can be no justification for taking any lenient view, nor was it necessary to consider the concept of notional
turnover figure, when the turnover of the National Stock Exchange is well available on the basis of Annual Reports. The
contention of relevant turnover was therefore, rejected.
Again, in the case of M/s International Cylinder Pvt Ltd v CCI,162 the Tribunal observed:
We also do not find any reason, why the CCI has chosen to inflict the penalty at 7%. We have considered question of necessity of
reasons in MDD Medical Systems India Pvt. Ltd v Foundation for Common Cause.163 In the aforementioned decision of MDD’s
case, where the CCI fixed the penalty at 5% of the average turnover, relying on a reported decision in Hindustan Steel Ltd v State
of Orissa,164 wherein it was observed “if there is discretion, authority is bound to take into account aggravating or mitigating
circumstances and exercise discretion laid down under the law, judicially”, we had held that the Hon’ble Supreme Court has
always insisted upon the reason and that in the absence of reason, the discretion tends to become arbitrary. We had also relied on
the judgment of the Hon’ble Supreme Court in Kranti Associates Pvt. Ltd v Sh. Masood Ahmed Khan.165 MDD was also a case of
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cartelisation. In another judgment dated 29 October 2013 in M/s Excel Crop Care Ltd v Competition Commission of India,166 we
had relied on some observations made in Southern Pipeline Contractors v The Competition Commission. We had also referred to
the guidelines by the European Union (EU) and Office of the Fair Trade (OFT). We had quoted the five EU guidelines, where it
was provided that is appropriate for the Commission to refer to the value of the sales of goods or services to which the
infringement related. We had also referred to the OFT guidelines to the same effect and we had commented upon the factor of a
relevant turnover. Ultimately, we had held that where a particular concern is a multi-commodity company, the relevant turnover
should be considered and not the total turnover.
The Tribunal held that the Commission should have referred to value of sales of goods or services to which infringement
related. Considering number of parties, stakes involved and all other relevant considerations, the Tribunal thought that, it
would be better if parties were given one more opportunity to address on question about penalties to Commission so that
Commission could give active consideration while deciding penalties. Thus, parties were directed to report to Commission
where after it would proceed to hear parties and decide upon penalties.
In the Insurance case,167 the Commission had calculated the penalty at the rate of 2% against the maximum of 10% on the
average turnover of the Appellants for the years 2010/2011, 2011/2012 and 2012/2013. The quantum of penalty imposed
was challenged on the ground of it being totally disproportionate to the turnover under the Rashtriya Swasthya Bima
Yojana (RSBY) Scheme in Kerala. It was contended that the Commission had ignored the principle of “relevant turnover”
upheld in a series of judgment viz: (a) Excel Crop Care Ltd v CCI168; (b) ECP Industries Ltd v CCI169; (c) Dr LH
Hiranandani Hospital v CCI170; and (d) Escorts Ltd v CCI.171
The Tribunal agreed with this contention and observed that the penalty had to be calculated with reference to the gross
premium received by United India Insurance as insurance provider under RSBY/Comprehensive Health Insurance Scheme
and penalty for each of the Appellants would be a proportion of their share in such premium. Further, COMPAT
recognised that the burden of penalty will ultimately be transferred to the public, as the insurance companies are owned by
the government; hence, reduced the penalty to 1% of the relevant turnover for the relevant period.
Imposition of Penalty on Association
The Commission in most of the cases has imposed penalties on Associations on the income/receipts of the Association.
The Commission in the case of Reliance Big Entertainment Ltd,172 noted that as per provisions of section 27(b), penalties
for anti-competitive agreements are to be imposed either on turnover or profit. Since the associations were not having
turnover of their own out of exploitation of the activities of film distribution and exhibition and were having receipts from
members besides some other miscellaneous income and also considering that the associations represented the collective
intent of the members and the decisions of the associations are having anti-competitive effects on the market, the
Commission found it appropriate to impose penalty on receipts/income of these associations.173
Alternate views have sometimes been taken by members in imposing penalty on the basis of collective turnover of all the
enterprises. However, this view has not generally been followed. In the case of Motion Pictures,174 the issue was whether
a penalty can be imposed on an Association or on a section 25 company, constituted by different enterprises for mutual
benefit. R Prasad, J in his dissenting opinion held that the appropriate mode of assessing the turnover of an Association for
the purpose of imposing penalty is the collective turnover of all the enterprises who are members of such an association.
All the members of such Association are business enterprises and are liable to be penalised for their collective anti-
competitive action, whether this collective anti-competitive action is taken in the name of the association or in the name of
a trust or cartel or in any other form. The Commission under such circumstances has power to impose an appropriate
penalty and the upper limit in such cases would be the total turnover of all the enterprises and not of the association or of
section 25 company registered as a non-profit association and in the name of turnover has no turnover or very nominal
turnover. Similarly, in the case of M/s Peeveear Medical Agencies,175 SN Dhingra, J, in his dissenting opinion held that in
case of associations, who behave like cartel and act for the benefit of their members so that the profit of the members is
maximised, the appropriate method of imposing penalty is to treat the association as a cartel of the members and impose
penalty on the association on the basis of aggregate turnover of the members.
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Receipts as appropriate basis for determining the quantum of penalty
The Tribunal in the case of Karnataka Film Chamber of Commerce v Kannada Grahakara Koota176 noted that the
Commission had levied the penalty with reference to the receipts of the Appellant (termed as income), as authorised under
section 27(b) of the Competion Act, 2002. The Tribunal held that the profitability or tax exempt status of a person
contravening provisions of section 3 of the Act, are not the factors to be considered for determining the average of the
turnover, ie, receipts referred in section 27(b) of the Act, with reference to which the penalty is to be calculated. Further,
since the conduct of the Appellant resulting in contravention of section 3 of the Act was traced to the very existence of the
Appellant as an association of enterprises, its receipts were held to be the appropriate basis for determining the quantum of
penalty.
Imposition of penalty – cases
“as it may deem fit”
Section 27 of the Act empowers the Commission to issue such other order or direction as it may deem fit in case of
contravention of the provisions of section 3 or section 4 of the Act. Further, in case of an anti-competitive conduct
committed by a company, including a firm or other association of individuals, the Commission may proceed under section
48 of the Act to penalise the individuals responsible for the anti-competitive conduct.177 However, the discretionary power
of the Finding Authority under section 27 must be regulated and guided, so that there is uniformity and stability with
respect to imposition of penalty. This discretion must not be arbitrary or vague.178
The Commission in the case of PK Krishnan v Paul Madavana observed that All Kerala Chemists and Druggists
Association (AKCDA) in the Peeveear case had been directed to cease and desist from indulging in and following the
practices which had been found to be anti-competitive in violation of section 3 of the Competion Act, 2002. It was further
directed to file an undertaking that it and its members would refrain from undertaking such practices with respect to the
issue of grant of NOC for appointment of stockists, fixation of trade margins, collection of portfolio investment scheme
charges and boycott of products of pharmaceutical companies etc. AKCDA had filed an undertaking in the said case on 21
February 2014 which was signed by its President and General Secretary named above. Despite the said order and
undertaking filed by it, AKCDA did not hesitate to indulge in anti-competitive practices. The Commission was of the view
that to discipline such erring party for its anti-competitive conduct and also to deter future contravention by other entities
which are operating under similar circumstances and are indulging in similar anti-competitive conducts, it was extremely
imperative to levy financial penalty proportionate to meet the said end. The Commission imposed a penalty on AKCDA at
the rate of 10% of its income (Rs 4,35,778) based on the financial statements filed by it. With regard to the individual
liability of the office-bearers of AKCDA in terms of the provisions of section 48 of the Act, the Commission imposed a
penalty at the rate of 10% of their income based on the income statements filed by them. Additionally, the Commission
directed AKCDA to organise, in letter and in spirit, at least five competition awareness and compliance programmes over
the next six months in State of Kerala for its members. Penalty at the rate of 3% was also imposed on M/s Alkem
Laboratories Ltd.
The Tribunal on 10 May 2016 set aside the Commission’s decision in PK Krishnan v Paul Madavana. The Tribunal held
that there was a violation of the principles of natural justice since no opportunity was extended to the office bearers to
present their defense. Further, the Tribunal questioned as to how an arrangement between parties entered into under
coercion could be termed as an “agreement”. Besides, it was found by conclusive evidence (both at the stage of
investigation and during the final hearing before the Commission) that the informant was a stockist of Alkem prior to filing
of the information with the Commission. Further, no proof of any demand of “No Objection Certificate” was established
against Alkem and the informant had admitted that it suppressed material facts while filing the information. While this fact
was not considered material in the final order of the Commission, it was viewed adversely by the Tribunal. The Tribunal
also set aside the penalty on Mr ANM Kurup as well as the direction asking Mr Kurup and Mr Thomas Raju not to
associate with AKCDA affairs for two years. The Tribunal noted that the Commission cannot make an order or issue a
direction which would directly or indirectly impinge upon the provisions of other statutes.
The Commission in the case of Belaire Owner’s Association v DLF Ltd,179 considering the size and resources of DLF and
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the duration during which the abuse had continued to the advantage of DLF Ltd and to the disadvantage of consumers,
warranted imposition of a heavy penalty. Keeping in view the totality of the facts and circumstances of the case, the
Commission considered it appropriate to impose penalty at the rate of 7% of the average of the turnover for the last three
preceding financial years on DLF.
In the case of Indian Sugar Mills Association v Indian Jute Mills Association,180 the Commission held that opposite
parties had not pointed out any mitigating factor during the course of hearing and have only preferred to justify their
conduct on various grounds. However, the Commission held that it was not oblivious of the fact that the Government of
India recognising that the jute industry was going through a difficult phase and needed support. Considering the
importance of jute to farmers and workers, it enacted the Jute Packaging Materials (Compulsory use in Packing
Commodities Act, 1987) which mandated compulsory packaging of certain commodities, including sugar, in jute bags.
Considering the totality of facts and circumstances of this case, including the factor discussed above, the Commission
decided to impose penalty on the Indian Jute Mills Association and Gunny Trade Association at 5% of the average
turnover of the last three years.
The Tribunal, however, in appeal set aside the order on the grounds of violation of principles of natural justice. Further, the
Tribunal held that the penalty imposed on Indian Jute Mills Association and Gunny Trade Association (at the rate of 5% of
the average turnover of the past three years) was disproportionate and without setting out cogent reasons. COMPAT relied
on its earlier ruling in M/s ECP Industries and another v CCI181 to reiterate that the term “turnover” used in section 27(b)
and its proviso would necessarily relate to the goods, products or services qua which finding of violation of section 3
and/or section 4 was recorded and while imposing penalty, the Commission cannot take average of the turnover of the last
three preceding financial years in respect of other products, goods or services of an enterprise or associations of enterprises
or a person or associations of persons.
In the case of PES Installations Pvt Ltd,182 the Commission found the three parties named in the information (PES
Installations Pvt Ltd (PES), MDD Medical Systems Pvt Ltd (MDD), Medical Products Services (MPS)) in contravention
of the provisions of section 3(3)(d) of the Competion Act, 2002. The Commission felt that bid-rigging was a major drain
on the exchequer, raising the cost of procurement for the Government and in any economy, this kind of behaviour was
unacceptable. Therefore, the Commission deemed it fit to impose penalties on all the three firms under section 27(b) of the
Act at the rate of 5%.
In the case of M/s Gulf Oil Corp Ltd,183 the Tribunal held that the Commission must not only give the reasons in support
of the quantum of penalty but also consider the mitigating circumstances and then only come to the final conclusion
regarding the quantum of punishment as earlier held in case of MDD Medical Systems India Pvt Ltd v CCI. The mitigating
factors would have to be taken into consideration. The first mitigating factor considered by the Tribunal was that this was a
first breach on the part of the Appellants under the Competion Act, 2002 and this was their very first contravention. The
second mitigating circumstance was that in fact, the only intention on the part of the manufacturers was to postpone the
auction on 4 January 2010 and 5 January 2010. The third mitigating circumstance was that the supplies were being made
under the running contract of 2008/2011 and that even after reduction of the price in the second auction by almost 30%, the
supplies had not been affected. Even this circumstance of uninterrupted supplies and the Coal India Limited (CIL) having
been benefited by the second auction whereby all the manufacturers including the Appellants took part, would also be a
relevant circumstance. Thus, in view of the above mitigating factors, the punishments were diluted. Therefore, the total
penalty was held to be 10% of the penalty already imposed by the Commission.
“parties” or “ enterprises”
In the Ola matter,184 the Informants argued that Uber and Ola can both be held dominant simultaneously in the relevant
market. While doing so, the Informant relied upon international case laws, including a Canadian case law, where two
entities MasterCard/Visa were held to be dominant. The informants relied on section 27(b) to substantiate their claim
which uses “parties” and “enterprises”. However, the Commission noted the use of words “parties” or “enterprises” in
section 27(b) refers to parties entering into anti-competitive agreements and not for enterprise indulging in unilateral
conduct. It observed that there are various provisions in the Act that signify the intent of the legislature that there cannot be
more than one dominant enterprise in the relevant market at a particular point of time. Rather, the existence of two strong
players in the market was indicative of competition between them, unless they had agreed not to compete, which also
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[s 27] Orders by Commission after inquiry into agreements or abuse of dominant position
could be only be looked into under section 3 of the Act, not section 4. Hence, the argument of collective dominance of
opposite party and Uber was rejected.
Natural Justice
In the Alkem Laboratories matter,185 the Tribunal noted that no action-oriented notice was given to the Appellants
proposing imposition of penalty under section 27(b); hence, they did not get a chance to represent their cause against the
proposed penalty. Thus, the penalty imposed was held to be vitiated due to violation of the principles of natural justice.
Further, it was held that the decision taken by the Commission to supply electronic copy of the investigation report to the
Appellants to enable them to file their reply/objections and further, direction given to them to furnish their income details
cannot be construed as a notice proposing imposition of penalty under section 27(b). The Commission observed that
section 27(g) cannot be interpreted to mean as conferring unbridled power upon the commission to pass any order or issue
any direction as it may deem fit. The commission accordingly does not have the jurisdiction, power or authority to pass an
order which has the effect of curtailing the tenure of duly-elected office bearers. The appeal was, therefore, allowed and
the order of the commission relating to the imposition of the penalty on Appellant 1 at 10% of the average of his income of
preceding three financial years was set aside.
MODIFICATION OF AGREEMENT [CLAUSE (D)]
The Commission may, apart from passing cease and desist order under clause (a), may also direct the parties to modify the
agreement to purge them from its anti-competitive character.
Cases involving direction to modify agreements
In the case of M/s Maharashtra State Power Generation Co Ltd,186 the Commission apart from passing cease and desist
alongside penalty orders directed the following: (a) The fuel supply agreements were ordered to be modified. For effecting
these modifications in the agreements, CIL was further directed to consult all the stakeholders. CIL was also directed to
ensure parity between old and new power producers as well as between private and public sector undertaking power
producers, as far as practicable; (b) CIL was further directed to incorporate suitable modifications in the fuel supply
agreements to provide for a fair and joint sampling and testing procedure; (c) CIL was further asked to consider and
examine the feasibility of sampling at the unloading-end, in consultation with power producers besides adopting
international best practices.
In the case of Reliance Big Entertainment Ltd,187 in addition to penalty, the Commission also directed all the associations
to cease and desist from the following practices and take suitable measures to modify or remove them from their articles of
association, rules and regulations as has been discussed in this order since they are anti-competitive: (a) The associations
should not compel any producer, distributor or exhibitor to become its members as a pre-condition for exhibition of their
films in the territories under their control and modify their rules accordingly; (b) The associations should not keep any
clause in rules and regulations which makes any discrimination between regional and non-regional films and impose
conditions which are discriminatory against non-regional films; (c) The rules of restrictions on the number of screens on
the basis of language or the manner in which a particular film is to be exhibited should be done away with; (d)
Associations should not put any condition regarding hold back period for release of films through other media like, CD,
Satellite etc. These decisions should be left to the concerned parties; (e) The condition of compulsory registration of films
as a pre-condition for release of any film and existing rules of association as discussed in the preceding paras of this order
on the issue should be dispensed with.188
In the case of Belaire Owner’s Association v DLF Ltd,189 the Commission listed out the conditions imposed by DLF Ltd
and its group companies on its consumers/buyers in detail which were unfair. The Commission passed cease and desist
order against DLF from formulating and imposing such unfair conditions in its agreements with buyers in Gurgaon. Also,
it was asked to suitably modify unfair conditions imposed on its buyers as referred to above, within three months of the
date of receipt of this order.
ISSUE OF DIRECTIONS [CLAUSE (E)]
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[s 27] Orders by Commission after inquiry into agreements or abuse of dominant position
The Commission may pass appropriate directions and such further orders as may be deemed necessary, including award of
costs.
RESIDUARY POWERS OF COMMISSION [CLAUSE (G)]
This is the residuary power of the Commission to pass any order, not covered in aforesaid clauses which may be deemed
fit in the facts and circumstances of a particular case. Where a person or enterprise complained against has undertaken not
to repeat the alleged contravention of section 3 or 4 in future, there may not be any necessity to pass any order except to
issue a warning. Consent orders passed by the Commission may also fall under this category. The power to award
compensation under clause (c) and the power to recommend the Central Government for division of an enterprise enjoying
dominant position under clause (f ) was omitted by the Amendment Act, 2007, as new section 53N confers power to award
compensation upon the Appellate Tribunal. Further, under amended section 28, Commission is empowered to direct
division of a dominant undertaking.
In the case of MCX Stock Exchange Ltd,190 the Commission passed the following orders: (a) In exercise of powers under
section 27(a) of the Competition Act, 2002, National Stock Exchange is directed to cease and desist from unfair pricing,
exclusionary conduct and unfairly using its dominant position in other market/s to protect the relevant CD market with
immediate effect; (b) Further, in exercise of the powers under section 27(g) of the Competion Act, 2002, National Stock
Exchange is directed to maintain separate accounts for each segment with effect from 1 April 2012; (c) In exercise of
powers under section 27(g) of the Act, National Stock Exchange is directed to modify its zero price policy in the relevant
market and ensure that the appropriate transaction costs are levied. This should be implemented within 60 days of the date
of this order; (d) In exercise of the power under section 27(g), National Stock Exchange is directed to put in place a system
that would allow National Stock Exchange members free choice to select NOW, ODIN or any other market watch software
for trading on the CD segment of National Stock Exchange. If necessary, this may be done under the overall supervision of
Securities and Exchange Board of India. National Stock Exchange shall ensure all cooperation from Dot Ex or Omnesys in
this regard.
Considering the fact that there was a clear intention on the part of NSE to eliminate competitors in the relevant market and
also considering the fact that Competition Act, 2002 is a new Act, the Commission imposed a penalty at the rate of 5% of
the average turnover.
PROVISIONS OF MRTP ACT, 1969 VIS-À-VIS THE COMPETITION ACT, 2002
Under section 37 of MRTP Act, 1969, since repealed, the Commission was empowered to pass cease and desist order to
declare the impugned agreement as void and to direct modification of the agreement after enquiry into any restrictive trade
practice. The MRTPC had also the power not to make any order if it was satisfied that the trade practice is no longer
prejudicial to public interest and necessary steps have been taken to purge the restrictive character. Further, under the
MRTP Act, 1969, the Central Government was empowered to pass appropriate orders directing division of undertakings or
inter-connected undertakings under section 27 or directing severance of inter-connection between undertakings, under
section 27A or order regulating the production, etc of goods, fixing standards, regulating profits, regulating quality of
goods, etc under section 31(3) on recommendations made by the Commission in this behalf.
Under the Competition Act, 2002, the Commission is competent to pass appropriate orders on any anti-competitive
agreement or abuse of dominant position. Additionally, the Commission has also the power to impose penalty.
Competition Act, 2002 v Patent Act, 1970
The Delhi High Court in the Ericsson case191 held that the remedies provided under section 27 of the Competition Act,
2002 for abuse of dominant position are materially different from the remedy as available under section 84 of the Patents
Act, 1970. Further, it was held that the remedies under the two enactments are not mutually exclusive and grant of one is
not destructive of the other. Thus, it may be open for a prospective licensee to approach the Controller of Patents for grant
Page 14 of 18
[s 27] Orders by Commission after inquiry into agreements or abuse of dominant position
of compulsory licence in certain cases. The same was not inconsistent with the CCI passing an order under section 27 of
the Act. Section 84 of the Patents Act, 1970 provides specific remedy to the person seeking relief, whereas the orders
passed by CCI were in rem. Thus, the operative width of the two enactments is different.
137 Came into force on 20 May 2009 vide Notification No. S.O. 1241(E), dated 15 May 2009.
138 CCI (Lesser Penalty) Regulations, 2009, vide Notification No. L-3(4)/Reg-L.P./2009-
10/CCI dated 13 August 2009.
139 Subs. by Amendment Act, 2007 (39 of 2007), section 20(i) (w.e.f. 20 May 2009). Prior to
its substitution, it stood as under:
Provided that in case any agreement referred to in section 3 has been entered into by any cartel, the Commission shall impose
upon each producer, seller, distributor, trader or service provider included in that cartel, a penalty equivalent to three times of
the amount of profits made out of such agreement by the cartel or ten per cent. of the average of the turnover of the cartel for
the last preceding three financial years, whichever is higher.
140 Clause (c) omitted by Amendment Act, 2007 (39 of 2007), section 20(ii) (w.e.f. 20 May
2009). Prior to its omission, it stood as follows:
(c) award compensation to parties in accordance with the provisions contained in section 34.
141 Clause (f) omitted by Amendment Act, 2007 (39 of 2007), section 20(ii) (w.e.f. 20 May
2009). Prior to its omission, it stood as follows:
(f) recommend, to the Central Government for the division of an enterprise enjoying dominant position.
142 Subs. by Amendment Act, 2007 (39 of 2007), section 20(iii), for the word “order” (w.e.f.
20 May 2009).
143 Ins. by Amendment Act, 2007 (39 of 2007), section 20(iv) (w.e.f. 20 May 2009).
Page 15 of 18
[s 27] Orders by Commission after inquiry into agreements or abuse of dominant position
144 JK Synthetics Ltd v Director of Investigation,
(1977) 47 Com Cas 323 .
145 Associated Newspapers Ltd,
(1964) 1 All ER 55 .
146 Supplementary order, Belaire Owner’s Association v DLF Ltd
Haryana Urban Development Authority Dept of Town and Country Planning, State of Haryana,
[2011] 104 CLA 398 : 2011 Comp LR 239 : [2011] 109
SCL 655 (CCI).
147 Cease and desist order was also passed in the case of Pankaj Aggarwal
v DLF Gurgaon Home Developers Pvt Ltd, 2015 Comp LR 728 (CCI).
148 FICCI Multiplex Association of India v United
Producers/Distributors Forum, 2011 Comp LR 79 (CCI).
149 Shri BP Khare, Principal Chief Engineer, South Eastern Railway v
M/s Orissa Concrete and Allied Industries Ltd, [2013] 114 CLA 280
(CCI) : [2013] 119 SCL 1 (CCI).
150 Uniglobe Mod Travels Pvt Ltd v Travel Agents Federation of India,
2011 Comp LR 400 (CCI).
151 Pankaj Aggarwal v DLF Gurgaon Home Developers Pvt Ltd, 2015
Comp LR 728 (CCI).
152 M/s Maharashtra State Power Generation Co Ltd v M/s Mahanadi
Coalfields Ltd and M/s Coal India Ltd, 2013 Comp LR 910 (CCI).
153 Re Bengal Chemist and Druggist Association,
[2014] 121 CLA 196 (CCI) : 2014 Comp LR 221 (CCI).
154 India Trade Promotion Organisation v CCI, [COMPAT], order dated
1 July 2016.
155 M/s ECP Industries v CCI, (Appeal No 47 of 2015). Also see Indian
Jute Mills Association v The Secretary, CCI (1 July 2016 - COMPAT).
156 Excel Crop Care Ltd v CCI,
AIR 2017 SC 2734 .
157 M/s Excel Crop Care Ltd v CCI, 2013 Comp LR 799 (COMPAT).
The Tribunal had accepted the argument on relevant turnover for multi-product companies. The Tribunal had held that the concept
of relevant turnover can be accepted in the peculiar circumstances where companies clearly indicate that the other products of those
companies have no connection and do not depend upon the product involved in this matter. The Tribunal, while finding the
appellants guilty of cartel activity held that the penalty at 9% of three years average turnover was not unreasonable. However, the
said turnover would have to be a “relevant turnover”. See also LH Hiranandani Hospital v CCI, 2016 Comp LR 129 (COMPAT);
Escorts Ltd v CCI, Appeal No 13, 15 and 20 of 2014.
Page 16 of 18
[s 27] Orders by Commission after inquiry into agreements or abuse of dominant position
158 MCX Stock Exchange Ltd v National Stock Exchange of India Ltd,
DotEx International Ltd and Omnesys Technologies Pvt. Ltd, 2011 Comp LR 129 (CCI) :
[2011] 109 SCL 109 (CCI).
159 Stipulates penalty based on an average of turnover for the last three
preceding financial years.
160 The National Stock Exchange of India Ltd v CCI, 2014 Comp LR
304 (COMPAT).
161 M/s Excel Crop v CCI, 2013 Comp LR 799 (COMPAT).
162 M/s International Cylinder Pvt Ltd v CCI,
[2014] 122 CLA 41 (CAT) : 2014 Comp LR 184 (COMPAT).
163 MDD Medical Systems India Pvt Ltd v Foundation for Common
Cause (Appeal No 93 of 2012).
164 Hindustan Steel Ltd v State of Orissa,
AIR 1970 SC 253 : (1969) 2 SCC 627
: 1970 1 SCJ 318
: 1969 SCD 1080 :
1970 1 SCR 753 , (1970) 25 STC 211
: [1972] 83 ITR 26 :
(1997) 104 STC 61 :
1978 2 ELT 159 .
165 Kranti Associates Pvt Ltd v Sh Masood Ahmed Khan,
(2010) 9 SCC 496 : [2010] 7 Mad LJ 1033 :
JT 2010 (9) SC 362 : 2010 (9) Scale 199
: [2010] 10 SCR 1070
.
166 M/s Excel Crop Care Ltd v CCI (Appeal No 79 of 2012).
167 National Insurance Co Ltd v CCI, Appeal No 94/2015; M/s New
India Assurance Co Ltd v CCI, Appeal No 95/2015; M/s United India Insurance Co Ltd v CCI, Appeal No 96/2015; M/s Oriental
Insurance Co Ltd v CCI, Appeal No 97/2015 [COMPAT] decided on 9 December 2016.
168 Appeal No 79/2012, order dated 29 October 2013.
169 Appeal No 47/2015, order dated 1 March 2016 at paras 22–23.
170 Appeal No 19/2014, order dated 18 December 2015 at para 38.
171 Appeal No 13/2014, order dated 18 December 2015 at para 27(ii).
Page 17 of 18
[s 27] Orders by Commission after inquiry into agreements or abuse of dominant position
172 Reliance Big Entertainment Ltd v Karnataka Film Chamber of
Commerce, [2012] 108 CLA 116 (CCI) : 2012 Comp
LR 269 (CCI).
173 M/s Sandhya Drug Agency v Assam Drug Dealers Association, 2014
Comp LR 61 (CCI).
174 UTV Software Communications Ltd, Mumbai v Motion Pictures
Association, Delhi, Case No 09/2011 decided on 8 May 2012.
175 M/s Peeveear Medical Agencies v All India Organisation of Chemists
and Druggists, 2014 Comp LR 10 (CCI).
176 Karnataka Film Chamber of Commerce v Kannada Grahakara
Koota, Appeal No 13/2016 with IA No 08/2017 [COMPAT] decided on 10 April 2017.
177 PK Krishnan v Paul Madavana, 2016 Comp LR 83 (CCI).
178 Excel Crop Care Ltd v CCI,
[2017] 138 CLA 95 (SC) : II (2017) CPJ 20
(SC) : 2017 (6) Scale 241 :
[2017] 141 SCL 480 (SC). See also Dilip N Shroff v Joint CIT,
(2007) 6 SCC 329 ; Hindustan Steel Ltd v State of Orissa,
AIR 1970 SC 253 : (1969) 2 SCC 627
: 25 STC 211 : 1970 1 SCJ 318 :
1969 SCD 1080 :
ILR 1970 Cut 241 , 1970 1 SCR 753
: (1970) 25 STC 211 :
[1972] 83 ITR 26 : (1997) 104 STC 61
: 1978 2 ELT 159 .
179 Belaire Owner’s Association v DLF Ltd,
[2011] 104 CLA 398 (CCI) : 2011 Comp LR 239 (CCI) :
[2011] 109 SCL 655 (CCI).
180 Indian Sugar Mills Association v Indian Jute Mills Association, 2014
Comp LR 225 (CCI).
181 ECP Industries and another v CCI, Appeal No 47 of 2015.
182 A Foundation for Common Cause & People Awareness v PES
Installations Pvt Ltd, 2012 Comp LR 588 (CCI).
183 M/s Gulf Oil Corp Ltd v CCI AND M/s Black Diamond Explosives v
Coal India Ltd, [2013] 114 CLA 25 : 2013 Comp LR 409
(COMPAT).
184 Fast Track Call Cab Pvt Ltd v ANI Technologies Pvt Ltd and Meru
Travel Solutions Pvt Ltd v ANI Technologies Pvt Ltd, Case No 6 & 74 of 2015, order dated 19 July 2017.
Page 18 of 18
[s 27] Orders by Commission after inquiry into agreements or abuse of dominant position
185 AN Mohana Kurup, Mr Thomas Raju v CCI, Mr PK Krishnan, Mr
Paul Madavana, M/s Alkem Laboratories Ltd, All Kerala Chemists and Druggists Association (AKCDA), Appeal No 05 OF 2016
[COMPAT].
186 M/s Maharashtra State Power Generation Co Ltd v M/s Mahanadi
Coalfields Ltd and M/s Coal India Ltd and M/s Gujarat State Electricity Corp Ltd v M/s South Eastern Coalfields Ltd and M/s Coal
India Ltd, 2013 Comp LR 910 (CCI).
187 Reliance Big Entertainment Ltd, v Karnataka Film Chamber of
Commerce, [2012] 108 CLA 116 (CCI) : 2012 Comp
LR 269 (CCI).
188 Eros International Media Ltd v Central Circuit Cine Association,
Indore, Film Distributors Association, Kerala, Northern India Motion Pictures Association and Motion Pictures Association and
Sunshine Pictures Pvt Ltd v Motion Pictures Association, 2012 Comp LR 20 (CCI).
189 Belaire Owner’s Association v DLF Ltd,
[2011] 104 CLA 398 (CCI) : 2011 Comp LR 239 (CCI) :
[2011] 109 SCL 655 (CCI).
190 MCX Stock Exchange Ltd v National Stock Exchange of India Ltd,
DotEx International Ltd and Omnesys Technologies Pvt Ltd, 2011 Comp LR 129 (CCI) : [2011] 109
SCL 109 (CCI).
191 Telefonaktiebolaget LM Ericsson (PURL) v CCI, 2016 Comp LR 497
(Delhi).
End of Document
[s 28] Division of enterprise enjoying dominant position
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > CHAPTER
IV DUTIES, POWERS AND FUNCTIONS OF COMMISSION
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
CHAPTER IV DUTIES, POWERS AND FUNCTIONS OF COMMISSION
192[s 28] Division of enterprise enjoying dominant position
(1) The 193[Commission], may, notwithstanding anything contained in any other law for the time being in force, by
order in writing, direct division of an enterprise enjoying dominant position to ensure that such enterprise does
not abuse its dominant position.
(2) In particular, and without prejudice to the generality of the foregoing powers, the order referred to in sub-section
(1) may provide for all or any of the following matters, namely:—
(a) the transfer or vesting of property, rights, liabilities or obligations;
(b) the adjustment of contracts either by discharge or reduction of any liability or obligation or otherwise;
(c) the creation, allotment, surrender or cancellation of any shares, stocks or securities;
(d) 194[* * *];
(e) the formation or winding up of an enterprise or the amendment of the memorandum of association or articles
of association or any other instruments regulating the business of any enterprise;
(f) the extent to which, and the circumstances in which, provisions of the order affecting an enterprise may be
altered by the enterprise and the registration thereof;
(g) any other matter which may be necessary to give effect to the division of the enterprise.
(3) Notwithstanding anything contained in any other law for the time being in force or in any contract or in any
memorandum or articles of association, an officer of a company who ceases to hold office as such in consequence
of the division of an enterprise shall not be entitled to claim any compensation for such cesser.
HISTORICAL BACKGROUND
MRTP Act, 1969
Provisions relating to division of undertakings and severance of inter-connection were contained in sections 27, 27A and
27B of MRTP Act, 1969, since repealed, as under:
[s 27] Division of undertakings.—(1) Notwithstanding anything contained in this Act or in any other law for the time being in
force, the commission may,—
Page 2 of 6
[s 28] Division of enterprise enjoying dominant position
(i) upon receiving a complaint of facts from any trade association or from any consumer or a registered consumers’
association, whether such consumer is a member of that consumers’ association or not, or
(ii) upon a reference made to it by the Central Government or a State Government, or
(iii) upon its own knowledge or information,
if it is of opinion that the working of an undertaking is prejudicial to the public interest, or has led, or is leading, or is likely to lead,
to the adoption of any monopolistic or restrictive trade practices, inquire as to whether it is expedient in the public interest to make
an order,—
(a) for the division of any trade of the undertaking by the sale of any part of the undertaking or assets thereof, or
(b) for the division of any undertaking or inter-connected undertakings into such number of undertakings as the
circumstances of the case may justify,
and the Commission may, after such hearing as it thinks fit, report to the Central Government its opinion thereon and shall, where
it is of opinion that a division ought to be made, specify the manner of the division and compensation, if any, payable for such
division.
Explanation.—For the purposes of this section all activities carried on by way of trade by an undertaking or two or more inter-
connected undertakings may be treated as a single trade.
(2) If the Commission so recommends, the Central Government may, notwithstanding anything contained in any other law for the
time being in force, by an order in writing, direct the division of any trade of the undertaking or of the undertaking or inter-
connected undertakings.
(3) Notwithstanding anything contained in any other law for the time being in force, the order referred to in sub-section (2) may
provide for all such matters as may be necessary to give effect to the division of any trade of the undertaking or of the undertaking
or inter-connected undertakings, including,—
(a) the transfer or vesting of property, rights, liabilities or obligations;
(b) the adjustment of contracts either by the discharge or reduction of any liability or obligation or otherwise;
(c) the creation, allotment, surrender or cancellation of any shares, stock or securities;
(d) the payment of compensation;
(e) the formation, or winding up of an undertaking or the amendment of the memorandum and articles of association or any
other instruments regulating the business of any undertaking;
Page 3 of 6
[s 28] Division of enterprise enjoying dominant position
(f) the extent to which and the circumstances in which provisions of the order affecting an undertaking may be altered by the
undertaking and the registration thereof;
(g) the continuation, with such changes as may be necessary, of parties to any legal proceeding.
(4) Where the Central Government makes, or intends to make, an order for any purpose mentioned in sub-section (3), it may, with
a view to achieving that purpose, prohibit or restrict the doing of anything that might impede the operation or making of the order
and may impose on any person such obligations as to the carrying on of any activities or the safeguarding of any assets, as it may
think fit, or it may, by order, provide for the carrying on of any activities or safeguarding of any assets either by the appointment of
a person to conduct, or supervise the conduct of, any such activities or in any other manner.
(5) Notwithstanding anything contained in any other law for the time being in force or in any contract or in any memorandum or
articles of association, an officer of a company who ceases to hold office as such in consequence of the division of an undertakings
or inter-connected undertakings shall not be entitled to claim any compensation for such cesser.
S. 27A. Power of the Central Government to direct severance of inter-connection between undertakings.—(1) Notwithstanding
anything contained in this Act or in any other law for the time being in force, the Commission may,—
(i) upon receiving a complaint of facts from any trade association or from any consumer or a registered consumers’
association, whether such consumer is a member of that consumers’ association or not, or
(ii) upon a reference made to it by the Central Government or a State Government, or
(iii) upon its own knowledge or information
if it is of opinion that the continuance of inter-connection of an undertaking (hereafter in this section referred to as the principal
undertaking) with any other undertaking is detrimental to—
(a) the interests of the principal undertaking; or
(b) the future development of the principal undertaking; or
(c) the steady growth of the industry to which the principal undertaking pertains; or
(d) the public interest,
inquire as to whether it is expedient in the public interest to make an order for the severance of such inter-connection on one or
more of the grounds aforesaid, and the Commission may, after such hearing as it thinks fit, report to the Central Government its
opinion thereon and shall, where it is of opinion that the
severance of the inter-connection of the principal undertaking with any other undertaking ought to be made, include in its report a
scheme with respect to such severance, providing therein for the matters specified in sub-section (2).
(2) Where, in any such report, the Commission recommends the severance of any such inter-connection, the scheme with respect
thereto shall provide for the following matters, namely:—
Page 4 of 6
[s 28] Division of enterprise enjoying dominant position
(a) the manner in which, and the period within which, the severance of such inter-connection is to be effected;
(b) the appropriation or transfer of any share or other interest held by the owner in, or in relation to, the principal
undertaking, in the other undertaking or the termination of any office or employment in such undertaking, which may be
required for effecting the severance of such inter-connection;
(c) compensation, if any, payable for the severance of such inter-connection; and
(d) such incidental, consequential and supplemental matters, as may be necessary to secure the severance of such inter-
connection.
(3) If the Commission so recommends, the Central Government may, notwithstanding anything contained in any other law for the
time being in force, by an order in writing, direct the severance of inter-connection between the undertakings, as far as may be, in
accordance with the scheme included in the report of the Commission.
(4) Where the Central Government makes, or intends to make, an order for any purpose mentioned in sub-section (3) it may, with a
view to achieving that purpose, prohibit or restrict the doing of anything that might impede the operation or making of the order
and may impose on any person such obligations as to the carrying on of any activities or the safeguarding of any assets, as it may
think fit, or it may, by order, provide for the carrying on of any activities or safeguarding of any assets either by the appointment of
a person to conduct, or supervise the conduct of, any such activities or in any other manner.
(5) Notwithstanding anything contained in any other law for the time being in force or in any contract or in any memorandum or
articles of association, an officer of a company who ceases to hold office as such in consequence of the severance of inter-
connection between undertakings shall not be entitled to claim any compensation for such cesser.
Explanation.—For the purposes of this section, “inter-connection” means inter-connection of an undertaking with any other
undertaking in any manner specified in clause (g) of section 2.
[s 27B] Manner in which order made under section 27 or section 27A shall be carried out.—(1) Where in any report made by it,
whether under section 27 or section 27A, the Commission recommends that the division of any trade of any undertaking or
division of any undertaking or undertakings or of inter-connected undertakings, or, as the case may be, the severance of inter-
connection between two or more undertakings, is to be effected by—
(a) the disinvestment by any person holding any share in the body corporate owning such undertaking or undertakings; of
(b) the sale of the whole or any part of such undertaking or undertakings, or, of any part of the assets thereof,
the Central Government may, in its order under the said section 27 or section 27A, specify that such disinvestment
of shares or the sale of the whole or part of the undertaking or undertakings or of such assets, as the case may be,
shall be effected within such period and in such one or more of the following methods as may be specified in such
order, namely:—
(i) by directing the person holding such shares to make a public offer for the sale of such number of shares held by him
in the body corporate owning the undertaking or undertakings, as may be specified in the order; or
Page 5 of 6
[s 28] Division of enterprise enjoying dominant position
(ii) by directing the body corporate owning the undertaking to make further issue of equity capital to the members of
the public except to the person who is directed to disinvest the shares held by him in such body corporate; or
(iii) by directing that the sale of the undertaking or any part thereof, or, as the case may be, of such assets, be made by
public auction; or
(iv) by such other prescribed method as the Central Government may specify:
Provided that the Central Government may extend on its own motion or on the application of the person concerned and for
sufficient cause, the period specified as aforesaid in any order made by it under section 27 or section 27A by another order.
(2) Every order of the Central Government referred to in sub-section (1), shall have effect notwithstanding anything contained
elsewhere in this Act or in any other law for the time being in force or in the memorandum or articles of association of the body
corporate owning the undertaking.
(3) Where any person who has been directed to do so by an order referred to in sub-section (1), omits or fails to disinvest any share
or block of shares specified in the said order, the body corporate in which such shares are held shall not permit such person or his
nominee or proxy to exercise any voting or other rights attaching to such share or block of shares.
Competition Act, 2002
Notes on clauses of the Bill stated, thus:
Notes on clauses.—This clause empowers the Central Government on the recommendation of the Commission to order division of
an enterprise enjoying dominant position so as to ensure that it does not abuse its dominant position. Sub-clause (2) of the said
clause enumerates the various matters relating to such division in respect which the Central Government may pass the order for
division of such enterprise. [Clause 28 of the Competition Bill, 2001].
Competition (Amendment) Act, 2007
Notes on clauses.—This clause seeks to amend section 28 of the Competition Act, 2002 relating to division of enterprise enjoying
dominant position.
Under the existing provisions contained in the said section the Central Government can, on recommendation of the Commission,
order division of enterprise enjoying dominant position.
It is proposed to amend section 28 so as to confer said power upon the Commission to order division of an enterprise instead of the
Central Government to order the division. [Clause 21 of the Competition (Amendment) Bill, 2007].
Page 6 of 6
[s 28] Division of enterprise enjoying dominant position
SCOPE OF THE SECTION
After inquiry into alleged abuse of dominant position, the Commission may order division of the enterprise enjoying
dominant position. The Commission may also pass other consequential orders specified in sub-section (2) to ensure that
such enterprise does not abuse its dominant position.
PROVISIONS OF THE MRTP ACT, 1969 VIS-À-VIS THE COMPETITION ACT, 2002
Section 27 of the MRTP Act, 1969 generally corresponds to section 28 of the Competition Act, 2002, except the power of
Central Government to order division of the enterprise enjoying dominant position has been vested with the Commission.
192 Came into force on 20 May 2009 vide Notification No. S.O. 1241(E), dated 15 May 2009.
193 Subs. by Amendment Act, 2007 (39 of 2007), section 21(a), for “Central Government, on
recommendation under clause (f) of section 27” (w.e.f. 20 May 2009).
194 Clause (d) omitted by Amendment Act, 2007 (39 of 2007), section 21(b) (w.e.f. 20 May
2009). Prior to its omission, it stood as under (d) the payment of compensation to any person who suffered any loss due to dominant
position of such enterprise;
End of Document
[s 29] Procedure for investigation of combinations
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > CHAPTER
IV DUTIES, POWERS AND FUNCTIONS OF COMMISSION
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
CHAPTER IV DUTIES, POWERS AND FUNCTIONS OF COMMISSION
195[s 29] Procedure for investigation of combinations
(1) Where the Commission is of the 196[prima facie] opinion that a combination is likely to cause, or has caused an
appreciable adverse effect on competition within the relevant market in India, it shall issue a notice to show cause
to the parties to combination calling upon them to respond within thirty days of the receipt of the notice, as to
why investigation in respect of such combination should not be conducted.
197[(1A) After receipt of the response of the parties to the combination under sub-section (1), the Commission
may call for a report from the Director General and such report shall be submitted by the Director General within
such time as the Commission may direct].
(2) The Commission, if it is prima facie of the opinion that the combination has, or is likely to have, an appreciable
adverse effect on competition, it shall, within seven working days from the date of receipt of the response of the
parties to the combination, 198[or the receipt of the report from Director General called under sub-section (1A),
whichever is later] direct the parties to the said combination to publish details of the combination within ten
working days of such direction, in such manner, as it thinks appropriate, for bringing the combination to the
knowledge or information of the public and persons affected or likely to be affected by such combination.
(3) The Commission may invite any person or member of the public, affected or likely to be affected by the said
combination, to file his written objections, if any, before the Commission within fifteen working days from the
date on which the details of the combination were published under sub-section (2).
(4) The Commission may, within fifteen working days from the expiry of the period specified in sub-section (3), call
for such additional or other information as it may deem fit from the parties to the said combination.
(5) The additional or other information called for by the Commission shall be furnished by the parties referred to in
sub-section (4) within fifteen days from the expiry of the period specified in sub-section (4).
(6) After receipt of all information and within a period of forty-five working days from the expiry of the period
specified in sub-section (5), the Commission shall proceed to deal with the case in accordance with the provisions
contained in section 31.
LEGISLATIVE BACKGROUND
Competition Act, 2002
Notes on clauses of the Bill stated, thus:
Page 2 of 3
[s 29] Procedure for investigation of combinations
Notes on clauses.—This clause lays down the detailed procedure for investigation of combinations if the Commission is of the
opinion that any combination is likely to cause or has caused an appreciable adverse effect on competition within the relevant
market in India. (Clause 29 of the Competition Bill, 2001).
Competition (Amendment) Act, 2007
Notes on clauses.— This clause seeks to amend section 29 of the Competition Act, 2002 relating to procedure for investigation of
combinations.
It is, inter alia, proposed to insert a new sub-section (1A) to provide that the Commission may, after receipt of the response of the
parties to the combination under sub-section (1), call for a report from the Director General and such report shall be submitted by
the Director General within such time as the Commission may direct. [Clause 22 of the Competition (Amendment) Bill, 2007].
SCOPE OF THE SECTION
This section prescribes a time-bound procedure for investigation of combinations. The following procedure has been laid
down:
Period prescribed (Number of
working days)
(1) Issue of show cause to the parties to 30
combination within
(2) (a) Formation of prima facie opinion by the 7
Commission that the alleged Combination
may have an AAEC from the date of receipt
of response within
(b) Directing the parties to the combination 10
to publish details of combination within
(3) Inviting objections from the members of the 15
public to file written objections before the
Commission within
(4) Call for additional information from the 15
parties by the Commission, if any, within
(5) Parties to furnish additional information to 15
the Commission within
(6) Commission shall proceed to deal with the 45
Page 3 of 3
[s 29] Procedure for investigation of combinations
case and pass appropriate orders thereafter
under section 31
137
Thus, the Commission may take about five months’ time to complete investigation.
It may be noted that no personal hearing is contemplated under section 20. It is, however, felt that in case the enterprise
concerned or the objectors require a personal hearing, the same may be allowed by the Commission, otherwise it may
amount to denial of principles of natural justice.
In exercise of the powers conferred by sub-section (1) and clauses (b), (c) and (f) of sub-section (2) of section 64 read with
sub-sections (2) and (5) of section 6 of the Competition Act, 2002, the CCI framed the Competition Commission of India
(Procedure in regard to the Transaction of Business relating to Combinations) Regulations, 2011.
For more discussion, see section 6.
PROVISIONS OF THE MRTP ACT, 1969 VIS-À-VIS THE COMPETITION ACT, 2002
Section 23 of MRTP Act, 1969 originally empowered the Central Government to approve any scheme of merger, or
amalgamation or takeover after giving an opportunity of hearing to any person who may be interested in the matter, vide
section 28. The Central Government may also refer the matter to MRTPC for an inquiry and report to the Central
Government. Under section 30, it was the duty of the Commission to make its report on the matter within 90 days from the
date of receipt of reference and the Central Government shall dispose of the matter within 60 days from the date of receipt
of the report of the Commission.
Under the Competition Act, 2002, a time-bound procedure has been prescribed covering a period of 137 working days for
investigation. This does not cover the time taken by Director General in giving his report or the Commission for hearing
the matter orally, if necessary, and passing appropriate orders.
195 Came into force on 1 June 2011 vide Notification No. S.O. 479(E), dated 4 March 2011.
196 Ins. by Amendment Act, 2007 (39 of 2007), section 22(a) (w.e.f. 1 June 2011).
197 Ins. by Amendment Act, 2007 (39 of 2007), section 22(b) (w.e.f. 1 June 2011).
198 Ins. by Amendment Act, 2007 (39 of 2007), section 22(c) (w.e.f. 1 June 2011).
End of Document
[s 30] Procedure in case of notice under sub-section (2) of section 6
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S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > CHAPTER
IV DUTIES, POWERS AND FUNCTIONS OF COMMISSION
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
CHAPTER IV DUTIES, POWERS AND FUNCTIONS OF COMMISSION
199[s 30] Procedure in case of notice under sub-section (2) of section 6
Where any person or enterprise has given a notice under sub-section (2) of section 6, the Commission shall examine such
notice and form its prima facie opinion as provided in sub-section (1) of section 29 and proceed as per provisions
contained in that section].
LEGISLATIVE BACKGROUND
Competition Act, 2002
Notes on clauses of the Bill stated, thus:
Notes on clauses.—This clause deals with an inquiry by the Commission on receipt of a notice under sub-clause (2) of clause 6.
The Commission shall inquire into whether the disclosure mentioned in the notice is correct and whether the combination has or is
likely to have an appreciable adverse effect on competition. [Clause 30 of the Competition Bill, 2001].
Competition (Amendment) Act, 2007
Notes on clause.—This clause seeks to substitute section 30 of the Competition Act, 2002 relating to inquiry into disclosures under
sub-section (2) of section 6.
Under the existing provisions contained in the said section, where any person or enterprise has given a notice under sub-section (2)
of section 6, the Commission shall inquire, (a) whether the disclosure made in the notice is correct (b) whether the combination
has, or is likely to have, an appreciable adverse effect on competition.
It is proposed to substitute section 30 so as to provide that where any person or enterprise has given a notice under sub-section (2)
Page 2 of 2
[s 30] Procedure in case of notice under sub-section (2) of section 6
of section 6, the Commission shall examine such notice and form its prima facie opinion and proceed in accordance with the
provisions of section 29. [Clause 23 of the Competition (Amendment) Bill, 2007].
SCOPE OF THE SECTION
The Commission may be given notice by any person or enterprise concerned, in the prescribed form, in relation to the
proposed combination before the Commission for any proposal relating to any agreement for acquisition, referred to in
section 5(a) or acquiring control, referred to in section 5(b), or seeking approval to any proposal for merger or
amalgamation, referred to in section 5(c) approved by the Board of Directors. On receipt of notice, the Commission shall
examine such notice and proceed in terms of section 29.
199 Subs. by Amendment Act, 2007 (39 of 2007), section 23 (w.e.f. 1 June 2011). Prior to its
substitution, it read as under:
[s 30] Inquiry into disclosures under sub-section (2) of section 6
Where any person or enterprise has given a notice under sub-section (2) of section 6, the Commission shall
inquire—
(a) whether the disclosure made in the notice is correct;
(b) whether the combination has or is likely to have an appreciable adverse effect on competition.
End of Document
[s 31] Orders of Commission on certain combinations
S M Dugar: Guide to Competition Law, 7th ed
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S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > CHAPTER
IV DUTIES, POWERS AND FUNCTIONS OF COMMISSION
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
CHAPTER IV DUTIES, POWERS AND FUNCTIONS OF COMMISSION
200[s 31] Orders of Commission on certain combinations
(1) Where the Commission is of the opinion that any combination does not, or is not likely to, have an appreciable
adverse effect on competition, it shall, by order, approve that combination including the combination in respect of
which a notice has been given under sub-section (2) of section 6.
(2) Where the Commission is of the opinion that the combination has, or is likely to have, an appreciable adverse
effect on competition, it shall direct that the combination shall not take effect.
(3) Where the Commission is of the opinion that the combination has, or is likely to have, an appreciable adverse
effect on competition but such adverse effect can be eliminated by suitable modification to such combination, it
may propose appropriate modification to the combination, to the parties to such combination.
(4) The parties, who accept the modification proposed by the Commission under sub-section (3), shall carry out such
modification within the period specified by the Commission.
(5) If the parties to the combination, who have accepted the modification under sub-section (4), fail to carry out the
modification within the period specified by the Commission, such combination shall be deemed to have an
appreciable adverse effect on competition and the Commission shall deal with such combination in accordance
with the provisions of this Act.
(6) If the parties to the combination do not accept the modification proposed by the Commission under sub-section
(3), such parties may, within thirty working days of the modification proposed by the Commission, submit
amendment to the modification proposed by the Commission under that sub-section.
(7) If the Commission agrees with the amendment submitted by the parties under sub-section (6), it shall, by order,
approve the combination.
(8) If the Commission does not accept the amendment submitted under sub-section (6), then, the parties shall be
allowed a further period of thirty working days within which such parties shall accept the modification proposed
by the Commission under sub-section (3).
(9) If the parties fail to accept the modification proposed by the Commission within thirty working days referred to in
sub-section (6) or within a further period of thirty working days referred to in sub-section (8), the combination
shall be deemed to have an appreciable adverse effect on competition and be dealt with in accordance with the
provisions of this Act.
(10) Where the Commission has directed under sub-section (2) that the combination shall not take effect or the
combination is deemed to have an appreciable adverse effect on competition under sub-section (9), then, without
prejudice to any penalty which may be imposed or any prosecution which may be initiated under this Act, the
Commission may order that—
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[s 31] Orders of Commission on certain combinations
(a) the acquisition referred to in clause (a) of section 5; or
(b) the acquiring of control referred to in clause (b) of section 5; or
(c) the merger or amalgamation referred to in clause (c) of section 5, shall not be given effect to:
Provided that the Commission may, if it considers appropriate, frame a scheme to implement its order under this
sub-section.
(11) If the Commission does not, on the expiry of a period of 201[two hundred and ten days from the date of notice
given to the Commission under sub-section (2) of section 6] pass an order or issue direction in accordance with
the provisions of sub-section (1) or sub-section (2) or sub-section (7), the combination shall be deemed to have
been approved by the Commission.
Explanation.—For the purposes of determining the period of 202[two hundred and ten] days specified in this
sub-section, the period of thirty working days specified in sub-section (6) and a further period of thirty
working days specified in sub-section (8) shall be excluded.
(12) Where any extension of time is sought by the parties to the combination, the period of ninety working days shall
be reckoned after deducting the extended time granted at the request of the parties.
(13) Where the Commission has ordered a combination to be void, the acquisition or acquiring of control or merger or
amalgamation referred to in section 5, shall be dealt with by the authorities under any other law for the time being
in force as if, such acquisition or acquiring of control or merger or amalgamation had not taken place and the
parties to the combination shall be dealt with accordingly.
(14) Nothing contained in this Chapter shall affect any proceeding initiated or which may be initiated under any other
law for the time being in force.
LEGISLATIVE BACKGROUND
Competition Act, 2002
Notes on clauses of the Bill stated, thus:
Notes on clauses.—This clause empowers the Commission to issue orders on certain combinations. Sub-clause (1) of the said
clause provides that if the Commission is of the opinion that a combination does not or is not likely to have an appreciable adverse
effect on competition, it shall, by order, approve the combination including a combination in respect of which a notice has been
given under sub-clause (2) of clause 6. Sub-clause (2) of the said clause empowers the Commission to direct that a combination
shall not take effect, if it is of the opinion that the combination has or is likely to have an appreciable adverse effect on
competition. Sub-clause (3) empowers the Commission to propose suitable modifications in the combinations in case the adverse
effect could be eliminated. Sub-clauses (4) to (12) contain provisions relating to acceptance of the modifications suggested by the
Commission, amendments to such modifications proposed by the parties to the combination, within the time specified in those
clauses and effect of acceptance or non-acceptance of such modifications and amendments by the Commission and the parties to
the combinations. [Clause 31 of the Competition Bill, 2001].
Competition (Amendment) Act, 2007
Notes on clauses.—This clause seeks to amend sub-section (11) of section 31 of the Competition Act, 2002 relating to orders of
Commission on certain combinations.
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[s 31] Orders of Commission on certain combinations
Under the existing provisions contained in the said sub-section (11) the combination is deemed to have been approved by the
Commission if the Commission does not pass orders on expiry of a period of ninety working days from the date of publication
referred to in sub-section (2) of section 29.
It is proposed to provide for deemed approval for the combination if the Commission does not pass orders in two hundred and ten
days from the date of notice given to the Commission under sub-section (2) of section 6. This amendment is consequential in
nature. [Clause 24 of the Competition (Amendment) Bill, 2007].
SCOPE OF THE SECTION
Commission is empowered to pass final orders relating to any combination after investigation, namely:—
(a) Approve the combination vide sub-section (1) if the Commission is of the opinion that it has no AAEC;
(b) Issue direction that the combination shall not take effect if the Commission is of the opinion that it has or is likely
to have an AAEC, vide sub-section (2);
(c) Propose appropriate modification to the combination, vide sub-section (3);
(d) Parties concerned may carry out modification within specified period, vide sub-section (4);
(e) In case parties fail to carry out modification within specified period, such combination shall be deemed to have
an adverse effect on competition, vide sub-section (5);
(f) If the parties do not accept the modification proposed by the Commission, they have the option to submit
amendment to the proposed modification to the Commission within 30 days, vide sub-section (6);
(g) If the Commission approves the revised modification, it shall approve the combination, vide sub-section (7);
(h) If the Commission does not accept the amended modification, the parties shall be allowed further 30 days to
accept the modification proposed by the Commission, vide sub-section (8);
(i) If the parties do not accept the proposed modification within further time, the combination shall be deemed to
have an AAEC, vide sub-section (9);
(j) In case of (b), (e), (i) ibid, the Commission may also order that the proposed combination shall not be given
effect to
“DEEMED TO HAVE BEEN APPROVED” [SUB-SECTION (11)].
As per sub-section (11), a period of 210 days from the date of publication of details of combination has been given to the
Commission to pass final order, failing which the combination shall be “deemed to have been approved” by the
Commission. For the purpose, time of 30 working days allowed under sub-sections (6) and (8) and extension of time
sought by the parties, shall not be taken into account. It is a presumption of law that in case of delay beyond 210 days, the
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[s 31] Orders of Commission on certain combinations
proposed combination shall be considered to have been approved by the Commission, even though no formal approval is
accorded by the Commission.
As per P Ramanatha Aiyar’s LAW LEXICON, 1997 Ed, a presumption of law is conclusive and is an inference which the
court will draw from the proof, which no evidence, however, strong, shall be presumed to overturn. It is an artificial rule
established by law on consideration of public policy or public convenience, against which no evidence is received.
“DEALT WITH BY OTHER AUTHORITIES UNDER ANY OTHER LAW” [SUB-SECTION
(13)]
Apart from seeking approval of the Commission under section 31, the persons or enterprise concerned in the combination
are also obliged to seek approval of the Company Law Tribunal under sections 230–235 of the Companies Act, 2013 as
also comply with the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeover)
Regulations, 2011. If any combination has been declared as void, the same cannot be given effect to by other authorities
under any other enactment.
200 Came into force on 1 June 2011 vide Notification No. S.O. 479(E), dated 4 March 2011.
201 Subs. by Amendment Act, 2007 (39 of 2007), section 24(a), for the words brackets and
figures “ninety working days from the date of publication referred to in sub-section (2) of section 29” (w.e.f. 1 June 2011).
202 Subs. by Amendment Act, 2007 (39 of 2007), section 24(b), for the words “ninety
working” (w.e.f. 1 June 2011).
End of Document
[s 32] Acts taking place outside India but having an effect on competition in India
S M Dugar: Guide to Competition Law, 7th ed
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The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > CHAPTER
IV DUTIES, POWERS AND FUNCTIONS OF COMMISSION
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
CHAPTER IV DUTIES, POWERS AND FUNCTIONS OF COMMISSION
203[s 32] Acts taking place outside India but having an effect on competition in India
The Commission shall, notwithstanding that,—
(a) an agreement referred to in section 3 has been entered into outside India; or
(b) any party to such agreement is outside India; or
(c) any enterprise abusing the dominant position is outside India; or
(d) a combination has taken place outside India; or
(e) any party to combination is outside India; or
(f) any other matter or practice or action arising out of such agreement or dominant position or combination is
outside India,
have power to inquire 204[in accordance with the provisions contained in sections 19, 20, 26, 29 and 30 of
the Act] into such agreement or abuse of dominant position or combination if such agreement or dominant
position or combination has, or is likely to have, an appreciable adverse effect on competition in the relevant
market in India 205[and pass such orders as it may deem fit in accordance with the provisions of this Act].
HISTORICAL BACKGROUND
MRTP Act, 1969
Section 14 of the MRTP Act, 1969, since repealed, empowered the MRTPC to pass orders relating to any monopolistic,
restrictive or unfair trade practice where any party to such practice did not carry on business in India but the trade practice
was carried on in India. It provided as under:
[s 14] Orders where party concerned does not carry on business in India.—Where any practice substantially falls within
monopolistic, restrictive or unfair, trade practice, relating to the production, storage, supply, distribution or control of goods of any
description or the provision of any services and any party to such practice does not carry on business in India, an order may be
made under this Act with respect to that part of the practices which is carried on in India.
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[s 32] Acts taking place outside India but having an effect on competition in India
Raghavan Committee Report—Recommendations of
This section is based on recommendations of Raghavan Committee, as follows:
4.2.7 Foreign Companies.—All foreign companies operating in India will fall within the ambit of the Competition Law. Thus, any
violation of the law by a foreign investor in India, will be in the ambit of the law. By the same token, any foreign investment
through mergers or takeovers will also be in the purview of the relevant section of the Competition Law. In short, the Competition
Law will be of universal applicability whether it is a domestic company or a foreign company.
Competition Act, 2002
Notes on clauses of the Bill stated, thus:
Notes on clauses.—This clause empowers the Commission to inquire into an agreement or abuse of dominant position or
combination if such agreements or dominant position or combination has or likely to have an appreciable adverse effect on
competition in India even if such agreement or abuse of dominant position or combination as specified in sub-clauses (a) to (g) of
the said clause take place outside India. [Clause 32 of the Competition Bill, 2001].
Competition (Amendment) Act, 2007
Notes on clauses.—This clause seeks to amend section 32 of the Competition Act, 2002 relating to acts taking place outside India
but having an effect on competition in India. The proposed amendment is clarificatory in nature. [Clause 25 of the Competition
(Amendment) Bill, 2007].
SCOPE OF THE SECTION
This section extends the scope of section 1(2) and seeks to clarify that for purposes of enquiry and passing orders by the
Commission, the resident status of the respondent is immaterial. The Commission is competent to enquire into any
agreement or abuse of dominant position or combination if the same has AAEC in the relevant market in India and pass
appropriate orders and it is immaterial whether the agreement has been entered into outside India or any party to the
agreement is outside India, or the enterprise is outside India, or combination has taken place outside India.
In Re Jugaldas Damodar Mody Co,206 it was urged that the whole gamut of transactions involved in the enquiry had taken
place in Oman and the main party was Sultan of Oman who represented the Sovereign State and the law applicable was
that of State of Oman. The MRTPC held that this contention overlooks section 14 of the MRTP Act, 1969.
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[s 32] Acts taking place outside India but having an effect on competition in India
The mere fact that the contract was executed in Muscat and Sultan of Oman was a party to that agreement did not preclude the
Commission from exercising its jurisdiction with respect to that part of the practice which is carried on in India. The definition of
‘restrictive trade practice’ clearly goes to show that it is an effect oriented or result based definition. ... If any of these effects is
visible in India, the trade practice must be taken to be carried on in India.
The answer to the question of whether the Commission has extra-territorial jurisdiction or not is neither an absolute no nor
an absolute yes. It is both yes and no, depending upon the facts and the circumstances of each case. Resident status of the
respondent is immaterial. This section empowers the Commission to pass an order in respect of that part of trade practice
which is carried on in India even if the party charged with an unfair trade practice is a foreign company carrying on
business from outside India, which was evident from the facts of the case.207 The mere fact that the American Natural
Soda Ash Corporation (ANSAC) agreement had been outside the country could not be construed in a vacuum, as its visible
effects in India would have to be seen in order to ascertain whether any part of the trade practice had been on the Indian
soil. The correspondence between some of the Indian consumers and the ANSAC clearly establish a nexus between the
two. Therefore, Commission has jurisdiction to entertain the complaint.208
The MRTPC had no extra-territorial jurisdiction. The action of an exporter to India when performed outside India would
not be amenable to the jurisdiction of the MRTPC. The Commission cannot pass an order determining the export price of
an exporter to India or prohibiting him from exporting to India at a low or predatory price.209
On the issue of extra territorial jurisdiction of the Competion Act, 2002 over the Fédération Internationale de Hockey
(FIH) in the case of Dhanraj Pillay v Hockey India,210 the Director General stated that as per section 2(l), the definition of
“person” includes an association of persons or a body of individuals, whether incorporated or not, in India or outside India.
The Director General also referred to section 32 of the Competition Act, 2002, whereby Commission has been empowered
to examine the agreements or abuse of dominant position or combination, if such agreement or dominant position is likely
to have an AAEC in the relevant market in India. Based on the definition of person and scope of section 32, it was
concluded in the Director General report and which was later agreed upon by the Commission, that FIH fell well within the
ambit of Competition Act, 2002.
203 Came into force on 20 May 2009 vide Notification No. S.O. 1241(E), dated 15 May 2009.
204 Ins. by Amendment Act, 2007 (39 of 2007), section 25 (w.e.f. 20 May 2009).
205 Ins. by Amendment Act, 2007 (39 of 2007), section 25 (w.e.f. 20 May 2009).
206 Re Jugaldas Damodar Mody Co, RTP Enquiry No 1/1980, order dated
14 June 1983.
207 Sub Chemic India Pvt Ltd v Haldor Topsoe AS,
(2005) 62 SCL 143 (MRTPC).
208 Alkali Manufacturers Assn of India v American Natural Soda Ash
Corp, (1998) 92 Com Cas 206 (MRTPC).
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[s 32] Acts taking place outside India but having an effect on competition in India
209 Haridas Exports v All India Floor Glass Manufacturers Assn,
(2002) 111 Com Cas 617 , 619 (SC).
210 Dhanraj Pillay v Hockey India, 2013 Comp LR 543 (CCI).
End of Document
[s 33] Power to issue interim orders
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > CHAPTER
IV DUTIES, POWERS AND FUNCTIONS OF COMMISSION
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
CHAPTER IV DUTIES, POWERS AND FUNCTIONS OF COMMISSION
211[s 33] Power to issue interim orders
Where during an inquiry, the Commission is satisfied that an act in contravention of sub-section (1) of section 3 or sub-
section (1) of section 4 or section 6 has been committed and continues to be committed or that such act is about to be
committed, the Commission may, by order, temporarily restrain any party from carrying on such act until the conclusion of
such inquiry or until further orders, without giving notice to such party, where it deems it necessary].
LEGISLATIVE HISTORY
MRTP Act, 1969
Section 33 of the Competition Act, 2002 generally corresponds to section 12A of MRTP Act, 1969, since repealed, as under:
[s 12A] Power of the Commission to grant temporary injunctions.—(1) Where, during an inquiry before the Commission, it is
proved, whether by the complainant, Director General, any trader or class of traders or any other person, by affidavit or otherwise,
that any undertaking or any person is carrying on, or is about to carry on, any monopolistic or any restrictive, or unfair, trade
practice and such monopolistic or restrictive, or unfair, trade practice is likely to affect prejudicially the public interest or the
interest of any trader, class of traders or traders generally or of any consumer or consumers generally, the Commission may, for the
purposes of staying or preventing the undertaking or, as the case may be, such person from causing such prejudicial effect, by
order, grant a temporary injunction restraining such undertaking or person from carrying on any monopolistic or restrictive, or
unfair, trade practice until the conclusion of such inquiry or until further orders.
(2) The provisions of rules 2A to 5 (both inclusive) of Order XXXIX of the First Schedule to the Code of Civil Procedure, 1908 (5
of 1908), shall as far as may be, apply to a temporary injunction issued by the Commission under this section, as they apply to a
temporary injunction issued by a civil court, and any reference in any such rule to a suit shall be construed as a reference to an
inquiry before the Commission.
Explanation I.—For the purposes of this section, an inquiry shall be deemed to have commenced upon the receipt by the
Commission of any complaint, reference or, as the case may be, application or upon its own knowledge or information reduced to
writing by the Commission.
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[s 33] Power to issue interim orders
Explanation II.—For the removal of doubts, it is hereby declared that the power of the Commission with respect to temporary
injunction includes power to grant a temporary injunction without giving notice to the opposite party.”
Competition Act, 2002
Notes on clauses of the Bill stated, thus:
Notes on clauses.—This clause empowers the Commission to grant interim relief by way of temporary injunctions. [Clause
33 of the Competition Bill, 2001].
Competition (Amendment) Act, 2007
Notes on clauses.—This clause seeks to substitute section 33 of the Competition Act, 2002 relating to power to grant
interim relief.
The existing provisions of section 33 provide that where during an inquiry before the Commission it is proved to the
satisfaction of the Commission that an act in contravention of sections 3, 4 and 6 has been committed, the Commission
may by order grant a temporary injunction restraining any party from carrying on such act. It also provides that where
during the inquiry before the Commission, if the Commission is satisfied that import of any goods is likely to contravene
sections 3, 4 and 6 it may, by order, grant a temporary injunction restraining any party from importing such goods until the
conclusion of such inquiry or until further orders, without giving notice to the opposite party, where it deems it necessary
and a copy of such order granting temporary injunction shall be sent to the concerned authorities. It further provides that
the provisions of rules 2A to 5 (both inclusive) of O XXXIX of Schedule I to the Code of Civil Procedure, 1908 shall, as
far as may be, apply to a temporary injunction issued by the Commission under this Act, as they apply to temporary
injunction issued by a Civil Court.
The proposed section 33 provides that where during an inquiry, the Commission is satisfied that an act in contravention of
sections 3, 4 and 6 has been committed, the Commission may, by order, temporarily restrain any party from carrying on
such act until the conclusion of such inquiry or until further orders, without giving notice to such party. [Clause 26 of the
Competition (Amendment) Bill, 2007].
SCOPE OF THE SECTION
This section has been recast by the Amendment Act, 2007.
The power of the Commission to grant temporary injunction against any person or enterprise has been related to any anti-
competitive agreement, abuse of dominant position, or combination, until the conclusion of the inquiry or until further
orders. Such an order granting temporary injunction can be passed by the Commission only after an inquiry has been
instituted under Competion Act, 2002. The Commission can pass the injunction order, if it is proved, that the person or
enterprise is acting in contravention of sub-section (1) of sections 3 & 4 or section 6.
For grant of temporary injunction, the Commission shall be guided by the provisions of Code of Civil Procedure, 1908.
INJUNCTION—MEANING AND ORIGIN
Injunctions are a type of relief in law. Injunction refers to a specific order of the Court forbidding the commission of a
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[s 33] Power to issue interim orders
wrong threatened or the continuance of a wrongful course of action which had already begun. Originally, in England, the
Court of Chancery had the powers to issue a writ of injunction, with the intention of giving relief to the party in a suit.
Thus, injunction, as commonly known, is a process of a court, whereby according to exigencies, the Court orders a party to
do a particular thing, or to refrain from doing a particular thing.
Types of Injunctions
Injunctions may be perpetual or temporary. The Specific Relief Act, 1963 governs the grant of perpetual injunctions. A
perpetual injunction can only be granted by the decree made at the hearing and upon the merits of the suit and when so
granted the defendant to a suit is perpetually enjoined from the assertion of a right, or from commission of an act, which
would be contrary to the rights of the plaintiff. Temporary injunctions are such as are to continue until a specified time, or
until the further order of the Court and they may be granted at any stage of a suit and are regulated by the Code of Civil
Procedure, 1980. Thus, temporary injunctions are covered by the Code of Civil Procedure, 1908, whereas, permanent
injunctions are granted under the Specific Relief Act, 1963, which deals with specific reliefs that can be granted for the
purpose of enforcing individual civil rights.
Injunctions can also be prohibitive or mandatory. A prohibitory injunction forbids a defendant from doing a wrongful act
which would be an infringement of some right of the plaintiff—legal or equitable. A mandatory injunction forbids the
defendant to permit the continuance of a wrongful state of things that already exists at the time when the injunction is
issued. A mandatory injunction, thus, seeks to restore a wrongful state of things to their formal rightful order.
PROVISIONS OF CODE OF CIVIL PROCEDURE, 1908
The Commission’s power to grant temporary injunction is similar to that of a civil court under the provisions of the Code
of Civil Procedure, 1908, as contained in rules 2A to 5 of O XXXIX of Schedule I to the Code. The said provisions are
reproduced below:
2A. Consequence of disobedience or breach of injunction
(1) In the case of disobedience of any injunction granted or other order made under rule 1 or rule 2, breach of any of the terms on
which the injunction was granted or the order made, the Court granting the injunction or making the order, or any Court to which
the suit or proceeding is transferred, may order the property of the person guilty of such disobedience or breach to be attached, and
may also order such person to be detained in the civil prison for a term not exceeding three months, unless in the meantime the
Court directs his release.
(2) No attachment made under this rule shall remain in force for more than one year, at the end of which time, if the disobedience
or breach continues, the property attached may be sold and out of the proceeds, the Court may award such compensation as it
thinks fit to the injured party and shall pay the balance, if any, to the party entitled thereto.
3. Before granting injunction, Court to direct notice to opposite party:
The Court shall in all cases, except where it appears that the object of granting the injunction would be defeated by the delay,
before granting an injunction, direct notice of the application for the same to be given to the opposite party:
Provided that, where it is proposed to grant an injunction without giving notice of the application to the opposite party, the Court
shall record the reasons for its opinion that the object of granting the injunction would be defeated by delay, and require the
applicant—
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[s 33] Power to issue interim orders
(a) to deliver to the opposite party, or to send to him by registered post, immediately after the order granting the injunction
has been made, a copy of the application for injunction together with—
(i) a copy of the affidavit filed in support of the application;
(ii) a copy of the plaint; and
(iii) copies of documents on which the applicant relies, and
(b) to file, on the day on which such injunction is granted or on the day immediately following that day, an affidavit stating
that the copies aforesaid have been so delivered or sent.
3A. Court to dispose of application for injunction within thirty days.
Where an injunction has been granted without giving notice to the opposite party, the Court shall make an endeavour to finally
dispose of the application within thirty days from the date on which the injunction was granted; and where it is unable so to do, it
shall record its reasons for such inability.
4. Order for injunction may be discharged, varied or set aside.
Any order for an injunction may be discharged, or varied, or set aside by the Court, on application made thereto by any party
dissatisfied with such order:
Provided that if in an application for temporary injunction or in any affidavit supporting such application, a party has knowingly
made a false or misleading statement in relation to a material particular and the injunction was granted without giving notice to the
opposite party, the Court shall vacate the injunction unless, for reasons to be recorded, it considers that it is not necessary so to do
in the interests of justice:
Provided further that where an order for injunction has been passed after giving to a party an opportunity of being heard, the order
shall not be discharged, varied or set aside on the application of that party except where such discharge, variation or setting aside
has been necessitated by a change in the circumstances, or unless the Court is satisfied that the order has caused undue hardship to
that party.
5. Injunction to corporation binding on its officers.
An injunction directed to a corporation is binding not only on the corporation itself, but also on all members and officers of the
corporation whose personal action it seeks to restrain.
INGREDIENTS
Section 33 has the following ingredients which must be fulfilled for seeking grant of temporary injunction:
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(i) temporary injunction can be granted only during an enquiry;
(ii) there must be proof of contravention of sections 3(1), 4(1) or 6 by the person or enterprise against whom
injunction is sought;
(iii) the Commission has the discretion to grant a temporary injunction restraining any party from carrying on such
act.
(iv) the temporary injunction order may remain in force until conclusion of the enquiry or until further orders.
(v) the temporary injunction may be granted ex parte.
PROCEDURE
An application for grant of temporary injunction is required to be supported by an affidavit of the person making the
application, stating the facts which constitute contravention of section 3(1), section 4(1) or section 6. The Commission,
may, before making an order under section 33, direct the Director General to make investigation into such allegations and
submit to it a report thereon.
“DURING AN ENQUIRY BEFORE THE COMMISSION”— MEANING OF
The meaning of the words “during an enquiry before the Commission” used in section 12A of MRTP Act, 1969,
(corresponding to section 33 of the Competition Act, 2002) came up for interpretation by the MRTPC in Voluntary
Organisation in the Interest of Consumer Education (VOICE) and Indian Federation of Consumer Organisation (IFCO) v
ITC Ltd,212 in which the former had made a complaint alleging certain unfair trade practices against ITC Ltd and then
came up with an application under section 12A for the grant of a temporary injunction by the Commission. The
Commission forwarded the complaint to the Director General of Investigation and Registration for a preliminary report.
The respondents contended that as “no enquiry was pending before the Commission”, the Commission had no jurisdiction
to pass any order by way of temporary injunction. Rejecting the argument advanced on behalf of the respondents, the
Commission held as follows:
Laying stress on the words “during an enquiry before the Commission”, Shri Anil Diwan contends that no enquiry has so far
commenced against the respondent and that, therefore, Commission has no jurisdiction to pass any order under section 12A of the
Act. We are unable to find any substance in this submission. Section 36B and section 36D are exactly the same as section 10 and
section 37 respectively with this difference that while the former two sections deal with unfair trade practices, the latter two
sections deal with restrictive trade practices. The enquiry by the Commission in case of either a restrictive trade practice or an
unfair trade practice is of two distinct phases. The first phase of enquiry does not envisage any notice to the person against whom
the enquiry is instituted while the second stage commences with a notice to the person against whom the enquiry is made. Either on
receipt of a complaint or on receipt of a reference from the Central or the State Government or an application from the Director
General (I&R) or while instituting an enquiry suo motu, the Commission does not generally issue a notice to the person against
whom the enquiry is initiated. A preliminary enquiry under section 10 in the case of a restrictive trade practice and under section
36B in the case of an unfair trade practice is usually made, as permitted under those provisions and then the Commission either
closes the enquiry should there be no case or issues a notice of enquiry to the concerned person or undertaking under section 37 in
the case of a restrictive trade practice and under section 36D in the case of an unfair trade practice. The enquiry into an unfair trade
practice commences as soon as the Commission institutes an enquiry either under section 10 or under section 36B. Once an
enquiry is instituted by the Commission without any reference to the other steps that may be taken by the Commission before the
issuance of the notice to the concerned party, the enquiry becomes pending before the Commission. It is only where after
preliminary enquiry, the Commission feels that a particular person or undertaking should be asked to show cause as to why an
appropriate order under section 37 or section 36D should not be passed, the Commission issues a notice of enquiry, marking the
beginning of the second stage of the enquiry. The forwarding of the complaint to the Director General of Investigation for a
preliminary investigation is a part of the enquiry instituted by the Commission. Section 36B does not bar any preliminary enquiry
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by the Commission. It is clearly provided in the section that in the case of an unfair trade practice in regard to which a complaint is
made under clause (a) of section 36B, the Commission shall cause a preliminary investigation before issuing any process requiring
the attendance of the person complained against. The provision clearly enunciates the purpose for which the preliminary
investigation is made compulsory and that purpose is that the complaint requires to be inquired into as contemplated under section
36D. The anterior enquiry envisaged under section 36B is independent and uncontrolled by the provision under section 36C which
comes into play only when the Commission considers it necessary to issue process requiring the attendance of the person
complained against. When a complaint from a consumer association or a reference from the Government or an application from the
Director General of Investigation is received, the Commission institutes an inquiry either under section 10 or under section 36B by
forwarding the complaint, reference or application to either its Research Wing or Investigation Wing or by directing a notice of
enquiry under section 37 or under section 36D. In all such cases where no notice of enquiry has been ordered under section 37 or
section 36D it cannot be said that there is no enquiry by the Commission. Under the circumstances, therefore, we over-rule the
objection against the existence of jurisdiction to pass an order under section 12A of the Act at this stage. We have no doubt
whatever that an enquiry is pending against the respondent in the instant case, the same having commenced on our receiving the
complaint and registering a case after due examination of the allegation in the complaint.
“During enquiry”213
The Supreme Court in the SAIL case laid down the understanding around section 33 in the following terms:
86. A bare reading of the above provision shows that the most significant expression used by the legislature in this provision is
“during inquiry”. “During inquiry”, if the Commission is satisfied that an act in contravention of the stated provisions has been
committed, continues to be committed or is about to be committed, it may temporarily restrain any party “without giving notice to
such party”, where it deems necessary. The first and the foremost question that falls for consideration is, what is “inquiry”? The
word “inquiry” has not been defined in the Act, however, regulation 18(2) explains what is “inquiry’” “Inquiry” shall be deemed to
have commenced when direction to the Director General is issued to conduct investigation in terms of regulation 18(2). In other
words, the law shall presume that an “inquiry” is commenced when the Commission, in exercise of its powers under section 26(1)
of the Act, issues a direction to the Director General. Once the regulations have explained “inquiry” it will not be permissible to
give meaning to this expression contrary to the statutory explanation. Inquiry and investigation are quite distinguishable, as is clear
from various provisions of the Act as well as the scheme framed thereunder. The Director General is expected to conduct an
investigation only in terms of the directive of the Commission and thereafter, inquiry shall be deemed to have commenced, which
continues with the submission of the report by the Director General, unlike the investigation under the MRTP Act, 1969, where the
Director General can initiate investigation suo moto. Then the Commission has to consider such report as well as consider the
objections and submissions made by other party. Till the time final order is passed by the Commission in accordance with law, the
inquiry under this Act continues. Both these expressions cannot be treated as synonymous. They are distinct, different in
expression and operate in different areas. Once the inquiry has begun, then alone the Commission is expected to exercise its
powers vested under section 33 of the Act. That is the stage when jurisdiction of the Commission can be invoked by a party for
passing of an ex parte order. Even at that stage, the Commission is required to record a satisfaction that there has been
contravention of the provisions mentioned under section 33 and that such contravention has been committed, continues to be
committed or is about to be committed. This satisfaction has to be understood differently from what is required while expressing a
prima facie view in terms of section 26(1) of the Act. The former is a definite expression of the satisfaction recorded by the
Commission upon due application of mind while the latter is a tentative view at that stage. Prior to any direction, it could be a
general examination or enquiry of the information/reference received by the Commission, but after passing the direction the
inquiry is more definite in its scope and may be directed against a party. Once such satisfaction is recorded, the Commission is
vested with the power and the informant is entitled to claim ex parte injunction. The legislature has intentionally used the words
not only ex parte but also “without notice to such party”. Again for that purpose, it has to apply its mind, whether or not it is
necessary to give such a notice. The intent of the rule is to grant ex parte injunction, but it is more desirable that upon passing an
order, as contemplated under section 33, it must give a short notice to the other side to appear and to file objections to the
continuation or otherwise of such an order. Regulation 31(2) of the regulations clearly mandates such a procedure. Wherever, the
Commission has passed interim order, it shall hear the parties against whom such an order has been made, thereafter, as soon as
possible. The expression “as soon as possible” appearing in regulation 31(2) has some significance and it will be obligatory upon
the fora dealing with the matters to ensure compliance to this legislative mandate. Restraint orders may be passed in exercise of its
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jurisdiction in terms of section 33 but it must be kept in mind that the ex parte restraint orders can have far-reaching consequences
and, therefore, it will be desirable to pass such order in exceptional circumstances and deal with these matters most expeditiously.
87. During an inquiry and where the Commission is satisfied that the act has been committed and continues to be committed or is
about to be committed, in contravention of the provisions stated in section 33 of the Act, it may issue an order temporarily
restraining the party from carrying on such act, until the conclusion of such inquiry or until further orders, without giving notice to
such party where it deems it necessary. This power has to be exercised by the Commission sparingly and under compelling and
exceptional circumstances. The Commission, while recording a reasoned order, inter alia, should: (a) record its satisfaction (which
has to be of much higher degree than formation of a prima facie view under section 26(1) of the Act) in clear terms that an act in
contravention of the stated provisions has been committed and continues to be committed or is about to be committed; (b) it is
necessary to issue order of restraint and (c) from the record before the Commission, there is every likelihood that the party to the lis
would suffer irreparable and irretrievable damage, or there is definite apprehension that it would have adverse effect on
competition in the market.
88. The power under section 33 of the Act, to pass a temporary restraint order, can only be exercised by the Commission when it
has formed prima facie opinion and directed investigation in terms of section 26(1) of the Act, as is evident from the language of
this provision read with regulation 18(2) of the Regulations.
89. It will be useful to refer to the judgment of this Court in the case of Morgan Stanley Mutual Funds v Kartick Das,214 wherein
this Court was concerned with Consumer Protection Act 1986, Companies Act 1956 and Securities and Exchange Board of India
(Mutual Fund) Regulations, 1993. As it appears from the contents of the judgment, there is no provision for passing ex parte
interim orders under the Consumer Protection Act, 1986 but the Court nevertheless dealt with requirements for the grant of an ad
interim injunction, keeping in mind the expanding nature of the corporate sector as well as the increase in vexatious litigation. The
Court spelt out the following principles:
36. As a principle, ex parte injunction could be granted only under exceptional circumstances. The factors which should weigh
with the court in the grant of ex parte injunction are—
(a) whether irreparable or serious mischief will ensue to the plaintiff;
(b) whether the refusal or ex parte injunction would involve greater injustice than the grant of it would involve;
(c) the court will also consider the time at which the plaintiff first had notice of the act complained so that the making of
improper order against a party in his absence is prevented;
(d) the court will consider whether the plaintiff had acquiesced for some time and in such circumstances it will not grant ex
parte injunction;
(e) the court would expect a party applying for ex parte injunction to show utmost good faith in making the application;
(f) even if granted, the ex parte injunction would be for a limited period of time.
(g) General principles like prima facie case, balance of convenience and irreparable loss would also be considered by the
Court.
90. In the case in hand, the provisions of section 33 are specific and certain criteria have been specified therein, which need to be
satisfied by the Commission, before it passes an ex parte ad interim order. We have already spelt out above these three ingredients,
and at the cost of repetition we may notice that there has to be an application of mind of higher degree and definite reasons having
a nexus to the necessity for passing such an order, need to be stated. Further, it is required that the case of the informant-applicant
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should also be stronger than a mere prima facie case. Once these ingredients are satisfied and where the Commission deems it
necessary, it can pass such an order without giving notice to the other party. The scope of this power is limited and is expected to
be exercised in appropriate circumstances. These provisions can hardly be invoked in each and every case except in a reasoned
manner. Wherever, the applicant is able to satisfy the Commission that from the information received and the documents in support
thereof, or even from the report submitted by the Director General, a strong case is made out of contravention of the specified
provisions relating to anti-competitive agreement or an abuse of dominant position and it is in the interest of free market and trade
that injunctive orders are called for, the Commission, in its discretion, may pass such order ex parte or even after issuing notice to
the other side.
91. For these reasons, we may conclude that the Commission can pass ex parte ad interim restraint orders in terms of section 33,
only after having applied its mind as to the existence of a prima facie case and issue direction to the Director General for
conducting an investigation in terms of section 26(1) of the Act. It has the power to pass ad interim ex parte injunction orders, but
only upon recording its due satisfaction as well as its view that the Commission deemed it necessary not to give a notice to the
other side. In all cases where ad interim ex parte injunction is issued, the Commission must ensure that it makes the notice
returnable within a very short duration so that there is no abuse of the process of law and the very purpose of the Act is not
defeated.
In the case of Nuziveedu Seeds Ltd v Mahyco Monsanto Biotech (India) Ltd (MMBL),215 the Commission noted that it was
not barred from proceeding with the application and could grant an interim relief, which shall not take effect without the
leave of the High Court. It observed that the process of development of the Bt cotton spans over five to seven years and if
the existing parent lines and germplasm were destroyed, it would take years to restore the same amount of supply. Apart
from prejudicing the Informants, such destruction would also adversely affect the dependent farmers and the entire
economy. The Commission observed that impact of the termination of the sub-license agreements and the post-termination
obligations was so vast, that the case satisfied the higher standard required for granting interim relief. Not giving the relief
would do more damage to the Informant which could not be compensated, on the other hand, giving the relief would cause
future monetary losses to the opposite parties, which could be computed and compensated. Thus, it found that the balance
of convenience lied in granting the interim relief sought and restrained the opposite parties from enforcing the post-
termination obligations. To protect the interests of the opposite parties, the Commission directed the Informants to adhere
to inspection, maintenance of records, audit, reporting, etc and to cooperate with the opposite parties to protect their
intellectual property rights.
PERSONS ENTITLED TO APPLY FOR GRANT OF TEMPORARY INJUNCTION
The language of section 33 is very generic. Any trader or class of traders or any other person can apply for grant of
temporary injunction, by filing an affidavit or otherwise. This is possible only when the Commission is approached to
enquire into any allegation made by them exercising its suo motu power.
Section 33 being generically worded, it cannot be said that rivals in trade cannot apply for temporary injunction, thus
taking up cudgels for the consumer.
Similarly, a person who is neither a trader nor a consumer can also complain against any alleged contravention of section
3, section 4 or section 6 though he may not be a person interested in the matter. But such person shall have to convince that
there is a public interest element involved in the complaint.
In Australia, many violations of consumer protection provisions of the Trade Practices Act, 1974 have been brought before
the courts by rivals in trade. The right of the rival traders to apply for injunction and/or damages in respect of unfair trade
practices has also been upheld there by the Federal Court. In R v Judges of the Federal Court of Australia; Ex parte
Pilkington ACI (Operations) Pty Ltd; R v Judges of the Federal Court of Australia; Ex parte Soul Pattinson (Laboratories)
Pty Ltd,216 it was held that notwithstanding the fact that Part V of the Trade Practices Act, 1974 (of Australia) was enacted
for the protection of consumers, they are enforceable at the instance of a competitor who is not a consumer. Mason, J (at p
79) observed:
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The enforcement at least by injunction, by such a person of Pt. V. provisions enhances the protection which they give to
consumers. Indeed, it constitutes the most effective sanction for that protection because the consumer who is misled or deceived in
consequence of unfair practice is unlikely to be a suitor for an injunction against the contravening corporation; he is more likely to
seek damages.
MASON, J further held:
I agree with the observations made by BOWN CJ in World Series Cricket Pty. Ltd v Parish.217 “Even where the application is
brought by a rival competitor seeking redress of damages to his business caused by the allegedly unfair and illegal practices of the
respondent, the application, though it vindicates or protects the private interests of the competitor, at the same time secures the
public interest of consumer protection. Though for example, the complaint under Pt. V of the Act in some cases closely resembles
an action for passing off or trade libel—it is nevertheless an action to protect the consuming public from being misled or
misinformed. For competition between rival traders properly to be promoted, it is necessary that the relevant market is kept
adequately informed about the goods or services available for purchase, and is not misled by deceptive trade practices”, (at p 79).
Likewise, in Hornsby Building Information Centre Pty. Ltd v Sydney Building Information Centre Ltd218 there was a majority
opinion that a person who is a trade competitor may claim injunction.
GENERAL PRINCIPLES GOVERNING GRANT OF TEMPORARY INJUNCTION
The grant of temporary injunctions is generally governed by three well-established principles in civil matters by courts of
equity, namely:—
(i) whether the petitioner has made out a prima facie case;
(ii) whether the balance of convenience lies in his favour;
(iii) whether by the non-grant of the injunction the petitioner would suffer irreparable loss or injury.
The first condition namely, making out a prima facie case is considered very essential after which if the petitioner is able
to prove any one of the other two conditions, he would be entitled to the relief. Mere proof of one of the three conditions
would not be sufficient. In Nawab Mir Barket Alikhan v Nawab Zulfiquar Jah Bahadur,219 MADHUSUDAN RAO, J held:—
It is well settled that the grant or refusal of a temporary injunction is covered by three well established principles, viz. (1) whether
the petitioners have made out a prima facie case; (2) whether the balance of convenience is in their favour, i.e., whether it would
cause greater inconvenience which the opposite party would be put to if the temporary injunction is granted, and (3) whether the
petitioners would suffer irreparable injury. With the first condition as sine qua non at least two conditions should be satisfied by
the petitioners conjunctively and a mere proof of one of the three conditions does not entitle the petitioners to obtain a temporary
injunction in their favour.
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In Shayak Mohammed v Iqbal Ahmad,220 it was held that for grant of temporary injunction, the plaintiff must be able to
prove not only that he has a prima facie case and that balance of convenience lies in his favour but also that irreparable
injury would be caused to him if it is not granted. The burden of proving the prima facie case, balance of convenience and
irreparable loss of injury is on the plaintiff.
Prima facie Case
The application for grant of temporary injunction is to be decided on the basis of affidavits or other material available. So,
in deciding a prima facie case, the court is generally to be guided by the apparent strength or otherwise of plaintiff’s case
as revealed by the affidavits and other materials on record—MK Dasappa v G Ramachandra.221 In Karunanidi v R
Renganathan Chettiar,222 it was held that making out a prima facie case does not mean that the court should examine the
merits of the case closely and then come to a conclusion that the applicant has a case in which he is likely to succeed, as
that would mean prejudging the merits of the suit. All that the Court has to see is that on the face of it the person applying
for an injunction has a case which needs consideration and which is not bound to fail by virtue of some apparent defects.
There must exist a strong probability that petitioner has an ultimate chance of success—Krishan Murgai v Superintendence
Co of India (Pvt) Ltd;223 Vimla Devi v Jang Bahadur;224 Upendra Das v Krishna Sahu.225 In Vimla Devi’s case (supra),
the Rajasthan High Court expressed the view that in deciding whether there was a prima facie case, every piece of
evidence produced by the parties must be examined. In Vellakutty v Karthyarani226 also a similar ruling was given. In
Roshan Lal v Ratoo,227 it was observed that the merits of the case must be closely examined by conducting an in-depth
investigation in order to decide whether the petitioner has ultimate chances of success. An entry into some degree of merits
of the case would be necessary in considering whether there is a prima facie case (see Kanshi Ram v Bansiyla,228).
The decision about the prima facie case has to be made on the basis of the affidavits brought on record. In Sakalabhaktula
Vykunta Rao v Appala-Swamy,229 PUNNAYYA, J on this point, observed—
In view of the urgency involved in the matter, the regular procedure of examining the petitioner and his witnesses and respondent
and his witnesses is dispensed with and the court is given a special power to decide the matter by affidavits. Further, the scope of
enquiry is quite limited and the rights of parties are not decided finally.
In Vadivel Mudaliar v Pachianna Gounder,230 GOKULA KRISHNA, J observed:—
In the matter of granting temporary injunction it is the duty of the court to take into consideration the affidavits and the relevant
documents before it records a finding. “Taking into consideration the documents” does not mean merely referring to the same in
the judgment; but there must be some discussion about them before any conclusion is arrived at. ... Interim injunction is no doubt a
discretionary relief. The same has to be granted only after applying judicial mind and on proper discussion of the evidence on
record. Mere reference to the documents filed and the affidavits placed before the Court cannot satisfy the requirement. There must
be at least a prima facie discussion about them.
This was a case in appeal from the decision of the District Judge by way of civil revision petition and the case lays down
the important point of law that the documents and affidavits brought on record have to be discussed and not merely
referred to. In Abdul Hameed Khan v Mujeed-ul-Hassan,231 the Allahabad High Court held that where the affidavits are
conflicting, deponents, who filed affidavits, if summoned for cross-examination, would not be illegal.
Balance of Convenience and Irreparable Injury
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The existence of a prima facie case is the sine qua non for considering the grant of temporary injunction. But that itself is
not sufficient. In Kamta Prasad Singh v The Regional Manager, Food Corp of India232 it was held that existence of prima
facie case alone is not sufficient for grant of temporary injunction. In Bhagalpur Rolling Mills v Bhagalpur Electric Supply
Co Ltd,233 the Patna High Court held that temporary injunction cannot be granted in the absence of prima facie case
and/or balance of convenience. In Smita Agarwal v Nirmal Kumar Das,234 it was observed that injunction can be granted
only when plaintiff makes out a good prima facie case, when the balance of convenience is in his favour and there is a
likelihood of irreparable injury. Further, in order to obtain interlocutory injunction, it was held that it is not enough for the
plaintiff to show that he has a prima facie case, but he must further show that (1) in the event of withholding the relief of
temporary injunction he will suffer an irreparable injury and (2) in the event of his success in the suit in establishing his
alleged legal right, he will not have the proper remedy in being awarded adequate damages. In MK Dasappa v G
Ramachandra,235 JAGANNATHA SHETTY, J held:
... but I am concerned with the validity of the interim injunction the grant of which primarily depends on the existence of prima
facie case of the plaintiff. In determining such a question, as I observed in J. Krishnamurthy v Bangalore Turf Club Ltd236
(M.F.A. No. 500 of 1974, disposed of on 13 August 1975) the Court should be guided more and more by the apparent strength or
otherwise of the plaintiff’s case as revealed by the affidavits and other materials and then has to consider the balance of
convenience for the grant or refusal of the interim injunction. I also observed that the court while considering the question of
balance of convenience must pertinently put the question, “Will the plaintiff suffer irreparable damage, if no injunction is granted
now?” Further, on the point of “imminent danger”, he observed: “But the word ‘imminent’ in the context need not be literally
understood. If the plaintiff has to wait till the last moment, disastrous consequences might follow which the Court cannot prevent
for want of time, or procedural requirements”.
In AR Gangadhar & Co v Police Malliah Rajeswar & Co,237 it was held:
Balance of convenience means that the Court should be satisfied that if an interlocutory injunction is granted and it turns out at the
trial it should not have been, the damage to the defendant is likely to be less than would be damage to the plaintiff if an
interlocutory injunction were refused and it afterwards turned out that it should have been granted.
In Tavener Rutledge Ltd v Specters Ltd;238 Bottagas Ltd v County Gas Ltd;239 Mohamed Minhajuddin v Ahmed Khan,240
it was held that in granting an interim injunction, the Court is to be generally guided by the balance of convenience to the
parties concerned and the extent of damage that is likely to be caused to them. In Marathon Oil Co v Marathon Shipping
Co Ltd241 (it was a patents case) it was held that interlocutory relief would not be granted in the absence of good ground
for supposing that the withholding of an injunction would be likely to result in damage to the plaintiffs or to their
reputation or goodwill pending trial.
Where the plaintiff’s damage if an injunction were wrongly refused might be very great and would also be difficult if not
impossible to quantify, and the damage to the defendants if an injunction were wrongly granted would merely be due to
delay in being prevented from using the mark, and other incidental expenses, the balance of convenience would be in
favour of granting an interlocutory injunction—EMI Records Ltd v CBS United Kingdom Ltd.242
Where the plaintiffs could be compensated by money by way of damage at the trial in the event of success in the suit, the
balance of convenience may be considered not in favour of granting interim injunction—Wombles Ltd v Wombles Skips
Ltd.243
If the damage which may be done to the plaintiff when inferior work of the defendant is due to the work of the plaintiffs is
incalculable and of great financial harm to the plaintiff, the balance of convenience will be considered in favour of the
plaintiffs—Rolls Royce Motors Ltd v Zanelli.244
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In Dorothy Perkins Ltd v Polly Perkins of Piccadilly Ltd245 (a passing off case), both the plaintiffs and defendants were
engaged in selling ladies garments. Defendants were selling their goods at a price range substantially higher than that of
the plaintiffs and the parties were not trading in the same town. It was not suggested that the goods of defendants were of
poor quality so that the plaintiff’s goodwill would be injured. It was held that this was rather a case for a speedy trial than
for granting an interlocutory injunction.
In Shamlal v Intrads Advertising Pvt Ltd246 (a passing off case), the plaintiff had been using the mark “Anil” for paint
brushes since 1965. Defendants who were exporters had been purchasing paint brushes marked “Anil” from the plaintiffs
from April 1974 for export. They discontinued such purchase since 1977 and began marketing brushes manufactured by
themselves or by others under the name “Anil”. In an action for passing off, interlocutory injunction was granted.
Defendants had claimed use of the mark since 1973 but did not produce any cogent evidence to show actual use of the
mark prior to April 1974, ie, prior to the date when orders were placed with the plaintiff. Plaintiff established prior use of
the mark. He was exclusively living on the income of the goods he produced and accordingly the balance of convenience
was held to be in his favour for interim relief.
In Wearwell Co (India) Ltd v Wearwell Industries,247 (a passing off case), dealing with the scope of grant of temporary
injunction with reference to balance of convenience, it was observed that this question was relevant only when at least
prima facie the two parties were on the same level and their rights were about equal. Principle relied on in Jagan Nath
Prem Nath v Bharatiya Dhoop Karyalaya.248
What are the precise aspects that would guide the Commission in granting a temporary injunction in actual practice is
difficult to lay down in specific terms. They are purely at the discretion of the Court under the Code of Civil Procedure,
1908 and the principles applicable in giving effect of O XXXIX of the CPC 1908 (CPC, for short) are equally applicable
to the cases coming up before the Commission. The only difference is, under the CPC, 1908 the suits are those relating to
private interests of parties. On the other hand, under the Competition Act, 2002, there is an element of public interest
running like a fine thread, through the entire fabric of the Act. Though an individual consumer has a right to apply for
grant of temporary injunction and in that sense proceedings under section 33 may be similar to those under O XXXIX of
CPC, 1908 yet, the action by a consumer may have public interest ramification. Invariably, only the astute consumer
would take the initiative to approach the Commission when a large majority, as experience generally proves, may not have
the initiative, time or resource. This is not to say that unless there is a public interest element, temporary injunctions would
not be granted, but to highlight the serious adverse influence on public interest, an alleged unfair trade practice can
eventually cast.
Essentially, the Commission would have to satisfy itself whether the applicant has made out a prima facie case. The word
“proved” used in section 33 would mean “proved by affidavits” the veracity of which would be tested in the proceedings
under section 33. It does not mean “proved beyond doubt”. Once this is established, it has to be seen whether balance of
convenience commands grant of injunction. Even where irreparable injury to the plaintiff is envisaged, grant of temporary
injunction is justified. No doubt these principles are universally acceptable. But the problem arises in the application of
these principles to the facts of a given case. No two cases can be identical especially in the context of unfair trade
practices. Numerous issues would arise, eg:
(a) whether on evidence (invariably affidavit) available, a prima facie case has been established.
(b) if so, whether balance of convenience requires grant of injunction.
(c) what should be the duration of the order.
(d) what should be the form of the order.
(e) whether laches on the part of the applicant can be raised by the respondent.
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(f) whether any undertaking as to damages, which might be caused to the respondent, is to be furnished by the
applicant.
Principles Epitomised by Lord Denning and Lord Diplok
The aforesaid principles governing grant of injunction were immaculately epitomised by LORD DENNING MR and LORD
DIPLOCK, J. LORD DENNING, J observed:
In considering whether to grant an interlocutory injunction, the right course for a Judge is to look at the whole case. He must have
regard not only to the strength of the claim but also to the strength of the defence, and then decide what is best to be done.
Sometimes it is best to grant an injunction so as to maintain the status quo until the trial. At other times it is best not to impose a
restraint upon the defendant but leave him free to go ahead. For instance, in Fraser v Evans,249 although the plaintiff owned the
copyright, we did not grant an injunction, because the defendant might have a defence of fair dealing. The remedy by interlocutory
injunction is so useful that it should be kept flexible and discretionary. It must not be made a subject of strict rules.
MEGAW, LJ observed:
To my mind it is impossible and unworkable to lay down different standards in relation to different issues which fall to be
considered in an application for an interlocutory injunction. Each must be decided on a basis of fairness, justice and common sense
in relation to the whole issues of fact and law which are relevant to the particular case.
Hubbard v Vosper250 quoted in Granada Group Ltd v Ford Motor Co Ltd.251
Flexible and Discretionary Nature of Remedy
It has also been observed that in a motion for interlocutory injunction, the attitude of the Court should be to exercise broad
discretion having regard to the entirety of the facts of the case, and not to apply a series of tests, first determining whether
the applicant has established a stray prima facie case of owning the right in question, and then merely requiring him to
show an arguable case that the respondent is about to infringe it. A number of factors with their varying weights should all
be put into the scales together. The remedy of an interlocutory injunction is to be kept flexible and discretionary, rather
than being the subject of strict rules; the basis is one of fairness, justice and common sense in relation to all the relevant
law and facts. Pickwick Internal Inc (GB) Ltd v Multiple Sound Distributors Ltd.252
In American Cyanamid Co v Ethicon Ltd,253 Lord Diplock observed covering every facet of the principles behind
interlocutory applications as follows:
Object of Interlocutory Injunction
When an application for an interlocutory injunction to restrain a defendant from doing acts alleged to be in violation of the
plaintiff’s legal right is made upon contested facts the decision whether or not to grant an interlocutory injunction has to be taken at
a time when ex hypothesi the existence of the right or the violation of it, or both, is uncertain and will remain uncertain until final
judgment is given in the action. It was to mitigate the risk of injustice to the plaintiff during the period before that uncertainty could
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be resolved that the practice arose of granting him relief by way of interlocutory injunction; but since the middle of the nineteenth
century this has been made subject to his undertaking to pay damages to the defendant for any loss sustained by reason of the
injunction if it should be held at the trial that the plaintiff had not been entitled to restrain the defendant from doing what he was
threatening to do. The object of the interlocutory injunction is to protect the plaintiff against injury by violation of his right for
which he could not be adequately compensated in damages recoverable in the action if the uncertainty were resolved in his favour
at the trial, but the plaintiff’s need for such protection must be weighed against the corresponding need of the defendant to be
protected against injury resulting from his having been prevented from exercising his own legal rights for which he could not be
adequately compensated under the plaintiff’s undertaking in damages if the uncertainty were resolved in the defendant’s favour at
the trial.254 The court must weigh one need against another and determine where “the balance of convenience” lies.
Facts in Dispute and Evidence Available
In those cases where the legal rights of the parties depend upon facts that are in dispute between them, the evidence available to the
court at the hearing of the application for an interlocutory injunction is incomplete. It is given on affidavit and has not been tested
by oral cross-examination. The purpose sought to be achieved by giving to the court discretion to grant such injunctions would be
stultified if the discretion were clogged by technical rule forbidding its exercise if upon that incomplete untested evidence the court
evaluated the chances of the plaintiff’s success in the action at 50% or less, but permitting its exercise if the court evaluated his
chances at more than 50 percent.
Prima facie Case
The notion that it is incumbent upon the court to undertake what is in effect a preliminary trial of the action upon evidential
material different from that upon which the actual trial will be conducted, is, I think, of comparatively recent origin, though it can
be supported by references in earlier cases to the need to show “a probability that the plaintiff is entitled to relief” [Peston v
Luck,255 or “a strong prima facie case that the right which he seeks to protect in fact exists” [Smith v Griff Ltd.256 These are to be
contrasted with expressions in other cases indicating a much less onerous criterion, such as the need to show that there is “certainly
a case to be tried”257 which corresponds more closely with what judges generally treated as sufficient to justify their considering
the balance of convenience upon applications for interlocutory injunctions at any rate up to the time when I became a member of
your Lordships’ House.
Existence of Serious Question to be Tried
The use of such expressions as “a probability”, “a prima facie case”, or “a strong prima facie case” in the context of the
exercise of a discretionary power to grant an interlocutory injunction leads to confusion as to the object sought to be
achieved by this form of temporary relief. The court no doubt must be satisfied that the claim is not frivolous or vexatious;
in other words, that there is a serious question to be tried.
Conflicting Evidence
It is no part of the court’s function at this stage of the litigation to try to resolve conflicts of evidence on affidavit as to
facts on which the claims of either party may ultimately depend nor to decide difficult questions of law which call for
argument and mature considerations. These are matters to be dealt with at trial. One of the reasons for the introduction of
the practice of requiring an undertaking as to damages upon the grant of an interlocutory injunction was that “it aided the
court in doing that which was its great object, viz., abstaining from expressing any opinion, upon the merits of the case
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[s 33] Power to issue interim orders
until the hearing” Wakefield v Duke of Buccleugh.258 So unless the material available to the Court at the hearing of the
application for an interlocutory injunction fails to disclose that the plaintiff has any real prospect of succeeding in his claim
for a permanent injunction at the trial the court should go on to consider whether the balance of convenience lies in favour
of granting or refusing the interlocutory relief that is sought.
Balance of Convenience and Damages as Adequate Remedy
As to that the governing principle is that the court should first consider whether, if the plaintiff were to succeed at the trial
in establishing his right to a permanent injunction he would be adequately compensated by an award of damages for the
loss he would have sustained as a result of the defendant’s continuing to do what was sought to be enjoined between the
time of the application and the time of the trial. If damages in the measure recoverable at common law would be adequate
remedy and the defendant would be in a financial position to pay them, interlocutory injunction should normally be
granted, however strong the plaintiff’s claim appeared to be at that stage. If on the other hand, damages would not provide
an adequate remedy for the plaintiff in the event of his succeeding at the trial, the court should then consider whether, on
the contrary hypothesis that the defendant were to succeed at the trial in establishing his right to do that which was sought
to be enjoined, he would be adequately compensated under the plaintiff’s undertaking as to damages for the loss he would
have sustained by being prevented from doing so between the time of the application and the time of the trial. If damages
in the measure recoverable under such a undertaking would be an adequate remedy and the plaintiff would be in a financial
position to pay them, there would be no reason upon this ground to refuse an interlocutory injunction.
Adequacy of damages
It is where there is doubt as to the adequacy of the respective remedies in damages available to either party or to both that
the question of balance of convenience arises. It would be unwise to attempt even to list all the various matters which may
need to be taken into consideration in deciding where the balance lies, let alone to suggest the relative weight to be
attached to them. These will vary from case of case.
Extent of uncompensable damages
Save in the simplest cases, the decision to grant or to refuse an interlocutory injunction will cause to whichever party is
unsuccessful on the application some disadvantages which his ultimate success at the trial may show he ought to have been
spared and the disadvantages may be such that the recovery of damages to which he would then be entitled either in the
action or under the plaintiff’s undertaking would not be sufficient to compensate him fully for all of them. The extent to
which the disadvantages to each party would be inapplicable of being compensated in damages in the event of his
succeeding at the trial is always a significant factor in assessing where the balance of convenience lies; and if the extent of
the uncompensatable disadvantage to each party would not differ widely, it may not be improper to take into account in
tipping the balance the relative strength of each party’s case as revealed by the affidavit evidence adduced on the hearing
of the application. This however, should be done only where it is apparent upon the facts disclosed by evidence as to which
there is no credible dispute that the strength of one party’s case is disproportionate to that of the other party. The court is
not justified in embarking upon anything resembling a trial of the action upon conflicting affidavits in order to evaluate the
strength of either party’s case.
Special Factors
I would reiterate that, in addition to those to which I have referred, there may be many other special factors to be taken into
consideration in the particular circumstances of individual cases.
DELAY IN BRINGING ACTION
Unexplained delay in bringing the action may be a ground for refusal of interim injunction. Yost Typewriter Co Ltd v
Typewriter Exchange Co.259 How much delay will be condoned will depend upon the circumstances of case. Where the
delay was unavoidable or necessary, the Court may grant the injunction. Army and Navy Co-op Society Ltd v Army Navy
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and Civil Service Society of South Africa Ltd.260 Where the defendant’s act is a gross fraud, delay may not stand as a bar
to granting interlocutory relief—Gillete Safety Razor Co v Diamond Edge Ltd.261 The question of delay will have to be
balanced against the likelihood of the plaintiff’s ultimate success in the action. Thus, where the plaintiff established a
strong prima facie case, interlocutory relief may be granted even if he has delayed in applying for relief and his
explanation for the delay is unsatisfactory. Cavendish House (Cheltenham) Ltd v Cavendish Woodhouse Ltd.262
In Malhotra Industries v Ropi Industries,263 the defendants, Malhotra Industries, in December 1967 got their mark
“Kismat” registered for dress hooks as proposed to be used. The plaintiffs, Ropi Industries, got their mark “Kismat”
registered for the same goods in December 1969 claiming use since 1963. Their application was unsuccessfully opposed
by Malhotras. In 1971, Ropi started rectification proceedings to expunge Malhotra’s mark. Registration of Ropi’s was
ordered in 1973 but certificate was received only in May 1974. The order for removal of Malhotra’s mark was made in
April 1973 and notification thereof published in the TMJ on 16 June 1974. Ropi filed a suit for infringement and passing
off against Malhotra in September 1974. It was held that there has been no delay and the delay if any has been explained.
Injunction was refused on the ground that the plaintiff had delayed moving for nine or 10 months after he had obtained
sufficient evidence of actual confusion.264 Delay of four months for the purpose of obtaining evidence of actual deception
was excused.265
In Kenitex Chemicals Inc v Kenitex Texturised Coating Ltd,266 a delay of three months was considered fatal. In
Bravingtons Ltd v Barrington Tennants,267 an unexplained three months’ delay was considered fatal. In Burgess v
Burgess,268 a six months’ delay in prosecuting an appeal was considered fatal.
In Society Francies D’Applications Commercials v Electronic Concepts Ltd,269 a delay of 11 months for a number of
reasons including a postal strike in France was not considered fatal as the defendants had not suffered any prejudice as
regards the possibility of having a fair trial of the issues in the action merely as a result of the delay in fixing a day for the
hearing of the contested motion or restoring that motion for some other order.
UNDERTAKING BY PARTIES
Where interlocutory injunction is granted, the plaintiff must give an undertaking to pay damages for loss, if any, suffered
by the defendant, as might be ordered by the Court if it turns out at the trial that the injunction ought not to have been
granted. If the defendant gives an undertaking to the Court in lieu of interim injunction, the plaintiff is asked to give a
cross-undertaking as to damages. The court may refuse to sanction an undertaking in terms of the agreement reached by
the parties if the terms are too vague to be enforced. Wilson and Whitworth Ltd v Express & Independent Newspapers
Ltd.270
The offer of undertaking should be recited in the order on the motion. Stilliz v Jones and Higgins.271 When the defendant
offers an undertaking in the defence or submits to the injunction, the plaintiff is entitled to an order of the Court
embodying the offer. Clark Ltd v Clark’s Show Service.272
Where an action is settled, if the parties do not observe the terms of settlement, the Court can grant an injunction and order
an enquiry as to damages on motion in the original suit by the party aggrieved. Hyatt Roller Bearing Co v Pollard.273
PUBLIC INTEREST TO BE CONSIDERED
The Court has to consider whether or not the public are being confused because the Court, apart from deciding the conflict
that is between the parties, has always got to have the interests of the public in mind and it is highly undesirable that in the
field of business, as much as in the field of trade marks for goods, the public should be put in a position where they are
likely to be deceived or confused. This question is, however, decided at the final hearing of the action GCT (Management)
Ltd v The Laurie Marsh Group Ltd;274 LRC International Ltd v Lilla Edets Sales Co Ltd.275
NOTICE TO THE OTHER PARTY AND EX PARTE INJUNCTION ORDERS
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Rule 3 of O XXXIX envisages serving of notice to the other party before granting an order of temporary injunction, except
where it appears that the object of granting the injunction would be defeated by the delay. Proviso to rule 3 lays down the
requirements for granting temporary injunction without giving notice to the opposite party. Accordingly, the applicant has
to deliver to the opposite party (or send by registered post) a copy of the injunction order together with a copy of the
affidavit filed in support of his application, a copy of the plaint and copies of other documents on which he relies. Also, the
applicant has to file an affidavit on the same day on which such injunction is granted or the day immediately following
that, stating that the copies have been so delivered. Where such ex parte injunction order is issued, reasons for court’s
opinion that delay would defeat object of injunction shall be given; otherwise the order would be illegal. Amiya Prasad v
Bejoy Krishna Chakraborty.276 Rule 3A provides that where an ex parte injunction order has been passed, the Court shall
endeavour to finally dispose of the application within 30 days and if it is unable to do so, it shall record its reasons for such
inability.
Ex Parte Injunction Order
The Commission is empowered to grant temporary injunction ex parte, without giving notice to the opposite party. In Re
Morgan Stanley Mutual Fund,277 the Supreme Court held that as a principle, ex parte injunction should be granted only
under exceptional circumstances and the factors which should weigh with the court in the grant of injunction are as under:
(i) Whether irreparable or serious mischief will ensure to the person who moves the court?
(ii) Whether the refusal of ex parte injunction would involve greater injustice than the grant of it would involve?
(iii) The court will also consider the time at which the plaintiff first had notice of the Competion Act, 2002
complained of so that the making of improver order against a party in his absence is prevented.
(iv) The court will consider whether the plaintiff had acquiesced for some time and in such circumstances it will not
grant ex parte injunction.
(v) The court would expect a party applying for ex parte injunction to show utmost good faith in making the
application.
(vi) Even if granted, the ex parte injunction would be for a limited period of time.
(vii) General principles like prima facie case, balance of convenience and irreparable loss would also be considered by
the court.
(viii)The court must record the reasons for granting ex parte injunctions. The court must be convinced of the gravity of
the situation and if the circumstances are not recorded, the order granting injunction would be struck down.
DISCHARGE/VARIATION/SETTING ASIDE/STAY OF THE ORDER OF INJUNCTION
Rule 4 of O XXXIX deals with discharge, varying or setting aside of an order of temporary injunction on the application
made by any party dissatisfied thereto. Where if in the application for temporary injunction or in any affidavit supporting
it, a party has knowingly made a false or misleading statement in relation to a material particular and injunction was
granted ex parte, the Court shall vacate the injunction unless, for reasons to be recorded, it considers that it is not necessary
to do so in the interest of justice. Where the order of injunction has been passed after giving to a party an opportunity of
being heard, the order shall not be discharged, varied or set aside on the application of that party except where such
discharge, variation or setting aside has been necessitated by circumstances, or unless the Court is satisfied that the order
has caused undue hardship to that party.
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In LD Meston School Society v Kashi Nath Misra,278 it was held that when an ex parte injunction is issued against a party,
and that party applies for discharge, variation or setting aside of the order, it is the duty of the Court to decide objections
raised by the opposite party to the passing of the order of injunction. In Chandrama Singh v Yasodanandan Singh,279 it
was held that the Court has to decide the objections raised without delay and should not postpone it till the plaintiff’s
application for amendment of plaint is disposed of, as the Court has to test the validity of the order of ex parte injunction in
the light of the plaint as it stood on the date of passing the order.
Where the defendant did not file any reply and urge any substantial grounds, opposing the plaintiff’s prayer for grant of
temporary injunction, the defendant cannot apply for discharge of the order, except on the presentation of new matter not
available when the original order was passed. In Sitaram Madan Ahir v Rajkunwarbai,280 the defendants asked for time to
reply to the notice in response to an application for grant of interim injunction by the plaintiff. Time having been given, the
defendants came with a prayer once again asking for time which was refused by the Court and an interim injunction order
was passed. Subsequently, when the defendant came with a prayer for discharging the order of temporary injunction
refusing the prayer, the Madhya Pradesh High Court held:
The defendants did not file any reply and urge any substantial grounds, opposing the plaintiff’s prayer for an order of injunction.
That order of injunction having been made after giving to the defendants an opportunity of being heard could not be discharged or
interfered with except on the presentation of new matter not available when the original order was passed.
When the defendants by their own laches omitted to file their reply to the plaintiff’s application for a temporary order of injunction
at the original hearing, they could not later on move the Court under rule 4 and have the case re-opened and re-heard under that
rule on the grounds and material which were available to them at the original hearing. Order XXXIX, rule 4, C.P.C. can be invoked
only when an urgent order ex parte has been passed under rule 3 or when an injunction order already in force, has, owing to fresh
circumstances become inappropriate.
It does not empower the Court to interfere with an injunction already made when each side had an opportunity of being heard and
on grounds other than those available at the original hearing are urged by the party seeking the discharge or variation of the order.
As pointed out by the Madras High Court in Govinda Ramanuja v Vijiaramaraju:281
Rule 4 is not intended to set at naught the ordinary cursus curiae that, once a Court has decided a matter after giving each side an
opportunity of being heard, its order is final and binding on itself as much as on the parties, and cannot be reopened except on the
presentation of some new matter not available when the original order was passed.
A stay of operation of an order of injunction may be granted at the discretion of the Court subject to terms—Worcester
Royal Porcelain Co Ltd v Loches Co.282 Interim injunction may be suspended if the defendants give an undertaking not to
sell any goods bearing the offending mark during the period required by them to carry out changes in their composite
name. John Letters & Co v J Letters (Craighton) Ltd.283
Thus, prayer for varying, setting aside, stay or discharge of an order of temporary injunction is not to be entertained in a
routine manner, but subject to justifiable circumstances being present.
CAVEAT—WHETHER COULD BE FILED BEFORE THE COMMISSION
The Competition Commission’s power to issue injunction is not fettered by sub-section (3) of section 148A of the Code of
Civil Procedure, 1908 (which deals with the right to lodge a caveat). Section 33(3) is the governing provision to issue ex
parte injunctions and the provisions of Code of Civil Procedure, 1908 were made applicable only to some extent by
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section 36(2) of the Competition Act, 2002, and section 148A above cited was not included in the above provisions.284
Thus, caveat cannot be filed before the Commission.
CONSEQUENCES OF BREACH OF AN INJUNCTION ORDER
Rule 2A of O XXXIX of Code of Civil Procedure, 1908 provides that in the case of disobedience of an injunction order,
the property of the person guilty of such disobedience may be attached, besides such person being ordered to be detained
in a civil prison for a term not exceeding three months. The order of attachment of any property shall not remain in vogue
for a period exceeding one year at the end of which, if the disobedience still continues, the property may be sold and out of
the proceeds of such sale, the Court may award such compensation as it thinks fit to the injured party and shall pay the
balance if any to the party entitled thereto.
In State of Bihar v Rani Sonabati Kumari,285 it was held that it is discretionary for the Court either to attach the property
or to direct the person concerned to be detained in civil prison. This was affirmed by the Supreme Court in State of Bihar v
Rani Sonabati.286 Also, in Nawal Kishore v Rajendra Prasad Singh,287 it was held that it is difficult to contend that in
case of disobedience it is always mandatory for the Court to order for detention of the guilty person in civil prison. An
order of injunction being an order by a Court, if violated, would give rise to a cause of action under the Contempt of Courts
Act, 1971. In Smt Indu Tewari v Ram Bahadur Chaudhari,288 the question of whether a person can invoke the Contempt of
Courts Act, 1971 for such violation came up for decision before the Allahabad High Court. JML SINHA, J held that when a
person has an effective alternative remedy under O XXXIX it would not be a proper discretion on the part of the High
Court to exercise its jurisdiction under the Contempt of Courts Act, 1971. In Sahib Zada Abdul Bais Khan v Budh Singh
Bapna,289 it was held that the provision for punishment of a contumacious party is to vindicate the supremacy of the Rule
of Law and not to benefit the parties. An undertaking given by a party to the proceedings to maintain status quo part of the
order passed by the court vacating the ad interim injunction order and its violation would render the defendant liable for
punishment.290 At times the injunction order is so worded as to be so ambiguous that a party gives his own interpretation
to the interim injunction order in good faith and without any mala fide intentions. Such a conduct may raise an issue as to
the disobedience of the order of interim injunction. The decision of the Supreme Court in The State of Bihar v Rani
Sonabati Kumari,291 lays down the law on this point. RAJAGOPALA IYENGAR, J speaking for the Court held that a party
proceeded against under O XXXIX of Code of Civil Procedure, 1908 for disobedience of an order of injunction cannot be
held to have wilfully disobeyed the order, provided two conditions are satisfied, namely:
(i) that the order was ambiguous and was reasonably capable of more than one interpretation;
(ii) that the party being proceeded against in fact did not intend to disobey the order but conducted himself in
accordance with his interpretation of the order.
The question of whether a party has understood an order in a particular manner and has conducted himself in accordance
with such a construction is primarily one of fact, and where the materials before the Court do not support such a state of
affairs, the Court cannot attribute an innocent intention based on presumptions for the only reason that ingenuity of the
counsel can discover equivocation in the order which is the subject of enforcement. In Mst Manmati Kuer v Ramgopal
Singh,292 where evidence showed that the defendant obtained adjournment after adjournment in interim injunction
proceedings to execute a sale deed of a property in respect of which the injunction matter arose, it was held that breach of
an ad interim injunction order asking the defendant to show cause why the same should not be made absolute, was clear
proof of disobedience of the order of the Court and the Court ordered the property to be attached. One of the consequences
of disobedience of temporary injunction may be injury or damage to the plaintiff. No doubt section 94(c) of the Code of
Civil Procedure, 1908 and O XXXIX provide for other reliefs, namely, committing the party to civil prison or attachment
of property. But the question that arises is whether the plaintiff can recover damages resulting from such disobedience of
the order of interim injunction. In Chiranjilal v Behari,293 it was held that where in a suit, the plaintiff had obtained an
interim injunction directing the defendant to refrain from interfering with the plaintiff’s possession qua certain plots, the
plaintiff can sue to recover the damages that he had sustained as a result of the defendant stopping him from cultivating the
plots, despite the prohibitory interim injunction issued and that he was not confined to the remedy afforded by O XXXIX.
It was further held that O XXXIX provides a mode for dealing with the disobedience of an interim order and award of
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compensation for injury or damage is not barred thereby, despite the contingency therein provided not having arrived.
GURTU, J observed at para 21:
No doubt if the court does award some damages and a plaintiff sues subsequently the compensation already awarded would be
taken into consideration in fixing further damages if any to be granted by the decree in the suit.
Often the case of violation of an injunction order raises the question of standard of proof. In Sudhir Namasudra v
Purrender Kumar Das,294 LAHIRI, J observed:
Violation of an injunction is punishable under the Code itself. The nature of the proceedings and quality of evidence which are
required to be proved and established may not be of the standard of criminal proceedings. Undoubtedly the proceedings are
punitive in nature. It is an established law that allegations like fraud, undue influence, establishment of violation of order of
injunction, being punitive proceedings require stricter proof than civil actions.
Where the continued telecast of the impugned advertisement for over 10 days after the issue of the injunction by the
Commission was due to the fact that none on behalf of the respondents was present before the Commission when it
pronounced its order, and soon after service of order on the respondents they took prompt action to stop the advertisement,
no case for contempt of court could be made out on the basis of complaint.295
In Star India Pvt Ltd v SITI Cable Network Ltd,296 the MRTPC granted injunction. In appeal, Supreme Court held that the
Commission had not addressed itself to the various issues which arose for its consideration even at an interim stage before
making the order under challenge. There was some justification in the contention of the appellants that, as a matter of fact,
the Commission by the order without assigning any reason had changed the existing distribution system. The Commission
was yet to decide the question of whether the policy of the Government of India to introduce the conditional access system
had really come into force in this country and if so whether the said conditional access system required the distribution
only through the new technology or not. Therefore, many of the issues required a considered finding, albeit prima facie, to
be given by the Commission before making the order. Moreover, the order of the Commission being appealable the
appellate court has every right to know the reasons and basis of the order. The order to this extent fell outside the scope of
section 12A; firstly, because the Commission had not assigned any reason for exercise of its power under section 12A of
the Competion Act, 2002, secondly, because there was no indication in the order that it was being made on the basis of
proved facts, and thirdly, if so, what was the basis for such conclusion. Therefore, it had to be quashed. The distribution of
the appellants’ programmes through terrestrial system pursuant to the agreement with the various multiple system
operators/cable operators was to be continued as an interim measure in public interest and none of the respondents,
multiple system operators and cable operators would have any right to use the facilities of the new technology (HITS) for
distribution of such signals until further orders from the Commission. Even the right to receive signals from the appellants
during this interregnum was to be subject to the terms and conditions of the agreement that the respondents and their
associates had with the appellants.
A statement made at the Bar at the time of the preliminary hearing of the injunction application would ordinarily operate
only till the injunction application is heard and finally disposed of on its own merits. If the intention is otherwise the
opposite party, against whom the interim relief of injunction operates, would not control the interim relief application.297
TEMPORARY INJUNCTION IN THE CONSUMER LAWS ABROAD
The Federal Trade Commission Act, 1914 in the United States was enacted to bolster the provisions of the anti-trust laws
with a view to affording more protection to consumers. Section 13 of the Act empowers that Federal Trade Commission to
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bring a suit in a District Court of the United States for issue of a temporary restraining order or preliminary injunction. In
proper cases, even permanent injunction can be granted.
The Trade Practices Act, 1974 of Australia, provided for issue of temporary injunction order, pending determination of an
application for a final injunction where the court is of the opinion that it is desirable to do so [section 80(2) of the Trade
Practices Act, 1974]. Later, in 2010, the Competition and Consumer Act, 2010 (CCA) was enacted. The object as per the
Act is to enhance the welfare of Australians through the promotion of competition and fair trading and provision for
consumer protection. Under section 80 of the new Act, the Federal Court may grant an injunction where a person has
engaged (or proposes to engage) in conduct that constitutes or would constitute a contravention of the CCA. An
application for an injunction may be made by any person, except for merger matters where only the ACCC may apply for
an injunction. An injunction can be sought on an interlocutory or interim basis, as well as on a final basis. Before the Court
will grant an interlocutory injunction, it must be satisfied that there is a serious question to be tried and that the balance of
convenience favours granting the injunction. Where an interlocutory injunction is granted, the party seeking the injunction
will be required to give the “usual undertaking as to damages”. This is an undertaking by the applicant that it will pay such
compensation as the Court may consider just to any person (whether a party or not) adversely affected by the operation of
the interlocutory injunction. There are no limitation periods under section 80; however, delay is a factor that the Court will
take into account in exercising its discretion to grant an injunction.
Relevant sections have been reproduced below:
[s 44ZZG] Interim injunctions
(1) The Federal Court may grant an interim injunction pending determination of an application under section
44ZZD or 44ZZE.
(2) If the Commission makes an application under section 44ZZE to the Federal Court for an injunction, the Court
must not require the Commission or any other person, as a condition of granting an interim injunction, to give
any undertakings as to damages.
[s 80] Injunctions
(1) Subject to sub-sections (1A), (1AAA) and (1B), where, on the application of the Commission or any other person,
the Court is satisfied that a person has engaged, or is proposing to engage, in conduct that constitutes or would
constitute:
(a) a contravention of any of the following provisions:
(i) a provision of Part IV;
(ii) a provision of Division 2 or 5 of Part IVB; (iia) section 55B;
(iii) section 60C;
(iv) section 60K; or
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(b) attempting to contravene such a provision; or
(c) aiding, abetting, counselling or procuring a person to contravene such a provision; or
(d) inducing, or attempting to induce, whether by threats, promises or otherwise, a person to contravene such a
provision; or
(e) being in any way, directly or indirectly, knowingly concerned in, or party to, the contravention by a person
of such a provision; or
(f) conspiring with others to contravene such a provision; the Court may grant an injunction in such terms as
the Court determines to be appropriate.
Note: Section 87AA provides that, if boycott conduct is involved in
proceedings, the Court must have regard to certain matters in exercising its powers under this Part.
(Boycott conduct is defined in sub-section 87AA(2).)
(1AA) Where an application for an injunction under sub-section (1) has been made, whether before or after the
commencement of this sub-section, the Court may, if the Court determines it to be appropriate, grant an
injunction by consent of all the parties to the proceedings, whether or not the Court is satisfied that a person has
engaged, or is proposing to engage, in conduct of a kind mentioned in sub-section (1).
(1A) A person other than the Commission is not entitled to make an application under sub-section (1) for an injunction
by reason that a person has contravened or attempted to contravene or is proposing to contravene, or has been
or is proposing to be involved in a contravention of, section 50, 60C or 60K.
(1AAA) Subject to sub-section (1B), a person other than the Minister or the Commission may not apply for an
injunction on the ground of:
(a) a person’s actual, attempted or proposed contravention of section 50A; or
(b) a person’s actual or proposed involvement in a contravention of section 50A.
(1B) Where the Tribunal has, on the application of a person (in this sub-section referred to as the applicant) other
than the Minister or the Commission, made a declaration under sub-section 50A(1) in relation to the acquisition
by a person of a controlling interest in a corporation, the applicant is entitled to make an application under sub-
section (1) for an injunction by reason that the corporation has contravened or attempted to contravene or is
proposing to contravene sub-section 50A(6) in relation to that declaration.
(2) Where in the opinion of the Court it is desirable to do so, the Court may grant an interim injunction pending
determination of an application under sub-section (1).
(3) The Court may rescind or vary an injunction granted under sub-section (1) or (2).
(4) The power of the Court to grant an injunction restraining a person from engaging in conduct may be exercised:
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(a) whether or not it appears to the Court that the person intends to engage again, or to continue to engage, in
conduct of that kind;
(b) whether or not the person has previously engaged in conduct of that kind; and
(c) whether or not there is an imminent danger of substantial damage to any person if the first-mentioned
person engages in conduct of that kind.
(5) The power of the Court to grant an injunction requiring a person to do an act or thing may be exercised:
(a) whether or not it appears to the Court that the person intends to refuse or fail again, or to continue to refuse
or fail, to do that act or thing;
(b) whether or not the person has previously refused or failed to do that act or thing; and
(c) whether or not there is an imminent danger of substantial damage to any person if the first-mentioned
person refuses or fails to do that act or thing.
(6) Where the Minister or the Commission makes an application to the Court for the grant of an injunction under this
section, the Court shall not require the applicant or any other person, as a condition of granting an interim
injunction, to give any undertakings as to damages.
(6A) Sub-section (6) does not apply to an application by the Minister for an injunction relating to Part IV.
(7) Where:
(a) in a case to which sub-section (6) does not apply the Court would, but for this sub-section, require a person
to give an undertaking as to damages or costs; and
(b) the Minister gives the undertaking; the Court shall accept the undertaking by the Minister and shall not
require a further undertaking from any other person.
(8) Sub-section (7) does not apply in relation to an application for an injunction relating to Part IV.
(9) If the Director of Public Prosecutions makes an application to the Court for the grant of an injunction under this
section in relation to:
(a) a person’s contravention, or proposed contravention, of section 44ZZRF or 44ZZRG; or
(b) a person’s involvement, or proposed involvement, in a contravention of section 44ZZRF or 44ZZRG; the
Court must not require the Director of Public Prosecutions or any other person, as a condition of granting
an interim injunction, to give any undertakings as to damages.
[s 80 AB] Stay of injunctions
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(1) The Court may stay the operation of an injunction granted under section 80 if:
(a) the injunction is in respect of conduct that constitutes or would constitute a contravention of sub-section
45D(1), 45DA(1), 45DB(1), 45E(2) or 45E(3) or section 45EA or an associated contravention; and
(b) there is a proceeding in respect of a dispute relating to the conduct pending before a court, tribunal or
authority of a State or Territory under a prescribed provision of a law of the State or Territory; and
(c) the conduct relates to the supply of goods or services to, or the acquisition of goods or services from, a
person who is or becomes a party to the proceeding referred to in paragraph (b); and
(d) any of the following has applied for the stay:
(i) a Minister of the Commonwealth;
(ii) if sub-paragraph (b)(ii) applies—a Minister of the State or Territory concerned;
(iii) a party to the proceeding for the injunction; and
(e) the Court considers that granting the stay:
(i) would be likely to facilitate the settlement of the dispute by conciliation; and
(ii) would, in all the circumstances, be just.
(2) An order staying the operation of the injunction may be expressed to have effect for a specified period and may
be varied or rescinded by the Court at any time.
(3) If the proceeding referred to in paragraph (1)(b) is terminated because the State or Territory court, tribunal or
authority has settled the dispute to which the conduct relates by conciliation, the Court must not make any order
in relation to the costs of the proceedings in respect of the granting of the injunction or in relation to the costs of
any proceedings for the rescission of the injunction.
(4) Nothing in this section affects other powers of the Court.
(5) In this section:
associated contravention means:
(a) attempting to contravene sub-section 45D(1), 45DA(1), 45DB(1), 45E(2) or 45E(3) or section 45EA; or
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(b) aiding, abetting, counselling or procuring a person to contravene any of those provisions; or
(c) inducing, or attempting to induce, a person (whether by threats, promises or otherwise) to contravene any of
those provisions; or
(d) being in any way, directly or indirectly, knowingly concerned in, or party to, the contravention by a person
of any of those provisions; or
(e) conspiring with others to contravene any of those provisions.
injunction includes an interim injunction.
In European Union, Article 8(1) of the 2003 Regulation298 provides that in cases of urgency due to the risk of irreparable
damage to competition, the Commission, acting on its own initiative, may on the basis of prima facie finding of
infringement, order interim measures. In practice, however the European Commission has preferred third parties to seek
interim relief in their domestic Courts.
Article 8: Interim measures
1. In cases of urgency due to the risk of serious and irreparable damage to competition, the Commission, acting on
its own initiative may by decision, on the basis of a prima facie finding of infringement, order interim measures.
2. A decision under paragraph 1 shall apply for a specified period of time and may be renewed in so far this is
necessary and appropriate.
The Federal Trade Commission Act, 1914 provides that only the Federal Trade Commission can bring an action before the
District Court for grant of a temporary or preliminary injunction order, though it might have been seized of the matter
pending complete inquiry by it. The Court is to weigh the equities and the Commission’s likelihood of ultimate success
looking to the public interest before granting the prayer. In comparison, in the Australian law (which is said to adopt the
American law), the provisions read a little different. Section 80(2) of the Trade Practices Act, 1974 empowers “any
person” to apply for an interim injunction. The words “any person” have been held to have a very wide meaning and the
string of cases reported in Australia point to the preponderant tendency of the trade rivals taking initiative in instituting
suits for injunctions/damages. The respondent’s contentions that such suits resembled passing-off actions have been
consistently negatived by the Federal Court of Australia on the ground that by the suits of the trade rival, misleading or
deceptive conduct is sought to be prescribed in the interest of consumers, though incidentally the trader’s private interests
were also protected.
The unique feature of the Indian law in comparison to others is the conferment of the powers on the MRTPC itself, rather
than on courts. No doubt, the experience of the Commission in handling cases relating to competition matters would
certainly guide the Commission in arriving at a conclusion as to whether in a particular case temporary injunction shall be
granted or not. Appeal is provided in the Act, from an order of temporary injunction passed by the Commission.299
However, the respondent may also obtain a stay of the order by a writ petition before High Court.
Judicial Principles Evolved by the Australian Courts
The Trade Practices Act, 1974 of Australia, contained provisions more or less analogous to that in the MRTP Act, 1969.
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Over the past 10 years or so there have been a number of cases decided by the Federal Court of Australia on temporary
injunctions, permanent injunctions, damages, etc. It would be instructive to know the judicial principle evolved by the
Australian Courts. These are discussed below.
Prima facie Case and Balance of Convenience
Whether prima facie case has been made out in a case or not is a question to be decided in the context of facts of a
particular case. “Fair chance of success” is also sometimes referred to as analogous to the prima facie case principle
though the former is not very much the same as making out a prima facie case.
(a) In Beecham Group Ltd v Bristol Laboratories Pty. Ltd,300 the Full Court of the High Court granted an interlocutory injunction
pursuant to its statutory jurisdiction under section 31 of the Judiciary Act, 1903, to make such orders in the case before it as were
just. The High Court was seized of the matter under the Patents Act, 1952 and was not exercising any inherent equitable
jurisdiction. Nevertheless, it invoked principles developed in equity to determine how it should exercise its statutory jurisdiction,
though in some ways departing from those principles, where the special nature of the patent jurisdiction made it appropriate to do
so. The High Court expressed the view that in all cases, including patent cases, a court, when contemplating granting or refusing
interlocutory relief, must direct itself to both the prima facie strength of the plaintiff’s claim and the balance of convenience. A
plaintiff is required to make out a prima facie case, “in the sense that if the evidence remains as it is, there is a probability that at
the trial of the action, the plaintiff will be held entitled to relief” (ibid at 622 and 470). The strength of the case which the plaintiff
must make out will depend upon the nature of the right which he is seeking to assert, and the consequences which will flow from
the making of the interlocutory order. However, where the facts are seriously in dispute, the court will not undertake a preliminary
trial of the action in order to forecast a probable result, and rather, if the plaintiff has a fair chance of success (and what will be
required will vary according to the nature of the case), the court will proceed to look to the balance of convenience.
It has been said by the House of Lords in American Cyanamid v Ethicon Ltd,301 that if the court is satisfied that there is a serious
question to be tried, it should not further test the strength of the plaintiff’s case before deciding the balance of convenience. It may
be that in a case such as the present there is no essential difference between the views of the High Court and of the House of Lords
as to the strength of the case which the applicant must make out. Whether, it is necessary to establish a prima facie case in the
Beecham sense, or serious question to be tried in the American Cyanamid sense, what will be required will vary from case to case.
If there is a divergence in approach, it would be proper for this Court to follow the judgment of the High Court in Beecham Group
Ltd v Bristol Laboratories Pty. Ltd [see Ashburton Oil NL v Alpha Minerals NL;302 Firth Industries Ltd v Polyglas Engg. Pty.
Ltd;303 Fortuna Holdings Pty. Ltd v Deputy Federal Commissioner of Taxation;304 Winthrop Investments Ltd v Winns Ltd;305
Cf. Hoffmann-La Roche & Co. AG v Secretary of State for Trade and Industry306 per LORD DIPLOCK at 360-1].—World Series
Cricket Pty Ltd v Parish.307
(b) In my opinion, the Court will approach the question whether an application for an interim injunction should succeed by seeing,
in the first instance, whether, the applicant has made out a prima facie case in the sense explained in the case of Beecham Group
Ltd v Bristol Laboratories Pty. Ltd308 It will be noted that in that case the High Court was considering the question of interim
relief in the exercise of a statutory jurisdiction. As I understand the matter, in order to show a prima facie case in this sense, it is
not necessary to show that it is more probable than not that the applicant will succeed at the hearing. It is sufficient if the applicant
establishes that it has a fair chance of success. What will be required will vary according to the nature of the case.
If a prima facie case is shown, the Court will then move to consider the balance of convenience. In some cases, the considerations
which then apply for determining the balance of convenience, will be very similar to those which apply in a court of equity. In
other cases where the public interest is involved, it may be necessary to weigh the public interest against a countervailing public
interest or a private interest.—Commercial Bank of Australia Ltd v Insurance Brokers Association of Australia.309
(c) The principles to be applied in determining whether to grant an interlocutory injunction are clear and I need to refer to
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two authorities only. In Mc Donald’s System of Australia Pty Ltd v McWilliam’s Wines Pty Ltd310 FRANIG, J, after reciting
a number of authorities, said:
The proper approach to interlocutory injunctions in general has also been dealt with by the Full Court of this court in Victorian
Egg. Marketing Board v Parkwood Enggs. Pty. Ltd,311 and by the New South Wales Court of Appeal in Shercliff v Engadine
Acceptance Corporation Pty. Ltd312
I have to consider first of all whether a prima facie case in the relevant sense has been made out and then to consider the balance of
convenience.
So far as concerns the question of prima facie case it is clear that it must approach the question upon the basis adopted by the High
Court in Beecham Group Ltd v Bristol Laboratories Pty. Ltd”313 I consider it is, however, clear that the court’s function in
considering this application is not to conduct a preliminary trial or to forecast the result of the case, nor indeed is it necessary that
the applicant should establish that it is more likely than not that it would succeed if the evidence remains as it is in the application
for interim relief. It is sufficient that ‘if the evidence remains as it is, there is a probability that at the trial of the action, the plaintiff
will be held entitled to relief.
In Slater Walker Superannuation Pty Ltd v Great Boulder Gold Mines Ltd,314 LUSH, J, considered the principles to be
applied. He said:
The weight to be given to the various considerations shown by the authorities to be relevant will vary from case to case. All the
authorities say in one way or another that the plaintiff must show that he has a chance of success before he will be granted an
interlocutory injunction. The authorities refer to the use of the injunction for the purpose of maintaining the status quo, or
establishing or maintaining a state of affairs which is on the balance of convenience appropriate to be maintained until the trial.
They refer to avoiding irreparable harm to the plaintiff. There will be situations in which the plaintiff cannot expect to be granted
an injunction unless he can show that he can prove positively the existence of his rights and the infringement of them. There will
be other situations in which, though the plaintiff’s proof of his rights or the infringement of them is not strong, an injunction may
be granted because to withhold it would do the plaintiff irreparable harm, while to grant it would not greatly injure the defendant.
The possible variety of situations is unlimited.
That statement has been approved by a Full Court of the Supreme Court of Victoria, the Magna Alloy’s case of 30
November 1978, unreported. I apply those principles to this case. George Macgregor Auto Service Pty Ltd v Caltex (Oil
Aust) Pty. Ltd.315
Special Factors
That is not to say that there are not special factors to be taken into account when exercising jurisdiction under the Trade Practices
Act. Special considerations with respect to interlocutory injunctions apply in other fields including common law injunctions to
restrain defamation, injunction to restrain breach of a patent and injunctions to restrain breach of copyright. In the same way
special considerations will arise under the Trade Practices Act, and the Court will not necessarily apply all of the principles which
a court of equity would apply in a suit where only individual interests of private litigants were in issue.
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World Series Cricket Pty. Ltd v Parish.316
In the granting of an interim injunction in proceedings such as this, the convenience of the defendant is, of course relevant, and the
public interest is a powerful consideration. The principles to be applied in such cases will differ markedly from those evolved by
equity courts in cases concerned with competing private rights and obligations. Some equitable doctrines and practices are
grounded on principles of fairness and justice which are applicable generally. Some are so connected with competing private rights
that they are quite foreign to the application of section 80 of the Trade Practices Act in relation to section 52. The wholesale
carryover of such principles concerning the granting of permanent or interlocutory injunctions would frustrate the evolution of
principles more appropriate to the Trade Practices Act.
—MURPHY, J, in Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd.317
Rivals in trade can apply
The provisions of the Trade Practices Act, 1974 concerning consumer protection have been effectively brought to judicial
scrutiny by rivals in the trade. Though this smacked of passing off action, yet the consumer was ultimate beneficiary of
successful suits. The following observations are the most characteristic on this aspect:
Proceedings under the Trade Practices Act have a special character in that the Act deals with the protection of the public interest,
and in the instant case, with the protection of consumers. In the course of protecting that public interest, the Act also enables a
party to seek relief from injury to his own interests. An applicant for an injunction under section 80 need not show that a
proprietary interest of his is affected, or that he has suffered special damage, or indeed, that he personally has suffered any damage
at all. Even where the application is brought by a rival competitor seeking redress of damage to his business caused by the
allegedly unfair and illegal practices of the respondent, the application, though it vindicates or protects the private interests of the
competitor, at the same time secures the public interest of consumer protection. Though, for example, the complaint under Part V
of the Act in some cases closely resembles an action for passing off or trade libel, it is nevertheless an action to protect the
consuming public from being misled or misinformed. For competition between rival traders properly to be promoted, it is
necessary that the relevant market is kept adequately informed about the goods or services available for purchase, and is not misled
by deceptive trade practices.
—World Series Cricket Pty Ltd v Parish.318 Also Hornsby Building Information Centre v Sydney Building Information
Centre Ltd.319
There is, in my view, no incongruity in making the provisions of Part V of the Act, notwithstanding they have been enacted for the
protection of consumers, enforceable at the instance of a competitor who is not a consumer. The enforcement, at least by
injunction, by such a person of the Part V provisions, enhances the protection which they give to consumers. Indeed, it constitutes
the most effective sanction for that protection because the consumer who is misled or deceived in consequence of an unfair practice
is unlikely to be a suitor for an injunction against the contravening corporation; he is more likely to seek damages—R. v Judges of
the Federal Court of Australia; Ex parte Pilkington ACI (Operations) Pty. Ltd; R. v Judges of the Federal Court of Australia; Ex
parte Soul Pattison (Laboratories) Pty Ltd
320—Per MASON, J, at pp 78–79 approving observations of BOWEN, CJ in World Series Cricket Pty Ltd’s case.321
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Interlocutory Order
In my view it is often undesirable to frame interlocutory order in such a way as to raise the very issues that will fall to be decided at
that hearing. If the conduct is again called in question, it will usually not be possible to determine on a contempt application,
whether or not the interlocutory order has been infringed— Australian Consolidated Press Ltd v Morgan.322 By leaving that
question to final hearing, there will be a failure to meet the need for urgent relief, and the party enjoined will on the final hearing,
be put at risk not only of a final injunction but also of being in contempt. That is not a purpose which, an interlocutory order is
meant to serve
—World Series Cricket Pty Ltd v Parish.323
Where the interim injunction order is given without stating any reasons, it may be bad, notwithstanding citation of cases
relied upon in granting the injunction order.
It follows that I do not consider that there was here any material upon which the Industrial Court324 could properly have
concluded that anything in the nature of a contravention of section 52(1) had been made out. What it was which led it into error
and the precise nature of that error must remain a matter for speculation. Its failure to give reasons for the making of its order is to
be regretted, not least because in consequence the task of an appellate court is made the more difficult since it is thereby deprived
of whatever assistance, reasons for judgment might have afforded in revealing the reasoning below. One example will suffice: it
cannot be known whether the court approached the grant of interlocutory relief upon the basis adopted by this court in Beecham
Group Ltd v Bristol Laboratories Pty. Ltd325 or instead preferred that adopted by their Lordships in American Cyanamid Co v
Ethicon Ltd326 both authorities were cited to the court in argument.
— Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd.327
Even though there is no persisting conduct or conduct likely to be engaged which would constitute breach of
section 52 of the Trade Practices Act, 1974 temporary injunction can be granted if otherwise the applicant
would suffer irreparable harm as a result of the contemplated conduct—George Macgregor Auto Service Pty
Ltd v Caltex Oil (Aust) Pty Ltd.328
Interlocutory order may not be granted on the plea that the rival uses a deceptively similar name in order to
unjustly benefit by the goodwill of the applicant if the name chosen by the applicant merely consists of
descriptive words over which no one can have monopoly—Dairy Vale Motors Metro Co-op Ltd v Brownes
& Dairy Ltd.329
On the question of whether undertaking as to damages must be obtained from the applicant for interim
injunction, the observations in Trade Practices Commission v Vaponordic (Aust) Pty Ltd; Trade Practices
Commission v Chamberlain Consolidated Holding Pty Ltd330 are instructive.
The result of an order nisi being granted in general terms is that the respondent does not know with any
degree of accuracy just what it is that is alleged against him. Very late in the course of these proceedings an
attempt was made to raise some matters against the respondents which had not been raised earlier in the
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proceedings. If an order nisi is granted in terms which lay down with precision just what the case is that the
commissioner is really making, then the respondent can contest that case with a feeling that he knows just
what is being put against him. The fact that affidavits are filed does by no means show necessarily what the
case is that is being made against a respondent, so that in future it is probable that a judge, before he grants an
order nisi will insist that a proper claim with proper particulars is made before him and he will give his order
nisi in respect of that claim.
“In addition, interim injunctions in very general terms were granted in this case. It would appear likely that
those interim injunctions have done considerable harm to the business of the respondents. No undertaking as
to damages was obtained at the time the interim injunctions were granted and the commissioner, as were
informed during the course of these proceedings, takes the view that he has no power to give an undertaking
as to damages.
I suggested these interim injunctions could have caused a great deal of harm to the respondent’s business and
the respondent has not got any undertaking as to damages which can now protect him. It is likely in future that
the court before granting interim injunctions will probably insist on an undertaking as to damages or refuse
the interim injunctions.”—Per JOSKE J at p 252 (It is to be noted that the applicant for interim injunctions in
this case was the Trade Practices Commission itself and it is pertinent to note that the necessity of obtaining
undertaking as to damages even in such a case was underlined by judge. The law has since changed by
legislative amendments on the question of furnishing of undertaking as to damages in respect of official
agencies).
Laches
Laches are a traditional defence in ordinary civil suits. It is based on the equitable principle that he who slumbers over his
legal rights has no remedy at law. The Limitation Act, 1963 embodies the general principle regarding the periods within
which suits must normally be filed. It is interesting to know how far laches would be fatal under consumer law context.
It is not an easy matter to determine the relevance of a defence of laches to an application for an interim injunction under the Act.
If the application was for a final injunction, it would usually be the case that laches in the sense of mere delay (if mere delay can
constitute laches), or delay sufficient to constitute in equity an equitable release or abandonment of the claim, would rarely
disentitle an applicant to relief under section 80. Even where the laches consists of delay which has led the respondent to alter his
position to his detriment in reliance on the non-enforcement of the Act, the applicant will not automatically be precluded from the
injunction he seeks. Because of the public interest involved, the Court will be slower to withhold relief than would an equity court
in a suit involving only individual interests.
As was said by the Privy Council in Associated Minerals Consolidated Ltd v Wyong Shire Council:331
The injury to a public interest by denial of relief, its extent and degree of irremediability, must be weighed against any loss which
the defendant may have sustained by the plaintiff standing by while the defendant incurs expense or, if such is the case, misleading
the defendant into thinking that its activities were or would be permitted.
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Thus, the effect of laches will differ from case to case and will depend on factors which will include the identity of the
applicant and the nature of his claim, the nature of the delay and of the prejudice it caused to the respondent, and the nature
of the public interest in question.
Where the application is for an interim injunction, the court will no doubt be prepared to give a greater degree of weight to
a defence of laches, especially if the delay has caused the respondent to alter his position to his deteriment. This, however,
will always depend on the circumstances of the particular case and the degree of public interest involved. Of course, in
equity, as an applicant for an interlocutory injunction seeks urgent relief, the application must be brought promptly and
mere delay can bar the applicant’s claim.332
CASES OF INJUNCTIVE RELIEF UNDER COMPETITION ACT, 2002
Manner of exercise of powers under section 33 of the Competition Act, 2002
During an inquiry and where the Commission is satisfied that the act is in contravention of the provisions stated in section
33 of the Competition Act, 2002 it may issue an order temporarily restraining the party from carrying on such act, until the
conclusion of such inquiry or until further orders without giving notice to such party, where it deems it necessary. This
power has to be exercised by the Commission sparingly and under compelling and exceptional circumstances. The
Commission, while recording a reasoned order inter alia should:
(a) record its satisfaction (which has to be of much higher degree than formation of a prima facie view under section
26(1) of the Competition Act, 2002) in clear terms that an act in contravention of the stated provisions has been
committed and continues to be committed or is about to be committed;
(b) it is necessary to issue order of restraint and
(c) from the record before the Commission, it is apparent that there is every likelihood of the party to the lis,
suffering irreparable and irretrievable damage or there is definite apprehension that it would have adverse effect
on competition in the market.
The power under section 33 of the Act to pass temporary restraint order can only be exercised by the Commission when it
has formed prima facie opinion and directed investigation in terms of section 26(1) of the Act, as is evident from the
language of the provision read with regulation 18(2) of the Regulations. In consonance with the settled principles of
administrative jurisprudence, the Commission is expected to record at least some reason even while forming a prima facie
view. However, while passing directions and orders dealing with the rights of the parties in its adjudicatory and
determinative capacity, it is required of the Commission to pass speaking orders, upon due application of mind, responding
to all the contentions raised before it by the rival parties.333
In cases where the conduct of an enterprise, association of enterprises, person or association of persons or any other legal
entity, is such that it would cause serious prejudice to the public interest and also violates the provisions of the Act, the
Commission will be well within its jurisdiction to pass ex parte ad interim injunction orders immediately in terms of
section 33 of the Act, while granting post decisional hearing positively, within a very short span in terms of regulation
31(2). This would certainly be more than adequate compliance to the principles of natural justice.334
Instances of use of power by the Commission under section 33 of the Competition Act, 2002
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In Belaire Owner’s Association v DLF Ltd Haryana Urban Development Authority Department of Town and Country
Planning, State of Haryana,335 the Commission after considering the submissions made before it restrained DLF from
canceling allotment of “apartment allottees” of Belaire Residential Complex located in Phase-V in DLF City Gurgaon,
Haryana without leave of the Commission. DLF was further restrained from creating third-party rights by selling,
alienating or transferring in any manner whatsoever, the apartments and the common areas and facilities relatable to any
cancellation of allotments so far, without leave of the Commission.
In M/s Santuka Associates Pvt Ltd v All India Organisation of Chemists and Druggists, Organisation of Pharmaceutical
Producer of India, Indian Drug Manufacturers’ Association and USV Ltd,336 the Commission, after giving due
consideration to the matter, opined that there existed a prima facie case to direct the Director General to cause an
investigation. The Commission also decided that the prayer of the Informant for interim relief would be considered on 19
May 2011. In the meantime, the Informant filed a petition dated 10 May 2011 before the Hon’ble High Court of Delhi in
which the Hon’ble High Court vide order dated 12 May 2011 directed the Commission to hear the application of the
Informant for interim relief under section 33 of the Competition Act, 2002 on an urgent basis on 16 May 2011.
Accordingly, the Commission considered the prayer of the Informant for passing interim order in its meeting held on 16
May 2011. The Commission, having noted that all the necessary conditions for granting the interim relief are found to be
satisfied, allowed the prayer of the Informant for grant of interim relief and passed an order restraining USV from giving
effect to its letter dated 4 May 2011 regarding termination of its C&F Agency. The All India Organisation of Chemists and
Druggists was also restrained from issuing any direction or threat to USV for termination of its C&F Agency with the
Informant. The said interim order was to remain effective till 1 June 2011 when the parties were required to appear before
the Commission.
In Financial Software and Systems Pvt Ltd Informant v ACI Worldwide Solutions Pvt Ltd,337 the Commission vide its
order dated 11 February 2014, granted interim relief to the Informant under section 33 of the Act. Consequently, the
Opposite Parties were restrained from implementing the condition imposed on ACI Banks that they would not take service
of the Informant for customisation of electronic software being supplied by the Opposite Parties, till the final disposal of
the information.
In Mr Vijay Gupta v Paper Merchants Association, Ms Shashi Jain (Prop Parasnath Associates) and Mr Ramesh Jaina,338
the Commission vide its order dated 8 April 2010 under section 33 of the Act disposed of the application of the informant
for interim relief by restraining the opposite party No 1 - PMAD from issuing any notice to its members to prohibit any
business dealings with the informant till the next date of hearing.
Instances where no interim relief was given by the Commission
In M/s India Glycols Ltd v CCI,339 the Tribunal noted that under section 33 where the Commission is satisfied that there
has been a contravention of section 3(1) (or section 4(1) or section 6), the Commission may temporarily restrain any party
from carrying on “such act”. The language of the section, the Tribunal noted, is indicative of the fact, that firstly there has
to be a complete satisfaction of the Commission; that there was a breach of section 3, wherein the Commission would have
to be satisfied that such breach would result into an AAEC. Further, the Commission can temporarily restrain “the act”,
which causes contravention of section 3. Therefore, as per the Tribunal, the Commission undoubtedly could have stopped
the further process of the first tender dated 2 January 2003, if it had been satisfied that, firstly, there was a contravention of
section 3 and, secondly, that there was or there was a likelihood of the AAEC. However, since the tender process was
completed and the contracts were signed, thereby creating third-party rights in favour of those bidders, who were the
successful bidders either because of the bidding or because of the negotiated prices, there was no question of passing any
orders against those persons who were actually not the parties. It was noted that the three representative parties were the
mere platforms of the sugar mills, whom they represented, but that did not mean that the rights of the three representative
parties were and would be identical with the rights of those who had executed the contract documents with the three Oil
Manufacturing Companies.
In Dhanraj Pillay v M/s Hockey India,340 the informants requested the Commission to pass an interim order under section
33 of the Competition Act, 2002 restraining Hockey India from abusing its dominant position and entering into anti-
competitive agreements. However, the Commission was of the opinion that there was no irreparable or irretrievable harm
to the players and the application filed by informants under section 33 was declined.
Page 33 of 43
[s 33] Power to issue interim orders
In M/s Shri Ashtavinayak Cine Vision Ltd v PVR Picture Ltd,341 the Commission vide order dated 18 November 2011
dismissed an application filed by the informant under section 33 of the Act seeking interim relief on the ground that the
application had become infructuous since the film was actually released on the appointed date in most parts of the country.
In The National Stock Exchange of India Ltd v Competition Commission of India,342 MCX-SX had filed an application
dated 6 July 2010 for interim relief under section 33, according to which it was complained that if National Stock
Exchange continued to offer its services in the CD segment free of cost despite a significant increase in the turnover, the
MCX-XS could suffer combined loss of around Rs 100 crores. It was urged that since the Commission had already formed
a prima facie opinion in this matter and had sent the matter for investigation to the Director General, MCX-XS would be
required to exit the market. The Commission, however, refused to pass any order under section 33 particularly in view of
the fact that the investigation by the Director General ordered by it, was near completion.
In M/s Reliance Big Entertainment Pvt Ltd v Tamil Nadu Film Exhibitors Association (now known as Tamil Nadu Theatre
Owners Association):343 Vide a separate order, the Commission disposed of the application of the informant seeking
interim relief by holding that though the action of the opposite party seemed to be anti-competitive, it was only the
investigations which would reveal as to which of the theatres of Tamil Nadu were members of the opposite party
association and; to what extent the dictates of the opposite party were being followed by them. Accordingly, the
application moved under section 33 of the Competition Act, 2002 seeking interim relief was rejected.
In Fast Track Call Cab Pvt Ltd v ANI Technologies Pvt Ltd:344 Interim relief was refused on the ground that irreparable
loss to the Informant or definite apprehension of adverse effect on competition in the market was not established. The
Commission observed that the figures submitted by the Informant needed to be investigated before any conclusions could
be drawn upon. Also, since the damages in this case were quantifiable in terms of money, the harm did not appear to
irreparable. Further, the Commission in light of the ongoing investigation for the issue of predatory pricing by the Director
General, did not deem fit to grant any interim relief.
PROVISIONS OF CONSUMER PROTECTION ACT, 1986
The Consumer Protection Act, 1986 has not vested any powers in the Consumer Disputes Redressal Authorities to grant
injunction in the unfair trade practice or restrictive trade practice enquiries before them. However, interim orders may be
passed by the District Forum as is just and proper.
COMPETITION COMMISSION INJUNCTIONS IN USA
Mediq Incorporated; Universal Hospital Services, Inc.
Mediq abandoned its proposed $100 million acquisition of Universal after the Commission filed a complaint and motion
for a preliminary injunction to block the merger of the nation’s two largest firms engaged in the rental to hospitals of
movable medical equipment, such as respiratory, infusion, and monitoring devices. The complaint, filed in the US District
Court for the District of Columbia, alleged that the merger would create a monopoly that would raise the rental prices of
movable medical equipment rental in many major metropolitan areas across the nation.
Staples, Inc.; Office Depot, Inc.
Staples abandoned plans to acquire Office Depot after the Commission won a preliminary injunction against the merger in
the US District Court for the District of Columbia. The complaint alleged that the merger of two of the three largest office
supply superstores in the country would have allowed the combined firm to control prices for the sale of office supplies in
over 40 major metropolitan areas throughout the United States. The Commission argued that the merger would violate
federal antitrust laws by substantially reducing competition in the sale of office supplies by superstores in various local
markets throughout the country where each firm directly competes against the other.
Page 34 of 43
[s 33] Power to issue interim orders
211 Subs. by Amendment Act, 2007 (39 of 2007), section 26 (w.e.f. 20 May 2009). Prior to its
substitution, it stood as under:
[s 33]. Power to grant interim relief
(1) Where during an inquiry before the Commission, it is proved to the satisfaction of the Commission, by affidavit or otherwise,
that an act in contravention of sub-section (1) of section 3 or sub-section (1) of section 4 or section 6 has been committed and
continues to be committed or that such act is about to be committed, the Commission may, by order, grant a temporary
injunction restraining any party from carrying on such act until the conclusion of such inquiry or until further orders, without
giving notice to the opposite party, where it deems it necessary.
(2) Where during the inquiry before the Commission it is proved to the satisfaction of the Commission by affidavit or otherwise
that import of any goods is likely to contravene sub-section (1) of section 3 or sub-section (1) of section 4 or section 6, it may,
by order, grant a temporary injunction restraining any party from importing such goods until the conclusion of such inquiry or
until further orders, without giving notice to the opposite party, where it deems it necessary and a copy of such order granting
temporary injunction shall be sent to the concerned authorities.
(3) The provisions of rules 2A to 5 (both inclusive) of Order XXXIX of the First Schedule to the Code of Civil Procedure, 1908
(5 of 1908) shall, as far as may be, apply to a temporary injunction issued by the Commission under this Act, as they apply to
a temporary injunction issued by a civil court, and any reference in any such rule to a suit shall be construed as a reference to
any inquiry before the Commission.
212 Voluntary Organisation in the Interest of Consumer Education
(VOICE) and Indian Federation of Consumer Organisation (IFCO) v ITC Ltd, UTP Enquiry No 58/1984, order dated 27 November
1984.
213 CCI v Steel Authority of India Ltd, 2010 (5) All MR (SC) 934 : 2010
Comp LR 61 (SC) : (2010) 4 Comp LJ 1 (SC) :
JT 2010 (10) SC 26 : (2011) 2 Mad LJ 271 (SC) : 2010 (9)
Scale 291 : (2010) 10 SCC 744 :
[2010] 103 SCL 269 (SC) : [2010] 11
SCR 112 : 2010 (8) UJ 4093 .
214 Morgan Stanley Mutual Funds v Kartick Das, 1994 AIR SCW 2801
: (1994) 4 SCC 225 : [1994] 2 Mad LJ 97 :
JT 1994 (3) SC 654 .
215 Nuziveedu Seeds Ltd v Mahyco Monsanto Biotech (India) Ltd
(MMBL), 2016 Comp LR 578 (CCI).
216 R v Judges of the Federal Court of Australia; Ex parte Pilkington ACI
(Operations) Pty Ltd; R v Judges of the Federal Court of Australia; Ex parte Soul Pattinson (Laboratories) Pty Ltd, (1978/79) 23
ALR 69.
217 World Series Cricket Pty Ltd v Parish,
(1977) 16 ALR 181 at pp 186-7 : 2 TPC 303 at pp 308-9.
Page 35 of 43
[s 33] Power to issue interim orders
218 Hornsby Building Information Centre Pty Ltd v Sydney Building
Information Centre Ltd, (1978) 18 ALR 639 .
219 Nawab Mir Barket Alikhan v Nawab Zulfiquar Jah Bahadur,
AIR 1975 AP 187 : (1975) 1 Andh WR 32.
220 Shayak Mohammed v Iqbal Ahmad,
AIR 1973 Raj 115 : 1972 Raj LW 436
.
221 MK Dasappa v G Ramachandra,
AIR 1976 Kant 53 : ILR (1975) Kant 2021
.
222 Karunanidi v R Renganathan Chettiar,
AIR 1973 Mad 443 : 1986 Mad LW 188
.
223 Krishan Murgai v Superintendence Co of India (Pvt) Ltd,
AIR 1979 Del 232 .
224 Vimla Devi v Jang Bahadur,
AIR 1977 Raj 196 : 1977 Raj LW 326
.
225 Upendra Das v Krishna Sahu,
AIR 1972 Ori 21 : (1971) 1 Cut WR 887.
226 Vellakutty v Karthyarani, AIR 1968
Ker 179 : 1967 Ker LT 667 .
227 Roshan Lal v Ratoo, AIR 1977
HP 10 : ILR (1976) HP 405
.
228 Kanshi Ram v Bansiyla, AIR 1977
HP 61 : ILR (1976) HP 833
.
229 Sakalabhaktula Vykunta Rao v Appala-Swamy,
AIR 1978 AP 103 : (1977) 2 Andh VTR 289.
230 Vadivel Mudaliar v Pachianna Gounder,
AIR 1974 Mad 87 : (1973) 2 Mad LJ 452.
231 Abdul Hameed Khan v Mujeed-ul-Hassan,
AIR 1975 All 398 : 1976 All LJ 194.
Page 36 of 43
[s 33] Power to issue interim orders
232 Kamta Prasad Singh v The Regional Manager, Food Corp of India,
AIR 1974 Pat 376 :
1975 Pat LJ 203 .
233 Bhagalpur Rolling Mills v Bhagalpur Electric Supply Co Ltd,
AIR 1974 Pat 269 .
234 Smita Agarwal v Nirmal Kumar Das,
AIR 1978 Pat 112 : 1978 Pat LJ 349
.
235 MK Dasappa v G Ramachandra,
AIR 1976 Kant 53 : ILR (1975) Kant 2021
.
236 J Krishnamurthy v Bangalore Turf Club Ltd,
(1975) 2 Kant LJ 428 .
237 AR Gangadhar & Co v Police Malliah Rajeswar & Co,
AIR 1962 AP 510 : (1962) 1 Andh WR 398.
238 Tavener Rutledge Ltd v Specters Ltd,
(1957) RPC 498 .
239 Bottagas Ltd v County Gas Ltd,
(1974) 31 RPC 119 .
240 Mohamed Minhajuddin v Ahmed Khan,
AIR 1959 AP 168 : (1958) 2 Andh WR 562 : 1958 Andh LT 784.
241 Marathon Oil Co v Marathon Shipping Co Ltd,
(1968) RPC 443 .
242 EMI Records Ltd v CBS United Kingdom Ltd,
(1976) RPC 1 at p 11.
243 Wombles Ltd v Wombles Skips Ltd,
(1977) RPC 99 at p 102.
244 Rolls Royce Motors Ltd v Zanelli,
(1979) RPC 148 at p 151.
245 Dorothy Perkins Ltd v Polly Perkins of Piccadilly Ltd,
(1962) RPC 163 ; See P Narayanan, Narayanan on Trade Marks and Passing
Off, 2d Ed, Eastern Law House, 1975, p 519.
246 Shamlal v Intrads Advertising Pvt Ltd,
AIR 1978 Del 270 .
Page 37 of 43
[s 33] Power to issue interim orders
247 Wearwell Co (India) Ltd v Wearwell Industries, 1969 Del LT 469.
248 Jagan Nath Prem Nath v Bharatiya Dhoop Karyalaya,
AIR 1975 Del 149 at p 153 : ILR
(1975) 2 Delhi 225 .
249 Fraser v Evans, (1969) 1
QB 349 .
250 Hubbard v Vosper, (1972) 2
WLR 389 , 396 and 398.
251 Granada Group Ltd v Ford Motor Co Ltd,
(1973) RPC 49 . The principle was followed in Malhotra Industries v Ropi Industries,
ILR (1976) 1 Del 278 .
252 Pickwick Internal Inc (GB) Ltd v Multiple Sound Distributors Ltd,
(1972) RPC 786 at p 796.
253 American Cyanamid Co v Ethicon Ltd,
(1975) RPC 513 at pp 539–542 (HL) (patent case). Although it is a patent case, the
principles are worth noting.
254 Emphasis added.
255 Peston v Luck, (1887) 27 Ch D
497 , per COTTON, LJ at p 506.
256 Smith v Griff Ltd, (1924) 1
KB 655 , per ATKIN, LJ at p 659.
257 Jones v Pacaya Rubber and Produce Co Ltd
(1991) 1 KB 445 , per BUCKLEY, LJ at p 457.
258 Wakefield v Duke of Buccleugh, (1865) 12 LTNS 628, at p 629.
259 Yost Typewriter Co Ltd v Typewriter Exchange Co,
(1902) 19 RPC 422 ; Bravington Ltd v Barringtons Tennant,
(1957) RPC 183 .
260 Army and Navy Co-op Society Ltd v Army Navy and Civil Service
Society of South Africa Ltd, (1902) 19 RPC 574 . See Apollinaries Co v
Herrfeldt, (1887) 4 RPC 478 at p 415 (CA).
261 Gillete Safety Razor Co. v Diamond Edge Ltd,
(1926) 43 RPC 310 .
Page 38 of 43
[s 33] Power to issue interim orders
262 Cavendish House (Cheltenham) Ltd v Cavendish Woodhouse Ltd,
(1968) RPC 448 (passing off case);
(1970) RPC 234 (CA). See also Effluent Disposals Ld. v Midlands Effluent Disposals Ld,
(1970) RPC 238 .
263 Malhotra Industries v Ropi Industries,
ILR 1976 Del 278 .
264 Isaacson v Thompson, (1871) 41
LJ Ch 101 .
265 Lee v Haley, (1869) 5 Ch App 155.
266 Kenitex Chemicals Inc v Kenitex Texturised Coating Ltd,
(1965) 2 FSR 109 .
267 Bravingtons Ltd v Barrington Tennants,
(1957) RPC 180 .
268 Burgess v Burgess, 22 LJ Ch 675.
269 Society Francies D’Applications Commercials v Electronic Concepts
Ltd, (1977) RPC 106 to 110.
270 Wilson and Whitworth Ltd v Express & Independent Newspapers Ltd,
1969 RPC 165 .
271 Stilliz v Jones and Higgins, (1943) 60
RPC 15 .
272 Clark Ltd v Clark’s Show Service,
(1935) 52 RPC 254 and Winkle v Gent, (1914) 31 RPC 473
.
273 Hyatt Roller Bearing Co v Pollard,
(1935) 52 RPC 115 and Green v Rozen, (1955) 2 All ER 797
.
274 GCT (Management) Ltd v The Laurie Marsh Group Ltd,
(1973) RPC 432 at p 434.
275 LRC International Ltd v Lilla Edets Sales Co Ltd,
(1973) RPC 560 at p 564.
276 Amiya Prasad v Bejoy Krishna Chakraborty,
AIR 1981 Cal 351 .
Page 39 of 43
[s 33] Power to issue interim orders
277 Re Morgan Stanley Mutual Fund, (1994) 2 CTJ 385 (CP). Judgment
dated 29 May 1994 in the case under Consumer Protection Act, 1986.
278 LD Meston School Society v Kashi Nath Misra,
AIR 1951 All 558 : 1950 ALJ 795
.
279 Chandrama Singh v Yasodanandan Singh,
AIR 1972 Pat 128 .
280 Sitaram Madan Ahir v Rajkunwarbai,
AIR 1959 MP 275 : 1959 MPLJ 532
.
281 Govinda Ramanuja v Vijiaramaraju,
AIR 1929 Mad 803 .
282 Worcester Royal Porcelain Co Ltd v Loches Co,
(1902) 19 RPC 479 at p 791.
283 John Letters & Co v J Letters (Craighton) Ltd,
(1967) RPC 209 .
284 Also refer to the case under MRTP Act, 1969. Re Universal Luggage
Manufacturing Co Ltd, Enquiry No 27/1987, order dated 29 January 1987.
285 State of Bihar v Rani Sonabati Kumari,
AIR 1954 Pat 513 .
286 State of Bihar v Rani Sonabati,
AIR 1961 SC 221 : (1961) 1 SCR 728
. Even a State was held included in the term “person” and hence duty bound to obey the injunction order.
287 Nawal Kishore v Rajendra Prasad Singh,
AIR 1976 Pat 56 .
288 Smt. Indu Tewari v Ram Bahadur Chaudhari,
AIR 1981 All 309 : 1981 All WC 521.
289 Sahib Zada Abdul Bais Khan v Budh Singh Bapna,
AIR 1973 Raj 201 : ILR (1972) 22 Raj 991
.
290 Mangal Thakur v Sundar Bhagat,
AIR 1977 Pat 282 .
Page 40 of 43
[s 33] Power to issue interim orders
291 The State of Bihar v Rani Sonabati Kumari,
AIR 1961 SC 221 .
292 Mst Manmati Kuer v Ramgopal Singh,
AIR 1976 Pat 240 .
293 Chiranjilal v Behari, AIR 1958
All 326 .
294 Sudhir Namasudra v Purrender Kumar Das,
AIR 1980 Gau 1 .
295 Dr Rajiv Dattatraya Karnik v Agro Tech Foods Ltd, (2005) 66 CLA
(Snr) 2 (MRTPC).
296 Star India Pvt Ltd v SITI Cable Network Ltd, (2003) 117 COMP
CASES 146 : (2003) 46 SCL 770 (SC).
297 Consumer Education and Research Society Suraksha School v SKF
Bearing India & APS Star Industries Ltd, (1998) 94 COMP CASES 393.
298 Regulation (EC) No 1/2003, OJ L 1 of 4 January 2003, pp 1–25.
299 See section 55 of the MRTP Act, 1969.
300 Beecham Group Ltd v Bristol Laboratories Pty Ltd,
(1968) 118 CLR 618 : (1968)
ALR 469 .
301 American Cyanamid v Ethicon Ltd,
(1975) AC 396 : 1975 1 All ER 504
.
302 Ashburton Oil NL v Alpha Minerals NL,
(1971) 123 CLR 614 at 627 and 641.
303 Firth Industries Ltd v Polyglas Engg Pty Ltd,
(1975) 132 CLR 489 : 6 ALR 212.
304 Fortuna Holdings Pty Ltd v Deputy Federal Commissioner of
Taxation, 1976 6 ART 620 at 648 : 76 ATC 4312 at 4336.
305 Winthrop Investments Ltd v Winns Ltd, (1975) 2 NSWLR 666 at
673, 708.
306 Cf Hoffmann-La Roche & Co AG v Secretary of State for Trade and
Industry, (1975) AC 295 .
Page 41 of 43
[s 33] Power to issue interim orders
307 World Series Cricket Pty Ltd v Parish, (1977/78) 16 ALR 181 at
186.
308 Beecham Group Ltd v Bristol Laboratories Pty Ltd,
(1968) ALR 469 : 118 CLR 618.
309 Commercial Bank of Australia Ltd v Insurance Brokers Association
of Australia, (1977/78) 16 ALR 168.
310 Mc Donald’s System of Australia Pty. Ltd v McWilliam’s Wines Pty.
Ltd, (1972) 2 ATPR 40-108 at 18, 104 : 5 TPC 55 at 56.
311 Victorian Engg Marketing Board v Parkwood Enggs Pty. Ltd,
(1978) ATPR 40-081 : 1978 20 ALR 129 .
312 Shercliff v Engadine Acceptance Corp Pty Ltd, (1978) 1 NSWLR
729.
313 Beecham Group Ltd v Bristol Laboratories Pty Ltd,
(1968) 118 CLR 618 .
314 Slater Walker Superannuation Pty Ltd v Great Boulder Gold Mines
Ltd, (1979) VR 107, at p 110.
315 George Macgregor Auto Service Pty Ltd v Caltex (Oil Aust) Pty Ltd,
(1981) 35 ALR 72 , at p 75.
316 World Series Cricket Pty Ltd v Parish, (1977/78) 16 ALR 181, at p
187.
317 Hornsby Building Information Centre Pty Ltd v Sydney Building
Information Centre Ltd, (1978) 18 ALR 639 , at p 652.
318 World Series Cricket Pty Ltd v Parish, (1977/78) 16 ALR 181, at pp
187–188.
319 Hornsby Building Information Centre v Sydney Building Information
Centre Ltd, (1978) 18 ALR 639 .
320 R v Judges of the Federal Court of Australia; Ex parte Soul Pattison
(Laboratories) Pty Ltd, (1978/79) 23 ALR 69.
321 World Series Cricket Pty Ltd’s case, (1977/78) 16 ALR 181, per
Bowen, CJ.
Page 42 of 43
[s 33] Power to issue interim orders
322 Australian Consolidated Press Ltd v Morgan,
(1965) 112 CLR 483 : 1966
ALR 387 .
323 World Series Cricket Pty Ltd v Parish, (1977/78) 16 ALR 181, at pp
191–92.
324 As the Federal Court then was known as.
325 Beecham Group Ltd v Bristol Laboratories Pty Ltd,
(1968) 118 CLR 618 : 1968
ALR 464 .
326 American Cyanamid Co v Ethicon Ltd,
(1975) AC 396 : (1975) 1 All ER 504
.
327 Hornsby Building Information Centre Pty Ltd v
Sydney Building Information Centre Ltd, (1978) 18 ALR 639
, at p 649.
328 George Macgregor Auto Service Pty Ltd v Caltex
Oil (Aust) Pty Ltd, (1981) 35 ALR 72 .
329 Dairy Vale Motors Metro Co-op Ltd v Brownes &
Dairy Ltd, (1981) 35 ALR 494 .
330 Trade Practices Commission v Vaponordic (Aust)
Pty Ltd; Trade Practices Commission v Chamberlain Consolidated Holding Pty Ltd, (1974/75) 6 ALR 248.
331 Associated Minerals Consolidated Ltd v Wyong Shire Council,
(1975) AC 538 at 560 : 4 ALR 353 at 365.
332 World Series Cricket Pty Ltd v Parish, (1977/78) 16 ALR 181, at pp
189–190.
333 CCI v Steel Authority of India Ltd, 2010 (5) All MR (SC) 934 : 2010
Comp LR 61 (SC) : (2010) 4 Comp LJ 1 (SC) :
JT 2010 (10) SC 26 : (2011) 2 Mad LJ 271 (SC) : 2010 (9)
Scale 291 : (2010) 10 SCC 744 :
[2010] 103 SCL 269 (SC) : [2010] 11
SCR 112 : 2010 (8) UJ 4093 .
334 Id.
335 Belaire Owner’s Association v DLF Ltd Haryana Urban
Development Authority Department of Town and Country Planning, State of Haryana, [2011]
104 CLA 398 (CCI) : 2011 Comp LR 239: [2011] 109 SCL 655
(CCI).
Page 43 of 43
[s 33] Power to issue interim orders
336 M/s Santuka Associates Pvt Ltd v All India Organisation of Chemists
and Druggists, Organisation of Pharmaceutical Producer of India, Indian Drug Manufacturers’ Association and USV Ltd, 2013
Comp LR 223 (CCI).
337 Financial Software and Systems Pvt Ltd Informant v ACI Worldwide
Solutions Pvt Ltd, 2015 Comp LR 253 (CCI).
338 Mr Vijay Gupta v Paper Merchants Association, Ms Shashi Jain
(Prop Parasnath Associates) and Mr Ramesh Jaina, Case No 07/2010.
339 M/s India Glycols Ltd v CCI, IA 45 of 2013 in Appeal No 25 of
2013, decided on 12 November 2013.
340 Dhanraj Pillay v M/s Hockey India, 2013 Comp LR 543 (CCI).
341 M/s Shri Ashtavinayak Cine Vision Ltd v PVR Picture Ltd, 2013
Comp LR368 (CCI).
342 The National Stock Exchange of India Ltd v CCI, 2014 Comp LR
304 (COMPAT).
343 M/s Reliance Big Entertainment Pvt Ltd v Tamil Nadu Film
Exhibitors Association (now known as Tamil Nadu Theatre Owners Association), 2013 Comp LR 828 (CCI).
344 Fast Track Call Cab Pvt Ltd v ANI Technologies Pvt Ltd, Case No 06
of 2015.
End of Document
[s 34] [* * *]
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > CHAPTER
IV DUTIES, POWERS AND FUNCTIONS OF COMMISSION
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
CHAPTER IV DUTIES, POWERS AND FUNCTIONS OF COMMISSION
[s 34] 345[* * *]
345 Section 34 omitted by Amendment Act, 2007 (39 of 2007), section 27 (w.e.f. 12 October
2007). Prior to its omission, it stood as under:
[s 34]. Power to award compensation
(1) Without prejudice to any other provisions contained in this Act, any person may make an application to the Commission for
an order for the recovery of compensation from any enterprise for any loss or damage shown to have been suffered, by such
person as a result of any contravention of the provisions of Chapter II, having been committed by such enterprise.
(2) The Commission may, after an inquiry made into the allegations mentioned in the application made under sub-section (1),
pass an order directing the enterprise to make payment to the applicant, of the amount determined by it as realisable from the
enterprise as compensation for the loss or damage caused to the applicant as a result of any contravention of the provisions of
Chapter II having been committed by such enterprise.
(3) Where any loss or damage referred to in sub-section (1) is caused to numerous persons having the same interest, one or more
of such persons may, with the permission of the Commission, make an application under that sub-section for and on behalf of,
or for the benefit of, the persons so interested, and thereupon, the provisions of rule 8 of Order 1 of the First Schedule to the
Code of Civil Procedure, 1908 (5 of 1908), shall apply subject to the modification that every reference therein to a suit or
decree shall be construed as a reference to the application before the Commission and the order of the Commission thereon.
End of Document
[s 35] Appearance before Commission
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > CHAPTER
IV DUTIES, POWERS AND FUNCTIONS OF COMMISSION
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
CHAPTER IV DUTIES, POWERS AND FUNCTIONS OF COMMISSION
346[s 35] Appearance before Commission
A 347[person or an enterprise] or the Director General may either appear in person or authorise one or more chartered
accountants or company secretaries or cost accountants or legal practitioners or any of his or its officers to present his or its
case before the Commission.
Explanation.—For the purposes of this section,—
(a) “chartered accountant” means a chartered accountant as defined in clause (b) of sub-section (1) of section 2 of the
Chartered Accountants Act, 1949 (38 of 1949) and who has obtained a certificate of practice under sub-section
(1) of section 6 of that Act;
(b) “company secretary” means a company secretary as defined in clause (c) of sub-section (1) of section 2 of the
Company Secretaries Act, 1980 (56 of 1980) and who has obtained a certificate of practice under sub-section (1)
of section 6 of that Act;
(c) “cost accountant” means a cost accountant as defined in clause (b) of sub-section (1) of section 2 of the Cost and
Works Accountants Act, 1959 (23 of 1959) and who has obtained a certificate of practice under sub-section (1) of
section 6 of that Act;
(d) “legal practitioner” means an advocate, vakil or an attorney of any High Court, and includes a pleader in practice.
LEGISLATIVE BACKGROUND
Competition Act, 2001
Notes on clauses of the Bill stated, thus:
Notes on clauses.—This clause contains provisions relating to the persons who are entitled to appear in proceedings before the
Commission. It provides that a complainant, defendant or the Director General may either appear in person or authorise one or
more chartered accountants, or company secretaries or cost accountants or legal practitioners, or any of the officers of such
complainant, defendant or Director General to present the case before the Commission. [Clause 35 of the Competition Bill, 2001].
Page 2 of 3
[s 35] Appearance before Commission
Competition (Amendment) Act, 2007
Notes on clauses.—This clause seeks to amend section 35 of the Competition Act, 2002 relating to appearance before of the
Competition Commission of India.
Under the existing provisions contained in the said section, a complainant or defendant or the Director General may either appear
in person or authorise one or more chartered accountants or company secretaries or cost accountants or legal practitioners or any of
his or its officers to present his or its case before the Commission.
It is proposed to amend the said section so as to substitute the words “person or an enterprises”, for the words “a complainant or
defendant” for appearance before the Commission. [Clause 28 of the Competition (Amendment) Bill, 2007].
SCOPE OF THE SECTION
The parties may appear before the Commission either in person or through their authorised representative, which may be
either a practising Chartered Accountant, Company Secretary, Cost Accountant or an Advocate. Similar provisions were
contained in regulation 58 of the MRTPC Regulations, 1991, since repealed. Section 35 of the Competition Act, 2002
confers right of appearance through specified professionals upon a party before the Commission. The same has no manner
of application to investigations before the Director General.348
Section 35 vis-à-vis section 53S349
Section 35 deals with appearance before Commission. It provides that a person or an enterprise or the Director General
may appear in person or authorise one or more of the enumerated professionals or his or its officers to present his or its
case before the Commission. Under section 19, inquiry into certain agreements and dominant position of enterprise can be
made. The inquiry can be undertaken under any of the three modes provided, ie, on its own motion, or, on receipt of any
information from any person, consumer or their association or trade association, or, on a reference made by the Central
Government or a State Government or a statutory authority. Obviously section 35 relates to the first two categories
enumerated above. Clause 35 of the Notes on Clauses on Competition Bill, 2002, provides that a complainant, defendant or
Director General may appear in the manner provided before the Commission.
Section 53S relates to right to legal representation. Sub-section (1) thereof relates to presentation of the case before the
Appellate Tribunal by one or more of the professionals enumerated in section 35. This has been specifically indicated in
the Explanation appended to section 53S. Additionally it has been provided that any of its officers can present his or its
case before the Appellate Tribunal. Sub-section (2) of section 53S relates to presentation of the case “with respect to any
appeal” before the Appellate Tribunal by any of the enumerated category of professionals authorised or officer of the
Central Government, State Government or a local authority or any enterprise. Obviously it must be a party in the appeal
either as appellant or respondent. The expression “any appeal” cannot mean an appeal where it is not a party or is not
connected with it.
The difference in terminology in section 35 and sub-sections (1) and (2) of section 53S needs to be noted. The former
provision relates to both a person and an enterprise. Sub-sections (1) and (2) of section 53S make a difference between a
person preferring an appeal and an enterprise. In the latter case it can appoint a presenting officer to present the case with
reference to any appeal before the Appellate Tribunal.
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[s 35] Appearance before Commission
Right to be accompanied by advocates
Division Bench of the Delhi High court in the case of Punjab National Bank v Kingfisher Airlines Ltd350 looked at the
question from the perspective of the rights of the advocates and observed that:
section 30 of the Advocates Act confers in the advocates a right to practice. The right of an advocate to practice before any Court or
Tribunal necessarily means that a litigant before an such Court, Tribunal, Authority or person will have a right to engage and avail
the services of an advocate. The right to practice is not only a statutory right, but also a fundamental right under Article 19(1) of the
Constitution.
The Delhi High Court in the Oriental Rubber case351 was faced with the question as to whether the Petitioner who was
summoned by the Director General had the right to be accompanied by advocates at the time of recording of their
statement before Director General. The Court relied on its earlier rulings352 and section 30 of the Advocates Act, 1961 to
hold that since section 30 of the Advocates Act, 1961 conferred on an advocate a right to practice inter alia before any
person legally authorised to take evidence and since the Director General under the Act had been legally authorised to take
evidence, an advocate had a right to practice before the Director General and this right includes accompanying a person
who had been summoned before the Director General for investigation.
346 Came into force on 20 May 2009 vide Notification No. S.O. 1241(E), dated 15 May 2009.
347 Subs. by Amendment Act, 2007 (39 of 2007), section 28, for the words “complainant or
defendant” (w.e.f. 20 May 2009).
348 Bijay Poddar v Coal India Ltd, 2014 Comp LR 208 (CCI).
349 Steel Authority of India Ltd through its MD v Jindal Steel and Power
Ltd through its Director, 2010 Comp LR 22, paras 25–28 (COMPAT).
350 Punjab National Bank v Kingfisher Airlines Ltd,
[2016] 133 SCL 317 (Del).
351 Oriental Rubber Industries Pvt Ltd v CCi,
(2016) 135 SCL 326 (Del).
352 The court relied upon the judgment given in the case of Google Inc v
CCI, 2015 Comp LR 391 (Del); Punjab National Bank v Kingfisher Airlines Ltd, [2016]
133 SCL 317 (Del).
End of Document
[s 36] Power of Commission to regulate its own procedure
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > CHAPTER
IV DUTIES, POWERS AND FUNCTIONS OF COMMISSION
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
CHAPTER IV DUTIES, POWERS AND FUNCTIONS OF COMMISSION
353[s 36] Power of Commission to regulate its own procedure
(1) In the discharge of its functions, the Commission shall be guided by the principles of natural justice and, subject
to the other provisions of this Act and of any rules made by the Central Government, the Commission shall have
the powers to regulate its own procedure.
(2) The Commission shall have, for the purposes of discharging its functions under this Act, the same powers as are
vested in a Civil Court under the Code of Civil Procedure, 1908 (5 of 1908), while trying a suit, in respect of the
following matters, namely:—
(a) summoning and enforcing the attendance of any person and examining him on oath;
(b) requiring the discovery and production of documents;
(c) receiving evidence on affidavit;
(d) issuing commissions for the examination of witnesses or documents;
(e) requisitioning, subject to the provisions of sections 123 and 124 of the Indian Evidence Act, 1872 (1 of
1872), any public record or document or copy of such record or document from any office.
(3) The Commission may call upon such experts, from the field of economics, commerce, accountancy, international
trade or from any other discipline as it deems necessary, to assist the Commission in the conduct of any inquiry
by it.
(4) The Commission may direct any person—
(a) to produce before the Director General or the Secretary or an officer authorised by it, such books, or other
documents in the custody or under the control of such person so directed as may be specified or described in
the direction, being documents relating to any trade, the examination of which may be required for the
purposes of this Act;
(b) to furnish to the Director General or the Secretary or any other officer authorised by it, as respects the trade
or such other information as may be in his possession in relation to the trade carried on by such person, as
may be required for the purposes of this Act.]
HISTORICAL BACKGROUND
Provisions under the MRTP Act, 1969
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[s 36] Power of Commission to regulate its own procedure
This section corresponds to section 12 of MRTP Act, 1969, since repealed, which is reproduced below:
[s 12] Powers of the Commission.—(1) The Commission shall for the purposes of any inquiry under this Act have the same
powers as are vested in a civil court under the Code of Civil Procedure, 1908 (5 of 1908), while trying a suit, in respect of the
following matters, namely:—
(a) the summoning and enforcing the attendance of any witness and examining him on oath;
(b) the discovery and production of any document or other material object producible as evidence;
(c) the reception of evidence on affidavits;
(d) the requisitioning of any public record from any court or office;
(e) the issuing of any commission for the examination of witnesses. (f ) the appearance of parties and consequence of non-
appearances.
(2) Any proceeding before the Commission shall be deemed to be a judicial proceeding within the meaning of sections 193 and
228 of the Indian Penal Code (45 of 1860), and the Commission shall be deemed to be a civil court for the purposes of section 195
and Chapter XXVI of the Code of Criminal Procedure, 1973 (2 of 1974).
(3) The Commission shall have power to require any person—
(a) to produce before, and allow to be examined and kept by, an officer of the Commission specified in this behalf, such
books, accounts or other documents in the custody or under the control of the person so required as may be specified or
described in the requisition, being documents relating to any trade practice, the examination of which may be required
for the purposes of this Act; and
(b) to furnish to an officer so specified such information as respects the trade practice as may be required for the purposes of
this Act or such other information as may be in his possession in relation to the trade carried on by any other person.
(4) For the purpose of enforcing the attendance of witnesses the local limits of the Commission’s jurisdiction shall be the limits of
the territory of India.
(5) Where, during any inquiry under this Act, the Commission has any grounds to believe that any books or papers of, or relating to
any undertaking in relation to which such inquiry is being made or which the owner of such undertaking may be required to
produce in such inquiry, are being, or may be, destroyed, mutilated, altered, falsified or secreted, it may, by a written order,
authorise any officer of the Commission to exercise the same powers of entry, search and seizure in relation to the undertaking, or
the books or papers, aforesaid as may be exercised by the Director-General while holding a preliminary investigation under section
11.
Competition Act, 2002
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[s 36] Power of Commission to regulate its own procedure
Notes on clauses of the Bill stated, thus:
Notes on clauses.—This clause confers powers upon the Commission to regulate its own procedure while conducting inquiries.
The Commission shall not be bound by the procedure laid down by the Code of Civil Procedure, 1908 but shall be guided by the
principles of natural justice. Sub-clause (2) confers upon the Commission the same powers as are vested in a civil court under the
Code of Civil Procedure, 1908 while trying a suit. Such powers include powers for summoning witnesses, production of
documents, receiving evidence on affidavits, deciding cases ex parte, etc. Sub-clause (3) provides that the proceedings before the
Commission shall be judicial proceedings within the meaning of sections 193 and 228 and for the purposes of section 196 of the
Indian Penal Code. Sub-clause (4) confers powers upon the Commission to call certain experts from fields specified in this sub-
clause to assist it in an inquiry or proceeding. Sub-clause (5) confers power upon the Commission to direct any person to produce,
before the Director General or Registrar or any officer authorised by it, books, accounts or other documents in the custody or
control of such person and to furnish to the Director General or Registrar or any officer authorised by the Commission, any
information relating to trade which may be in possession of such person. Sub-clause (6) confers power upon the Commission to
conduct inquiry or adjudicate in matters after giving oral hearing to the parties concerned. [Clause 36 of the Competition Bill,
2001].
Competition (Amendment) Act, 2007
Notes on clauses.—This clause seeks to substitute section 36 of the Competition Act, 2002 relating to power of Commission to
regulate its own procedure.
The existing section 36 confers powers upon the Commission, inter alia, to dismiss an application in default or deciding it ex parte
or exercise power in respect of any other matter which may be prescribed. It also provides that every proceeding before the
Commission shall be deemed to be a judicial proceeding within the meaning of sections 193 and 228 and for the purposes of
section 196 of the Indian Penal Code and the Commission shall be deemed to be a civil court for the purposes of section 195 and
Chapter XXVI of the Code of Criminal Procedure, 1973.
It is proposed to substitute the said section so as to provide that the Commission may direct any person to produce before the
Director General or Secretary or an officer authorised by it the books or other documents, being documents relating to any trade, in
the custody or under the control of such person for the purpose of examination under the Act and also that the Commission may
direct any person to furnish to the Director General or Secretary or any officer authorised by it, such other information as may be in
his position in relation to the trade carried on by such person as required for the purpose of this Act. [Clause 29 of the Competition
(Amendment) Bill, 2007].
SCOPE OF THE SECTION
The Commission has been vested with the powers of a Civil Court under the Code of Civil Procedure, 1908 while trying a
suit. It may be noted that although the Commission exercises the powers of the Court in respect of certain matters referred
to in sub-section (2), it is not a court. It is not bound by rules of evidence.
The Commission has to act within the framework of principles of natural justice and also in accordance with its own
regulations in the conduct of its business.
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[s 36] Power of Commission to regulate its own procedure
The Commission may also order the production of any document or books of account before its officers for purposes of the
Competition Act, 2002.
PRINCIPLES OF NATURAL JUSTICE [SUB-SECTION (1)]
In the exercise of its powers and discharge of its functions, the Commission shall be guided by the rules of natural justice.
It is a well-settled principle of administrative law that a quasi-judicial body should act according to the principles of
natural justice. More often than not, it is not easy to draw a line demarcating an administrative decision from a quasi-
judicial decision. Nevertheless, the aim of both a quasi-judicial function as well as an administrative function is to arrive at
a just decision. In AK Kraipak v UOI,354 the Supreme Court had observed that the dividing line between an administrative
power and a quasi-judicial power is quite thin and is being gradually obliterated. For determining whether a power is an
administrative power or a quasi-judicial power, regard must be had to: (i) the nature of the power conferred; (ii) the person
or persons on whom it is conferred; (iii) the framework of the law conferring that power; (iv) the consequences ensuing
from the exercise of that power; and (v) the manner in which that power is expected to be exercised.355
“Natural justice is a great humanising principle intended to invest law with fairness and to secure justice and over the years
it has grown into a widely pervasive rule affecting large areas of administrative action.”356 By developing the principles of
natural justice, the courts have devised a kind of code of fair administrative procedure.357 According to LORD MORRIS, J:
natural justice is but fairness writ large.358 The aim of the rules of natural justice is to secure justice or to put it negatively to
prevent miscarriage of justice. These rules can operate only in areas not covered by any law validly made. In other words, they do
not supplant the law of the land but supplement it. The concept of natural justice has undergone a great deal of change in recent
years. In the past, it was thought that it included just two rules.359
But in the course of years, many more subsidiary rules came to be added to the rules of natural justice. These and many
other rules are merely extensions or refinements of the two main principles which are the essential characteristics of
natural justice and are the twin pillars supporting it, ie, no man shall be a judge in his own cause; and both sides shall be
heard.
The requirements of natural justice vary with the varying constitution of the different quasi-judicial authorities and the
statutory provisions under which they function. Hence, the question of whether or not any rule of natural justice has been
contravened in any particular case should be decided not under any pre-conceived notions, but in the light of the relevant
statutory provisions, the constitution of the Tribunal and the circumstances of each case.360 The extent and application of
the doctrine of natural justice cannot be imprisoned within the straitjacket of a rigid formula. The application of the
doctrine depends upon the nature of the jurisdiction conferred on the administrative authority, upon the character of the
rights of the persons affected, the scheme and policy of the statute and other relevant circumstances disclosed in the
particular case.361
The Supreme Court has emphasised in KL Tripathi v State Bank of India362 that whether any particular principle of natural
justice would be applicable to a particular situation, or the question of whether there has been any infraction of the
application of that principle, has to be judged on the facts and circumstances of each case. The basic requirements are that
there “must be fair play in action and the decision must be arrived at in a just and objective manner with regard to the
relevance of the materials and reasons. ... The rules of natural justice are flexible and cannot be put on any rigid formula”
(Ibid).363
The requirement of acting judicially in essence is nothing but a requirement to act justly and fairly and not arbitrarily or
capriciously. The procedures which are considered inherent in the exercise of a judicial power are merely those which facilitate if
Page 5 of 34
[s 36] Power of Commission to regulate its own procedure
not to ensure just and fair decision. In recent years, the concept of quasi-judicial power has been undergoing a radical change.
What was considered as an administrative power some years back is now being considered as a quasi-judicial power.364
The writ of certiorari will lie where a judicial or quasi-judicial authority has violated the principles of natural justice even
though the authority has acted within its jurisdiction.
Given above is an outline of the principles affecting “natural justice” and “discretion” according to which the Company
Law Board has to exercise its powers and discharge its functions.365
Basic Principles of Natural Justice
The two basic principles of natural justice are discussed below:
(a) Audi alteram partem rule
This latin maxim means “hear the other side”. Another rule rendering the same idea is “audiatur et altera pars” which
means “no man should be condemned unheard”. Quasi-judicial authority cannot make any decision adverse to any party
without giving him an effective opportunity of meeting any relevant allegation against him.366 It requires that every person
whose civil right is affected must have a reasonable notice of the case he has to meet. He must be furnished with the
information upon which the action is based.367 He must have a reasonable opportunity of being heard in his defence or to
meet the case against him.368 He must also have the opportunity of adducing all relevant evidence on which he relies.369
The requirements of audi alteram partem rule are:
1. Notice.—A basic principle of natural justice is that before adjudication, the persons who are likely to be affected by the
decision should be given notice. Any proceeding taken without notice would violate natural justice.370 The notice must
give a reasonable opportunity to comply with its requirements.371 A notice which is vague is not a proper notice in law.
The court’s conscience must be satisfied that the individual had a fair chance to know the details of the action proposed to
be taken against him.372 Few cases have been discussed below:
In The Board of Control for Cricket in India (BCCI) v The Competition Commission of India,373 appeal was directed
against the 2013 order by which the Commission held BCCI in contravention of section 4(2)(c) of the Competition Act,
2002 and a penalty of Rs 52.24 crore was imposed. It was argued before the Tribunal that the order was liable to be set
aside on the ground of violation of the principles of natural justice. It was submitted that while the Director General had
treated the “relevant market” as “underlying economic activities which are ancillary for organising the IPL Twenty 20
Cricket Tournament”, the Commission apparently differed with him and held that the relevant market as “Organisation of
Private Professional Cricket League/Events in India” and this was done without giving any notice or opportunity of
hearing to the appellant. Further, it was argued that the finding recorded on the issue of contravention of section 4 was
based upon information allegedly available in public domain and the SNNIP test was applied without disclosing the same
to the appellant and giving it an opportunity to controvert the same. Also, the direction given by the Commission to delete
clause 9.1(c)(i) of Media Rights Agreement was in violation of ordinary procedure as no finding was recorded qua the
clause and no notice and opportunity of hearing was given to BCCI in that regard.
The Tribunal noted that the exercise required to be undertaken by the Commission under sections 26(7) or 26(8) read with the
relevant regulations and an order passed under section 27 which visits the concerned person with civil consequences makes the
functions of the Commission adjudicatory/quasi judicial. Therefore, before recording an adverse finding against a person and
holding him guilty of violating section 3 or 4 of the Act, the Commission is obliged to comply with various facets of the principles
of natural justice. This necessarily implies that while holding an inquiry under section 26(7) or section 26(8) the Commission is
Page 6 of 34
[s 36] Power of Commission to regulate its own procedure
required to comply with the rule of audi alteram partem and give an effective opportunity of hearing to the person against whom a
finding is likely to be recorded on the issue of contravention of section 3 or section 4 of the Act not only to controvert the
allegation made against him as also the evidence/material proposed to be used in support of such allegation but also produced
evidence to show that he/she/it has not violated any provision of the Act. If the Commission wants to rely upon some
information/material, which does not form part of the report of the Director General then such information/material must be
disclosed to the person concerned and an effective opportunity has to be given to him to controvert the same. The Commission is
also required to pass a speaking order to demonstrate application of mind to the relevant factors/considerations and exclusion of
irrelevant and extraneous factors/considerations.374
Reference was made to the Supreme Court decision in State of Orissa v Dr (Miss) Binapani Dei,375 which contains a lucid
exposition of the principles of natural justice and their applicability to what was then thought as purely administrative
action.
9. The deciding authority, it is true, is not in the position of a Judge called upon to decide an action between contesting parties, and
strict compliance with the forms of judicial procedure may not be insisted upon. He is however under a duty to give the person
against whom an enquiry is held an opportunity to set up his version or defence and an opportunity to correct or to controvert any
evidence in the possession of the authority which is sought to be relied upon to his prejudice. For that purpose the person against
whom, in enquiry is held must be informed of the case he is called upon to meet, and the evidence in support thereof. The rule that
a party to whose prejudice, an order is intended to be passed is entitled to a hearing applies alike to judicial tribunals and bodies of
persons invested with authority to adjudicate upon matters involving civil consequences. It is one of the fundamental rules of our
constitutional set-up that every citizen is protected against exercise of arbitrary authority by the State or its officers. Duty to act
judicially would therefore arise from the very nature of the function intended to be performed: it need not be shown to be super-
added. If there is power to decide and determine to the prejudice of a person, duty to act judicially is implicit in the exercise of
such power. If the essentials of justice be ignored and an order to the prejudice of a person is made, the order is a nullity. That is a
basic concept of the rule of law and importance thereof transcends the significance of a decision in any particular case.
12. It is true that some preliminary enquiry was made by Dr. S. Mitra. But the report, of that enquiry officer was never disclosed to
the first respondent. Thereafter, the first respondent was required to show cause, why 16 April 1907 should not be accepted as the
date of birth and without recording any evidence the order was passed. We think that such an enquiry and decision were contrary to
the basic concept of justice and cannot have any value. It is true that the order is administrative in character, but even an
administrative order which involves civil consequences, as already stated, must be made consistently with the rules of natural
justice after informing the first respondent of the case of the State, the evidence in support thereof and after giving an opportunity
to the first respondent of being heard and meeting or explaining the evidence.
The Tribunal further relied on the case of Rajesh Kumar v CIT376 to emphasise that in any event, when civil consequences
ensue, there is hardly any distinction between an administrative order and a quasi-judicial order. Further, the Tribunal also
relied on cases like Balchandra L Jharkihoili v BS Yeddyurappa,377 Ayaaubkhan Noorkhan Pathan v State of
Maharashtra,378 State of MP v Chintaman Sadashiva Waishampayan379 to hold that the rules of natural justice require
that a party must be given the opportunity to adduce all relevant evidence upon which he relies, and further, that the
evidence of the opposite party should be taken in his presence, and that he should be given the opportunity of cross-
examining the witnesses examined by that party. Not providing the said opportunity to cross-examine witnesses would
violate the principles of natural justice.380 Also, right of cross-examination is an integral part of the principles of natural
justice.
The Tribunal noted after a careful scrutiny of the record that while directing its Secretary to forward the report of the
Director General to the appellant, the Commission had nowhere indicated that it did not agree with the finding recorded by
the Director General on the issue of “relevant market” and the appellant should show as to why Organisation of Private
Professional Cricket League/Events in India may not be treated as the “relevant market”. It was, thus, evident that the
appellant did not get any opportunity to contest the proposed determination of the “relevant market” by the Commission.
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[s 36] Power of Commission to regulate its own procedure
Also, the appellant was served with copy of the Director General’s report in two installments and was called upon to file its
objections/suggestions. Therefore, it was natural for the appellant to file reply only with reference to the findings and the
conclusions recorded by the Director General.
It was held by the Tribunal that the Commission was expected to hear the appellant in the context of
objections/suggestions filed in the context of the findings recorded by the Director General. If the Commission wanted to
differ with the Director General on the issue of “relevant market”, then it should have given notice spelling out its intention
to do so and given an opportunity of hearing to the appellant, which was admittedly not done. Therefore, there is no escape
from the conclusion that the finding recorded by the Commission that Organisation of Private Professional Cricket
League/Events in India is the “relevant market” is vitiated due to violation of the rule of audi alteram partem.
Further, the Tribunal noted that the Commission’s failure to disclose the information/material proposed to be used by it for
arriving at a finding on the issue of abuse of dominance and give an opportunity to the appellant to explain/controvert the
same resulted not only in violation of the principles of natural justice but also occasioned failure of justice.
In Interglobe Aviation Ltd IndiGo Airlines v Competition Commission of India,381 the COMPAT in April 2016 set aside
Rs 258 crore penalty imposed on Jet Airways, IndiGo and SpiceJet and directed the Commission to pass a fresh order. The
Commission had penalised the carriers for alleged cartelisation in fixing fuel surcharge on air cargo. The Tribunal held that
the Commission’s failure to give notice to the appellants incorporating the reasons of its disagreement with the conclusions
recorded by the joint Director General violated principles of natural justice. Also, it was held that not giving the appellants
“effective opportunity to show that they had not formed any cartel for jacking-up fuel surcharge from time to time has not
only resulted in gross violation of principles of natural justice, but has also caused prejudice to them”. Further, it was held
that if the Commission disagreed with the findings, then reasons should have been indicated for the same.
2. Hearing.—The requirement of the rule is that the parties whose civil rights are to be effected by a quasi-judicial
authority must have a reasonable opportunity of being heard in their defence.
Stating it broadly and without intending it to be exhaustive ... rules of natural justice require that a party should have the
opportunity of adducing all relevant evidence on which he relies, that the evidence of the opponent should be taken in his presence
and that he should be given the opportunity of cross-examining the witness examined by that party, and that no materials should be
relied on against him without his being given an opportunity of explaining them.382
It is now well settled that a mere opportunity to explain the conduct is not sufficient and the applicant should have the
opportunity to produce his defence.383 He should have fair opportunity to state his case and to meet the accusations made
against him. He should have full opportunity to correct or contradict a relevant statement prejudicial to him. Whether a
reasonable opportunity has been given in a particular case will depend on its own circumstances, there being no uniform
formula or rigid rules for the purpose. The duty to offer a reasonable opportunity of being heard does not include any
obligation to hear a party in person, UOI v Jyoti Prakash,384 or by a lawyer.385 Ordinarily, an opportunity of making a
written representation against the proposed action will meet the requirement of natural justice, (Jyoti Prakash case,
supra). Whether a personal hearing should be given or not will depend on the circumstances of each case. See further,
Charanlal Sahu v UOI,386 where the Supreme Court in the matter of Bhopal Gas disaster said that where a statute
conferring the power is silent with regard to the giving of a pre-decisional hearing to the person effected, a decision arrived
at without hearing but providing post decisional hearing may also be good.
When the affected party requests the adjudicatory body to exercise its power to summon witness and documents to prove
his defence, it would be a denial of natural justice to him if his request is not acted upon.387 When the adjudicator lacks
coercive power to compel attendance of witnesses and production of documents, it is enough if he takes evidence of such
witnesses as are produced before him by the party affected. The adjudicator may help the party to secure the attendance of
witnesses by issuing letters of request to them though in the absence of any legal provision to compel their attendance, they
may or may not appear in answer thereto.388
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[s 36] Power of Commission to regulate its own procedure
Appearance of a lawyer is not claimable as a matter of right. But in a case where complicated questions of law and fact
arise, where the evidence is elaborate and the party concerned may not be in a position to meet the situation himself
effectively, denial of legal assistance may amount to a denial of natural justice.389
It is only where there is nothing in the statute to actually prohibit the giving of an opportunity to be heard, but on the other
hand, the nature of the statutory duty imposed itself necessarily implied an obligation to hear before deciding that the audi
alteram partem rule could be imported.390
The COMPAT in the case of Himachal Pradesh Society of Chemist & Druggist Alliance v Rohit Medical Store391 set
aside the order of the Commission and remitted the matter back to the Director General to conduct fresh investigations on
grounds of violation of principles of natural justice. The Tribunal noted that the Commission did not deal with allegations
made by the appellants who had taken specific plea of violation of the principles of natural justice before the Commission
by pointing out that the Director General relied upon the statement made by Respondent and the unverified documents
produced by him without giving an opportunity to cross-examine him. Also, it was alleged that the Director General had
relied upon his personal knowledge for recording a finding against them and this was contrary to the basic principle that
“no one should be a judge in his own cause”. The Tribunal held that the Commission was duty bound to consider and
decide on the pleas made by the appellants before delving into the merits of the findings recorded in the report of the
Director General.
(a) One who hears must decide
In the case of Lafarge India Ltd v Competition Commission of India,392 the question before the Tribunal was whether the
Chairperson of the Commission who did not hear arguments of the learned counsel representing the appellants could
become a party to the final order passed under section 27 of the Competition Act, 2002, whereby, the appellants were held
guilty of having acted in violation of sections 3(3)(a) and 3(3) (b) read with section 3(1) of the Act and penalty at 0.5 times
of net profit for 2009/2010 (from 20 May 2009) and 2010/2011 was imposed on 10 appellants (manufacturers of cement)
and penalty of 10% on total receipts for two years was imposed on the Cement Manufacturer’s Association. The stand
taken by the Commission was that adjudication of issues relating to anti-competitive agreements, abuse of dominant
position and regulation of combinations is purely an administrative function and as such the orders passed under sections
3, 4 and 6 read with section 27 cannot be termed as quasi-judicial so as to attract the application of the principles of natural
justice. Further, it was argued that the powers exercised by the Commission under the Act are meant to promote and
sustain competition in markets, to protect the interest of consumers and to ensure freedom of trade carried on by different
participants in the markets and, therefore, it is not bound to comply with the rule of audi alteram partem in strict sense. An
alternative plea taken by the Commission was that various provisions of the Act are regulatory in nature and as such, it was
not bound to comply with the rule of hearing, etc. The Tribunal firstly tried to determine whether in exercise of its
adjudicatory functions, the Commission acts as a quasi-judicial body and as such, it is bound to comply with the principles
of natural justice and whether non-compliance of an important facet of natural justice, namely “only the one who hears
should decide” has the effect of rendering the impugned order a nullity.
The Tribunal, after an analysis of various provisions of the Act, held that procedure required to be followed by the Director
General for conducting investigation and by the Commission as a prelude to the passing of orders/issue directions under
section 27 and/or the various provisions contained in Chapter VI of the Act and corresponding regulations is akin to the
procedure required to be followed by the Civil Court for deciding a suit except that the Director General and the
Commission are not bound by the technicalities of the procedure contained in the Code of Civil Procedure, 1908 and rules
embodied in the Indian Evidence Act, 1872 except to the extent indicated in the Act.393 It was noted that while amending
the Competition (Amendment) Act, 2007 and 2009 (Act 39 of 2007 and Act 39 of 2009), Parliament consciously decided
to retain provisions relating to adjudicatory functions of the Commission in their full vigor. Therefore, the mere fact that
the business of the Commission is required to be transacted in its meetings by virtue of substituted section 22, which would
necessarily include exercise of adjudicatory functions/powers, cannot lead to an inference that while deciding the
allegations contained in the information filed or reference made under section 19(1)(a) and passing orders under sections
27, 33, 39, 42, 42A, 43, 43A, 44 and 45, the Commission exercises purely administrative power or discharge
administrative functions or that while passing orders under those sections and also under section 28, which can have far-
reaching impact on the rights of the parties, the Commission is not required to act as per the accepted standard of fairness
and render just decision after complying with the principles of natural justice as expounded by the Courts across the globe
including the Supreme Court of India.394
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[s 36] Power of Commission to regulate its own procedure
Reference was made to the Supreme Court decision in Competition Commission of India v Steel Authority of India Ltd,395
where the Court held:
The various provisions of the Act deal with the establishment, powers and functions as well as discharge of adjudicatory functions
by the Commission. Under the scheme of the Act, this Commission is vested with inquisitorial, investigative, regulatory,
adjudicatory and to a limited extent even advisory jurisdiction. Vast powers have been given to the Commission to deal with the
complaints or information leading to invocation of the provisions of sections 3 and 4 read with section 19 of the Act.
Again, in the case of Rangi International Ltd v Nova Scotia Bank,396 a two-Judge Bench of the Supreme Court considered
the question of whether the Commission and the Appellate Tribunal should record reasons in support of their orders and
observed that the Commission as well as the Tribunal were exercising very important quasi-judicial functions and their
orders should be supported by reasons. The Court went on to then refer to decisions of various High Courts and Supreme
Court to emphasise that the Commissions, Tribunals and other administrative bodies clothed with the power to adjudicate
upon the rights of the parties or pass orders adversely affecting a person or a body of persons or imposing penalty for
contravention of any statutory provision or otherwise were bound to act justly, fairly and in consonance with the principles
of natural justice.
Multiple decisions of Supreme Court and High Courts397 were relied upon along with para 6 of the European Convention
on Human Rights and Fundamental Freedoms of 1950, to emphasise on the following points:
1. The concept of rule of law would lose its vitality if the instrumentalities of the State are not charged with the duty
of discharging their functions in a fair and just manner. The requirement of acting judicially in essence is nothing
but a requirement to act justly and fairly and not arbitrarily or capriciously. The procedures which are considered
inherent in the exercise of a judicial power are merely those which facilitate if not ensure a just and fair decision.
2. If the purpose of the rules of natural justice is to prevent miscarriage of justice, one fails to see why those rules
should be made inapplicable to administrative enquiries. Often times it is not easy to draw the line that
demarcates administrative enquiries from quasi-judicial enquiries.398
3. This unwritten right of hearing is fundamental to a just decision by any authority which decides a controversial
issue affecting the rights of the rival contestants.399
4. “Fair hearing is a postulate of decision making cancelling a poll, although fair abridgement of that process is
permissible. It can be fair without the rules of evidence or form of trial. It cannot be fair if apprising the affected
and appraising the representations is absent”.400
5. A tribunal or a person to whom judicial or quasi-judicial functions are entrusted is presumed to have an
obligation to act with fairness that is not only the obligation to observe the principles of natural justice but, on the
contrary, to observe a higher standard of behaviour than that required by natural justice.401
6. Personal hearing enables the authority concerned to watch the demeanor of the witnesses and clear up his doubts
during the course of the arguments, and the party appearing to persuade the authority by reasoned argument to
accept his point of view. If one person hears and another decides, then personal hearing becomes an empty
formality.402
7. A person who hears must decide and that divided responsibility is destructive of the concept of hearing is too
fundamental a proposition to be doubted. The very person/officer who accords the hearing to the objector must
also submit the report/take decision on the objection and in case his successor decides the case without giving a
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[s 36] Power of Commission to regulate its own procedure
fresh hearing, the order would stand vitiated having been passed in violation of the principles of natural
justice.403
The Tribunal noted that even though the Chairman was not present during the hearing held on 21, 22 and 23 February
2012, he not only participated in the decision-making process but also initialled each page of the final order, which is
strongly indicative of the fact that he had authored the impugned order. As per the Tribunal, the Chairperson’s
participation in the decision-making process had salutary effect on the final verdict. The Tribunal also rejected the
argument that no prejudice was caused to the appellants due to the participation of the Chairperson in the decision-making
process. Accordingly, the impugned order was held to be vitiated due to the violation of one of the facets of the principles
of natural justice and the appeal was allowed.
In All India Organisation of Chemists and Druggists v Competition Commission of India,404 the Tribunal observed that
the statement contained in the Commission’s order405 that the Commission had perused the material available on record
besides hearing the counsel for the appellant at length was factually incorrect because the date on which the arguments
were heard, ie, 27 February 2014, the Chairperson and two members, namely, Shri Sudhir Mittal and Shri Augustine Peter
were not present. Two of the five members who signed the impugned order had joined the Commission after more than 1½
months of the date of hearing. The Tribunal held that such order was vitiated due to flagrant violation of the basics of
natural justice. Reference was made to the Supreme Court decision in the case of Gullapalli Nageswara Rao v Andhra
Pradesh State Road Transport Corp,406 where it was held that an order passed by a person who had not heard the
arguments offends the principle of judicial procedure.
... Personal hearing enables the authority concerned to watch the demeanour of the witnesses and clear up his doubts during the
course of the arguments, and the party appearing to persuade the authority by reasoned argued to accept his point of view. If one
person hears and another decides, then personal hearing becomes an empty formality. We therefore hold the said procedure
followed in this case also offends another basic principle of judicial procedure.407
Similarly, in the Bengal Chemist and Druggist Association case,408 the Tribunal held that since the members were not
given a copy of the main investigation report, on the basis of which the alleged involvement of them was found, they were
deprived of an effective opportunity to reply or raise objections against the findings and hence the penalty was liable to be
set aside on the basis of violation of principles of natural justice.409
The Tribunal in the case of M/s Sheth & Co v Competition Commission of India,410 in light of the propositions laid down
in Lafarge India Ltd v Competition Commission of India,411 connected appeals decided on 11 December 2015, set aside
the order of the Commission on grounds of violation of principles of natural justice. The Tribunal held that the
participation of Shri Sudhir Mital in the decision-making process despite the fact that he had not heard the arguments of
the advocates/representatives of the appellants and other suppliers of the product has the effect of vitiating the impugned
order on the ground of breach of one of the facets of the principles of natural justice and on that ground, the impugned
order is liable to be set aside.412
The Tribunal vide order dated 1 July 2016 in the case of Indian Jute Mills Association v CCI413 set aside the order of the
Commission on the grounds of violation of principles of natural justice. The Tribunal noted that the participation of Mr UC
Nahata, one of the members who joined the Commission more than three years after filing of the case, in the decision
making of the Commission vitiated the order due to violation of principles of natural justice as he was not part of earlier
hearing in the CCI. The same issue was considered by the Tribunal in the Coal India case414 and others and connected
matters decided on 17 May 2016 and it was observed:
12. The question of whether a person, who is a member of an adjudicatory body and has not, heard the parties, can
adjudicate upon their rights and/or pass an order adversely affecting either party is no longer res-integra and must be
answered in negative in view of the judgements of the Supreme Court. That question was first considered in Gullapalli
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[s 36] Power of Commission to regulate its own procedure
Nageswar Rao v Andhra Pradesh State Road Transport Corp415. The Supreme Court reversed the order of the High Court
and held:
... In the case of quasi-judicial proceedings, the authority empowered to decide a dispute between opposing parties must be one
without bias towards one side or other in the dispute. It is also a matter of fundamental importance that a person interest in one
party or the other should not, even formally, take part in the proceedings though in fact he does not influence the mind of the
person, who finally decides the case. This is one the principle that justice should not only be done, but should manifestly and
undoubtedly be seen to be done. The hearing given by the Secretary, Transport Department, certainly offends the said principle of
natural justice and the proceedings and the hearing given, in violation of that principle, are bad.
(b) Nemo debet esse judex in propria suo causa rule
This latin maxim is a rule against bias and means that no man shall be a judge in his own cause. In the words of BOWEN, LJ:
“Judges, like Caesar’s wife, should be above suspicion”. The idea underlying the rule prohibiting a judge to adjudicate
upon a case to which he is a party or in which he is interested has most salutary influence on the adjudicatory tribunals.
LORD CRANWORTH, LC said:
... a judge ought to be, and is supposed to be, indifferent between the parties. He has, or is supposed to have, no bias inducing him
to lean to the one side rather than to the other. In ordinary cases it is just ground of exception to a judge that he is not indifferent,
and the fact that he is himself a party, or interested as a party, affords the strongest proof that he cannot be indifferent.416
It is well settled that every member of a tribunal that is called upon to try issues in judicial or quasi-judicial proceedings
must be able to act judicially; and it is of the essence of the judicial decision and judicial administration that judges should
be able to act impartially, objectively and without bias.417 The test always is and must be whether a litigant could
reasonably apprehend that a bias attributable to a member of the tribunal might have operated against him in the final
decision of the tribunal (ibid). The principle is not confined to judges but extends to any authority vested with quasi-
judicial functions.
Pecuniary interest, however small, would wholly disqualify a person from acting as a judge.418 Personal bias towards a
party owing to relationship and the like the personal hostility to a party may equally disqualify a judge.419
In the case of official bias, the officer is not actuated by any personal ill-will. He is so imbued with the desire to promote
the departmental policy that he becomes blind to the existence of the interest of the private individuals. Official bias is not
tolerated by Courts even if it is sanctioned by statute. In this connection, the observations of SUBBA RAO, J in Gullapalli
Nageswara Rao v Andhra Pradesh State Road Transport Corp,420 are noteworthy:
It is not out of place here to notice that in England the Parliament is supreme and, therefore, statutory law, however repugnant to
the principles of natural justice, is valid; whereas in India, the law made by Parliament or a State legislature should stand the test of
fundamental rights declared in Part II of the Constitution.
A quasi-judicial body is not to be directed as to how it should decide a specific matter.
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[s 36] Power of Commission to regulate its own procedure
In the case of administrative or executive authorities, the Government could direct them to carry out their functions in a particular
manner. But the same cannot be said of a quasi-judicial authority. Although, the Government may have appointed it, may be
paying it and may have the right to take disciplinary action against it in certain eventualities, yet, in the very nature of thing, where
the rule of law prevails, it is not open to the Government to control the functioning of a quasi-judicial authority and to direct it to
decide a particular matter before it in particular manner.421
Where a tribunal consists of several members, bias on the part of one of the members is sufficient to vitiate the
decision.422 In deciding the question of bias, human probabilities and ordinary course of human conduct have to be taken
into consideration. In a group deliberation and decision like that of a Selection Board, the members do not function as
computers. Each member of the group or board is bound to influence the others. More so if the member concerned is a
person with special knowledge. His bias is likely to operate in a subtle manner.423
The decision of a quasi-judicial authority must be based on materials before it and not on the findings or directions of any
outside authority, however eminent it may be.424 This principle is violated even where the quasi-judicial tribunal feels that
he cannot refuse to comply with the directions of an administrative superior except for reasons to be recorded.425 It is a
basic principle of judicial procedure that the person who hears must decide the case and not another person.426 Hence, if
an officer, who is bound under the law to give a personal hearing, is transferred, his successor-in-office cannot decide the
matter without giving a fresh hearing.427
3. Reasoned decisions.—speaking orders.—An extension of the principle of natural justice requires a reasoned decision.
A quasi-judicial tribunal must give reasons for its order,428 or else, the supervisory jurisdiction of the superior Courts
under Article 136 or 226 or 227 of the Constitution will be rendered nugatory.429 This does not mean that such authority
should write out a judgment, like that of a Court of law, but that it must give an outline of the process of reasoning by
which it arrives at its decision,430 or that reasons must be recorded separately even where the order speaks for itself as
regards the reasons which have led to it,431 or the impugned order merely concurs with a statutory report of another
authority, which gives reasons.432 Nor does it follow that, in the absence of any statutory requirement, a statutory tribunal
must give its judgment in writing or that it must always give reasons for its decisions immediately with its
pronouncement.433 The adjudicator will have to give such reasons for his decision as may be regarded fair and legitimate
by a reasonable man and thus it will minimise chances of irrelevant or extraneous considerations from entering his
decisional process, and it will minimise chances of unconscious infiltration of personal bias or unfairness in the
conclusion. Statement of reasons also gives satisfaction to the party against whom the decision is made. Justice should not
only be done but should also seem to be done. An unreasoned decision may be just but may not appear to be so to the
person affected. A reasoned decision, on the other hand, will have the appearance of justice. SUBBA RAO, J, in MP
Industries v UOI.434 LORD DENNING in Breen v Amalgamated Engineering Union:435
Recording of reasons is the only visible safeguard against possible injustice and arbitrariness. Reasons, if given, substitute
objectivity for subjectivity. Reasons, if recorded, indicate whether the adjudicatory or administrative authority has acted bona fide
or otherwise.
Cited in Manab Kumar Mitra v Orissa.436
The faith of the people in administrative tribunals can be sustained only if the tribunals act fairly and dispose of the matters
before them by well considered orders.437 Reiterating the same thing in SN Mukherjee v UOI,438 the Supreme Court said
that a recording of reasons serves a statutory purpose, eg, it excludes chances of arbitrariness and assures a degree of
fairness in the process of decision making. The court followed its own decision in Raipur Development Authority v
Chokhamal Contractors.439
In Bombay Oil Industries Pvt Ltd v UOI (supra), the Supreme Court observed in the context of MRTP Act, 1969 that:
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[s 36] Power of Commission to regulate its own procedure
we must, however, impress upon the Government that while disposing of applications under sections 21, 22 and 23 of the
Monopolies and Restrictive Trade Practices Act, 1969, it must give good reason in support of its order and not merely state its bald
conclusion. The faith of the people in administrative tribunal can be sustained only if the tribunals act fairly and dispose of the
matters before them by well considered orders. The relevant material must be made available to the objectors because, without it,
they cannot possibly meet the claim or contentions of the applications under sections 21, 22 and 23 of the MRTP Act. The refusal
of the Government to furnish such material to the objectors can amount to a denial of a reasonable opportunity to the objectors to
meet the applicant’s case. And denial of a reasonable opportunity to meet the other man’s case is denial of natural justice. On the
question of the need to give reasons in support of the conclusions to which the Government has come, the authorities concerned
may, with profit, see the Judgments of this Court in UOI v Mohan Lal Capoor.440
Distinguishing this in National Institute of Mental Health and Nuro Sciences v KK Raman,441 the Supreme Court held that
where a selection committee is composed of men of high status who are unquestionably impartial and their function is also
of administrative nature, the Court would not lightly interfere in the decision of the Committee and statement of reasons
would not be necessary. The Court followed in this respect, RS Das v UOI,442 where the Court held that sufficient
compliance with the requirement of natural justice was made when the enquiry committee afforded the full opportunity of
hearing to the judge in question in respect of contesting the charges against him.
The giving of reasons in support of their conclusions by judicial and quasi-judicial authorities when exercising initial
jurisdiction is essential for various reasons. Firstly, it is meant to prevent unfairness or arbitrariness in reaching the
conclusions. The very search for reasons will put the authority on the alert and minimise the chances of infiltration of
personal bias in the conclusion. Secondly, it is a well-known principle that justice should not only been done but should
also appear to have been done. Unreasoned conclusions may be just but they may not appear to be just to those who read
them. Reasoned conclusions, on the other hand, will have also the appearance of justice. Thirdly, it should be noted that an
appeal generally lies from the decision of judicial and quasi-judicial authorities to the High Court and Supreme Court by
special leave granted under Article 136. A judgment which does not disclose the reasons, will be of little assistance to the
court.443
When a statute itself requires reasons to be recorded for taking an action of a quasi-judicial character, the provision is
treated as mandatory and the failure to record reasons would be fatal to the action taken. In Verma (CL) v State of MP,444
the Supreme Court emphasised that a statutory rule would prevail over administrative instructions. See also Neelima Misra
v Harinder Kaur Paintal,445 where the Supreme Court distinguishes administrative action from a quasi-judicial decision
and prescribes the requirement of fairness in all cases.
The Supreme Court has also emphasised the need to give reasons for passing ex-parte orders of injunction.446
In Shri Krishna Tiles & Potteries (Madras) P Ltd v CLB,447 it was held that the functions of the Central Government or
the Company Law Board under section 399(4) in granting an authorisation to a member to file a petition under section
397/398, is not quasi-judicial but purely administrative function. No prior notice or hearing need be given to the company
before granting an authorisation, nor is there any need of granting authorisation supported by reasons.
In Competition Commission of India v Steel Authority of India Ltd,448 the Supreme Court noted that the compliance of
principles of natural justice can be classified under three categories. First, where application of principles of natural justice
is excluded by specific legislation; second, where the law contemplates strict compliance to the provisions of principles of
natural justice and default in compliance thereto can result in vitiating not only the orders but even the proceedings taken
against the delinquent; and third, where the law requires compliance to these principles of natural justice, but an irresistible
conclusion is drawn by the competent court or forum that no prejudice has been caused to the delinquent and the non-
compliance is with regard to an action of directory nature. The cases may fall in any of these categories and therefore, the
Court has to examine the facts of each case in light of the Competition Act, 2002 or the Rules and Regulations in force in
relation to such a case. It is not only difficult but also not advisable to spell out any straightjacket formula which can be
applied universally to all cases without variation.449
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[s 36] Power of Commission to regulate its own procedure
Whether in terms of section 26(1) of the Act read with Regulations in force, it is obligatory upon
the Commission to issue notice to the parties concerned and then form an opinion as to the existence of a prima facie case,
or otherwise, and to issue direction to the Director General to conduct investigation in the matter?
The intimation received by the Commission from any specific person complaining of violation of section 3(4) read with
section 19 of the Act, sets into motion the mechanism stated under section 26 of the Act. Section 26(1) requires the
Commission to form an opinion whether or not there exists a prima facie case for issuance of direction to the Director
General to conduct an investigation. This section does not mention about issuance of any notice to any party before or at
the time of formation of an opinion by the Commission on the basis of a reference or information received by it. Language
of sections 3(4) and 19 and for that matter, any other provision of the Act does not suggest that notice to the informant or
any other person is required to be issued at this stage. In contra-distinction to this, when the Commission receives the
report from the Director General and if it has not already taken a decision to close the case under section 26(2), the
Commission is not only expected to forward the copy of the report, issue notice, invite objections or suggestions from the
informant, Central Government, State Government, Statutory Authorities or the parties concerned, but also to provide an
opportunity of hearing to the parties before arriving at any final conclusion under section 26(7) or section 26(8) of the Act,
as the case may be. This obviously means that wherever the legislature has intended that notice is to be served upon the
other party, it has specifically so stated and there is no compelling reason to read into the provisions of section 26(1) the
requirement of notice, when it is conspicuous by its very absence. Once the proceedings before the Commission are
completed, the parties have a right to appeal under section 53A(1)(a) in regard to the orders termed as appealable under
that provision. Section 53B requires that the Tribunal should give, parties to the appeal, notice and an opportunity of being
heard before passing orders, as it may deem fit and proper, confirming, modifying or setting aside the direction, decision or
order appealed against. The Supreme Court in the SAIL case noted:450
55. Some of the regulations also throw light as to when and how notice is required to be served upon the parties including the
affected party. Regulation 14(7) states the powers and functions, which are vested with the Secretary of the Commission to ensure
timely and efficient disposal of the matter and for achieving the objectives of the Act. Under regulation 14(7)(f) the Secretary of
the Commission is required to serve notice of the date of ordinary meeting of the Commission to consider the information or
reference or document to decide if there exists a prima facie case and to convey the directions of the Commission for investigation,
or to issue notice of an inquiry after receipt and consideration of the report of the Director General. In other words, this provision
talks of issuing a notice for holding an ordinary meeting of the Commission. This notice is intended to be issued only to the
members of the Commission who constitute ‘preliminary conference’ as they alone have to decide about the existence of a prima
facie case. Then, it has to convey the direction of the Commission to the Director General. After the receipt of the report of the
Director General, it has to issue notice to the parties concerned.
56. Regulation 17(2) empowers the Commission to invite the information provider and such other person, as is necessary, for the
preliminary conference to aid in formation of a prima facie opinion, but this power to invite cannot be equated with requirement of
statutory notice or hearing. Regulation 17(2), read in conjunction with other provisions of the Act and the Regulations, clearly
demonstrates that this provision contemplates to invite the parties for collecting such information, as the Commission may feel
necessary, for formation of an opinion by the preliminary conference. Thereafter, an inquiry commences in terms of regulation
18(2) when the Commission directs the Director General to make the investigation, as desired.
57. Regulation 21(8) also indicates that there is an obligation upon the Commission to consider the objections or suggestions from
the Central Government or the State Government or the Statutory Authority or the parties concerned and then the Secretary is
required to give a notice to fix the meeting of the Commission, if it is of the opinion that further inquiry is called for. In that
provision notice is contemplated not only to the respective Governments but even to the parties concerned.
58. The notices are to be served in terms of regulation 22 which specifies the mode of service of summons upon the concerned
persons and the manner in which such service should be effected. The expression ‘such other person’, obviously, would include all
persons, such as experts, as stated in regulation 52 of the Regulations. There is no scope for the Court to arrive at the conclusion
that such other person would exclude anybody including the informant or the affected parties, summoning of which or notice to
whom, is considered to be appropriate by the Commission.
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[s 36] Power of Commission to regulate its own procedure
59. With some significance, we may also notice the provision of regulation 33(4) of the Regulations, which requires that on being
satisfied that the reference is complete, the Secretary shall place it during an ordinary meeting of the Commission and seek
necessary instructions regarding the parties to whom the notice of the meeting has to be issued. This provision read with sections
26(1) and 26(5) shows that the Commission is expected to apply its mind as to whom the notice should be sent, before the
Secretary of the Commission can send notice to the parties concerned. In other words, issuance of notice is not an automatic or
obvious consequence, but it is only upon application of mind by the authorities concerned that notice is expected to be issued.
60. Regulation 48, which deals with the procedure for imposition of penalty, requires under sub-regulation (2) that show cause
notice is to be issued to any person or enterprise or a party to the proceedings, as the case may be, under sub-regulation (1), giving
him not less than 15 days time to explain the conduct and even grant an oral hearing, then alone to pass an appropriate order
imposing penalty or otherwise.
The Supreme Court held that a cumulative reading of the provisions, in conjunction with the scheme of the Competition
Act, 2002 and the object sought to be achieved, suggested that it will not be in consonance with the settled rules of
interpretation that a statutory notice or an absolute right to claim notice and hearing can be read into the provisions of
section 26(1) of the Act. Discretion to invite has been vested in the Commission, by virtue of the Regulations, which must
be construed in their plain language and without giving it undue expansion.
The Tribunal in the case of Sunil Bansal v Jaiprakash Associates Ltd451 held that the Commission’s failure to record
reasons for disagreement with the findings and conclusions recorded in the supplementary investigation report and
communicate the same to the parties to enable them to file replies/objections resulted in violation of the principles of
natural justice, which were required to be followed by the Commission in the discharge of its functions.
Exclusion of Principles of Natural Justice
The exclusion of principles of natural justice by specific legislative provision is not unknown to law. Such exclusion would
either be specifically provided or would have to be imperatively inferred from the language of the provision. There may be
cases where post decisional hearing is contemplated. Still there may be cases where “due process” is specified by offering
a full hearing before the final order is made. Of course, such legislation may be struck down as offending due process if no
safeguard is provided against arbitrary action. It is an equally settled principle that in cases of urgency, a post-decisional
hearing would satisfy the principles of natural justice.452 The provisions of section 26(1) clearly indicate exclusion of
principles of natural justice, at least at the initial stages, by necessary implication. In cases where the conduct of an
enterprise, association of enterprises, person or association of persons or any other legal entity, is such that it would cause
serious prejudice to the public interest and also violates the provisions of the Act, the Commission will be well within its
jurisdiction to pass ex parte ad interim injunction orders immediately in terms of section 33 of the Act, while granting post
decisional hearing positively, within a very short span in terms of regulation 31(2). This would certainly be more than
adequate compliance to the principles of natural justice.453
In Steel Authority of India Ltd through its MD v Jindal Steel and Power Ltd through its Director,454 the question that was
raised was whether the appellant had a reasonable opportunity to present its case. It was contended for the respondent that
there is no requirement of the Commission to invite parties to present their point of view before forming a prima facie
opinion. But the Commission may for the purpose of satisfying itself on any aspect permit the parties to present their point
of view. [See sub-regulation 5(c) of regulation 3 of the Regulations]. In this case, the respondent was granted opportunity
to place materials and to make detailed submission. The Tribunal held that the Commission was allowed to adopt its own
particular procedure (section 36) of the Competition Act, 2002. However, after having done that, it was not open to the
Commission to abandon the opportunity granted midway.
The Tribunal further emphasised that the essential requirement of natural justice was reasonable opportunity to the person
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[s 36] Power of Commission to regulate its own procedure
charged with which in turn, means: (a) a reasonable notice; (b) an adequate notice; (c) a fair consideration of the
explanation; and (d) passing of a speaking order.455 The Tribunal noted:
35. The rules of natural justice operate only in areas not covered by any law validly. In other words they do not supplant the law of
the land but supplement it. The rules of natural justice are not embodied rules. What particular rule of natural justice should apply
to a given case must depend to a great extent on the facts and circumstances of that case, the framework of the law under which the
enquiry is held and the constitution of the Tribunal or body or persons appointed for that purpose.
The Tribunal, granting an extension of time, noted that the materials required to be placed for consideration by the
Commission along with the views, the comments were voluminous and large number of documents were needed to be
filed. The reason indicated for seeking extension of time was certainly plausible and it could not be said to be an endeavour
for wasting of valuable time.
Whether it would be necessary to indicate reasons while forming opinion that a prima facie case
exists?
The Tribunal in SAIL456 emphasised that Reason is the heartbeat of every conclusion and it introduces clarity in an order
and without the same it becomes lifeless.457 Failure to give reasons amounts to denial of justice.458 Reasons substitute
subjectivity by objectivity. The emphasis on recording reasons is that if the decision reveals the “inscrutable face of the
sphinx”, it can, by its silence, render it virtually impossible for the courts to perform their appellate function or exercise the
power of judicial review in adjudging the validity of the decision. Another rationale is that the affected party can know
why the decision has gone against him. One of the salutary requirements of natural justice is spelling out reasons for the
order made; in other words, a speaking-out. The “inscrutable face of the sphinx” is ordinarily incongruous with a judicial
or quasi-judicial performance.
Principles of natural justice - right to cross examination waived
The Commission is required to act in consonance with the principles of natural justice but it is also one of the well-
recognised principles that a party which seeks compliance of the rules of natural justice also has the right to waive that
rights. The right to seek cross-examination of a person whose statement is sought to be relied on against him is personal to
the person concerned and he has the absolute discretion to waive that right. Therefore, where the appellant had not raised
any objection in its reply about denial of the opportunity to cross-examine by the Director General and also did not make
any separate application before the Commission that the persons examined by the Director General should be summoned
for cross-examination, he can be said to have waived his right.459
Maintainability of writ petition
Alternative remedy has been consistently held by the Supreme Court not to operate as a bar in at least three contingencies,
namely, where the writ petition had been filed for the enforcement of any of the Fundamental Rights or where there had
been a violation of the principle of natural justice or where the order or proceedings were wholly without jurisdiction or the
vires of an Act was challenged.460 Consequently, a writ petition challenging an order of COMPAT was maintainable on
limited grounds.461 However, issues of applicability of the Competition Act, 2002 and levy of penalty were not equivalent
to lack of inherent jurisdiction to decide the case. Therefore, it was only the Competition Commission of India and
COMPAT which had the jurisdiction to decide the issue of applicability of the Competition Act, 2002.462
Cases where no violation of Principles of Natural Justice was held
In the case of Shamsher Kataria Informant v Honda Siel Cars India Ltd,463 it was contended that only the Commission
had the power to initiate an investigation and the Director General’s exercise of power to unilaterally expand the scope of
Page 17 of 34
[s 36] Power of Commission to regulate its own procedure
the investigation with the prior permission of the Commission was an instance of “excessive delegation”, which was ultra
vires to the provisions of the Competition Act, 2002 and in violation to the principles of natural justice. The Commission
held that the Director General had brought the matter to the Commission and thereafter exercising its power under the Act,
the Commission had allowed the request in order to achieve the objectives of the Act, as mentioned in the Preamble and in
discharge of its functions under section 18 of the Act. The Commission, therefore, could not be said to have committed any
irregularity by allowing the request of Director General for doing thorough and complete investigation as mandated under
the Act for achieving its objectives. It was also noted that all Opposite parties were given ample opportunity by the
Director General to present their case and without exception all of them had indeed taken that opportunity to make detailed
submissions and they were also heard at length by the Commission and further allowed to submit written arguments. All
these facts demonstrated that principles of natural justice were followed by the Commission at every stage of inquiry and
none of the Opposite parties had claimed that Director General had drawn findings against it without affording sufficient
opportunity of hearing.464
In the case of M/s Gulf Oil Corp Ltd,465 it was argued before the Tribunal that the copy of the objections of Coal India Ltd
(CIL) was not supplied to any of the appellants. It was also strongly pleaded that the documents on which the CIL had
relied, were also not supplied to any of the appellants and this caused the denial of natural justice to all these parties. The
Tribunal, however, noted that all the appellants had adequate notice of the hearings and had the notice of the report of the
Director General, which was sent to them in which they were invited to record their objections and suggestions, if any.
Further, it was noted that barring representatives of two companies namely, Indian Explosives and Blastec and Indian
Explosives and Keltech, nobody else appeared on the said days. Thus, the appellants voluntarily chose not to appear before
the Commission, inspite of the specific directions and the notices. The Tribunal held that there was no duty on the part of
the CIL to serve the copy of the objections and the documents in advance of the hearing and if the appellants had attended
the hearings as per the notice, they would certainly have been justified in seeking all these copies. However, their absence
from the hearing and their complacent attitude in relying upon the Director General’s report has to be taken into
consideration before giving any finding about the denial of natural justice to them. Reference was made to the Supreme
Court decision in the case of NK Prasada v Government of India,466 to emphasise that the principles of natural justice
cannot be put into a straightjacket formula and its application will depend upon the facts and circumstances of each case. It
is also well settled that if a party after having proper notice chose not to appear, he, at a later stage cannot be permitted to
say that he had not been given a fair opportunity of hearing.467
The Tribunal, therefore, rejected the contention that there was a refusal of natural justice on account of non-service of the
copy of the report and documents supplied by CIL.
In Tavoy Apparels Ltd v CCI,468 the Tribunal noted that the consistent view expressed by the Division Benches of
Bombay, Kerala and Madras High Courts was that the inclusion of the name of an entity/enterprise in the Specific
Approval List does not amount to blacklisting and the same need not be preceded by an action-oriented notice. Also,
opportunity of hearing represents the correct position of law and the action taken by Respondent No 2 vide letter/circular
dated 6 August 1999 cannot be castigated as arbitrary, unreasonable or violative of the rules of natural justice. The
Tribunal held that the very fact that the appellants waited for good six years before filing writ petition under Article 226 of
the Constitution and an information under section 19(1)(a) militates against their claim that the impugned action is
contrary to the rules of natural justice.
COMMISSION’S POWER TO REGULATE ITS OWN PROCEDURE [SUB-SECTION (1)]
Commission is empowered to frame its own regulations for the conduct of its business.
For conducting inquiry and passing orders, as contemplated under the provisions of the Competition Act, 2002, the
Commission is entitled to evolve its own procedure under section 36(1) of the Act. However, the Commission is also
vested with the powers of a Civil Court in terms of section 36(2) of the Act, though for a limited purpose. After completing
the inquiry in accordance with law, the Commission is required to pass such orders as it may deem appropriate in the facts
and circumstances of a given case in terms of sections 26 to 31 of the Act.
For text of the Competition Commission of India (General) Regulations, 2009, refer to Appendix 1.
Page 18 of 34
[s 36] Power of Commission to regulate its own procedure
POWER OF CIVIL COURT [SUB-SECTION (2)]
The powers of Civil Court under sub-section (2) have been conferred on the Commission for the purpose of any inquiry
under the Act. The provisions of the Civil Procedure Code, 1908 in relation to matters referred to in sub-section (2) are
mentioned hereunder:
Provisions of Civil Procedure
Code, 1908
Summoning, enforcing attendance and : section 31 and Os IX, XVI and XVIII
examination of witnesses under clause (a)
Discovery and production of documents : Os XI and XIII
under clause (b)
Proof by affidavits under clause (c) : O XIX
Issuing a Commission for examination of : O XXVI
witnesses under clause (d)
Summoning records from courts and public : Os XIII and XVI
offices under clause (e)
Dismissal of application in default or : O XXI
deciding it ex parte
Though the Commission enjoys the powers of a Civil Court, it is not strictly bound by the rules of evidence as provided in
the Indian Evidence Act, 1872. Section 36 also empowers the Commission to regulate the procedure and conduct of its
business.
Opinion evidence may be produced, particularly in the case of expert witnesses and exchange of evidence by way of
affidavits between parties may be permitted by the Commission so that at the hearing, proof need be adduced on the
contested facts alone. Likewise, the Commission may frame issues after endeavouring to arrive at the agreed or provided
facts. The procedure that may be followed by the Commission in conducting inquiries under the Competition Act, 2002, is
regulated by the regulations framed by the Commission under section 36 of the Act and the provisions of the Civil
Procedure Code, 1908 would apply to the extent so provided in the Regulations.
Whether a person summoned for investigation (and whose statement may be recorded) has the right
to be represented by an advocate merely because the Authority investigating is empowered to take evidence?
Section 36(2) of the Competition Act, 2002 provides the Director General powers similar to that of a Civil Court and allows
him to take evidence. Section 36 is given further content through Regulation 41 and 43 of the Competition Commission of
India Regulations, which also clarifies that the Director General is authorised under the Competition Act, 2002 to take
evidence. The Director General thus has been held to fall under Section 30(ii) of the Advocates Act, 1961, as being a
person “legally authorized to take evidence”. Therefore, advocates under section 30 would have the right to practice before
such individual. The right of practice of an advocate and the right of a litigant to engage the services of an advocate being
firmly entrenched in the Advocates Act, 1961 and through the Constitution, restrictions on such a right must be clearly
spelt out in the legislation. In the absence of any express stipulation, restriction cannot be read in to the statute. The Delhi
High Court has, however, observed:
Page 19 of 34
[s 36] Power of Commission to regulate its own procedure
23. At the same time, this Court is alive to the concerns raised by the CCI that if parties are allowed
to be accompanied or represented by advocates in investigations before the DG, the efficacy of the investigation may be hampered
and the collection of evidence may become onerous or cumbersome. The concern of CCI, furthermore that during the course of
investigation and recording of evidence of a witness, the active participation of a counsel may not be conducive to the larger
public interest in promoting competition, because the likelihood of a counsel cautioning (either orally, or through non verbal
communication) a witness from making or refraining from making a statement. In that regard, the Commission or the DG, as the
case may be, lay prescribe, in the order, during the course of proceeding, when a request for representation by counsel is made, an
appropriate procedure to be followed during such investigation, where the counsel may be allowed to accompany the party, but
not continuously confer with him when the DG is taking his or her testimony or asking questions. Therefore, while the party is
allowed his right to be accompanied by an advocate, the DG’s investigations are not unnecessarily hindered. The Commission
having regard to the appropriate best practices across jurisdictions in antitrust matters may formulate such procedures and
incorporate them in regulations; till then, it is open to the DG to make appropriate procedural orders. This court feels additionally
that this precautionary note is essential, because often there can be situations where the prominent presence of a counsel might
hinder questioning of the witness by the investigating officers or the Director General. Apart from non-verbal communication, the
counsel might restrict the element of surprise that is essential when collecting such evidence. Therefore, the DG shall ensure that
the counsel does not sit in front of the witness; but is some distance away and the witness should be not able to confer, or consult
her or him. The Court does not deem it necessary or appropriate to say more on this aspect of the matter, leaving it to the
Commission to decide the appropriate course. 469
Case law under MRTP Act, 1969
The MRTPC had the powers of the Court in the matter of discovery and production of documents, during the course of
enquiry. In some of the cases, the respondents objected to the delivery of interrogatories and for seeking better particulars
and discovery of documents. The views of the Commission in such cases are as under:
— In Re Ballarpur Industries Ltd,470 it was held that the enquiry under the MRTP Act, 1969 is not in the nature of
trial under the adversary system of dispensation of justice. Under the MRTP Act, 1969, the Commission is
expected to serve a public cause namely checking anti-competitive trade practices in the larger interests of the
consumers. It is with that object in view that section 12 specifically confers on the Commission the powers to
require any person to produce books, accounts or other documents relating to any trade practice examination of
which may be required for the purpose of the Act and to furnish such information in relation to a trade as may be
required. Regulation 74 of the MRTPC Regulations471 has been adopted to give effect to these provisions of
section 12 of the MRTP Act, 1969.
— In Re WS Insulators of India Ltd,472 interrogatories were sought to be delivered to the respondent in respect of
alleged restrictive trade practice for linking the debentures with equity shares on rights basis. The Commission
held that this aspect may have to be proved by direct evidence or by the surrounding circumstances. The object of
delivering interrogatories is to curtail evidence. Under O XI rule 7 of the Civil Procedure Code, 1908, an
interrogatory may be set aside on the ground that the same has been exhibited unreasonably or vexatiously or that
it is prolix, oppressive, unnecessary or scandalous.
— In Re Parle (Exports) Pvt Ltd,473 it was held that:
in Raj Narain v Smt. Indira Gandhi,474 the Supreme Court held that questions that may be relevant during
cross-examination are not necessarily relevant as interrogatories. The only questions that are relevant as
interrogatories are those relating to “any matters in question”. The interrogatories served must have
reasonably close connection with “matters in question”.
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[s 36] Power of Commission to regulate its own procedure
It should have been mentioned in the application as to how the interrogatories were relevant. But that lacuna
is not fatal to the application. Such a lacuna could be fatal in proceedings strictly in accordance with
“adversary system”. Here the Director General cannot be termed as an adversary because his organisation is
to assist the Commission in discharging its functions. If he had committed any omission in drafting the
application, he can show at the time of arguments that such application does not suffer from any defect of
substance.
Originally, sub-section (3) provided that the proceedings before the Commission are deemed to be judicial proceedings for
purposes of punishment in case of false evidence or contempt committed by way of insult or interruption of its proceedings
under sections 193 and 228 of the Indian Penal Code, 1860 and the Commission may adopt the procedure laid down in
section 195 and Chapter XXVI of CrPC, 1973, and will be treated as a civil court in relation to these offences. However,
the said provisions were omitted by the Amendment Act, 2007.
PRODUCTION OF BOOKS OF ACCOUNT, ETC. [SUB-SECTION (4)]
Sub-section (4) confers additional and special power on the Commission, not available to Civil Court. The power is,
however, circumscribed inasmuch as it has been related to “any trade the examination of which may be required for the
purposes of this Act”. “Trade” has been defined in section 2(x) rather widely. A trade becomes subject-matter of
examination only when it is in the nature of anti-competitive agreement, abuse of dominant position or combination. Since
sub-section (4) does not use the qualifying words “inquiry under the Act”, but instead, mentions examination of trade, the
said power is exercisable by the Commission for investigation also, before a formal inquiry is instituted.475 The authority
of the Commission under sub-section (4) is confined to requiring any person to produce before Director General or the
secretary or an officer of the Commission books, or other documents for examination which could be retained for the said
purpose and for information to be furnished on the trade carried on by any other person to the extent known to him.
Though not specifically stated, it appears that the Commission’s jurisdiction for purpose of exercise of these special
powers extends to the whole territory of India excluding the State of Jammu and Kashmir. The provisions of sub-section
(4) cannot enable the Commission to order the production of any privileged document or information not permitted by
section 124 of the Indian Evidence Act, 1872, or privileged communication made to a legal adviser or information as to the
affairs of a customer made to a banker under section 251 of the Companies Act, 1956,476 even though it may relate to any
trade as covered by the Act.
In the case of Eastern India Motion Picture Association (EIMPA),477 the Tribunal noted that the Commission had not
adduced any reason as to why the four office-bearers were required to submit their individual accounts. It was further
noted that there were no allegations against the office-bearers individually and also the Director General had exonerated
the first appellant. The Tribunal emphasised that the directions which are to be followed imperatively under section 48
read with section 36 cannot be given casually. There must be some application of mind before issuing such directions and
the orders must reflect such application of mind. Reference was made to the Supreme Court decision in Rama Vilas
Service Pvt Ltd v C Chandrasekaran;478 MP Industries v UOI;479 N Mukherjee v UOI;480 to emphasise again that the
concerned authority must give an outline of the process of reasoning by which it arrives at its decision. The Tribunal noted
that the Commission was in the role of an adjudicator and hence it was bound to give the reasons for this decision for it
being regarded a fair and legitimate exercise. Recording reasons is the only visible safeguard against possible injustice and
arbitrariness. The Tribunal held:
22. The last words of clause of sub-section (4)(a) namely—”the examination of which may be required for the purposes of this
Act” would in our opinion entail and would require the Commission to state at least prima facie as to why the examination of the
books of accounts was required. The clause of sub-section (4)(b) also uses similar words. Therefore, the Commission would have
to show before issuing any such direction that it has come to the conclusion that it would be necessary to examine such books or
documents or for that matter the Commission would have to come to the conclusion that the information in possession of such
Page 21 of 34
[s 36] Power of Commission to regulate its own procedure
persons would be required for the purposes of this Act. The section is not meant to give an untrammeled and uncontrolled
discretion to the Commission to ask for any information from anybody. It cannot be a mere ipse dixit on the part of the
Commission to decide to call for the production of books and documents or supply of information and the non-compliance of
which would result in the penalty under section 43. We find that the language of sub-sections (4)(a) and (b) of section 36 would
require a deeper examination of the issue as to whether production of books or documents in custody of such persons are necessary
at all, the examination of which would be required for the purposes of the Act. It has not been shown by the Commission in any of
its order, as to how the personal or individual accounts were in any way related to the business of the appellant No. 1. The
relevancy of the personal trade of the Appellants Nos. 2, 3, 4 and 5 in considering the question whether the action taken by
Appellant No. 1 and the its governing rules were anti-competitive and in violation of section 3 of the Act (was bound to be
established). Similar is the case of the information required by the Commission under sub-section (b). We have not found any such
application of mind and it seems that the direction was given as a matter of course. In the absence of any reason, as to why such
directions were necessary, we are unable to agree with the Commission in spite of its finding of breach of its directions under
section 36(4)(a) and (b) and the resultant penalty under section 43. We, therefore, allow this appeal and quash the penalties
inflicted in the impugned order. The impugned order is set aside and the appeal stands allowed.
PROVISIONS OF CONSUMER PROTECTION ACT, 1986 VIS-À-VIS THE COMPETITION
ACT, 2002
Under the Consumer Protection Act, 1986, the consumer dispute redressal authorities set up thereunder viz, the District
Forums, State Commission and the National Commission have been vested with the same powers481 as are enjoyed by the
Competition Commission, ie, to say the powers vested in a Civil Court under the Code of Civil Procedure, 1908 while
trying a suit.482 In regard to the applicability or otherwise of the provisions of Code of Civil Procedure, 1908 in cases
under the Consumer Protection Act, 1986, it has been observed as under:
All the provisions of the Code of Civil Procedure, 1908 are not applicable to the proceedings before the Consumer Dispute
Redressal Authorities and only certain specific provisions enumerated in section 13(4) of the Consumer Protection Act,
1986 are made applicable to such proceedings.483 Even though the Consumer Forums are not governed by all the
provisions of the Code of Civil Procedure, 1908, yet sound principles of law and procedure embodied in the Code of Civil
Procedure, 1908 are followed by the Forums.484 The provisions of O I rule 8 of the Code of Civil Procedure, 1908
(whereunder complaint-petition in a representative capacity for the benefit for general public can be filed) has not been
made applicable to the Consumer Forums under section 13(4) of the Competition Act, 2002 nor by rules framed under the
Act.485 Filing of cross objections under O XLI, rule 22 of the Code of Civil Procedure, 1908, for enhancement of
compensation amount, has not been made applicable to proceedings under the Consumer Protection Act, 1986; if the
complainant felt aggrieved by the order of the Redressal Authority, it ought to file an independent appeal.486
353 Subs. by Amendment Act, 2007 (39 of 2007), section 29 (w.e.f. 12 October 2007). Prior to
its substitution, it stood as under:
[s 36] Power of Commission to regulate its own procedure
(1) The Commission shall not be bound by the procedure laid down by the Code of Civil Procedure, 1908 (5 of 1908), but shall
be guided by the principles of natural justice and, subject to the other provisions of this Act and of any rules made by the
Central Government, the Commission shall have powers to regulate its own procedure including the places at which they shall
have their sittings, duration of oral hearings when granted, and times of its inquiry.
(2) The Commission shall have, for the purposes of discharging its functions under this Act, the same powers as are vested in a
civil court under the Code of Civil Procedure, 1908 (5 of 1908), while trying a suit, in respect of the following matters,
namely:—
Page 22 of 34
[s 36] Power of Commission to regulate its own procedure
(a) summoning and enforcing the attendance of any person and examining him on oath;
(b) requiring the discovery and production of documents;
(c) receiving evidence on affidavits;
(d) issuing commissions for the examination of witnesses or documents;
(e) subject to the provisions of sections 123 and 124 of the Indian Evidence Act, 1872 (1 of 1872), requisitioning any public
record or document or copy of such record or document from any office;
(f) dismissing an application in default or deciding it ex parte;
(g) any other matter which may be prescribed.
(3) Every proceeding before the Commission shall be deemed to be a judicial proceeding within the meaning of sections 193 and
228 and for the purposes of section 196 of the Indian Penal Code (45 of 1860) and the Commission shall be deemed to be a
civil court for the purposes of section 195 and Chapter XXVI of the Code of Criminal Procedure, 1973 (2 of 1974).
(4) The Commission may call upon such experts, from the fields of economics, commerce, accountancy, international trade or
from any other discipline as it deems necessary, to assist the Commission in the conduct of any inquiry or proceeding before
it.
(5) The Commission may direct any person—
(a) to produce before the Director-General or the Registrar or an officer authorised by it, such books, accounts or other
documents in the custody or under the control of such person so directed as may be specified or described in the
direction, being documents relating to any trade, the examination of which may be required for the purposes of this Act;
(b) to furnish to the Director-General or the Registrar or any officer authorised by it, as respects the trade or such other
information as may be in his possession in relation to the trade carried on by such person, as may be required for the
purposes of this Act.
(6) If the Commission is of the opinion that any agreement referred to in section 3 or abuse of dominant position referred to in
section 4 or the combination referred to in section 5 has caused or is likely to cause an appreciable adverse effect on
competition in the relevant market in India and it is necessary to protect, without further delay, the interests of consumers and
other market participants in India, it may conduct an inquiry or adjudicate upon any matter under this Act after giving a
reasonable oral hearing to the parties concerned.
354 AK Kraipak v UOI, AIR 1970
SC 150 : (1969) 2 SCC 262 :
(1970) 1 SCR 457 .
355 Automotive Tyre Manufacturers Association v Designated Authority,
AIR 2011 SC 481 : (2011) 2
SCC 258 : JT 2011 (1) SC 282 :
[2011] 1 SCR 198 : 2011 (263) ELT 481
: 2011 (1) Scale 149 .
Page 23 of 34
[s 36] Power of Commission to regulate its own procedure
356 Maneka Gandhi v UOI, AIR 1978
SC 597 (625) : (1978) 1 SCC 248 :
1964 4 LLJ 418 , per BHAGWAN, J.
357 HWR WADE, Administrative Law, 5th Edn, ELBS (Educational Low-
Priced Book Scheme), 1984.
358 Furnell v Whangarei High Schools Board,
(1973) AC 660 , 697.
359 AK Kraipak v UOI, AIR 1970
SC 150 (156) : 1969 (2) SCC 262 :
(1969) 1 SCA 605 :
(1970) 1 SCR 457 , per HEGDE, J.
360 Suresh Koshy v University of Kerala,
AIR 1969 SC 198 : (1969) 1 SCR 317
.
361 UOI v PK Roy, AIR 1968 SC 850
(858) : (1968) 2 sCR 186 : 1968 2 SCJ 503
: 1968 2 SCR 186 : 1970 1 Lab
LJ 633 : 1968 2 SCWR 41 , per
RAMASWAMI, J.
362 KL Tripathi v State Bank of India,
AIR 1984 SC 273 : (1984) 1 Lab LJ 2
: 1984 1 SCC 43 : 1984 SCC (Lab) 62 :
1983 63 FJR 312 : 1984 1 Lab LJ 2
: [1984] 1 SCR 184 : 1983 (2)
Scale 587 : 1984 1 SCWR 150 .
363 MP Jain and SN Jain, Principles of Administrative Law, Supplement
1989 by MP Jain, 4th Ed, NM Tripathi Private Limited, Bombay, 1986, p 24 of Supplement.
364 AK Kraipak v UOI, AIR 1970
SC 150 at 154 : (1970) 1 SCR 457 :
1969 (2) SCC 262 , followed in Baburao Vishwanath
Mathpati v State, AIR 1996 Bom 227 at 241 : (1995) 2 Bom
CJ 498.
365 Detailed account of the subject can be had from MP Jain and SN Jain,
Principles of Administrative Law, 4th Edn, NM Tripathi Private Limited, Bombay, 1986; HWR Wade, Administrative Law, 5th
Edn, ELBS (Educational Low-Priced Book Scheme), 1984 and De Smith, Judicial Review of Administrative Action, 4th Edn,
Stevens & Sons, 1980.
366 Dhakeswari Cotton Mills v CIT,
AIR 1955 SC 65 : (1955) 1 Mad LJ (SC) 60 : 1954 26 ITR 775 :
1955 SCR 941 : 1955 Andh LT (Civil) 61
: 1955 SCJ 122 :
1955 SCA 96 .
Page 24 of 34
[s 36] Power of Commission to regulate its own procedure
367 SL Kapoor v Jagmohan, AIR 1981
SC 136 : (1980) 4 SCC 379 :
[1981] 1 SCR 746 .
368 State of MP v Chintaman Sadashiva Waishampayan,
AIR 1961 SC 1623 : 1961 Jab
LJ 702 .
369 UOI v TR Verma, AIR 1957
SC 882 : (1958) 1 Mad LJ (SC) 66.
370 East India Commercial Co v Collector of Customs,
AIR 1962 SC 1893 : (1963) 3
SCR 338 : 1963 1 SCA 622 :
1983 13 ELT 1342 .
371 CIT v Bombay Trust Corp Ltd,
AIR 1936 PC 269 .
372 Fedco Pvt Ltd v Bilgrami SN,
AIR 1960 SC 415 : (1960) Mad LJ (SC) 71 : 1960 62 Bom LR
293 : 1960 1 SCA 369 :
1960 Mad LJ (Cri) 184 : 1960 2 SCR 408 :
1960 SCJ 235 : 1999 110 ELT 92
.
373 The Board of Control for Cricket in India (BCCI) v The CCI,
[2015] 128 CLA 186 (CAT) : 2015 Comp LR 548 (COMPAT)
: [2015] 131 SCL 443 (CAT).
374 Para 15, Id.
375 State of Orissa v Dr (Miss) Binapani Dei,
AIR 1967 SC 1269 : (1967) 2 SCR 625
: 1967 2 SCA 393 :
1967 2 SCJ 339 : 1967 2
SCWR 442 : 1967 Mah LJ 993
: 1967 MPLJ 932 :
1967 SCD 551 : 33 Cut LT 583 : [1967] 2 LLJ 266
.
376 Rajesh Kumar v CIT, (2007) 2
SCC 181 : 2006 (11) Scale 409
: JT 2006 (10) SC 76 .
377 Balchandra L Jharkihoili v BS Yeddyurappa,
(2011) 7 SCC 1 : 2011 (6) Scale 172
, [2011] 10 SCR 877 .
378 Ayaaubkhan Noorkhan Pathan v State of Maharashtra,
AIR 2013 SC 58 : (2013) 4 SCC 465
: 2012 (11) Scale 39 :
Page 25 of 34
[s 36] Power of Commission to regulate its own procedure
2012 (5) ESC 663 : 2012 (8) Mad LJ 679 : 2012 AIR SCW
6177 : 2013 (1) ICC 119 : 2013 (1) KCCR 34 SN :
2013 (1) SCT 800 : 2013 (3)
Bom CR 113 : 2013 (4) Mah LJ 561
: 2013 (1) CLR 16 .
379 State of MP v Chintaman Sadashiva Waishampayan,
AIR 1961 SC 1623 : 1961 Jab
LJ 702 .
380 Also see UOI v TR Varma,
AIR 1957 SC 882 : (1958) 1 Mad LJ (SC) 66; Meenglas Tea Estate v Workmen,
AIR 1963 SC 1719 : (1964) 1
SCR 293 : 1963 2 LLJ 396
SC : 1964 1 SCJ 98 :
1963 64 25 FJR 150 ; Kesoram Cotton Mills Ltd v Gangadhar, (1963) II LLJ 371 SC; New
India Assurance Co Ltd v Nusli Neville Wadia, (2008) 3 SCC 279 ;
Rachpal Singh v Gurmit Singh, AIR 2009 SC 2448 :
(2009) 7 Scale 197 : 2009 AIR SCW 4567 :
(2009) 15 SCC 88 : JT 2009
(6) SC 425 ; Biecco Lawrie v State of WB, AIR 2010
SC 142 : (2009) 10 SCC 32 :
2009 AIR SCW 5779 : 2009 (8) Mad LJ 451 : 2009 (10) Scale 334
: 2009 Lab IC 4207 :
[2009] 11 SCR 972 : JT 2009 (10) SC
340 : 2009 (3) SCT 807
and State of UP v Saroj Kumar Sinha, AIR 2010 SC 3131 :
(2010) 2 SCC 772 : 2010 AIR SCW 1077 :
2010 (1) SCT 811 : 2010 (2) Scale 42
: 2010 (3) Mad LJ 742 : 2010 (2) All LJ 441 : 2010 (3) KCCR 47
SN : 2010 (4) All WC 4221 : JT 2010 (1) SC 618
: [2010] 3 SCR 326 .
381 IndiGo Airlines v CCI, Appeal No 07/2016.
382 UOI v TR Verma, AIR
1957 SC 882 : (1958) 1 Mad LJ (SC) 66.
383 Mukhtar Singh v State, AIR 1957
All 297 : 1956 All LJ 878.
384 UOI v Jyoti Prakash, AIR 1971
SC 1093 : (1971) 1 Lab LJ 256
: 1971 2 SCJ 501 :
(1971) 1 SCC 396 : 1972 1 SCA 82
: 1971 3 SCR 483 .
385 Mulchand Gulab Chand v Mukund Shivram,
AIR 1952 Bom 296 : ILR 1952 Bom 766
.
386 Charanlal Sahu v UOI, AIR 1990
SC 1480 : (1990) 1 SCC 613 .
Page 26 of 34
[s 36] Power of Commission to regulate its own procedure
387 Sita Ram v UOI, AIR 1967 Delhi 38
: 69 Pun LR (D) 160.
388 CMP Co-op Soc v State of MP,
AIR 1967 SC 1815 : (1967) 3 SCR 329
: 1968 MPLJ 305 :
1968 1 SCJ 444 : 1968 1 SCR 138
: 1968 BLJR 159 : 1968 All LJ 189 :
1968 Jab LJ 175 .
389 Board of Trustees of the Port of Bombay v DR Nadkarni,
AIR 1983 SC 109 : (1983) 1
SCC 124 ; CL Subramaniam v Collector of Customs, AIR 1972
SC 2178 : (1972) Lab LJ 465 :
(1972) 3 SCC 542 :
[1972] 3 SCR 485 : [1972] 1 LLJ 465
.
390 Schedule Caste & Weaker Section Welfare Association v State of
Karnataka, AIR 1991 SC 1117 :
(1991) 1 SCC 604 : 1991 AIR SCW 1010 : 1991 (1) UJ (SC) 628 :
JT 1991 (2) SC 184 : 1991 (1)
SCR 974 : 1991 (2) JT 184 .
391 Himachal Pradesh Society of Chemist & Druggist Alliance v Rohit
Medical Store, 2016 Comp LR 304 (COMPAT).
392 Lafarge India Ltd v CCI, Appeal No 105 of 2012 and IA No
36/2013, Appeal Nos 103 of 2012, 104, 106, 107, 108, 109, 110, 111, 112, 113, 122, 123, 124, 125, 126, 127, 128, 129, 132, 133
and 134/12.
393 Para 46, Id.
394 Para 47, Id.
395 CCI v Steel Authority of India Ltd, 2010 (5) All MR (SC) 934 : 2010
Comp LR 61 (SC) : (2010) 4 Comp LJ 1 (SC) :
JT 2010 (10) SC 26 : (2011) 2 Mad LJ 271 (SC) : 2010 (9)
Scale 291 : (2010) 10 SCC 744 :
[2010] 103 SCL 269 (SC) : [2010] 11
SCR 112 : 2010 (8) UJ 4093 .
396 Rangi International Ltd v Nova Scotia Bank,
(2013) 7 SCC 160 .
397 State of Orissa v Dr (Miss) Binapani Dei,
AIR 1967 SC 1269 : (1967) 2 SCR 625
: 1967 2 SCA 393 :
1967 2 SCJ 339 : 1967 2
SCWR 442 : 1967 Mah LJ 993
: 1967 MPLJ 932 :
1967 SCD 551 : 33 Cut LT 583 : [1967] 2 LLJ 266
; A Kraipak v UOI, AIR 1970 SC 150 :
Page 27 of 34
[s 36] Power of Commission to regulate its own procedure
(1969) 2 SCC 262 :
(1970) 1 SCR 457 ; Sirsi Municipality v Ceclia Kom Francis Tellis,
(1973) 1 SCC 409 ; Maneka Gandhi v UOI, AIR 1978 SC 697
: (1978) 1 SCC 248 :
1964 4 LLJ 418 ; Mohinder Singh Gill v Chief Election
Commissioner, AIR 1978 SCC 851 :
(1978) 1 SCC 405 : 1978 2 SCR 272
: 1978 2 SCJ 441 ; UOI v
Tulsiram Patel, AIR 1985 SC 1416 :
(1985) 3 SCC 398 : 1985 (2) Scale 133
; Inderpreet Singh Kahlon v State of Punjab, AIR 2006
SC 2571 : (2006) 11 SCC 356
: 2006 (5) Scale 273 :
JT 2006 (5) SC 352 ; Onkar Lal Bajaj v UOI,
AIR 2003 SC 2562 : (2003) 2 SCC 673
: 2002 (9) Scale 501 :
[2002] SUPP 5 SCR 605; Institute of Chartered
Accountants of India v LK Ratna, AIR 1987 SC 71 (6) :
(1986) 4 SCC 537 : [1986] 3
SCR 1049 ; Rasid Javed v State of UP, AIR 2010 SC 2275
: (2010) 7 SCC 781 :
JT 2010 (7) SC 285 ; Automotive Tyre
Manufacturers Association v Designated Authority, AIR 2011 SC 481
: (2011) 2 SCC 258 :
JT 2011 (1) SC 282 : [2011] 1 SCR 198
: 2011 (263) ELT 481 :
2011 (1) Scale 149 ; Swadeshi Cotton Mills v UOI,
AIR 1981 SC 818 :
(1981) 1 SCC 664 : 1981 2 SCR 533
: 1981 (1) Scale 90 : 51 Com Cas 210.
398 Re HK (An Infant),
(1967) 2 QB 617 at p 630.
399 Sayeedur Rehman v State of Bihar,
AIR 1973 SC 239 :
(1973) 3 SCC 333 : 1973 SCD 194
: 1973 1 SCWR 328
: 1974 1 SCJ 442 :
1973 2 SCR 1043 .
400 Mohinder Singh Gill v Chief Election
Commissioner, AIR 1978 SC 851 :
(1978) 1 SCC 405 :
1978 (3) SCR 272 : 1978 2 SCJ 441
.
401 Menaka Gandhi v UOI,
AIR 1978 SC 697 : (1978) 1
SCC 248 : 1964 4 LLJ 418
.
402 UOI v Shiv Raj,
(2014) 6 SCC 564 .
403 UOI v Shiv Raj,
(2014) 6 SCC 564 ; Automotive Tyre Manufacturers Assn v Designated Authority,
AIR 2011 SC 481 :
(2011) 2 SCC 258 : JT 2011 (1) SC 282
Page 28 of 34
[s 36] Power of Commission to regulate its own procedure
: [2011] 1 SCR 198
: 2011 (1) Scale 149 .
404 All India Organisation of Chemists and Druggists v CCI, III
(2015) CPJ 4 COMPAT.
405 Para 8.
406 Gullapalli Nageswara Rao v Andhra Pradesh State Road Transport
Corp, AIR 1959 SC 1376 :
[1959] Supp 1 SCR 319.
407 Also see UOI v Shiv Raj (2014) 6
SCC 564 ; Rasid Javed v State of UP, 17 SCC 796, para 51.
408 Bengal Chemist & Druggists Association v CCI, Appeal No 37 of
2014 [COMPAT].
409 See also AN Mohana Kurup, Mr Thomas Raju v CCI, Appeal No 05
of 2016 [COMPAT]; M/s Alkem Laboratories Ltd v CCI, Appeal No 09 of 2016 [COMPAT]; Chemists & Druggists Association of
Baroda v Vedant Bio-sciences, CCI, Appeal No 140 of 2012 [COMPAT], decided on 18 November 2016.
410 M/s Sheth & Co v CCI, Appeal No 102/2015 [along with M/s Mac
Polymer v CCI, Appeal No 90/2015; M/s Miltech Industries Pvt Ltd, Appeal No 91/2015; M/s Veekay Enterprises v CCI, Appeal
No 103/2015].
411 Lafarge India Ltd v CCI, Appeal No 105 of 2012.
412 Also see M/s Sheth & Co v CCI, Appeal No 102/2015 [along with
M/s Mac Polymer v CCI, Appeal No 90/2015; M/s Miltech Industries Pvt Ltd, Appeal No 91/2015; M/s Veekay Enterprises v CCI,
Appeal No 103/2015]; Coal India v CCI, Appeal No 01/2014, Appeal Nos 44-47/2014, Appeal No 49/2014, Appeal No 70/2014
and Appeal No 52/2015; M/s Alkem Laboratories Ltd v CCI, Appeal No 09/2016.
413 Indian Jute Mills Association v The Secretary, CCI, [COMPAT],
order dated 1 July 2016.
414 Coal India Ltd v CCI, Appeal No 01/2014 [COMPAT].
415 Gullapalli Nageswar Rao v Andhra Pradesh State Road Transport
Corp, AIR 1959 SC 1376 :
[1959] Supp 1 SCR 319.
416 Ranger v Great Western Railway Co, (1854) 5 HLC 72.
417 Manaklal v Dr Prem Chand Singhvi,
AIR 1957 SC 425 : (1957) 1 Mad LJ (Cri) 254 : (1957) SCR 575.
Page 29 of 34
[s 36] Power of Commission to regulate its own procedure
418 Manaklal v Prem Chand, AIR 1957
SC 425 : (1957) 1 Mad LJ (Cri) 254 : (1957) SCR 575.
419 AK Kraipak v UOI, AIR 1970
SC 150 : (1970) 1 SCR 457 :
1969 (2) SCC 262 .
420 Gullapalli Nageswara Rao v Andhra Pradesh State Road Transport
Corp, AIR 1959 SC 1376 : (1960) Mad LJ (SC) 13 :
1960 1 SCR 580 : 1960 SCJ
53 : 1960 1 Andh WR (SC) 13 : 1960 1 Mad LJ (SC) 13.
421 Ramamurthy Reddiar v Chief Commissioner, Pondicherry,
AIR 1963 SC 1464 :
(1964) 1 SCR 656 .
422 Narayana v State of AP, AIR 1958
AP 636 : (1958) Lab LJ 298 .
423 G Sarana v Lucknow University,
AIR 1976 SC 2428 : (1976) 3 SCC 585
.
424 Rajagopala v STAT, AIR 1964
SC 1573 : (1964) 2 Mad LJ 131 : [1964] 7 SCR 1
: 1964 2 SCJ 570 (SC).
425 New Prakash Transport Co Ltd v New Suwarna Transport Co Ltd,
AIR 1957 SC 232 : (1957) 1 Mad LJ (Cri) 157.
426 Gullapalli Nageswara Rao v Andhra Pradesh State Road Transport
Corp, AIR 1959 SC 308 : (1959) 2 Mad LJ (SC) 156.
427 Calcutta Tanneries (1944) Ltd v Commr of IT,
AIR 1960 Cal 543 : ILR (1961) 1 Cal
383 .
428 Siemens Engg and Mfg Co v UOI,
AIR 1976 SC 1785 : (1976) 2 SCC 981
; RB Desai v UOI, (1987) 3 Comp LJ 111 (Del), Anil
Kumar v Residing Officer, AIR 1985 SC 1121 :
(1985) 3 SCC 378 : [1986] 1
LLJ 101 : 1985 (2) Scale 1365
: 1985 UJ (SC) 639; Oranco Chemicals (P) Ltd v Gwalior Rayon Silk Mfg & Wvg Co Ltd,
AIR 1987 SC 1564 : (1987) 2 SCC 620
.
429 Harinagar Sugar Mills Ltd v Shyam Sunder,
AIR 1961 SC 1669 : (1961) 31 Com Cas
387 : 1962 2 SCR 339 :
1963 1 SCJ 471 ; Govindrao v State of MP,
AIR 1965 SC 1222 : (1965) 1
Page 30 of 34
[s 36] Power of Commission to regulate its own procedure
SCR 678 : 1966 1 SCJ 480 :
1965 1 SCWR 1043 :
1965 MPLJ 566 .
430 Rama Vilas Service v Chandrasekaran,
AIR 1965 SC 107 : (1965) 1 Mad LJ (SC) 1.
431 Board of Mining Exams v Ramjee,
AIR 1977 SC 965 : (1977) 2 SCC 256
: [1977] 2 SCR 904 .
432 Tara Chand v Municipal Corp of Delhi,
AIR 1977 SC 567 : (1977) 1 SCC 472
: [1977] 2 SCR 198 l:
[1977] 1 LLJ 331 .
433 Maharashtra SRTC v Balwant,
AIR 1969 SC 329 : (1969) 1 SCR 808
.
434 MP Industries v UOI, AIR 1966
SC 671 : (1966) 1 SCR 466 .
435 Breen v Amalgamated Engg Union,
(1971) 1 All ER 1148 .
436 Manab Kumar Mitra v Orissa,
AIR 1997 Ori 52 , 54 : (1996) 2 Orissa LR 253.
437 Bombay Oil Industries Pvt Ltd v UOI,
(1984) 55 Com Cas 356 (SC).
438 SN Mukherjee v UOI, AIR 1990
SC 1984 , 1995 : 1990 Cri LJ 2148 .
439 Raipur Development Authority v Chokhamal Contractors,
AIR 1990 SC 1426 :
(1989) 2 SCC 721 : JT 1989 (2) SC 285
: 1989 (1) Scale 1279 .
440 UOI v Mohan Lal Capoor,
1974 (1) SCR 797 ; Siemens Engineering & Manufacturing Co of India Ltd v UOI,
AIR 1976 SC 1785 : (1976) 2
SCC 981 : [1976] Supp SCR 489 and Uma Charan v State of MP,
AIR 1981 SC 1915 : (1981) 4 SCC 102
: 1981 SCC (Lab) 582 : 1981 UJ (SC) 736 : 1981 2 Lab LJ 303
.
441 National Institute of Mental Health and Nuro Sciences v KK Raman,
AIR 1992 SC 1806 , 1808 : (1992) 2 SCC (sup)
481.
Page 31 of 34
[s 36] Power of Commission to regulate its own procedure
442 RS Das v UOI, AIR 1987 SC 593
: JT 1986 (1) SC 1043 :
1985 2 Punj LR 593 :
[1987] 1 SCR 527 . See further Sarojini Ramaswami v UOI,
AIR 1992 SC 2219 , 2265 : (1992) 4 SCC 506
: JT 1992 (5) SC 1 .
443 Woolcombers of India Ltd v Woolcombers Workers’ Union,
AIR 1973 SC 2758 :
(1974) 3 SCC 318 : 1973 SCC (Lab) 551 : 1974 1 SCR 504
: [1974] 1 LLJ 138 :
1973 Lab IC 1613 : 1974 1
Lab LJ 138 .
444 Verma (CL) v State of MP, AIR 1990
SC 463 : (1989) 4 JT 182 .
445 Neelima Misra v Harinder Kaur Paintal,
AIR 1990 SC 1402 , 1408 : (1990) 2 JT 103
: (1990) 2 SCC 746 .
446 Shiv Kumar Chadha v Municipal Corp of Delhi,
(1993) 3 SCC 161 : (1993) 3 SCR 522
: 1993 2 Scale 772 :
1993 3 JT 238 .
447 Shri Krishna Tiles & Potteries (Madras) P Ltd v CLB,
(1979) 49 Com Cas 409 (Del).
448 CCI v Steel Authority of India Ltd, 2010 (5) All MR (SC) 934 : 2010
Comp LR 61 (SC) : (2010) 4 Comp LJ 1 (SC) :
JT 2010 (10) SC 26 : (2011) 2 Mad LJ 271 (SC) : 2010 (9)
Scale 291 : (2010) 10 SCC 744 :
[2010] 103 SCL 269 (SC) : [2010] 11
SCR 112 : 2010 (8) UJ 4093 .
449 Para 51, Id.
450 CCI v Steel Authority of India Ltd, 2010 (5) All MR (SC) 934 : 2010
Comp LR 61 (SC) : (2010) 4 Comp LJ 1 (SC) :
JT 2010 (10) SC 26 : (2011) 2 Mad LJ 271 (SC) : 2010 (9)
Scale 291 : (2010) 10 SCC 744 :
[2010] 103 SCL 269 (SC) : [2010] 11
SCR 112 : 2010 (8) UJ 4093 .
451 Shri Sunil Bansal v M/s Jaiprakash Associates Ltd, Appeal No 21 of
2016 [COMPAT], decided on 28 September 2016.
452 Maneka Gandhi v UOI, (1978) 1
SCC 48 and State of Punjab v Gurdayal, AIR 1980 SC 319
: (1980) 2 SCC 471 :
[1980] 1 SCR 1071 .
Page 32 of 34
[s 36] Power of Commission to regulate its own procedure
453 Para 64.
454 Steel Authority of India Ltd through its MD v Jindal Steel and Power
Ltd through its Director, 2010 Comp LR 22 (COMPAT).
455 Grindlays Bank Ltd v Central Government Industrial Tribunal,
AIR 1981 SC 606 and UOI v Mohan Lal Capoor,
AIR 1974 SC 87 : (1973) 2 SCC 836
: (1974) 1 SCR 797 .
456 Id.
457 Raj Kishore Jha v State of Bihar,
2003 (11) SCC 519 .
458 Alexander Machinery (Dudley) Ltd v Crabtree,
1974 ICR 120 (NIRC).
459 India Trade Promotion Organisation v CCI, [COMPAT], order dated
1 July 2016.
460 Whirlpool Corp v Registrar of Trade Marks, Mumbai,
(1998) 8 SCC 1 .
461 Shree Cement Ltd v CCI, WP (C) 3008/2014.
462 Shree Cement Ltd v CCI, WP (C) 3008/2014. See also Raghupati
Singhania v CCI, 229 (2016) DLT 140 .
463 Shamsher Kataria Informant v Honda Siel Cars India Ltd, 2014
Comp LR 1 (CCI).
464 Also see Nissan Motors India Pvt Ltd (NMIPL) v CCI, 2014 Comp
LR 187 : (2014) 5 Mad LJ 267 (Mad).
465 Gulf Oil Corp Ltd v CCI and M/s Black Diamond Explosives v Coal
India Ltd, [2013] 114 CLA 25 : 2013 Comp LR 409
(COMPAT).
466 NK Prasada v Government of India,
AIR 2004 SC 2538 : (2004) 6 SCC 299
: [2004] 3 SCR 1178 :
2004 (4) Scale 845 .
467 Sohan Lal Gupta (Dead) through LRs v Asha Devi Gupta (Smt),
AIR 2004 SC 856 : (2003) 7
Page 33 of 34
[s 36] Power of Commission to regulate its own procedure
SCC 492 : JT 2003 (7) SC 524
: 2003 (7) Scale 139 .
468 Tavoy Apparels Ltd v CCI, Appeal No 29 of 2014, decided on 26
October 2015.
469 CCI v Oriental Rubber Industries Pvt Ltd,
(2018) 251 DLT 137 .
470 Ballarpur Industries Ltd, RTP Enquiry No 89 of
1984, order dated 18 March 1986.
471 MRTPC Regulations, 1974 (since repealed);
Regulation 65 of MRTPC Regulations, 1991 is identically worded.
472 WS Insulators of India Ltd, RTP Enquiry No 33 of
1986, order dated 22 September 1986.
473 Parle (Exports) Pvt Ltd, RTP Enquiry No 124 of
1985, order dated 23 September 1986.
474 Raj Narain v Smt Indira Gandhi,
AIR 1972 SC 1302 :
(1972) 3 SCR 841 .
475 See Re Nylon Filament Yarn case,
(1975) 45 Com Cas 646 (MRTPC); Re Indian and Eastern Newspaper Society,
(1976) 46 Com Cas 165 (MRTPC).
476 Section 227 of the Companies Act, 2013. Came into force on 9
September 2016 vide Notification No SO 2912(E), dated 9 September 2016.
477 Eastern India Motion Picture Association, EIMPA v Ms Manju
Tharad, [2013] 113 CLA 222 (CAT).
478 Rama Vilas Service Pvt Ltd v C Chandrasekaran,
AIR 1965 SC 107 : (1965) 1 Mad LJ (SC) 1.
479 MP Industries v UOI, AIR 1966
SC 671 : 1966 MPLJ 256 :
1966 1 SCR 466 .
480 N Mukherjee v UOI, AIR 1990
SC 1984 : 1990 Cri LJ 2148 .
481 Section 13(4) of the Consumer Protection Act, 1986.
Page 34 of 34
[s 36] Power of Commission to regulate its own procedure
482 Sub-section (1) of section 12 of the MRTP Act, 1969.
483 Sunil Blood Bank of Transfusion Centre v Naresh Kumar, 1 (1992)
CPR 430 : 1 (1995) CPJ 57 (NC).
484 LIC of India v Zareena Sulaiman, 1
(1995) CPJ 4 (NC).
485 Commissioner of Transport v YR Grover, 1
(1994) CPJ 199 (NC).
486 UP Rajya Vidyut Parishad v Gayatri Poly Pack Industries,
(1994) 1 CPJ 126 (NC).
End of Document
[s 37] [* * *]
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > CHAPTER
IV DUTIES, POWERS AND FUNCTIONS OF COMMISSION
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
CHAPTER IV DUTIES, POWERS AND FUNCTIONS OF COMMISSION
[s 37] 487[* * *]
HISTORICAL BACKGROUND
MRTP Act, 1969
This section generally corresponds to section 13 of MRTP Act, 1969, since repealed, reproduced below:
[s 13] Orders of Commission may be subject to conditions, etc.—(1) In making any order under this Act, the Commission may
make such provisions not inconsistent with this Act, as it may think necessary or desirable for the proper execution of the order and
any person who commits a breach of or fails to comply with any obligation imposed on him by any such provision shall be deemed
to be guilty of an offence under this Act.
(2) Any order made by the Commission may be amended or revoked at any time in the manner in which it was made.
(3) An order made by the Commission may be general in its application or may be limited to any particular class of traders or a
particular class of trade practice or a particular trade practice or a particular locality.”
Competition Act, 2002
Page 2 of 2
[s 37] [* * *]
Notes on clauses of the Bill stated, thus:
Notes on clauses.—This clause provides for review of orders of the Commission in certain cases. [Clause 37 of the Competition
Bill, 2001].
COMPETITION (AMENDMENT) ACT, 2007
Notes on clauses.—This clause seeks to omit section 37 of the Competition Act, 2002 relating to review of orders of the
Competition Commission of India. [Clause 30 of the Competition (Amendment) Bill, 2007].
SCOPE OF THE SECTION
The Commission was originally empowered to review its order and was free to amend or revoke any order passed by it.
This power of the Commission has been withdrawn by omitting this section by the Amendment Act, 2007.
487 Section 37 omitted by Amendment Act, 2007 (39 of 2007), section 30 (w.e.f. 12
October 2007). Prior to its omission, it stood as under:
[s 37] Review of orders of Commission
Any person aggrieved by an order of the Commission from which an appeal is allowed by this Act but no
appeal has been preferred, may, within thirty days from the date of the order, apply to the Commission for review of its order and
the Commission may make such order thereon as it thinks fit:
Provided that the Commission may entertain a review application after the expiry of the said period of thirty
days, if it is satisfied that the applicant was prevented by sufficient cause from preferring the application in time:
Provided further that no order shall be modified or set aside without giving an opportunity of being heard to
the person in whose favour the order is given and the Director General where he was a party to the proceedings.
End of Document
[s 38] Rectification of orders
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > CHAPTER
IV DUTIES, POWERS AND FUNCTIONS OF COMMISSION
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
CHAPTER IV DUTIES, POWERS AND FUNCTIONS OF COMMISSION
488[s 38] Rectification of orders
(1) With a view to rectifying any mistake apparent from the record, the Commission may amend any order passed by
it under the provisions of this Act.
(2) Subject to the other provisions of this Act, the Commission may make—
(a) an amendment under sub-section (1) of its own motion;
(b) an amendment for rectifying any such mistake which has been brought to its notice by any party to the order.
Explanation.—For the removal of doubts, it is hereby declared that the Commission shall not, while rectifying any
mistake apparent from record, amend substantive part of its order passed under the provisions of this Act.
LEGISLATIVE BACKGROUND
Competition Act, 2002
Notes on clauses of the Bill stated, thus:
Notes on clauses.—This clause provides for rectification of orders of the Commission for rectifying any mistakes apparent from
the record. [Clause 38 of the Competition Bill, 2001].
SCOPE OF THE SECTION
The Commission has been empowered to rectify any mistake apparent from record either on its own motion or on an
application of any party. Power of the Commission under section 38 is limited to rectifying the mistakes apparent on
record. The Commission cannot amend substantive part of its order passed under the Competition Act, 2002. It is also clear
Page 2 of 3
[s 38] Rectification of orders
that only clerical or arithmetical mistakes can be corrected under section 38 and in the garb of correcting mistakes, the
Commission cannot change any substantive portion of the order.489
Similar provisions were also contained in regulation 79 of the MRTPC Regulations, 1991.
An application made by a party to the proceedings before the Commission shall be subject to the provisions of sections 152
and 153 of the Code of Civil Procedure, 1908.
INSTANCES OF USE OF SECTION 38
In All India Tyre Dealers’ Federation Informant v Tyre Manufacturers,490 application was made on behalf of the All
India Tyre Dealers’ Federation under section 38(2)(b) of the Competition Act, 2002 for rectifying a mistake apparent in the
order dated 30 October 2012. It was submitted by the Applicant that the order was passed under section 27 of the Act
holding that there was insufficient evidence for a violation of the Act by the opposite parties. It was further submitted by
the Applicant that provisions of section 27 of the Act provided for certain orders that could be passed by the Commission
where after inquiry the Commission found that there was a contravention of section 3 or section 4 of the Act. Therefore, it
was contended that the order was not correctly made under section 27 of the Act since the Commission had exonerated the
opposite parties of the violation, and therefore a correction of the order was requested under section 38 of the Act.
The Commission held that it was clear from a plain reading of section 27 that orders under section 27 could only be passed
where after inquiry, the Commission finds a contravention of section 3 or section 4 of the Act. Since in this case, no
contravention of either section 3 or section 4 was found by the Commission after inquiry, the order in question could not
be made under section 27 of the Act. The Commission, therefore, was of the opinion that this was a fit case for
rectification of the order and directed that the title of the order be amended to “Final Order” and not “Order under section
27” of the Act.
In MCX Stock Exchange Ltd v National Stock Exchange of India Ltd, DotEx International Ltd and Omnesys Technologies
Pvt Ltd,491 the Commission noted that in the order, a direction had been issued to the Secretary to issue a demand notice
to the opposite party. As per the Recovery Regulations, the demand notice could be issued only after the expiry of the
period specified for this purpose in the order of imposition of penalty by the Commission. Hence, in view of the
regulations, the demand notice could be issued only after the expiry of the period of 30 days from the date of receipt of the
order by the opposite party No 1. The direction contained therefore was rectified under section 38 of the Act.
In HLS Asia Ltd v Schlumber Asia Services Ltd and Oil & Natural Gas Corp Ltd (ONGC),492 it was contended that the
observation of the Commission with respect to non-providing of pricing data by the informant of its own product was
misplaced. The plea of the informant was that this data was provided by the informant to the Commission at the time of
arguments. During arguments, the counsel for the informant handed over one sheet of paper to the Commission stating that
data given therein was confidential since it contained pricing data of the informant. This piece of paper was taken back by
the informant. It was held that producing some data during arguments and not placing the same on record cannot be
considered giving information to the Commission. The Commission observed:
The information to the Commission is only that information which forms part of the record of the Commission and which can be
used by the commission. There is a procedure prescribed under law for seeking confidentiality of the data submitted to the
Commission. If any party submits data to the Commission and seeks that the data should be kept confidential, it has to make an
application and the Commission, after considering the application, decides whether the data has to be given confidentiality as per
the norms laid down by the act or not. Similarly, filing an affidavit containing data, after the order is reserved has no significance
and the Commission could not have considered such affidavit or application as it would have violated the Principles of Natural
Justice. The Opposite Party would have got no opportunity to respond to the application or to the data furnished in the application.
The data given in the application dated 4 February 2013, therefore, could not have formed part of the Order of the Commission.
Page 3 of 3
[s 38] Rectification of orders
488 Came into force on 20 May 2009 vide Notification No. S.O. 1241(E), dated 15 May 2009.
489 HLS Asia Ltd v Schlumber Asia Services Ltd and Oil & Natural Gas
Corp Ltd (ONGC), Case No 80/2012.
490 All India Tyre Dealers’ Federation Informant v Tyre Manufacturers,
2013 Comp LR 92 (CCI).
491 MCX Stock Exchange Ltd v National Stock Exchange of India Ltd,
DotEx International Ltd and Omnesys Technologies Pvt Ltd, 2011 Comp LR 129 : [2011] 109
SCL 109 (CCI).
492 HLS Asia Ltd v Schlumber Asia Services Ltd and Oil & Natural Gas
Corp Ltd (ONGC), Case No 80/2012.
End of Document
[s 39] Execution of orders of Commission imposing monetary penalty
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > CHAPTER
IV DUTIES, POWERS AND FUNCTIONS OF COMMISSION
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
CHAPTER IV DUTIES, POWERS AND FUNCTIONS OF COMMISSION
493[s 39] Execution of orders of Commission imposing monetary penalty
(1) If a person fails to pay any monetary penalty imposed on him under this Act, the Commission shall proceed to
recover such penalty, in such manner as may be specified by the regulations.
(2) In a case where the Commission is of the opinion that it would be expedient to recover the penalty imposed under
this Act in accordance with the provisions of the Income-tax Act, 1961 (43 of 1961), it may make a reference to
this effect to the concerned income-tax authority under that Act for recovery of the penalty as tax due under the
said Act.
(3) Where a reference has been made by the Commission under sub-section (2) for recovery of penalty, the person
upon whom the penalty has been imposed shall be deemed to be the assessee in default under the Income-tax Act,
1961 (43 of 1961) and the provisions contained in sections 221 to 227, 228A, 229, 231 and 232 of the said Act
and the Second Schedule to that Act and any rules made thereunder shall in so far as may be, apply as if the said
provisions were the provisions of this Act and referred to sums by way of penalty imposed under this Act instead
of to income-tax and sums imposed by way of penalty, fine and interest under the Income-tax Act, 1961 (43 of
1961) and to the Commission instead of the Assessing Officer.
Explanation 1.—Any reference to sub-section (2) or sub-section (6) of section 220 of the Income-tax Act,
1961 (43 of 1961), in the said provisions of that Act or the rules made thereunder shall be construed as
references to sections 43 to 45 of this Act.
Explanation 2.—The Tax Recovery Commissioner and the Tax Recovery Officer referred to in the Income-
tax Act, 1961 (43 of 1961), shall be deemed to be the Tax Recovery Commissioner and the Tax Recovery
Officer for the purposes of recovery of sums imposed by way of penalty, under this Act and reference made
by the Commission under sub-section (2) would amount to drawing of a certificate by the Tax Recovery
Officer as far as demand relating to penalty under this Act.”
Explanation 3.—Any reference to appeal in Chapter XVIID and the Second Schedule to the Income-tax Act,
1961 (43 of 1961), shall be construed as a reference to appeal before the Competition Appellate Tribunal
under section 53B of this Act.]
HISTORICAL BACKGROUND
MRTP Act, 1969
Page 2 of 3
[s 39] Execution of orders of Commission imposing monetary penalty
This section generally corresponds to section 12C of the MRTP Act, 1969, since repealed, and is reproduced below:
[s 12C] Enforcement of the order made by the Commission under section 12A or 12B.—Every order made by the Commission
under section 12A granting a temporary injunction or under section 12B directing the owner of an undertaking or other person to
make payment of any amount, may be enforced by the Commission in the same manner as if it were a decree or order made by a
court in a suit pending therein and it shall be lawful for the Commission to send, in the event of its inability to execute it, such
order to the court within the local limits of whose jurisdiction,—
(a) in the case of an order against a company, the registered office of the company is situated, or
(b) in the case of an order against any other person, the place where the person concerned voluntarily resides or carries on
business or personally works for gain, is situated,
and thereupon the court to which the order is so sent shall execute the order as if it were a decree or order sent to it for execution.
Competition Act, 2002
Notes on clauses of the Bill stated, thus:
Notes on clauses.—This clause contains provisions regarding execution of orders of the Commission. The orders of the
Commission under the proposed legislation shall be enforced by the Commission in the same manner as if it were a decree or order
made by a High Court or the principal civil court in a suit pending therein. [Clause 39 of the Competition Bill, 2001].
Competition (Amendment) Act, 2007
Notes on clauses.—This clause seeks to substitute section 39 of the Competition Act, 2002 relating to execution of orders of the
Competition Commission of India.
The existing section provides that every order passed by the Commission under this Act shall be enforced by the Commission in
the same manner as if it were a decree or order made by a High Court or the principal civil court in a suit pending therein and it
shall be lawful for the Commission to send, in the event of its inability to execute it, such order to the High Court or the principal
civil court, as the case may be.
It is proposed to substitute said section, inter alia, to provide that if a person fails to pay any monetary penalty imposed on him
under the Act, the Commission shall proceed to recover such penalty, in the manner as may be specified by regulations. Sub-
section (2) of proposed section provides that in a case where the Commission is of the opinion that it would be expedient to recover
the penalty imposed under the Competition Act, 2002 in accordance with the provisions of the Income-tax Act, 1961, it may make a
reference to this effect to the concerned income-tax authority under the Income-tax Act, 1961 for recovery of the penalty as tax due
under the said Act. It is also proposed to provide that any reference made by the Commission under sub-section (2) would amount
to drawing of a certificate by the Tax Recovery Officer as far as demand relating to penalty under this Act and any reference to
Page 3 of 3
[s 39] Execution of orders of Commission imposing monetary penalty
appeal in Chapter XVIID and the Second Schedule of the Income-tax Act, 1961, shall be construed as a reference to appeal before
the Competition Appellate Tribunal under section 53B of this Act. [Clause 31 of the Competition (Amendment) Bill, 2007].
SCOPE OF THE SECTION
This section has been recast by the Amendment Act, 2007.
If a person fails to pay any penalty, the Commission shall recover such penalty in the manner specified in the Regulations.
The Commission may also recover the penalty by making reference to the concerned Income Tax authority as tax due
under the Income Tax Act, 1961.
PROVISIONS OF MRTP ACT, 1969 VIS-À-VIS THE COMPETITION ACT, 2002
Section 12C of MRTP Act provided for execution of orders of the MRTPC only for grant of temporary injunction and
awards of compensation as if it were a decree of civil court. However, under section 39 of the Competition Act, 2002,
penalty may be recovered by the Commission as Income Tax dues by making a reference to concerned Income Tax
authorities.
493 Subs. by Amendment Act, 2007 (39 of 2007), section 31 (w.e.f. 20 May 2009). Prior to its
substitution, it stood as under:
[s 39] Execution of orders of Commission
Every order passed by the Commission under this Act shall be enforced by the Commission in the same
manner as if it were a decree or order made by a High Court or the principal civil court in a suit pending therein and it shall be
lawful for the Commission to send, in the event of its inability to execute it, such order to the High Court or the principal civil
court, as the case may be, within the local limits of whose jurisdiction,—
(a) in the case of an order against a person referred to in sub-clause (iii) or sub-clause (vi) or sub-clause (vii) of clause (l) of
section 2, the registered office or the sole or principal place of business of the person in India or where the person has also a
subordinate office, that subordinate office, is situated;
(b) in the case of an order against any other person, the place where the person concerned voluntarily resides or carries on
business or personally works for gain, is situated, and thereupon the court to which the order is so sent shall execute the order
as if it were a decree or order sent to it for execution.
End of Document
[s 40] [* * *]
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > CHAPTER
IV DUTIES, POWERS AND FUNCTIONS OF COMMISSION
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
CHAPTER IV DUTIES, POWERS AND FUNCTIONS OF COMMISSION
[s 40] 494[* * *]
LEGISLATIVE BACKGROUND
Competition Act, 2002
Notes on clauses of the Bill stated, thus:
Notes on clauses.—This clause provides for filing of an appeal. Any person aggrieved by any decision or order of the Commission
may file an appeal to the Supreme Court within sixty days from the date of communication of the decision or order to him on one
or more grounds specified in section 100 of the Code of Civil Procedure, 1908 arising out of such decision-or order. However, in
case of delay in filing such appeal before the Supreme Court, that Court may allow filing of appeal within a further period not
exceeding sixty days if the appellant can satisfy the court that he was prevented by sufficient cause from filing the appeal within
the said period of sixty days. [Clause 40 of the Competition Bill, 2001].
Competition (Amendment) Act, 2007
Notes on clauses.—This clause seeks to omit section 40 of the Competition Act, 2002 relating to appeal.
Under the existing provisions contained in the said section, any person aggrieved by any decision or order of the Commission may
Page 2 of 2
[s 40] [* * *]
file an appeal to the Supreme Court within 60 days from the date of communication of the decision or order of the Commission to
him on one or more of the grounds specified in section 100 of the Code of Civil Procedure, 1908.
It is proposed to insert, by clause 43 of the Bill, new sections 53B and 53T to provide filing of appeal from any direction, decision
or order referred to in clause (a) of new section 53A to the Appellate Tribunal and filing of an appeal to the Supreme Court from
any decision or order of the Appellate Tribunal. Omission of section 40 is therefore, consequential in nature. [Clause 32 of the
Competition (Amendment) Bill, 2007].
SCOPE OF THE SECTION
Originally, any order or document of the Commission was appealable to the Supreme Court of India. As per newly inserted
section 53B by the Amendment Act, 2007, the appeal lies to Appellate Tribunal. This section has accordingly been omitted
by the Amendment Act, 2007.
494 Section 40 omitted by Amendment Act, 2007 (39 of 2007), section 32 (w.e.f. 12
October 2007). Prior to its omission, it stood as under:
[s 40] Appeal
Any person aggrieved by any decision or order of the Commission may file an appeal to the Supreme Court
within sixty days from the date of communication of the decision or order of the Commission to him on one or more of the grounds
specified in section 100 of the Code of Civil Procedure, 1908 (5 of 1908):
Provided that the Supreme Court may, if it is satisfied that the appellant was prevented by sufficient cause
from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days:
Provided further that no appeal shall lie against any decision or order of the Commission made with the
consent of the parties.
End of Document
[s 41] Director General to investigate contraventions
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > CHAPTER
V DUTIES OF DIRECTOR-GENERAL
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
CHAPTER V DUTIES OF DIRECTOR-GENERAL
1[s 41] Director General to investigate contraventions
(1) The Director General shall, when so directed by the Commission, assist the Commission in investigating into any
contravention of the provisions of this Act or any rules or regulations made thereunder.
(2) The Director General shall have all the powers as are conferred upon the Commission under sub-section (2) of
section 36.
(3) Without prejudice to the provisions of sub-section (2), sections 240 and 240A of the Companies Act, 1956 (1 of
1956), so far as may be, shall apply to an investigation made by the Director General or any other person
investigating under his authority, as they apply to an inspector appointed under that Act.
2[Explanation.—For the purposes of this section,—
(a) the words “the Central Government” under section 240 of the Companies Act, 1956 (1 of 1956) shall be
construed as “the Commission”;
(b) the word “Magistrate” under section 240A of the Companies Act, 1956 (1 of 1956) shall be construed as “the
Chief Metropolitan Magistrate, Delhi”].
HISTORICAL BACKGROUND
Monopolies and Restrictive Trade Practices Act, 1969 (MRTP Act, 1969)
Section 11 of the MRTP Act, 1969, since repealed, provided for preliminary investigation and submission of a report to the
MRTP Commission as follows:
S.11. Investigation by Director-General before issue of process in certain cases.—(1) The Commission may, before issuing any
process requiring the attendance of the person against whom an inquiry (other than an inquiry upon an application by the Director
General) may be made under section 10, by an order, require the Director-General to make, or cause to be made, a preliminary
investigation in such manner as it may direct and submit a report to the Commission to enable it to satisfy itself as to whether or
not the matter requires to be inquired into.
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[s 41] Director General to investigate contraventions
(2) The Director-General may, upon his own knowledge or information or on a complaint made to him, make, or cause to be made,
a preliminary investigation in such manner as he may think fit to enable him to satisfy himself as to whether or not an application
should be made by him to the Commission under [* * * *] section 10.
(3) For the purpose of conducting the preliminary investigation under sub-section (1), or sub-section (2), as the case may be, the
Director-General or any other person making the investigation shall have the same powers as may be exercised by an Inspector
under sub-section (2) of section 44.
(4) Any order or requisition made by a person making an investigation under sub-section (1), or sub-section (2), shall be enforced
in the same manner as if it were an order or requisition made by an Inspector appointed under section 240 or section 204A of the
Companies Act, 1956 (1 of 1956), and any contravention of such order or requisition shall be punishable in the same manner as if it
were an order or requisition made by an Inspector appointed under the said section 240 or section 240A].
Competition Act, 2002
Notes on clauses of the Bill stated, thus:
Notes on clauses.—This clause seeks to empower the Director General to investigate contravention of the provisions of the
proposed legislation or the rules or regulations made thereunder. The Director General shall, when so directed by the Commission,
assist the Commission in investigating such contraventions. The provisions of section 240 relating to production of documents and
evidence and section 240A relating to seizure of documents by inspector under the Companies Act, 1956 shall, so far as may be,
apply in conducting the investigations by the Director General or any other person investigating under his authority as they apply
to an inspector appointed under that Act. [Clause 41 of the Competition Bill, 2001].
Competition (Amendment) Act, 2007
Notes on clauses.—This clause seeks to amend section 41 of the Competition Act, 2002 relating to Director General to investigate
contraventions.
The existing sub-section (3) of section 41 provides that, without prejudice to the provisions of sub-section (2), sections 240 and
240A of the Companies Act, 1956, so far as may be, shall apply to an investigation made by the Director General or any other
person investigating under his authority, as they apply to an inspector appointed under that Act.
It is proposed to add as Explanation to sub-section (3) of section 41 to provide that the words “the Central Government” under
section 240 of the Companies Act, 1956 shall be construed as “the Commission” and the word “Magistrate” under section 240A of
the Companies Act, 1956 shall be construed as “the Chief Metropolitan Magistrate, Delhi”. [Clause 33 of the Competition
(Amendment) Bill, 2007].
SCOPE OF THE SECTION
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[s 41] Director General to investigate contraventions
The Commission is empowered to direct the Director General (DG) to make investigation into any contravention of the
provisions of the Act. In main, the allegations to be investigated will relate to agreements, acts of dominant position and
combinations under sections 3, 4 or 5. The DG will have all the powers of Civil Court which are necessary for conduct of
investigation. The DG has also the same powers as is available to an Inspector appointed by the Central Government, in
terms of sections 240(2) and 240A of the Companies Act, 1956 (now, sections 217 and 220 of Companies Act, 2013). The
DG has to approach the Chief Metropolitan Magistrate, Delhi for seizure of documents.
The DG has no suo moto power of investigation, earlier available to him under the MRTP Act, 1969.
The DG, during the course of such investigation, by virtue of section 41(2) read with section 36(2) of the Competition Act,
2002 has the same powers as are vested in a Civil Court under the Code of Civil Procedure, 1908, while trying a suit in
respect of, (i) summoning and enforcing the attendance of any person and examining him on oath, (ii) requiring the
discovery and production of documents, (iii) receiving evidence on affidavit, (iv) issuing commissions for the examination
of witnesses and documents, and (v) requisitioning public records or documents from any public office. The DG is further,
empowered by section 41(3) read with sections 240 and 240A of the Companies Act, 1956 (now, sections 217 and 220 of
Companies Act, 2013) to keep in their custody any books and papers of the person/enterprise investigated against/into for a
period of six months and to examine any person on oath relating to the affairs of the person/enterprise being investigated
against/into and all officers, employees and, agents of such person/enterprise are also obliged to preserve all books and
papers which are in their custody and power.3
PENALTY
Vide section 43, failure to furnish books of account, information, etc. so directed by the DG is punishable with a penalty of
Rs 1 lakh per day till the default continues, subject to a maximum of Rs 1 crore.
APPLICABILITY OF SECTIONS 217 AND 220 OF COMPANIES ACT, 2013
[s 217]. Procedure, powers, etc., of inspectors.—(1) It shall be the duty of all officers and other employees and agents including the
former officers, employees and agents of a company which is under investigation in accordance with the provisions contained in
this Chapter, and where the affairs of any other body corporate or a person are investigated under section 219, of all officers and
other employees and agents including former officers, employees and agents of such body corporate or a person—
(a) to preserve and to produce to an inspector or any person authorised by him in this behalf all books and papers of, or
relating to, the company or, as the case may be, relating to the other body corporate or the person, which are in their
custody or power; and
(b) otherwise to give to the inspector all assistance in connection with the investigation which they are reasonably able to
give.
(2) The inspector may require any body corporate, other than a body corporate referred to in sub-section (1), to furnish such
information to, or produce such books and papers before him or any person authorised by him in this behalf as he may consider
necessary, if the furnishing of such information or the production of such books and papers is relevant or necessary for the
purposes of his investigation.
(3) The inspector shall not keep in his custody any books and papers produced under sub-section (1) or sub-section (2) for more
than one hundred and eighty days and return the same to the company, body corporate, firm or individual by whom or on whose
behalf the books and papers were produced:
Page 4 of 11
[s 41] Director General to investigate contraventions
Provided that the books and papers may be called for by the inspector if they are needed again for a further period of one hundred
and eighty days by an order in writing.
(4) An inspector may examine on oath—
(a) any of the persons referred to in sub-section (1); and
(b) with the prior approval of the Central Government, any other person,
in relation to the affairs of the company, or other body corporate or person, as the case may be, and for that purpose may require
any of those persons to appear before him personally:
Provided that in case of an investigation under section 212, the prior approval of Director, Serious Fraud Investigation Office shall
be sufficient under clause (b).
(5) Notwithstanding anything contained in any other law for the time being in force or in any contract to the contrary, the inspector,
being an officer of the Central Government, making an investigation under this Chapter shall have all the powers as are vested in a
civil court under the Code of Civil Procedure, 1908 (5 of 1908), while trying a suit in respect of the following matters, namely:—
(a) the discovery and production of books of account and other documents, at such place and time as may be specified by
such person;
(b) summoning and enforcing the attendance of persons and examining them on oath; and
(c) inspection of any books, registers and other documents of the company at any place.
(6) (i) If any director or officer of the company disobeys the direction issued by the Registrar or the inspector under this section,
the director or the officer shall be punishable with imprisonment which may extend to one year and with fine which shall not be
less than twenty-five thousand rupees but which may extend to one lakh rupees.
(ii) If a director or an officer of the company has been convicted of an offence under this section, the director or the officer shall,
on and from the date on which he is so convicted, be deemed to have vacated his office as such and on such vacation of office,
shall be disqualified from holding an office in any company.
(7) The notes of any examination under sub-section (4) shall be taken down in writing and shall be read over to, or by, and signed
by, the person examined, and may thereafter be used in evidence against him.
(8) If any person fails without reasonable cause or refuses—
(a) to produce to an inspector or any person authorised by him in this behalf any book or paper which is his duty under sub-
section (1) or sub-section (2) to produce;
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[s 41] Director General to investigate contraventions
(b) to furnish any information which is his duty under sub-section (2) to furnish;
(c) to appear before the inspector personally when required to do so under sub-section (4) or to answer any question which is
put to him by the inspector in pursuance of that sub-section; or
(d ) to sign the notes of any examination referred to in sub-section (7),
he shall be punishable with imprisonment for a term which may extend to six months and with fine which shall not be less than
twenty-five thousand rupees but which may extend to one lakh rupees, and also with a further fine which may extend to two
thousand rupees for every day after the first during which the failure or refusal continues.
(9) The officers of the Central Government, State Government, police or statutory authority shall provide assistance to the
inspector for the purpose of inspection, inquiry or investigation, which the inspector may, with the prior approval of the Central
Government, require.
(10) The Central Government may enter into an agreement with the Government of a foreign State for reciprocal arrangements to
assist in any inspection, inquiry or investigation under this Act or under the corresponding law in force in that State and may, by
notification, render the application of this Chapter in relation to a foreign State with which reciprocal arrangements have been
made subject to such modifications, exceptions, conditions and qualifications as may be deemed expedient for implementing the
agreement with that State.
(11) Notwithstanding anything contained in this Act or in the Code of Criminal Procedure, 1973 (2 of 1974) if, in the course of an
investigation into the affairs of the company, an application is made to the competent court in India by the inspector stating that
evidence is, or may be, available in a country or place outside India, such court may issue a letter of request to a court or an
authority in such country or place, competent to deal with such request, to examine orally, or otherwise, any person, supposed to be
acquainted with the facts and circumstances of the case, to record his statement made in the course of such examination and also to
require such person or any other person to produce any document or thing, which may be in his possession pertaining to the case,
and to forward all the evidence so taken or collected or the authenticated copies thereof or the things so collected to the court in
India which had issued such letter of request:
Provided that the letter of request shall be transmitted in such manner as the Central Government may specify in this behalf:
Provided further that every statement recorded or document or thing received under this sub-section shall be deemed to be the
evidence collected during the course of investigation.
(12) Upon receipt of a letter of request from a court or an authority in a country or place outside India, competent to issue such
letter in that country or place for the examination of any person or production of any document or thing in relation to affairs of a
company under investigation in that country or place, the Central Government may, if it thinks fit, forward such letter of request to
the court concerned, which shall thereupon summon the person before it and record his statement or cause any document or thing
to be produced, or send the letter to any inspector for investigation, who shall thereupon investigate into the affairs of company in
the same manner as the affairs of a company are investigated under this Act and the inspector shall submit the report to such court
within thirty days or such extended time as the court may allow for further action:
Provided that the evidence taken or collected under this sub-section or authenticated copies thereof or the things so collected shall
be forwarded by the court, to the Central Government for transmission, in such manner as the Central Government may deem fit, to
the court or the authority in country or place outside India which had issued the letter of request.
[s 220] Seizure of documents by inspector.—(1) Where in the course of an investigation under this Chapter, the inspector has
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[s 41] Director General to investigate contraventions
reasonable grounds to believe that the books and papers of, or relating to, any company or other body corporate or managing
director or manager of such company are likely to be destroyed, mutilated, altered, falsified or secreted, the inspector may—
(a) enter, with such assistance as may be required, the place or places where such books and papers are kept in such manner
as may be required; and
(b) seize books and papers as he considers necessary after allowing the company to take copies of, or extracts from, such
books and papers at its cost for the purposes of his investigation.
(2) The inspector shall keep in his custody the books and papers seized under this section for such a period not later than the
conclusion of the investigation as he considers necessary and thereafter shall return the same to the company or the other body
corporate, or, as the case may be, to the managing director or the manager or any other person from whose custody or power they
were seized:
Provided that the inspector may, before returning such books and papers as aforesaid, take copies of, or extracts from them or place
identification marks on them or any part thereof or deal with the same in such manner as he considers necessary.
(3) The provisions of the Code of Criminal Procedure, 1973 (2 of 1974), relating to searches or seizures shall apply mutatis
mutandis to every search or seizure made under this section.
It is also relevant to refer to section 2(12) of the Companies Act, 2013. Like under the earlier Act of 1956, it also provides
an expansive definition for the expression “book and paper” and “book or paper”. In terms of the said definition “book or
paper” includes “books of account, deeds, vouchers, writings documents, minutes and registers maintained on paper or in
electronic form”. Thus, the DG or any person acting under his authority would have an unmitigated access to any
document available with the enterprise being investigated. Obviously, such documents may also include confidential and
sensitive information and even though the DG may keep the same as confidential, it can hardly be disputed that an
enterprise furnishing sensitive information to DG would run the risk of the information being leaked or disclosed. It also
cannot be overlooked that the fact that an enterprise is being investigated in respect of allegations of its anti-competitive
conduct may also result in loss of reputation and goodwill.4
POWERS OF DIRECTOR GENERAL
The powers of the DG are to be same as that of the Competition Commission of India (CCI) under section 36(2) of the
Competition Act, 2002.
Procedure for investigation by DG
The Competition Commission of India (General) Regulations, 2009 lays down the following procedure for investigation by the
Director General5 –
(1) The Secretary shall, while conveying the directions of the Commission under regulation 18, send a copy of the information or
reference, as the case may be, with all other documents or materials or affidavits or statements which have been filed either along
with the said information or reference or at the time of preliminary conference, to the Director General.
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[s 41] Director General to investigate contraventions
(2) The Commission shall direct the Director General to submit a report within such time as may be specified by the Commission
which ordinarily shall not exceed sixty days from the date of receipt of the directions of the Commission.
(3) The Commission may, on an application made by the Director General, giv ing sufficient reasons extend the time for
submission of the report by such period as it may consider reasonable.
(4) The report of the Director General shall contain his findings on each of the allegations made in the information or reference, as
the case may be, together with all evidences or documents or statements or analyses collected during the investigation:
Provided that when considered necessary, the Director General may, for maintaining confidentiality, submit his report in two parts.
One of the parts shall contain the documents to which access to the parties may be accorded and another part shall contain
confidential and commercially sensitive information and documents to which access may be partially or totally restricted.”
(5) Ten copies of the report of the Director General, along with a soft copy in document format, shall be forwarded to the Secretary
within the time specified by the Commission:
Provided that the Secretary may ask for more copies of the report as and when required.
(6) If the Commission, on consideration of the report, is of the opinion that further investigation is called for, it may direct the
Director General to make further investigation and submit a supplementary report on specific issues within such time as may be
specified by the Commission but not later than forty five days.
Duty to conduct investigation in to all the allegations contained in the reference
On receipt of the order passed by the Commission under section 26(1), the DG is required to conduct investigation in
accordance with the provisions of section 41 read with the relevant provisions of the Regulations and submit report under
section 26(3) read with regulation 20(4), which postulates that the report of the DG shall contain his findings on each of
the allegations made in the information or reference, as the case may be, together with all evidences or documents or
statements or analyses collected during the investigation. If the DG accepts the request made by any party to the
investigation for maintaining confidentiality of any document or commercially sensitive information, then the DG can
submit report in two parts.
Where the Commission rejects the allegation constituting violation of the particular provision of the Competition Act, 2002
and directs investigation into the violation of the other provision, then the DG has no option but to confine the
investigation only to such allegation. However, if the Commission does not specifically reject an allegation constituting
violation of a particular provision of the Act and issues omnibus direction for investigation into the allegation of violation
of the provisions of the Act, as had been done in the case, then the DG was duty bound to record findings on each of the
allegations made in the information or reference. In other words, in the absence of express negation by the Commission of
any particular allegation made in the information/reference, the DG was under a statutory obligation to conduct
investigation into all the allegations contained in the information or reference and record findings on each allegation.6
Limited mandate of investigation by the DG
Under the scheme of the Competition Act, 2002 and the Competition Commission of India (General) Regulations, 2009,
the DG can conduct investigation only if a direction to that effect is given by the Commission under section 26(1). The
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[s 41] Director General to investigate contraventions
jurisdiction of the DG is circumscribed by the mandate of the direction given by the Commission. He cannot suo-moto
initiate or conduct investigation into any allegation of violation of the particular provision of section 3 or 4.
In the case of M/s Sheth & Co,7 appeal was filed against order dated 10 June 2015 holding the Appellants liable under
section 3(3)(a) and section 3(3)(b) read with section 3(1), for indulging in collusive bidding in the supply of CN Containers
with disc to Ammunition Factory, Khadki (Pune), Ordnance Factory, Dehu Road (Pune) and Ordnance factory,
Chandrapur. The Tribunal in appeal held that the Dy. DG had exceeded his jurisdiction in returning a finding that the
Appellants and other suppliers of CN containers had acted in contravention of section 3(3)(a). The Tribunal noted that the
in the order passed under section 26(1) of the Act, the Commission had opined that the suppliers of CN containers with
disc appear to have acted in contravention of section 3(3)(d). The Tribunal observed that in view of section 41(1) of the
Act, the Dy. DG was bound to confine his investigation to the mandate contained in the directive issued by the
Commission, but he suo-moto expanded the scope of investigation and reported that the Appellants and other suppliers had
acted in contravention of section 3(3)(a) apart from section 3(3)(d). This exercise undertaken by the Dy. DG was therefore,
held to be per-se illegal.
Taking evidence
Subject to the provisions of the Competition Act, 2002, the Commission or the Director General, as the case may be, may
determine the manner in which evidence may be adduced in the proceedings before them. Regulation 41 of the
Competition Commission of India (General) Regulations, 2009 lays down the procedure for taking evidence by the DG or
the Commission for the purposes of inquiry or investigation.
Inquiry v Investigation – Limit to Director General’s Power
Under the laws of India, a court, a tribunal or a quasi-judicial authority carries out an inquiry. Inquiry leads to rights
conferred on parties and penalty is levied on those contravening the law through adjudication or a decision. The court of
quasi-judicial authority has to rely on the principles of natural justice and common law. But investigation does not confer
any rights and no penalties can be levied during investigation. The Supreme Court in SAIL’s case8 held that the
Commission carries on inquiry while the DG carries out investigation. But investigation of a contravention of a statute to a
large extent cannot be limited in scope, otherwise, it would defeat the very purpose of the Competition Act, 2002. In a
criminal or a civil case, the investigation is the cornerstone on which the inquiry by the court/quasi-judicial authority is
built. The Supreme Court in the case of Hindustan Development Corp9 held that restrictive trade practices are anti-
competitive practices and breaking such practices is for public good.
In the light of the decision of the Supreme Court and the provisions of the Competition Act, 2002, the limitations on the
DG’s power to investigate a case requires examination. The Central Government appoints the Director General for the
purpose of assisting the Commission in conducting inquiry into contraventions of any of the provision of the Act and for
performing such other functions as are, or may be, provided by or under the Act. This is in accordance with the section
16(1) of the Act. Thus, the DG has not only been given the power to assist the Commission in its work of inquiry, but can
also perform other functions as are provided under the Act or regulations. The power of investigation becomes clear from
the provisions of section 26(1) of the Act. If the Commission finds a prima facie case then it can direct the DG to
investigate the case. No limitations on the power to investigate a case have been provided under section 26(1) of the
Competition Act, 2002. Section 41(1) of the Competition Act, 2002, states that, the DG on the directions of the Commission
is required to assist the Commission in investigating into any contravention of the provisions of Act or rules or regulations.
In this provision also there are no fetters on the DG’s powers except that the DG on his own cannot start an investigation.
The investigation has to be carried out on the directions of the Commission.
A Division Bench of the Delhi High Court in the case of Google Inc v CCI10 had also examined the sweeping powers of
the DG under the Competition Act, 2002 and concluded that the investigation by a DG ordered by CCI stand on a different
pedestal from a show cause notice or from an investigation/enquiry conducted pursuant to an FIR.
R Prasad, in his dissenting opinion in the Tyre Manufacturer case11 opined that if during the course of investigation, the
DG finds some other areas of contravention over another period of time by some other persons which was not in the
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[s 41] Director General to investigate contraventions
knowledge of the Commission, then the Act does not put any limitation on the powers of the DG. The DG can investigate
and report the issues to the Commission. He further, compared the DG to the Assessing officer under the Income Tax Act,
1961 and noted that when an Assessing officer finds that some income assessable to tax has escaped assessment, then with
the approval of the Competent Authority he can reopen the assessment. But when, during the course of investigation, he
finds more sources of income which had not been subjected to tax, then, he need not go to the Competent Authority to
reopen the assessment again. Accordingly, he held that in the case of the DG, as there are no limitations on his powers
except that he can investigate only on the directions of the Commission, the DG can investigate the contravention over a
period of time and of numbers of person not mentioned in the Commission’s directions but contravening the law and it
would apply especially in the case of a cartel where the Commission may have a few names but the DG may find more
members of the cartel.
In the writ petition filed before Madras High Court by Hyundai Motor India Ltd,12 it was contended that the Director
General had overstepped the jurisdiction vested in him in law. It was argued that section 41(3) of the Competition Act,
2002 circumscribes the duties of the DG and his duties are akin to that of an Inspector under sections 240 and 240A of the
Companies Act, 1956. The Inspector performs only a fact-finding role under those provisions of the Companies Act, as
held by the Supreme Court in Raja Narayanlal Bansilal v Maneck Phiroz Mistry.13 In other words, the contention of the
petitioner was that the DG being a subordinate to the Commission, was obliged only to do what he was told to do by the
Commission. Therefore, by filing a memo on 19 April 2011, the Director General exceeded the jurisdiction that was
conferred upon him by the order of the Commission dated 24 February 2011 read with section 41(3). The High Court
observed that sub-section (3) of section 41 begins with a non-obstante clause and therefore, it is subject to sub-section (2)
of section 41. Further, section 41(3) of the Act merely states that the provisions of sections 240 and 240A of the
Companies Act, 1956 shall apply to an investigation made by the DG, as they apply to an Inspector appointed under the
Companies Act, 1956. Section 41(3) is not the source of power of the DG, instead he derives his powers in terms of section
41(2), the moment the Commission directs him to investigate into a matter under sub-section (1) of section 41. He has all
the powers that are conferred upon the Commission under section 36(2), by virtue of sub-section (2) of section 41. The
High Court however, held that the DG only placed additional information before the Commission and then the
Commission passed an order on 26 April 2011. Thereafter, the DG issued a notice to the writ petitioner on 4 May 2011,
which was in compliance with the directions issued under section 41(1). The moment the Commission passed an order
directing him to expand the scope of the investigation, section 41(1) came into play. Accordingly, the Court held that the
DG did nothing in excess of what he was directed to do by the Commission.
The petitioner also placed heavy reliance on the decision of the Delhi High Court in Grasim Industries Ltd v CCI.14 In this
case, information was received by the Commission about certain practices adopted by the manufacturers of man-made
fibres. The Commission formed a prima facie opinion about the existence of material to order an investigation and hence
passed an order on 22 June 2011 directing the DG to cause an investigation. The DG, after investigation, filed a report that
though there was no violation of section 3(3)(a), (b) and (c), the enterprise abused its dominant position. The Industry filed
an application for setting aside the report of the DG, primarily on the ground that it was beyond the scope of the powers
conferred upon the DG. The application to set aside the report was dismissed by the Commission. The order was then
challenged before the Delhi High Court. The High Court observed:
9. The scheme of the Act thus, does not permit investigation by Director General into any information which was not considered
by the Commission, while forming opinion under sub-section (1) of section 26 of the Act. The formation of opinion by the
Commission and direction to cause an investigation to be made by the Director General being a pre-requisite condition for
initiation of investigation, the Director General would have no power to undertake investigation in respect of the complaint which
the Commission did not consider while forming an opinion and directing investigation by the Director General. If the Director
General investigates an information which the Commission did not consider in the first instance, while forming opinion with
respect to existence of a prima facie case, such an act on his part shall be ultra vires his power under the Act and, therefore, clearly
illegal. It is a settled legal proposition that when the provisions of a statute require an act to be done in a particular manner, such an
act can be done only in the prescribed manner and not otherwise. Since the Act requires the Director General to investigate only
such information which was considered by the Commission, while forming its opinion with respect to existence of a prima facie
case, it cannot, on its own, carry out investigation, based upon information which was not available to the Commission. It would be
appropriate to note here that though MRTP Act, 1969 empowered the Director General to exercise suo motu power of investigation,
the said power has been expressly denied to him under the Competition Act. In clause (5) of the Statement of Objects and Reasons
for enacting the Competition Act, it is clearly stated that “the Director General would be able to act only if so directed by the
Commission, but will not have any suo motu power for initiating investigation”. If the Director General, is directed by the
Commission to cause an investigation to be made into information ‘X’ and he, besides investigating information ‘X’ also
Page 10 of 11
[s 41] Director General to investigate contraventions
investigates information ‘Y’, which was not considered by the Commission, while directing investigation by him, that would
amount to conferring suo motu power of investigation upon the Director General which would clearly contravene the scheme of the
Act, as far as investigation into complaint ‘Y’ is concerned.15
However, the Madras High Court did not hold the Commission or the Director General to have gone beyond the
Competition Act, 2002. The Court held that the Director General did not suo motu initiate any investigation and he merely
placed before the Commission information already available in the complaint lodged by the individual. It was additional
information that could be taken note of under the proviso to section 26(1). The Commission had already formed a prima
facie opinion and recorded its reasons in respect of the three named car manufacturers. Therefore, it was not necessary for
the Commission to record reasons repeatedly. The Commission did not come to any conclusion with regard to the writ
petitioners on the basis of any special pleadings as against them. The decision taken by the Commission was only to
expand the scope of the investigation. Therefore, it was held that the Director General or the Commission did not overstep
the jurisdiction vested in them in law.
1 Came into force on 20 May 2009 vide Notification No. S.O. 1241(E), dated 15 May 2009.
2 Ins. by Act 39 of 2007, section 33 (w.e.f. 20 May 2009).
3 Google Inc v CCI, [2015] 127
CLA 367 (Delhi): 2015 Comp LR 391(Delhi): 2015 (150) DRJ 192
.
4 Telefonaktiebolaget LM Ericsson (PUBL) v CCI, W.P.(C) 464/2014,
CM Nos 911/2014 and 915/2014, W.P.(C) 1006/2014, CM Nos 2037/2014 and 2040/2014.
5 Regulation 20, the Competition Commission of India (General)
Regulations, 2009.
6 The Air Cargo Agents Association of India v CCI, Hindustan Times
House, 2016 Comp LR 1223 (CompAT).
7 M/s Sheth & Co v CCI, [COMPAT], Appeal No 102 of 2015.
8 CCI v Steel Authority of India, CA No 7779/2010,
(2010) 10 SCC 744 : JT 2010
(10) SC 26 : (2010) 9 Scale 291
.
9 UOI v Hindustan Development Corp,
AIR 1994 SC 988 : (1993) 3 SCC 499
: JT 1993 (3) SC 15 .
10 Google Inc v CCI, 2015
(150) DRJ 192 .
Page 11 of 11
[s 41] Director General to investigate contraventions
11 All India Tyre Dealers’ Federation v Tyre Manufacturers, 2013
Comp LR 92 (CCI), paras 415–16, per R PRASAD, dissenting opinion.
12 Hyundai Motor India Ltd, [2015]
127 CLA 46 (Mad), 2015 (3) CTC 290, (2015) 2 Mad LJ 560.
13 Raja Narayanlal Bansilal v Maneck Phiroz Mistry,
AIR 1961 SC 29 : (1961) 1 Mad LJ (Crl) 208 : (1961) 1 Mad LJ 73 : [1961]
Mad LJ 208 : LNIND 1960 SC 186 .
14 Grasim Industries Ltd v CCI,
[2014] 119 CLA 169 (Delhi) : 2014 Comp LR 109 (Delhi) : 206
(2014) DLT 42 .
15 Reliance was placed on decisions of the Supreme Court in State of
UP v Singhara Singh, AIR 1964 SC 358 :
1964 (4) SCC 485 :
(1964) SCR 485 : 1965 Mad LJ (Cri) 72 : 1965 1 SCJ 184
: 1964 All WR (HC) 97 : 1964 1 SCWR 57
: 1964 1 CrLJ 263 (2) : 1964 1 Ker LR
84 : 1964 SCD 345 : 1963 All LJ 1093 :
ILR 1964 1 All 340 : LNIND
1963 SC 192 ; Rukumanand Bairoliya v State of Bihar,
AIR 1971 SC 746 : (1971) 3 SCC 167
; and Hussein Ghadially v State of Gujarat, AIR 2014 SC (Supp) 1659 :
(2014) 8 SCC 425 : 2014 (8) Scale 598
: LNIND 2014 SC 676 :
JT 2014 (8) SC 391 , to stress that when a statute provides
for a thing to be done in a particular manner, it shall be done only in that manner and not otherwise.
End of Document
[s 42] [Contravention of orders of Commission
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > CHAPTER
VI PENALTIES
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
CHAPTER VI PENALTIES
1[s 42] [Contravention of orders of Commission
(1) The Commission may cause an inquiry to be made into compliance of its orders or directions made in exercise of
its powers under the Act.
(2) If any person, without reasonable cause, fails to comply with the orders or directions of the Commission issued
under sections 27, 28, 31, 32, 33, 42A and 43A of the Act, he shall be punishable with fine which may extend to
rupees one lakh for each day during which such non-compliance occurs, subject to a maximum of rupees ten
crore, as the Commission may determine.
(3) If any person does not comply with the orders or directions issued, or fails to pay the fine imposed under sub-
section (2), he shall, without prejudice to any proceeding under section 39, be punishable with imprisonment for a
term which may extend to three years, or with fine which may extend to rupees twenty-five crore, or with both, as
the Chief Metropolitan Magistrate, Delhi may deem fit:
Provided that the Chief Metropolitan Magistrate, Delhi shall not take cognizance of any offence under this
section save on a complaint filed by the Commission or any of its officers authorised by it].
HISTORICAL BACKGROUND
The Monopolies and Restrictive Trade Practices (MRTP) Act, 1969
Sections 50 and 52A of the Monopolies and Restrictive Trade Practices Act, 1969 since repealed, provided for punishment
for contravening any order of the Commission as follows:
S. 50. Penalty for offences in relation to orders under the Act.—(1) A person who is deemed under section 13 to be guilty of an
offence under this Act, shall be punishable with imprisonment for a term which may extend to three years, or with fine which may
extend to fifty thousand rupees, or with both, and where the offence is a continuing one, with a further fine which may extend to
five thousand rupees for every day, after the first, during which such contravention continues.
(2) If any person contravenes, without any reasonable excuse, any order made by the Central Government under section 31 or any
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[s 42] [Contravention of orders of Commission
order made by the Commission under section 37, he shall be punishable with imprisonment for a term which shall not be less
than,—
(a) in the case of the first offence, six months but not more than three years, and
(b) in the case of any second or subsequent offence in relation to the goods or services in respect of which the first offence
was committed, two years but not more than seven years,
and, in either case, where the contravention is a continuing one, also with fine which may extend to five thousand rupees for every
day, after the first, during which such contravention continues:
Provided that the court may, for reasons to be recorded in writing, impose a sentence of imprisonment for a term lesser than the
minimum term specified in this sub-section.
(3) If any person carries on any trade practice which is prohibited by this Act, he shall be punishable with imprisonment for a term
which may extend to six months, or with fine which may extend to five thousand rupees, or with both, and where the offence is a
continuing one, with a further fine which may extend to five hundred rupees for every day, after the first, during which such
contravention continues.
*****
S. 52A. Penalty for contravention of any condition or restriction, etc.—If any person contravenes, without any reasonable excuse,
any condition or restriction subject to which any approval, sanction, direction or exemption in relation to any matter has been
accorded, given, made or granted under this Act, he shall be punishable with fine which may extend to one thousand rupees, and
where the contravention is a continuing one, with a further fine which may extend to one hundred rupees for every day, after the
first, during which such contravention continues.
Competition Act, 2002
Notes on clauses of the Bill stated, thus:
Notes on clauses.—This clause provides that if any person contravenes without any reasonable ground the order of the
Commission or any condition or restriction subject to which any approval, sanction, direction or exemption in relation to any pay
the penalty imposed under the Act, he shall be liable to be detained in civil prison for a term which may extend to one year or shall
be liable to a penalty not exceeding rupees ten lakhs. [Clause 42 of the Competition Bill, 2001].
Competition (Amendment) Act, 2007
Notes on clause.—This clause seeks to substitute section 42 of the Competition Act, 2002 relating to contravention of orders of the
Competition Commission of India.
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[s 42] [Contravention of orders of Commission
Under the existing provisions contained in the said section if any person contravenes, without any reasonable ground, any order of
the Commission, or any condition or restriction subject to which any approval, sanction, direction or exemption in relation to any
matter has been accorded, given, made or granted under this Act or fails to pay the penalty imposed under this Act, he shall be
liable to be detained in civil prison for a term which may extend to one year, unless in the meantime the Commission directs his
release and he shall also be liable to a penalty not exceeding rupees ten lakh.
It is proposed to substitute the said section so as to provide that if any person, without reasonable cause fails to comply with the
orders or directions issued under the sections specified therein, he shall be punishable with fine which may extend to rupees one
lakh for each day subject to a maximum of rupees ten crore as the Commission may determine. It also provides that if any person
does not comply with the orders or directions issued under this section, he shall be punishable with imprisonment for a term which
may extend to three years or with fine which may extend to rupees twenty-five crore or with both as the Chief Metropolitan
Magistrate, Delhi may deem fit. It further provides that the Chief Metropolitan Magistrate, Delhi may pass such orders as it may
deem fit on a complaint filed before it by the Commission for non-compliance of its orders. [Clause 34 of the Competition
(Amendment) Bill, 2007].
SCOPE OF THE SECTION
Originally, this section provided that any person who has contravened any order of the Commission or who has failed to
pay the penalty imposed under the Competition Act, 2002 shall be liable to be detained in civil prison up to one year and
shall also be liable to pay the penalty not exceeding Rs 10 lakhs. Further, any person who fails to comply with the
directions issued by the Commission for proper implementation of the order be detained in civil prison and penalty, as
aforesaid.
This section was amended by the Competition (Amendment) Act, 2007 to provide that the Commission may cause an
inquiry as to compliance of its orders or directions. Now the punitive provisions have been divided into two parts:
(a) If any person fails to comply with the orders or directions of the Commission issued under sections 27, 28, 32,
33, 42A and 43A of the Competition Act, 2002 he shall be punishable with fine up to Rs 1 lakh per day during
which such non-compliance occurs, subject to a maximum fine of Rs 10 crores.
(b) If any person fails to comply with orders or directions issued or fails to pay the fine as aforesaid, he shall be
punishable with imprisonment up to three years or with fine up to Rs 25 crores or with both, as the Chief
Metropolitan Magistrate (CMM), Delhi may deem fit. CMM Delhi will take cognisance of such an offence on a
complaint filed by the Commission or any officer authorised by it.
This section was enforced vide S.O. 1241(E), dated 15 May 2009, w.e.f. 20 May 2009.
If the order of the Commission is upheld by the COMPAT and the abuse of dominance is continued by the opposite party
despite cease and desist order of the Commission, an applicant would have a right to move the Commission under section
42 of the Competition Act, 2002 and the Commission shall consider the matter.2 However, the Commission can also take
cognisance of such non-compliance on its own.
PENALTY AND FINE
Under the Law Lexicon, “penalty” and “fine” are the same in law. A penalty is always recoverable in a civil action. A fine
never is. A penalty, when recovered, goes to the party suiting; a fine, to the state. A fine is defined in law to be a pecuniary
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[s 42] [Contravention of orders of Commission
punishment imposed by a lawful tribunal upon a person convicted of a crime or misdemeanor. This definition is wholly
inapplicable to a judgment in a civil suit.
The expression “penalty” is a word of wide significance. Sometimes, it means a recovery of amount as a penal measure
even in civil proceedings. An exaction which is not compensatory in character is also termed as a penalty. When penalty is
imposed by an adjudicating officer it is done so in “adjudicatory proceedings” and not by way of fine as a result of
prosecution of an accused for Commission of an offence in Criminal Court.3
Evidently, punishment by way of imprisonment or fine is imposed by the Magistrate’s court in respect of an offence
committed by an accused after following the procedure laid down under Code of Criminal Procedure (Cr PC 1973).
Till date, there are no sentencing guidelines issued by the Commission.
Further, the varied nature of penalties imposed by the Commission underlines the lack of clarity and systemization in competition
law.4
This has led to filing of multiple appeals before the appellate body.5 There is a huge disparity in the quantum of fines
imposed.6 Globally, competition agencies have laid out transparent guidelines for fining, but the Commission is yet to
develop such guidelines. As per the Commission, it has taken a conscious decision to build on some more cases before
establishing an architecture that will ensure transparency in the broad principles or guidelines for imposition of penalty.7
Penalty guidelines that set out clear principles and predictable fines, as well as factors that aggravate and mitigate fines,
will most likely engender a greater compliance culture.
PENALTY GUIDELINES IN THE EUROPEAN UNION
Guidelines on the method of setting fines imposed pursuant to Article 23(2)(a) of Regulation
No 1/20038
The 2006 Guidelines make it imperative for the Commission to ensure that its action has the necessary deterrent effect.
Accordingly, when the Commission discovers that Article 101 (ex 81) or 102 (ex 82) of the Treaty on the Functioning of
the European Union (TFEU) has been infringed, it may be necessary to impose a fine on those who have acted in breach of
the law. Fines should have a sufficiently deterrent effect, not only in order to sanction the undertakings concerned (specific
deterrence) but also in order to deter other undertakings from engaging in, or continuing, behaviour that is contrary to
Articles 101 and 102 of the TFEU (general deterrence). Brief summary has been given below:
Basic fine – The basic amount will be set by reference to the value of Percentage of value of relevant sales (0-30%) x
sales
Duration (years or periods less than one year) + 15-25% of value of
relevant sales: additional deterrence for cartel
Increased by Aggravating factors
e.g., ring leader, repeat offender or obstructing investigation
Decreased by Mitigating factors
e.g., limited role or conduct encouraged by legislation; evidence that
the infringement has been committed as a result of negligence;
evidence that its involvement in the infringement is substantially
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[s 42] [Contravention of orders of Commission
limited and thus demonstrates that, during the period in which it was
party to the offending agreement, it actually avoided applying it by
adopting competitive conduct in the market: the mere fact that an
undertaking participated in an infringement for a shorter duration
than others will not be regarded as a mitigating circumstance since
this will already be reflected in the basic amount
Subject to overall cap 10% of turnover (per infringement)
Possibly further decreased Leniency: 100% for first applicant, up to 50% for next, 20-30% for
by third and up to 20% for others
Settlement:10%
Inability to pay reduction
Source: Fines for breaking EU Competition Law.9
CASES UNDER THE COMPETITION ACT, 2002
In the case of BP Khare v M/s Orissa Concrete and Allied Industries Ltd,10 the Commission directed the opposite parties
to cease and desist from indulging in anti-competitive conduct in future which resulted in bid rigging. However, the
Commission also noted that there were circumstances which required the issue of penalty under section 27 to be looked
into somewhat differently. The facts in the case revealed a complete lack of awareness by the opposite parties which were
small and micro enterprises. Further, the Commission noted that the replies filed by them were effectively incriminating in
nature and the offers made by these parties were not in accordance with the requirement of the tender and hence, they
could not have got supplies as per the tender conditions. The Commission, therefore, did not deem it fit to impose a penalty
and stopped at only passing a cease and desist order. The Commission, however, warned the parties that if any person,
without reasonable cause, failed to comply with the orders or directions of the Commission, he shall be punishable with
fine which may extend to Rs 1 lakh for each day during which such non-compliance occurs, subject to a maximum of Rs
10 crore, as the Commission may determine, as per the provisions contained in section 42 of the Competition Act, 2002.
Will non-filing of an undertaking attract section 42?
In the case of Rajkumar Dyeing and Printing Works Pvt Ltd v CCI,11 a petition challenged the penalties imposed by the
Commission under section 42 for non-filing of undertakings to cease and desist from anti-competitive conduct, within the
time period as directed by Commission.12 It was argued that the non-filing of the undertaking within the prescribed time
was neither intentional, nor deliberate and there were “reasonable causes” which the Commission failed to examine and
consider. Therefore, it was alleged that the Commission had acted dehors its powers under section 42 of the Competition
Act, 2002 in passing the impugned order. It was further, contended that the penalty of Rs 5,000 per day was grossly
disproportionate in the facts and circumstances of the case. Further, it was argued that since the parties were blacklisted by
the Directorate General of Supplies and Disposals after the Commission’s order, they were disabled from participating in
future tenders with regard to the product and therefore, there was no question of the bidders indulging in any anti-
competitive conduct.
The Delhi High Court noted that the Commission’s 2013 order imposing penalty and directing the opposite parties to cease
and desist from indulging in anti-competitive conduct in future, was clearly covered within the provisions of section 27 of
the Competition Act, 2002. However, the direction to file an undertaking to cease and desist from anti-competitive conduct
was only to aid and ensure compliance of the “cease and desist” direction. The direction to file the undertaking was not a
part of the substantive measures taken by the Commission. The Court noted:
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[s 42] [Contravention of orders of Commission
It is apparent from the above that penalties as contemplated under section 42(2) of the Act are levied as a punitive measure for
noncompliance of orders including orders under section 27 of the Act. Given the nature of penalties and the wide discretion vested
with CCI, the same are to be considered keeping in view several relevant factors including the nature of directions that have
remained uncomplied – whether they are substantive or merely formal, the effect of such non-compliance, the intention of the
parties accused of non-compliance, the benefit derived by such parties, causes for non-compliance. Penalties by their very nature
are punitive measures and thus, have to be considered in light of the gravity of the offence in respect of which they are imposed.
The Court noted that there was no allegation of indulgence in any anti-competitive conduct or that the parties had failed to
comply with the directions to cease and desist from anti-competitive conduct as directed by the Commission. Further, it
was noted that the failure on the part of the petitioners to file an undertaking did not have any adverse effect on public
interest. Moreover, the petitioners had not benefitted from non-filing of the undertaking and there was no reason why the
petitioners’ contention that their failure to file undertaking was unintentional, should not have been accepted. Also, in light
of the fact that the COMPAT had stayed the penalty on account of the petitioners being small-scale industries, the
Commission’s order was held to be “shockingly disproportionate” and “unreasonable”.13
In the case of Magnolia Flat Owners Association,14 it was contended that even though a cease and desist order was passed
against DLF by the Commission’s order on 31 January 2012 and later confirmed by COMPAT, it still indulged in
imposing unfair conditions in its agreement in the form of demand letters issued to the members of the applicant
association demanding exorbitant sums under the garb of “super area”, a concept declared illegal and abusive by the
Commission and imposition of the same by DLF had been restrained by the “cease and desist” order of the Commission.
The Commission noted that the Tribunal while granting interim relief to DLF had stayed recovery of penalty from it.
However, the “cease and desist” order was not stayed. Thus, DLF was bound to act in accordance with the order of the
Commission except the payment of the penalty imposed by the Commission. It was argued by DLF that after final disposal
of the case, no application could be filed by the applicant for intervention as the Commission had become functus officio.
Further, it was agitated that the applicant Shri Brij Raj Singh was not a party to Case No. 67 of 2010 and as such, he had
no locus standi to move any application including an application under section 42 of the Competition Act, 2002. The
Commission, however, held that while it is true that after passing of final orders in terms of the provisions contained in
section 27 of the Act, the inquiry conducted by the Commission comes to an end. However, the proceedings contemplated
under section 42 of the Act, by their very nature, will arise post passing of the orders by the Commission. The inquiry
envisaged under section 42 of the Act may be initiated by the Commission either suo moto or on an application moved by
any member of the public bringing to the notice of the Commission, the alleged contravention by a party against whom an
order was issued by the Commission.
The Commission noted that DLF had contravened the order of the Commission, dated 31 January 2012 by issuing the
impugned demand letters, dated 28 November 2012. The Commission accordingly, imposed a fine of Rs 50,000 upon DLF
for each day of non-compliance and it was directed to pay within a period of 60 days. If the non-compliance continued
beyond the date of passing of this order, DLF was to be liable to a fine of Rs 1 lakh per day for each day of further non-
compliance till the time DLF purged itself of non-compliance or till the time the total fine reached the maximum statutory
limit of Rs 10 crores, whichever was earlier.
1 Subs. by Act 39 of 2007, section 32, for section 42 (w.e.f. 20 May 2009). Section 42,
before substitution, stood as under:
S. 42. Contravention of orders of Commission
(1) Without prejudice to the provisions of this Act, if any person contravenes, without any reasonable ground, any order of the
Commission, or any condition or restriction subject to which any approval, sanction, direction or exemption in relation to any
matter has been accorded, given, made or granted under this Act or fails to pay the penalty imposed under this Act, he shall be
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[s 42] [Contravention of orders of Commission
liable to be detained in civil prison for a term which may extend to one year, unless in the meantime the Commission directs
his release and he shall also be liable to a penalty not exceeding rupees ten lakh.
(2) The Commission may, while making an order under this Act, issue such directions to any person or authority, not inconsistent
with this Act, as it thinks necessary or desirable, for the proper implementation or execution of the order, and any person who
commits breach of, or fails to comply with, any obligation imposed on him under such direction, may be ordered by the
Commission to be detained in civil prison for a term not exceeding one year unless in the meantime the Commission directs
his release and he shall also be liable to a penalty not exceeding rupees ten lakh.
2 Pan India Infra Projects Pvt Ltd v Board of Control for Cricket in
India, Case No 91/2013, decided on 16 January 2014.
3 Director of Enforcement v MCTM Corp Pvt Ltd,
AIR 1996 SC 1100 , 1104 : [1997] Com Cas 449
(SC).
4 Pradeep S Mehta, “Need for a realistic penalty regime”, Financial
Express, 29 March 2013. Available at: http://www.financialexpress.com/news/need-for-a-realistic-penaltyregime/1094528/0 (last
accessed in February 2019).
5 Excel Crop Care Ltd v CCI, 2013 Comp LR 799 (Comp AT). Also
refer to the discussion on imposition of fine on relevant turnover.
6 India, Penalty Guidelines, A Key Tool To Encourage Competition
Law Compliance, Legal News & Analysis – Asia Pacific - India – Competition & Antitrust, 19 July 2015. Available at:
http://www.conventuslaw. com/report/india---penalty-guidelines-a-key-tool-to-encourage/(last accessed in February 2019).
7 We have taken the position that our orders will speak for themselves
for a few years and then maybe guidelines will come out. And in any case, guidelines are not all that easy in the area of
competition, because the whole thing depends on behaviour, on how it is done, when it is done, under what circumstances. So, too
much of mathematics is also neither the right thing, nor is it very good in the long run, Ashok Chawla, Chairman, The Firm Special:
Interview with CCI Chairman Ashok Chawla. Available at: https://www.youtube.com/watch?v=UAOFCR0Asyw (last accessed in
February 2019).
8 2006/C 210/02. Available at: http://eur-lex.europa.eu/legal-
content/EN/ALL/?uri=CELEX%3A52006 XC0901(01) (last accessed in February 2019).
9 Available at:
http://ec.europa.eu/competition/cartels/overview/factsheet_fines_en.pdf (last accessed in February 2019).
10 BP Khare, Principal Chief Engineer, South Eastern Railway v Orissa
Concrete and Allied Industries Ltd, [2013] 114 CLA 280 (CCI) :
[2013] 119 SCL 1 (CCI).
11 Rajkumar Dyeing and Printing Works Pvt Ltd v CCI, 2015 Comp LR
201 : [2015] 129 SCL 221 (Del).
12 The petition, W.P.(C) No. 6260/2014 was filed by M/s RS Industries
(hereafter “RSI”) and the petition, W.P.(C) No. 5947/2014 was filed by M/s Rajkumar Dyeing & Printing Works Pvt Ltd inter alia
seeking quashing of a common order, dated 6 August 2014 passed by CCI Re Case No 1/2012 whereby, the CCI imposed a penalty
of a sum of Rs 5,000 per day on each of the petitioners, which works out to Rs 14,10,000 in the case of RSI and Rs 13,65,000 in the
case of Rajkumar Dyeing.
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[s 42] [Contravention of orders of Commission
13 The Court also held that the impugned order failed the
“Wednesbury” test of unreasonableness, which was explained by LORD DIPLOK in Council of Civil Service Unions v Minister for
Civil Service, (1984) 3 All ER 935 . The Court, referring
to the decisions Associated Provincial Picture Houses v Wednesbury Corp, [1948] 1 KB 223
and Indian Rly Construction Co Ltd v Ajay Kumar, AIR 2003
SC 1843 : (2003) 4 SCC 579 ,
noted that the discretion vested with the Commission had to be exercised in a reasonable manner and after considering the relevant
factors.
14 Magnolia Flat Owners Association and Rahul Kapoor v DLF
Universal Ltd, Haryana Urban Development Authority and The Director Town and Country Planning, Haryana, 2014 Comp LR 97
(CCI).
End of Document
[s 42A] Compensation in case of contravention of orders of Commission
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > CHAPTER
VI PENALTIES
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
CHAPTER VI PENALTIES
15[s 42A] Compensation in case of contravention of orders of Commission
Without prejudice to the provisions of this Act, any person may make an application to the Appellate Tribunal for an order
for the recovery of compensation from any enterprise for any loss or damage shown to have been suffered, by such person
as a result of the said enterprise violating directions issued by the Commission or contravening, without any reasonable
ground, any decision or order of the Commission issued under sections 27, 28, 31, 32 and 33 or any condition or restriction
subject to which any approval, sanction, direction or exemption in relating to any matter has been accorded, given, made or
granted under this Act or delaying in carrying out such orders or directions of the Commission].
LEGISLATIVE BACKGROUND
The Competition (Amendment) Act, 2007
Notes on clauses.—This clause seeks to insert a new section 42A regarding compensation in case of contravention of orders of
Commission.
The proposed new section provides that any person may make an application to the Appellate Tribunal for an order for the
recovery of compensation from any enterprise for any loss or damage shown to have been suffered, by such person as a result of
the said enterprise violating directions issued by the Commission or contravening, without any reasonable ground, any decision or
order of the Commission. [Clause 35 of the Competition (Amendment) Bill, 2007].
SCOPE OF THE SECTION
This section has been inserted by the Competition (Amendment) Act, 2007 to provide that any person may approach the
Page 2 of 2
[s 42A] Compensation in case of contravention of orders of Commission
Appellate Tribunal for an order for recovery of compensation from any enterprise for any loss or damage suffered by
him/it as a result of violation of the directions issued by the Commission or contravention of any decision or order of the
Commission issued under sections 27, 28, 31, 32 and 33 or any condition or restriction subject to which any approval,
sanction, direction or exemption in relation to any matter has been accorded, given, made or granted under the Competition
Act, 2002 or delaying in carrying out the orders or directions of the Commission.
The person concerned may in his defence plead reasonable grounds to sustain his case. Section 42A was inserted to
provide for “compensation in case of contravention of orders of Commission”.16
15 Ins. by Act 39 of 2007, section 35 (w.e.f. 20 May 2009).
16 Lafarge India Ltd v CCI, Appeal No 105 of 2012 and IA No
36/2013, Appeal Nos 103 of 2012, 104, 106, 107, 108, 109, 110, 111, 112, 113, 122, 123, 124, 125, 126, 127, 128, 129, 132, 133
and 134/12, 2013 Com LR 439 (CompAT).
End of Document
[s 43] [Penalty for failure to comply with directions of Commission and Director
General
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > CHAPTER
VI PENALTIES
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
CHAPTER VI PENALTIES
17[s
43] [Penalty for failure to comply with directions of Commission and Director
General
If any person fails to comply, without reasonable cause, with a direction given by—
(a) the Commission under sub-sections (2) and (4) of section 36; or
(b) the Director General while exercising powers referred to in sub-section (2) of section 41,
such person shall be punishable with fine which may extend to rupees one lakh for each day during which such failure
continues subject to a maximum of rupees one crore, as may be determined by the Commission].
LEGISLATIVE BACKGROUND
The Competition Act, 2002
Notes on clauses of the Bill stated, thus:
Notes on clauses.—This clause provides for imposition of penalty for failure to comply with the directions of the Commission
under sub-clause (5) of clause 36 or the Director General under sub-clause (2) of clause 41. The Commission may impose a penalty
of rupees one lakh for each day during which the person has failed to comply with the direction given under those sub-clauses by
the Commission or the Director General, as the case may be. [Clause 43 of the Competition Bill, 2001].
The Competition (Amendment) Act, 2007
Notes on clauses.—This clause seeks to substitute section 43 of the Competition Act, 2002 relating to penalty for failure to comply
with the directions of the Competition Commission of India and Director General of the Commission. The new section seeks to
provide that a penalty which may extend to rupees one lakh for each day subject to a maximum of rupees one crore may be
Page 2 of 7
[s 43] [Penalty for failure to comply with directions of Commission and Director General
imposed on the person who, without reasonable cause, fails to comply with the directions given by the Commission and the
Director General issued under the specified section. [Clause 36 of the Competition (Amendment) Bill, 2007].
SCOPE OF THE SECTION
This penal provision is for failure to comply with any direction issued by the Commission for appearance or for production
of the records and for failure to comply with direction given by Director General (DG) or the Secretary of the Commission
to produce the books of accounts and records as also information relating to trade carried on by any person. The penalty is
by way of fine up to Rs 1 lakh for each day’s failure to furnish the required information/documents subject to a maximum
of Rs 1 crore, as determined by the Commission.
The books of account, information, etc., must relate to any trade, the examination of which may be required for purposes
of the Competition Act, 2002, i.e., in respect of allegations relating to actions covered by sections 3, 4 or 5.18
PENALTY
The Commission is empowered to impose a penalty of Rs 1 lakh per day (subject to a maximum of Rs 1 crore) for the
failure on the part of the person directed to furnish the books of account, etc.
PROVISIONS OF MONOPOLIES AND RESTRICTIVE TRADE PRACTICES ACT, 1969 VIS-A-
VIS THE COMPETITION ACT, 2002
Section 49(1) of the Monopolies and Restrictive Trade Practices Act, 1969, since repealed, provided for penalty by way of
imprisonment up to 3 months or fine up to Rs 2,000 or with both and further fine of Rs 1,000 for every day in case of
continuing offence. However, under the Competition Act, 2002 the penalty imposed is quite substantial and deterrent.
IS THE COMPETITION ACT, 2002 PENAL IN NATURE?
A breach of civil obligation which attracts penalty in the nature of fine under the provisions of the Competition Act, 2002
and the Regulations would immediately attract the levy of penalty irrespective of the fact whether contravention was made
by the defaulter with guilty intention or not. The Supreme Court’s decision in the case of The Chairman, SEBI v Shriram
Mutual Fund,19 held that penalty is attracted as soon as the contravention of the statutory obligation as contemplated by
the Competition Act, 2002 and the Regulation is established and therefore, the intention of the parties committing such
violation becomes wholly irrelevant and unless the language of the statute indicates the need to establish the presence of
mens rea, it is wholly unnecessary to ascertain whether such a violation was intentional or not.
It was submitted on behalf of the petitioner in the Kingfisher Airlines Ltd20 case that since section 43 of the Competition
Act, 2002 prescribes punishment, it should be treated as a penal Act. The Bombay High Court did not agree that the Act
was penal in nature because the Act did not make punishable by itself an act of entering into an agreement, contrary to the
provisions of the Act. Therefore, even if parties enter into an agreement covered by the Act, that by itself, does not amount
to an offence. What is made punishable is disobedience of the order passed by the Commission and non-compliance.
Sections 42 and 43, therefore, make contravention of orders of the Commission and non-compliance of the direction of
Commission an offence. Strictly speaking, no criminal liability ensues for breach of sections 3 or 4 of the Competition Act,
2002. The penalty is provided only with a view to ensure or enforce compliance of the directions of the Commission, as
can be seen from section 27(1) of the Competition Act, 2002. Such a direction can be issued by the Commission only after
enquiry. Necessarily, therefore, unless and until any enquiry is held and pursuant to that certain directions as envisaged by
section 2(a) to (g) are issued, there would be no question of anybody committing any offence. It may be said that breach of
sections 3 and 4 by itself is not an offence.
Page 3 of 7
[s 43] [Penalty for failure to comply with directions of Commission and Director General
CASES UNDER THE COMPETITION ACT, 2002
Exercise of power under section 43
A reading of the language of section 43 makes it clear that any person failing to comply with the direction given by the DG
under section 41(2) read with section 36(2) is liable to be punished with fine. The section confers ample discretion upon
the Commission so far as the quantum of fine is concerned within the limit of Rs 1 lakh per day and maximum of Rs 1
crore. The only other rider is that in terms of regulation 48 of the General Regulation, the Commission is required to
comply with the basics of natural justice before imposing fine under section 43. Since the Competition Act, 2002 and
Regulations do not contain any guidelines for the exercise of power by the Commission under section 43, the said power is
required to be exercised reasonably keeping in view the totality of the facts of a given case, the nature and extent of non-
compliance of the direction given by the Commission and/or the DG and the explanation given by the defaulting party for
the delay.
“Person” includes “Association”
It is imperative that the party involved in a case before the Commission should supply the requisite information about its
financial status, including its turnover and profits for the last three years. The Commission for the purpose of discharging
its functions can even otherwise call upon the concerned parties to file each and every required information. Non-filing of
the requisite information is looked upon seriously by the Legislature and section 43 of the Competition Act, 2002 provides
that if any person (which includes an association or an enterprise) fails to comply with the directions of the omission or
with the directions of the DG seeking information, then such person is liable to be punished with fine, which may extend
up to Rs 1,00,000 for each day during such continuance of refusal, subject to a maximum of Rs 1,00,00,000. In the case of
Varca Druggist & Chemist21 the Commission held that non-submission of requisite information by the Chemists and
Druggists Association, Goa (CDAG) without reasonable cause will hamper further proceedings in the matter. The
Commission, therefore, decided to initiate proceedings against CDAG under section 43 of the Competition Act, 2002. The
Commission further decided to accord opportunity to the Association of being heard in person or through their authorised
representative on 13 December 2011, if it so desired. The Commission in the penalty proceeding conducted ex parte as no
one appeared on behalf of CDAG, noted that CDAG had deliberately and purposefully refused to part with the information
and had rather questioned the authority of the Commission to ask for the information. The Commission, therefore, imposed
a penalty of Rs 25,000 per day on CDAG for non-furnishing the requisite information w.e.f. 13 December 2011 for a
period of 30 days. In case, the information was not furnished within the 30 days, it was decided that the penalty shall be Rs
50,000 per day for the next 30 days and Rs 1,00,000 per day thereafter, till the penalty amount culminated to Rs
1,00,00,000.
Continuing offence – Multiple Complaints
In the Google Case,22 the Commission observed that one of Counsel’s contentions related to DG widening the scope of
investigation, particularly with respect to information sought on remote tech Adword accounts. However, the Commission
observed that scope of investigations ordered under section 26(1) of Competition Act, 2002 was very broad and
encompassed various aspects relating to Google’s policies with respect to online search advertising. Further, it was not
limited to advertisers of any particular industry and would cover all who advertise on Google. Against this background,
information sought by DG’s Office with respect to suspension of Adword accounts of remote tech support advertisers,
squarely fell within the ambit of investigation. Moreover, the Commission was constrained to note that despite indulgence
shown by DG to the Opposite Parties, they engaged in dilatory tactics in order to procrastinate and prolong investigations
without any justifiable reason. Therefore, it was evident that Opposite Parties had failed to comply with directions given by
DG in exercise of its powers under section 41(2) read with section 36(2) of Act. Also, no reasonable cause was shown by
the Opposite Parties save and except raising and advancing pleas based on abstract propositions. The Commission had no
hesitation in holding that Opposite Parties had rendered themselves liable to be proceeded against and punished in terms of
provisions contained in section 43 of Act. It was manifest that the Opposite Parties had failed to comply fully with various
notices issued by DG on different occasions. Furthermore, taking into consideration the totality of facts and circumstances
of the case, and, in particular, considering the fact that Opposite Parties had submitted some of the documents as sought
for, the DG was of the opinion that ends of justice would be met if maximum fine envisaged under provisions of section 43
of Act was imposed upon Opposite Parties by taking only one instance of non-compliance. It was also made clear that if
Page 4 of 7
[s 43] [Penalty for failure to comply with directions of Commission and Director General
Opposite Parties further failed to comply with directions of DG in future, each instance of non-compliance shall be taken
separately, besides considering the same as an aggravating factor for purposes of imposition of fine. As a result, a fine of
Rs 1 crore was imposed upon Opposite Parties.
In the case of M/s Santuka Associates Pvt Ltd,23 the DG recommended initiation of penalty proceedings against All India
Organisation of Chemists and Druggists (AIOCD) under section 43 of the Competition Act, 2002. After considering the
said recommendation and correspondence with AIOCD by the office of DG, the Commission decided to initiate
proceedings against it under section 43 of the Act. However, the Commission also accorded an opportunity of hearing in
person or through authorised representation on 25 October 2011. The Commission noted that AIOCD was in a habit of
either withholding information sought by the Commission/DG or furnishing only a part of the information. It was also
noted that AIOCD had shown the same attitude in other cases pending before the Commission/DG related to it, e.g., Case
Nos. 30/2011 and 41/2011. The Commission further noted that non-filing of reply to various notices of DG viz., dated 28
June 2011, 22 July 2011 and 10 August 2011 showed willful disregard by AIOCD to the communications of DG, despite
having being made aware of its consequences, and ample opportunities and time given to it. The said act of the party in not
providing the requisite information for such a long period was found to hamper the inquiry in the case. Thus, considering
the conduct of the AIOCD, the Commission passed an order for penalty of Rs 25,000 per day from 2 September 2011 till
AIOCD provided the requisite information to the office of DG as would suffice to meet the ends of justice.24
The Tribunal,25 however, set aside the Commission’s order. It noted that the information filed by Santuka Associates Pvt
Ltd, Cuttack,26 M/s Peeveera Medical Agency, Kerala,27 and Sandhya Drug Agency, Assam,28 contained substantially
similar allegations. Moreover, the DG adopted identical methodology for conducting investigations in three cases and even
though the same were not clubbed, the information supplied in one case was used for preparing report in the other cases.
The notices issued under section 41 read with section 36(2) for supply of information in all the cases were identical. The
appellant complied with the notice issued in Case No. 30 of 2011 and furnished the required information and documents.
The Tribunal, therefore, held that the non-supply of the information in Case No. 20/2011 was inconsequential. Further, the
Tribunal held that this lapse on the appellant’s part would have acquired significance if the DG felt handicapped in
conducting investigation or preparing the report. However, no such difficulty was faced by the DG. Rather, the DG utilised
the information supplied in one case for preparing report in the other cases. Even the Commission did not find any
difficulty in passing final orders under section 27 of the Competition Act, 2002. Therefore, even though there may be some
semblance of justification for imposing penalty under section 43 of the Act on the ground of non-compliance of the
directives given by the DG, there was absolutely no justification for continuing the penalty beyond the date of submission
of report by the DG and the Commission committed a grave error by incorporating a direction in order dated 25 October
2011 that the penalty will continue to be levied till the party provided the information to the office of the DG. The Tribunal
further held that the Commission also violated the principle of proportionality in imposing penalty since the Commission
had not found any deficiency in the report of the DG on account of non-supply of information by the appellant and that it
acted upon the reports prepared by the DG for the purpose of passing orders under section 27 of the Act.
Knowledge of Notice
Mr Jose C Mundadan29 in an appeal made to the Tribunal, challenged the order passed by the Commission whereby
penalty of Rs 19,25,000 was imposed on him for his alleged failure to comply notice issued by the DG under section 36(2)
read with section 41(2) of the Competition Act, 2002. The Tribunal noted that the Notices and reminders issued by the Jt
DG, which were addressed to General Secretary of Association, were returned by postal authorities with the remark
“unclaimed” implying that Mr Mundadan, who was then holding post of General Secretary had refused to accept notices
and reminders. Also, in a reply filed by Mr Mundadan before the Commission on 7 June 2014 he tried to absolve himself
of responsibility to comply with direction given by the Jt DG by saying that he had disclosed contents of notice to the
Association. His contention, however, was rejected by the Tribunal.30 The Tribunal noted that by having made a statement
that he had disclosed contents of notice to other office-bearers of Association, appellant would be deemed to have admitted
that at least he knew contents of notice affixed on his front door. Therefore, the Tribunal agreed with finding of the
Commission that Mr Mundadan knew about direction given by the Jt DG to supply information/documents. Further, in a
Memo of Appeal filed before the Tribunal, the appellant also blamed Shri VN Mohan Kumar and for non-compliance of
direction given by the Jt DG by saying that, even though he was General Secretary, functioning of Association was
controlled by Shri VN Mohan Kumar. The Tribunal noted:
If there was any grain of truth in Appellant’s plea of alibi, then he would have surely disclosed as to when he returned from Trissur
Page 5 of 7
[s 43] [Penalty for failure to comply with directions of Commission and Director General
to Ernakulam; who told him about affixation of notice and when he contacted Shri V.N. Mohan Kumar. However, neither in reply
dated 7 June 2014 nor the Memo of Appeal filed before the Tribunal Appellant had disclosed these details. Therefore, it was not
possible to rely upon story concocted by Appellant that, on date of affixation of notice i.e., 14 August 2003, he was at Trissur.
Likewise, the Tribunal held that the assertion that contents of notice were disclosed to other office-bearers of Association
could not be relied upon for absolving the appellant of his responsibility to comply with the direction given by the Jt DG. It
was held that the Commission did not commit any illegality by imposing penalty on appellant under section 43 of
Competition Act, 2002 and the appeal, therefore, was dismissed.
Issuance of show-cause notice section 43
The decision to issue show-cause notice was an internal process. It got externalised only when a show-cause notice was
issued but the show-cause notice by itself could not be said to be a “direction” or “order” indicating any finality of a
decision in respect to the alleged violation. Therefore, it could not be said that issuance of a show-cause notice or an
internal order of the Commission to the Secretary for issuing a show-cause notice could be categorised as a direction or
order under section 43 of the Competition Act, 2002. Issuance of a show-cause notice was only a step towards facilitating
consideration of the matter by seeking a response from the person who had been issued the show-cause notice. It could not
be said that show-cause notice by itself was an issuance of direction or order. When the person served with a show-cause
notice tendered a response for consideration of the Commission and the Commission after having considered the matter
following due process, taken a decision in the nature of imposition of a fine or otherwise, as prescribed under section 43 of
the Act, the process of enquiry would be completed and if the Commission decided to impose a fine, the order would be
considered as having attained finality and will have an appealable character.31
Reasonable Cause
Section 43 of the Competition Act, 2002 allows the Commission the discretion to find a breach and impose a penalty only
in circumstances where a person “fails to comply” with a direction given by the Commission or the DG “without
reasonable cause”. A “reasonable cause” as required under section 43 of the Competition Act, 2002 implies that there are
causes which actually incapacitate the concerned party from furnishing the requisite information, because of circumstances
beyond its control. Such a cause is to be submitted by the party before the Commission and demonstrated to be palpably
reasonable. The Commission can take a view about such a cause being reasonable only on receiving a specific submission,
and cannot presume it on the basis of some general statements. Various courts in India have established that a penalty will
not ordinarily be imposed unless the party against whom failure was alleged acted deliberately in defiance of law, or was
guilty of contumacious or dishonest conduct, or acted in conscious disregard of its obligation.32
In applying section 43, the Commission must also distinguish between “belated compliance”, and “failure to comply”. In
a given case, when the compliance is to be done within a particular time and it is not done, there is failure. But when the
time is extended, the failure does not occur till the extended time ends. In the case of Kingfisher Airlines Ltd,33 the
Commission noted that the only submission made by the party initially was that the Commission had no jurisdiction, and
later that they had filed a writ petition before the Hon’ble High Court, Bombay and the matter was sub judice. It was not
claimed that the Hon’ble High Court had issued a stay order, nor was any interim order issued in fact. The Commission
held that the party failed to satisfy the “reasonable cause” requirement laid down under section 43. However, the
Commission noted that since the Commission itself had kept the investigation in abeyance till the judgment of Hon’ble
High Court, Bombay was received, it could have reasonably, even though unintentionally, caused the party to think that the
Commission had indeed kept the DG notices in abeyance, and it was not required to furnish the information till the
judgment in the writ petition. Since this judgement was delivered only on 31 March 2013 and no notice was issued by the
DG till 14 April 2010, keeping in view the observations of COMPAT, the Commission gave the benefit of doubt to the
party and did not treat the period from 18 August 2009 to 14 April 2010 as a period of non-compliance.
Further, the Commission noted that there was no reasonable cause for non-compliance in terms of the notice dated 15 April
2010 and subsequent 7 notices and the provisions of section 43 of the Competition Act, 2002. The party on its own chose to
withdraw the Special Leave Petition (SLP) on 24 September 2010, and requisite information in compliance of notice dated
Page 6 of 7
[s 43] [Penalty for failure to comply with directions of Commission and Director General
15 April 2010 was furnished on 27 September 2010. The Commission, therefore, held that Kingfisher Airlines had no
“reasonable cause” for non-compliance from 5 May 2010 to 27 September 2010 and was consequently liable to a penalty
being levied. The Commission imposed penalty totalling Rs 72.50 lakhs on Kingfisher Airlines Ltd under section 43 of the
Act within 60 days of the date of receipt of the order. The Tribunal34 rejected the argument of the Commission that the
letters/reminders in question did not amount to “extension of time” and were “only reminders”. The Tribunal concluded
that because the letters sent as reminders amounted to extension of time, there was no question of the appellant being
penalised for failure to comply. Accordingly, the order of the Commission levying the penalty of Rs 72.50 lakhs was set
aside.
17 Subs. by Act 39 of 2007, section 36, for section 43 (w.e.f. 20 May 2009). Section 43,
before substitution, stood as under:
[s 43] Penalty for failure to comply with directions of Commission and Director General
If any person fails to comply with a direction given by—
(a) the Commission under sub-section (5) of section 36; or
(b) the Director General while exercising powers referred to in sub-section (2) of section 41, the Commission shall impose on
such person a penalty of rupees one lakh for each day during which such failure continues.
18 See pp 835 and 868, where sections 36 and 41 are discussed.
19 The Chairman, SEBI v Shriram Mutual Fund,
AIR 2006 SC 2287 : 2006 (5) All LT 15 (SC) : III (2006) BC 392 (SC) : [2006] 131 Comp Cases
591 (SC) : (2006) 5 Comp LJ 30 (SC) :
2006 (3) CTC 569 : JT 2006 (11) SC 164
: 2006 4 LW 974 :
2006 (6) Scale 154 : (2006) 5 SCC 361
: [2006] 68 SCL 216 (SC) :
[2006] Supp (2) SCR 833 .
20 Kingfisher Airlines Ltd, a company incorporated and registered under
the provisions of the Companies Act, 1956 and Dr Vijay Mallya v Competition Commission of India through its Secretary (Ministry
of Company Affairs, Government of India), The Director General, CCI, MP Mehrotra, Indian Inhabitant and UOI through
Secretary, Ministry of Company Affairs, [2011] 100 CLA 190
(Bom) : (2010) 4 Comp LJ 557 (Bom) :
[2011] 108 SCL 621 (Bom).
21 Varca Druggist & Chemist v Chemists & Druggists Association,
Goa, 2012 Comp LR 838 (CCI).
22 Consim Info Pvt Ltd v M/s Google Inc, USA and M/sGoogle India
Pvt Ltd [Along with Case No. 30 of 2012], 2014 CompLR 338 (CCI).
23 M/s Santuka Associates Pvt Ltd v All India Organization of Chemists
and Druggists, Organisation of Pharmaceutical Producer of India, Indian Drug Manufacturers’ Association and USV Ltd, Case
20/2011, 2013 Comp LR 223 (CCI).
Page 7 of 7
[s 43] [Penalty for failure to comply with directions of Commission and Director General
24 Also see Nandu Ahuja v CCI, 2014 Comp LR 209 (CompAT).
25 All India Organisation of Chemists and Druggists v CCI, III
(2015) CPJ 4 .
26 Case 20/2011.
27 Case 30/2011.
28 Case 41/2011.
29 Jose C Mundadan v CCI, 2015 Comp LR 920 (CompAT).
30 Film Distributors Association, Kerala v CCI, 2015 Comp LR 854
(CompAT).
31 AKMN Cylinders Pvt Ltd & N Ravindran Managing Director v CCI,
Appeal No 01 of 2017, I.A. No. 14/2017 [COMPAT], decided on 13 February 2017.
32 Hindustan Steel Ltd v State of Orissa,
AIR 1970 SC 253 : (1969) 2 SCC 627
: 1970 1 SCJ 318 :
ILR 1970 Cut 241 : 1970 1 SCR 753
: (1970) 25 STC 211 :
[1972] 83 ITR 26 :
(1997) 104 STC 61 : 1978 2 ELT 159
.
33 MP Mehrotra v Jet Airways (India) Ltd and Kingfisher Airlines Ltd,
Case No Misc 1/2010 (4/2009), decided on 9 January 2012 (CCI).
34 Kingfisher Airlines Ltd v CCI, Appeal No 15 of 2012, decided on 29
August 2012 (CompAT).
End of Document
[s 43A] Power to impose penalty for non-furnishing of information on combinations
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > CHAPTER
VI PENALTIES
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
CHAPTER VI PENALTIES
35[s 43A] Power to impose penalty for non-furnishing of information on combinations
If any person or enterprise who fails to give notice to the Commission under sub-section (2) of section 6, the Commission
shall impose on such person or enterprise a penalty which may extend to one per cent. of the total turnover or the assets,
whichever is higher, of such a combination].
LEGISLATIVE BACKGROUND
Competition (Amendment) Act, 2007
Notes on clauses.—This clause seeks to insert a new section 43A regarding power to impose penalty, for non-furnishing of
information on combinations.
The new section seeks to empower the Commission for imposing a penalty on the person or enterprise for not giving the notice to
the Commission about the combination under sub-section (2) of section 6. This insertion is consequential in nature.
SCOPE OF THE SECTION
This penal provision has been inserted by the Competition (Amendment) Act, 2007. It is provided that, the Commission
shall impose a penalty which may extend to 1% of the total turnover or assets, whichever is higher, if any person does not
give notice to the Commission about the combination under section 6(2) of the Act. Section 6(2) casts a statutory civil
obligation on the person or enterprise to notify the Commission and the penalty leviable is penalty for breach of civil
obligation. Section 43A has no requirement of establishment of mens rea. The Legislature has not used the phrase “willful
failure”. Failure simpliciter has penal consequences. The imposition of penalty under section 43A is on account of breach
Page 2 of 5
[s 43A] Power to impose penalty for non-furnishing of information on combinations
of a civil obligation, and the proceedings are neither criminal nor quasi criminal. Once it is established that there was a
failure to notify the proposed combination as required under section 6(2) of the Act, penalty had to follow. The
Commission has a discretion regarding the quantum but cannot exculpate the party from their failure. Regulation 48 of the
General Regulations stipulates that the quantum has been decided based on the facts and circumstances of the case.
Proof of mens rea was, therefore, not essential to impose any penalty. Penalty was attracted as soon as contravention of the
statutory obligation as contemplated by the Competition Act, 2002 was established and therefore, the intention of the
parties committing such violation became immaterial.36 The mens rea assumes importance in case of criminal and quasi-
criminal liability. For the imposition of penalty under section 43A, the action may not be mala fide in case there is a breach
of the statutory provisions of the civil law; penalty is attracted simpliciter on its violation. Section 43A of the Competition
Act, 2002 does not use the expression “the failure has to be willful or mala fide” for the purpose of imposition of penalty.
The breach of the provision is punishable and considering the nature of the breach, it is open to impose the penalty. Only
discretion in the provision under section 43A is with respect to quantum of penalty.37
Although not stated, it appears that the turnover/assets will be based on the latest available audited balance sheet of the
company convened.
Failure to give notice
Appeal38 was filed against the Commission’s order imposing a fine of Rs 5 crores on Piramal Enterprises Ltd for failure
to give notice of combination. On 10 May 2013, the Appellant acquired equity stake of 9.96% in Shriram Transport
Finance Co Ltd (STFC) by way of block purchase of 22,600,000 shares of the said company at BSE for a consideration of
Rs 1635.96 crores through a broker UBS Security India Pvt Ltd. The Appellant through a collaboration agreement dated 17
April 2014 acquired an effective 20% equity stake in Shriram Capital Ltd (SCL). SCL was incorporated in 1974 and was
an investment holding company for the financial services entities of Shriram group and was promoter of STFC. Along with
the equity stake and the right to appoint two directors on the board of SCL, the Appellant acquired certain affirmative
voting rights at the Board and shareholder levels for certain matters. On 3 June 2014, the Appellant acquired 9.99% stake
in Shriram City Union Finance Ltd (SCUF) pursuant to a preferential allotment of 6,579,840 equity shares of Rs 10 each at
a price of Rs 1,200 per equity share, which meant a premium of Rs 1,190 per equity share. SCUF was established in 1986
and specialised in retail finance. It was promoted by SCL and was listed on the BSE & NSE.
The Commission considered the submissions of the Appellant and came to the conclusion that the three acquisitions by the
Appellant were inter-connected and was made strategically to enter into a partnership with and to acquire (joint) control
over the financial services business of the Shriram group of companies. The Commission listed the affirmative voting
rights acquired along with the 20% equity stake, to hold that consent of the Appellant was required for strategic
commercial decisions of SCL and noted that the Appellant had admitted that the SCL Transaction was a notifiable
combination under the provisions of the Competition Act, 2002 as it resulted in an acquisition of “control” under the Act.
Accordingly, the Commission imposed penalty of Rs 5 crore, vide order dated 2 May 2016, which was approximately
0.005% of the value of the worldwide assets of the combination. The fact that the Appellant consummated the combination
was considered as an aggravating factor. However, the Commission considered the following mitigating factors while
determining the quantum of penalty:
(a) absence of mala fide intention to evade compliance of the provisions of the Act;
(b) no previous instances of violation of the provisions of the Act or the Combination Regulations; and (c) the Appellant’s
cooperation with the Commission pursuant to the Commission’s inquiry under sub-section (1) of section 20 of the Act.
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[s 43A] Power to impose penalty for non-furnishing of information on combinations
The Tribunal in appeal upheld the decision and the penalty imposed by the Commission. The Tribunal held that the three
acquisitions were inter-connected with the ultimate intended effect of gaining “control” in terms of section 5 of the
Competition Act, 2002 of the financial service entities of the Shriram Group. The acquisitions constituted entering into a
combination notifiable under section 6(2) of the Competition Act, 2002.
Time frame under section 43A
The timeline specified under proviso to section 20(1) of the Competition Act, 2002 cannot be applied to proceedings under
section 43A of the Competition Act, 2002. Legislature has not provided any time limit for initiation or imposition of
penalty for contravention of section 6(2) of the Act. In the absence of a statutory time limit, imposition of penalty should
be done within a reasonable time of noticing of infraction.
Section 32 versus 43A
The Tribunal in SCM Soilfert Ltd v CCI39 observed:
Sections 31 and 43A of the Act operate in two different fields. The Commission has the power to approve a combination under
section 31 and such approval neither obliterates nor condones the contravention, for which penalty was to be imposed under
section 43A. Approval under section 31 was not even listed as a mitigating circumstance under regulation 48 of the General
Regulations which deals with the procedure for imposition of penalty. Accordingly, Penalty under section 43A of the Act was
leviable even if the combination had no appreciable adverse effect on competition.
11.5 The Tribunal agreed that the use of words “shall impose” in section 43A of the Act had a significant bearing on interpreting
this provision. Besides, in the language employed in the section, there was no requirement of mens rea or intentional breach, as
essential elements for the levy of penalty. Power to impose penalty under section 43A as per the header of the said section, was for
non-furnishing of information on combination and such non-furnishing is explained in the body of the section i.e. if any person or
enterprise “failed to give notice to the Commission” under section 6(2) of the Act. The Act did not indicate that the failure had to
be willful or mala fide. There was also no escape from penal consequences of such failure on grounds of a bona fide interpretation
of statutory provision imposing civil obligations. In this context, it was relevant to juxtapose the language of section 42(2), which
deals with contravention of orders of the Commission, with the language of section 43A of the Act. The concept of failure “without
reasonable cause” was specifically incorporated for imposition of fine under section 42(2) while the crucial words “without
reasonable cause” were missing from section 43A.
CASES UNDER THE COMPETITION ACT, 2002
The Commission in a matter, after taking suo moto cognisance of the two public announcements dated 5 May 2014,
imposed a penalty of Rs 5 crores on GE Energy Europe BV, GE and GE Industrial France SAS (Acquirers) for failure to
notify the proposed combination relating to acquisition of up to 26% of the total paid-up equity share capital of Alstom
India Ltd and acquisition of up to 25% of the total paid-up equity share capital of Alstom T&D India Ltd (collectively
Targets) in terms of section 6(2)(b) of the Competition Act, 2002 (Act) read with regulation 5(8) of Combination
Regulations, 2011. The Commission was of the view that the Acquirers were required to give notice within 30 days of the
public announcements, i.e., 6 April 2014. The Commission noted that the intent to acquire would include unilateral
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[s 43A] Power to impose penalty for non-furnishing of information on combinations
measures such as public announcements under the Takeover Regulations. Further, the public announcements would
constitute a “communication” within the purview of second proviso to regulation 5(8) of the Combination Regulations.
While determining the quantum of penalty, the Commission considered: (a) the bona fide conduct of the Acquirers as
regards the intent to file the notice, albeit after the expiry of statutory timelines; and (b) the fact that the combination was
not consummated by the Acquirers without the approval of the Commission.40
Earlier in 2015, the Commission had also imposed a total penalty of Rs 2 crore on Deepak Fertilizers41 and its subsidiary
SCM Soilfert for violating competition norms with regard to their stake purchases in Mangalore Chemicals and Fertilizers
(MCFL). Deepak Fertilizers and its subsidiary were penalised for not giving notice to Competition Commission of India
(CCI) regarding their acquisition of 24.46% in MCFL which happened in July 2013.42
In the Jet-Etihad Combination,43 the parties (Etihad Airways PJSC (Etihad) and Jet Airways (India) Ltd (Jet)) sought the
Commission’s approval for the acquisition of 24% equity interest in Jet by Etihad and in relation to all the rights and
benefits which the parties had commercially agreed upon in the amended Shareholder’s Agreement (SHA) and a
Commercial Co-operation Agreement (CCA), all executed on 24 April 2013. The parties had also entered into agreements
on 26 February 2013 regarding sale of three landing/take-off slots of Jet at London Heathrow Airport to Etihad; and lease
of the same slots back to Jet (LHR Transaction). The Commission while approving the transaction noted that some
provisions of CCA were already operational. Also, sale of certain landing/take-off slots of Jet at the London Heathrow
Airport (LHR Transaction) had not been notified before consummation. Accordingly, the Commission imposed a penalty
of Rs 1 crore on the parties.
For more cases, Titan International, Inc (Titan International or Acquirer) and Titan Europe PLC (Titan Europe);44
Dewan Housing Finance Corp Ltd (DHFL);45 Zulia Investments Pte Ltd and Kinder Investments Pte Ltd;46 Tesco
Overseas Investment Ltd (TOIL) and Trent Hypermarket Ltd (THL);47 Aditya Birla Nuvo Ltd (ABNL),48 see section 6.
35 Ins. by Act 39 of 2007, section 37 (w.e.f. 1 June 2011).
36 Chairman, SEBI v Shriram Mutual Fund,
[2006] 131 Com Cas 591 .
37 SCM Solifert Ltd v CCI, (2018) 6
SCC 631 ; CCI v Thomas Cook (India) Ltd, (2018) 6 SCC 549
.
38 Piramal Enterprises Ltd v CCI, Appeal No. 37/2016 [COMPAT],
decided on 16 November 2016.
39 Appeal No 59/2015. See also Piramal Enterprises Ltd v CCI, Appeal
No 37/2016 [COMPAT], decided on 16 November 2016.
40 Combination Registration No C-2015/01/241.
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[s 43A] Power to impose penalty for non-furnishing of information on combinations
41 Combination Registration No C-2014/05/175; Also see Combination
Registration No C-2014/06/181 [Zuari Fertilisers and Chemicals Ltd and Zuari Agro Chemicals Ltd].
42 Note: In terms of section 43A, if any person or enterprise fails to give
notice under sub-section (2) of section 6 of the Competition Act, 2002 the Commission shall impose on such person or enterprise a
penalty which may extend to 1% of the total turnover or the assets, whichever is higher, of such a combination. However, in this
case, the Commission considering the fact that the Acquirers disclosed the requisite information, and given the quantum of turnover
of the proposed combination, considered it appropriate to impose a nominal penalty of Rs 2 Crores on the Acquirers.
43 Combination Registration No. C-2013/05/122.
44 Combination Registration No. C-2013/02/109.
45 Combination Registration No. C-2012//11/92.
46 Combination Registration No. C-2013/02/109.
47 Combination Registration No. C-2014/03/162.
48 Combination Registration No. C-2015/01/241.
End of Document
[s 44] Penalty for making false statement or omission to furnish material information
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > CHAPTER
VI PENALTIES
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
CHAPTER VI PENALTIES
49[s44] Penalty for making false statement or omission to furnish material
information
If any person, being a party to a combination,—
(a) makes a statement which is false in any material particular, or knowing it to be false; or
(b) omits to state any material particular knowing it to be material,
such person shall be liable to a penalty which shall not be less than rupees fifty lakh but which may extend to rupees one
crore, as may be determined by the Commission.
LEGISLATIVE BACKGROUND
Competition Act, 2002
Notes on clauses of the Bill stated, thus:
Notes on clauses—This clause provides for the penalty for making false statements or omission to furnish material information by
any person being a party to a combination. Such penalty shall not be less than rupees fifty lakh but it may extend up to rupees one
crore, as may be determined by the Commission. [Clause 44 of the Competition Bill, 2001].
This section was enforced vide Notification No. S.O. 1231(E) dated 30 May 2011, w.e.f. 1 June 2011.
SCOPE OF THE SECTION
The penalty has been provided for making false statement or withholding any material fact which shall not be less than Rs
50 lakhs but may extend to Rs 1 crore, in respect of the proceedings before the Commission relating to the combination.
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[s 44] Penalty for making false statement or omission to furnish material information
Penalty up to Rs 10 lakhs has been provided in section 45 for making false statement relating to anti-competitive
agreements or abuse of dominant position.
PROVISIONS OF THE MONOPOLIES AND RESTRICTIVE TRADE PRACTICES ACT, 1969
VIS-A-VIS THE COMPETITION ACT, 2002
Section 52B of the Monopolies and Restrictive Trade Practices Act, 1969, since repealed, provided for penalty by way of
imprisonment for a term which may extend to two years and shall also be liable to fine for making false statement in any
application, return, report, certificate, balance sheet, prospectus, statement or other document made, submitted or produced
for purposes of MRTP Act, 1969. Deterrent penalty has also been provided in the Competition Act, 2002 but no provision
by way of compulsory imprisonment has been made.
49 Came into force on 1 June 2011 vide Notification No. S.O. 1231(E), dated 30 May 2011.
End of Document
[s 45] Penalty for offences in relation to furnishing of information
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > CHAPTER
VI PENALTIES
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
CHAPTER VI PENALTIES
50[s 45] Penalty for offences in relation to furnishing of information
51[(1) Without prejudice to the provisions of section 44, if a person, who furnishes or is required to furnish under
this Act any particulars, documents or any information,—
(a) makes any statement or furnishes any document which he knows or has reason to believe to be false in any
material particular; or
(b) omits to state any material fact knowing it to be material; or
(c) wilfully alters, suppresses or destroys any document which is required to be furnished as aforesaid,
such person shall be punishable with fine which may extend to rupees one crore as may be determined by the
Commission.].
(2) Without prejudice to the provisions of sub-section (1), the Commission may also pass such other order as it
deems fit.
LEGISLATIVE BACKGROUND
Competition Act, 2002
Notes on clauses of the Bill stated, thus:
Notes on clauses.—This clause provides for penalty for offences in relation to furnishing of information. If any person furnishes
any statement or document which he knows or has reason to believe to be false in any material particular or omits to state any
material fact, knowing to be material or wilfully alters, suppresses or destroys any document which is required to be furnished, the
Commission may impose a penalty which may extend to rupees ten lakh. The Commission may also pass such other orders as it
deems fit. [Clause 45 of the Competition Bill, 2001].
Competition (Amendment) Act, 2007
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[s 45] Penalty for offences in relation to furnishing of information
Notes on clauses.—This clause seeks to substitute sub-section (1) of section 45 of the Competition Act, 2002 regarding penalty for
offences in relation to furnishing of information.
The existing provision provides for imposition of a penalty on a person, which may extend to rupees ten lakh, for furnishing
documents or making statements which he knows and has reason to believe to be false.
It is proposed to provide for imposition of a fine which may extend to rupees one crore, as the Commission may determine, on a
person for furnishing documents or making statements which he knows and has reason to believe to be false. [Clause 38 of the
Competition (Amendment) Bill, 2007].
This section was enforced vide Notification No. S.O. 1241(E), dated 15 May 2009, w.e.f. 20 May 2009.
SCOPE OF THE SECTION
The penalty has been provided for making any false statement or withholding any material fact or suppressing or
destroying any document by any person who furnishes any particulars or documents or information under the Competition
Act, 2002. The Commission was originally empowered to impose penalty for such an offence which may extend to Rs 10
lakhs or pass such other appropriate order(s) as it deems fit. As per changes made by the Competition (Amendment) Act,
2007, punishment by way of fine up to Rs 1 crore has been provided, in place of penalty up to Rs 10 lakhs. The power of
the Commission to impose penalty is without prejudice to section 44 which empowers it to impose penalty on the person or
enterprise who is a party to the combination and is making a false statement or omitting to state material facts. Only that
statement or information given in the course of proceeding before the Commission having effect on the determination of
effect of a conduct or behavior on competition and other purposes of the Competition Act, 2002 is relevant. Materiality of
information suppressed or falsely adduced has to be determined before imposing penalty. The word “material” means
necessary for the purpose of formulating a complete cause of action; and if one “material” statement is omitted, the
statement of claim is bad. The purpose of “material particulars” is in the extent of the need to give the opponent sufficient
detail of the charge set up against him and to give him a reasonable opportunity.52
PROVISIONS OF THE MONOPOLIES AND RESTRICTIVE TRADE PRACTICES ACT, 1969
VIS-A-VIS THE COMPETITION ACT, 2002
Section 49(2) of MRTP Act, 1969, since repealed, provided for punishment by way of imprisonment which may extend to
six months or with fine which may extend to Rs 5,000 or both by any person who furnishes or is required to furnish any
particulars, documents or any information making false statement, etc. Similar provisions are contained in section 45 of the
Competition Act, 2002 providing for fine which may extend to Rs 1 crore but no provision for imprisonment has been
made.
50 Came into force on 20 May 2009 vide Notification No. S.O. 1241(E), dated 15 May 2009.
51 Subs. by Act 39 of 2007, section 38 (w.e.f. 20 May 2009). Prior to its substitution, it
stood as under: (1) Without prejudice to the provisions of section 44, if any person, who furnishes or is required to furnish under
this Act any particulars, documents or any information,—
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[s 45] Penalty for offences in relation to furnishing of information
(a) makes any statement or furnishes any document which he knows or has reason to believe to be false in any material particular;
or
(b) omits to state any material fact knowing it to be material; or
(c) wilfully alters, suppresses or destroys any document which is required to be furnished as aforesaid, the Commission shall
impose on such person a penalty which may extend to rupees ten lakh.
52 Bruce v Odhamas Press Ltd,
[1936] 1 KB 697 .
End of Document
[s 46] Power to impose lesser penalty
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > CHAPTER
VI PENALTIES
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
CHAPTER VI PENALTIES
53[s 46] Power to impose lesser penalty
The Commission may, if it is satisfied that any producer, seller, distributor, trader or service provider included in any
cartel, which is alleged to have violated section 3, has made a full and true disclosure in respect of the alleged violations
and such disclosure is vital, impose upon such producer, seller, distributor, trader or service provider a lesser penalty as it
may deem fit, than leviable under this Act or the rules or the regulations:
54[Provided that lesser penalty shall not be imposed by the Commission in cases where the report of investigation directed
under section 26 has been received before making of such disclosure:]
Provided further that lesser penalty shall be imposed by the Commission only in respect of a producer, seller, distributor,
trader or service provider included in the cartel, who 55[has] made the full, true and vital disclosures under this section:
56[Provided also that lesser penalty shall not be imposed by the Commission if the person making the disclosure does not
continue to co-operate with the Commission till the completion of the proceedings before the Commission].
Provided also that the Commission may, if it is satisfied that such producer, seller, distributor, trader or service provider
included in the cartel had in the course of proceedings,—
(a) not complied with the condition on which the lesser penalty was imposed by the Commission; or
(b) had given false evidence; or
(c) the disclosure made is not vital,
and thereupon such producer, seller, distributor, trader or service provider may be tried for the offence with respect to
which the lesser penalty was imposed and shall also be liable to the imposition of penalty to which such person have been
liable, had lesser penalty not been imposed.
LEGISLATIVE BACKGROUND
Competition Act, 2002
This section was part of official amendments moved during consideration and passing of the Competition Bill, 2000.
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[s 46] Power to impose lesser penalty
Competition (Amendment) Act, 2007
Notes on clauses.—This clause seeks to amend section 46 of the Competition Act, 2002 relating to power to impose lesser penalty.
Under the existing provisions of the said section the Competition Commission of India has been conferred power to impose lesser
penalty in the circumstances mentioned in that section. The first proviso to said section provides that the Commission shall not
impose lesser penalty in cases where proceedings for the violation of any of the provisions of this Act or the rules or the
regulations have been instituted or any investigation has been directed to be made under section 26 before making of such
disclosure.
It is proposed to substitute said first proviso to provide that the Commission shall not impose lesser penalty in cases where the
report of investigation directed under section 26 has been received before making of such disclosure. It is also proposed to amend
second proviso so as to provide for lesser penalty upon a person who discloses the information about a cartel. It is also proposed to
add a third proviso to the said section providing that lesser penalty shall not be imposed by the Commission if the person making
the disclosure does not continue to co-operate with the Commission till the completion of the proceedings before the Commission.
[Clause 39 of the Competition (Amendment) Bill, 2007].
This section was enforced vide Notification No. S.O. 1241(E), dated 15 May 2009, w.e.f. 20 May 2009.
SCOPE OF THE SECTION
Amnesty provision has been made for making a full and true disclosure in respect of alleged violation of section 3 relating
to cartel as defined in section 2(c) in which case the Commission may impose lesser penalty than the penalty provided in
the Competition Act, 2002. The conditions to be fulfilled in this behalf are—
(a) The Commission is satisfied that full and true disclosure in respect of alleged violation of section 3 has been
made by the producer, seller, distributor, trader or service provider included in any cartel;
(b) The disclosures made are vital;
(c) The disclosures have been made before the receipt of investigation report directed under section 26;
(d) The producer, seller, distributor, etc., has made the full, true and vital disclosures;
(e) The person making the disclosure has continued to co-operate with the Commission till completion of
proceedings before the Commission.
(f) The producer, seller, distributor, etc., has complied with the condition on which lower penalty was imposed by
the Commission and has not made any false disclosure.
No such provision was made under the MRTP Act, 1969, since repealed.
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[s 46] Power to impose lesser penalty
LENIENCY SCHEME
Leniency programme is a type of whistle-blower protection, i.e., an official system of offering lenient treatment to a cartel
member who reports to the Commission about the cartel. Competition authorities have framed various leniency
programmes to encourage and incentivise various actors connected with the commission of such competition infringements
to come forward and disclose such anticompetitive agreements and assist the competition authorities in lieu of immunity or
lenient treatment. Leniency programme is a protection to those who come forward and submit information honestly, who
would otherwise have to face stringent action by the Commission if existence of a cartel is detected by the Commission on
its own.57 In an attempt to break up the clandestine bands of colluders, the Competition Act, 2002 introduced a leniency
programme, rewarding undertakings which provide the Commission with evidence leading to the detection and
punishment of cartels with immunity from or reduction of fines. The aim of the leniency programmes is thus to increase
compliance with the competition rules by creating distrust between the cartelists and increasing the risk of detection.58
Under the erstwhile Monopolies and Restrictive Trade Practices Act, 1969 (the MRTP), the MRTP Commission could
only pass cease-and-desist orders to stop the operation of any cartels. However, under the Competition Act, 2002 the CCI
can (as well as making cease-and-desist orders) also impose heavy fines. The Competition Act, 2002 also provides for a
leniency provision. This applies to any producer, seller, distributor, trader or service provider included in any cartel that
has allegedly violated the Competition Act, 2002 provisions regarding anti-competitive agreements and who makes a full
and true disclosure in respect of the alleged violation. There are, however, four other conditions: (1) the disclosure must be
vital;59 (2) the disclosing party must continue to co-operate with the CCI until the completion of the proceedings before
the CCI; (3) the disclosing party must not have concealed, destroyed, manipulated or removed the relevant documents in
any manner that may contribute to the establishment of a cartel; and (4) the disclosure should be made before the report of
the investigation by the DG, as directed by the CCI, has been received. This leniency provision has proved to be a
powerful tool in the detection and destabilisation of cartels. The scheme is designed to induce members to help in detection
and investigation of cartels. This scheme is grounded on the premise that successful prosecution of cartels requires
evidence supplied by a member of the cartel.
To carry out the leniency provisions in the Competition Act, 2002 section 64 empowers the Commission to draft
regulations for matters in respect of which provisions is to be made by regulations. In pursuance of the powers conferred
by section 64, read with section 46 and clause (b) of section 27 of the Competition Act, 2002, the Commission formulated
the Competition Commission of India (Lesser Penalty) Regulations, 2009.
Regulation 3.60—Conditions for lesser penalty
(1) An applicant, seeking the benefit of lesser penalty under section 46 of the Act, shall—
(a) cease to have further participation in the cartel from the time of its disclosure unless otherwise directed by
the Commission;
(b) provide vital disclosure in respect of 61[contravention of the provisions] of section 3 of the Act;
(c) provide all relevant information, documents and evidence as may be required by the Commission;
(d) co-operate genuinely, fully, continuously and expeditiously throughout the investigation and other
proceedings before the Commission; and
(e) not conceal, destroy, manipulate or remove the relevant documents in any manner, that may contribute to the
establishment of a cartel.
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[s 46] Power to impose lesser penalty
62[(1A) Where the applicant is an enterprise, it shall also provide the names of individuals who have been involved in
the cartel on its behalf and for whom lesser penalty is sought by such an enterprise.]
(2) Where an applicant fails to comply with the conditions mentioned in sub-regulation (1), the Commission shall be
free to use the information and evidence submitted by the applicant, in accordance with the provisions of section
46 of the Act.
(3) Without prejudice to sub-regulations (1) and (2), the Commission may subject the applicant to further restrictions
or conditions, as it may deem fit, after considering the facts and circumstances of the case.
(4) The discretion of the Commission, in regard to reduction in monetary penalty under these regulations, shall be
exercised having due regard to—
(a) the stage at which the applicant comes forward with the disclosure;
(b) the evidence already in possession of the Commission;
(c) the quality of the information provided by the applicant; and
(d) the entire facts and circumstances of the case.
[Regulation 4.—Grant of lesser penalty
Subject to the conditions laid down in regulation 3, the applicant and individual mentioned in sub-regulation (1A) of
regulation 3 shall be granted benefit of lesser penalty than leviable under clause (b) of section 27 and section 48 of the Act,
as the Commission may decide, in the following manner, namely;—
(a) The applicant and individual mentioned in sub-regulation (1A) of regulation 3 may be granted benefit of
reduction in penalty upto or equal to one hundred percent, if the applicant is the first to make a vital disclosure by
submitting evidence of a cartel, enabling the Commission to form a prima-facie opinion regarding the existence
of a cartel which is alleged to have contravened the provisions of section 3 of the Act and the Commission did
not, at the time of application, have sufficient evidence to form such an opinion:
Provided that the Commission may also grant benefit of reduction in penalty up to or equal to one hundred
per cent, to the applicant and individual mentioned in sub-regulation (1A) of regulation 3, if the applicant is
the first to make a vital disclosure by submitting such evidence which establishes the contravention of the
provisions of section 3 of the Act, by a cartel, in a matter under investigation and the Commission, or the
Director General did not, at the time of application, have sufficient evidence to establish such a
contravention.
(b) The applicants who are subsequent to the first applicant may also be granted benefit of reduction in penalty on
making a disclosure by submitting evidence, which in the opinion of the Commission, may provide significant
added value to the evidence already in possession of the Commission or the Director General, as the case may be,
to establish the existence of the cartel, which is alleged to have contravened the provisions of section 3 of the Act.
Explanation.— For the purposes of these regulations, “added value” means the extent to which the evidence
provided enhances the ability of the Commission or the Director General, as the case may be, to establish the
existence of a cartel, which is alleged to have contravened the provisions of section 3 of the Act.
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[s 46] Power to impose lesser penalty
(c) The reduction in monetary penalty referred to in clause (b) shall be in the following order—
(i) the applicant and individual mentioned in sub-regulation (1A) of regulation 3 marked as second in the
priority status may be granted reduction of monetary penalty upto or equal to fifty percent of the full penalty
leviable; and
(ii) the applicant and individual mentioned in sub-regulation (1A) of regulation 3 marked as third or subsequent
in the priority status may be granted reduction of penalty up to or equal to thirty percent of the full penalty
leviable.]
Regulation 5.—Procedure for grant of lesser penalty
(1) For the purpose of grant of lesser penalty, the applicant or its authorized representative may make an application
containing all the material information as specified in the Schedule, or may contact, orally or through e-mail or fax, the
designated authority for furnishing the information and evidence relating to the existence of a cartel. The designated
authority shall, thereafter, 64[within five working days], put up the matter before the Commission for its consideration.
(2) The Commission shall thereupon mark the priority status of the applicant and the designated authority shall convey the
same to the applicant either on telephone, or through e-mail or fax. If the information received under sub-regulation (1) is
oral or through e-mail or fax, the Commission shall direct the applicant to submit a written application containing all the
material information as specified in the Schedule within a period not exceeding fifteen days.
(3) The date and time of receipt of the application by the Commission shall be the date and time as recorded by the
designated authority or as recorded on the server or the facsimile transmission machine of the designated authority.
(4) Where the application, along with the necessary documents, is not received 65[within a period of fifteen days from the
date of communication of direction under sub-regulation (2)] or during the further period as may be extended by the
Commission, the applicant may forfeit its claim for priority status and consequently for the benefit of grant of lesser
penalty.
(5) The Commission, through its designated authority, shall provide written acknowledgement on the receipt of the
application informing the priority status of the application but merely on that basis, it shall not entitle the applicant for
grant of lesser penalty.
(6) Unless the evidence submitted by the first applicant has been evaluated, the next applicant shall not be considered by
the Commission.
(7) Where the Commission is of the opinion that the applicant or its authorised representative, seeking the benefit of lesser
penalty or priority status, has not provided full and true disclosure of the information and evidence as referred and
described in the Schedule or as required by the Commission, from time to time, the Commission may take a decision after
considering the facts and circumstances of the case for rejecting the application of the applicant, but before doing so the
Commission shall provide an opportunity of hearing to such applicant.
(8) Where the benefit of the priority status is not granted to the first applicant, the subsequent applicants shall move up in
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[s 46] Power to impose lesser penalty
order of priority for grant of priority status by the Commission and the procedure prescribed above, as in the case of first
applicant, shall apply mutatis mutandis.
(9) The decision of the Commission of granting or rejecting the application for lesser penalty shall be communicated to the
applicant.
[Regulation 6.—Confidentiality
Notwithstanding anything contained in the Competition Commission of India (General) Regulations, 2009, the
Commission or the Director General shall treat as confidential,—
(a) the identity of the applicant; and
(b) the information, documents and evidence furnished by the applicant under regulation 5:
Provided that the identity of the applicant or such information or documents or evidence may be disclosed if,—
(i) the disclosure is required by Law; or
(ii) the applicant has agreed to such disclosure in writing; or
(iii) there has been a public disclosure by the applicant:
Provided further that where the Director General deems it necessary to disclose the information, documents and evidence
furnished under Regulation 5 to any party for the purposes of investigation and the applicant has not agreed to such
disclosure, the Director General may disclose such information, documents and evidence to such party for reasons to be
recorded in writing and after taking prior approval of the Commission.]
[Regulation 6A.—Inspection of documents
Notwithstanding the confidentiality under regulation 6, the provisions of sub-regulations (1), (3) and (4) of regulation 37
and the provisions of regulation 50 of the Competition Commission of India (General) Regulations, 2009, to the extent
they relate to inspection, shall become applicable to the non-confidential version of the information, documents and
evidence furnished by the applicant under regulation 5, after the Commission forwards a copy of the report containing the
findings of the Director General to the party concerned:
Provided that such party shall not disclose the information, documents and evidence so obtained other than for the
proceedings under the Act.]
Case Laws
In the electric fan cartel case,68 Application under section 46 of the Competition Act, 2002 read with regulation 5 of
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[s 46] Power to impose lesser penalty
Competition Commission of India (Lesser Penalty) Regulations, 2009 was filed by Pyramid Electronics. This application
was received in the Commission when the investigation in the matter was in progress and the report from the DG was
pending. The Commission noted that the company was the first and only party to accept the existence of a cartel/bid
rigging in tenders for railways for BLDC Fans and submitted information in support thereof. It was also noted that the
evidence submitted supported the evidence provided by CBI and played a significant role in revealing the modus operandi
of the cartel. The Commission was also satisfied with the cooperation offered by the company and acknowledged that the
evidence and cooperation provided by it which strengthened the Commission’s investigation in establishing the existence
of a cartel. However, the Commission was also cognisant of the stage at which the Applicant approached the Commission,
i.e., not at the very beginning but at a later stage in the investigation, and of the evidence already in possession of the
Commission at that stage. Considering the co-operation extended by the Pyramid, in conjunction with the value addition
provided in establishing the existence of cartel, the Commission decided to grant a 75% reduction in the penalty to the
Applicant than would otherwise have been imposed on it had it not cooperated with the Commission.
Cartelisation in the market for zinc-carbon dry-cell batteries market in India was discovered after a leniency application
was filed by Panasonic Energy India Co Ltd.69 It was found that the employees of opposite parties (manufacturers) used to
meet and agree on the price increase, which was to be led by one manufacturer of zinc-carbon dry-cell batteries and
followed by others under the pretext of following the market leader. Further, it was also found that the manufacturers
agreed not to push sales through their channel/distribution partners aggressively to avoid price war amongst themselves. It
was seen that coordination not only pertained to the Maximum Retail Price (MRP) of their products but also exchange of
information about the components of pricing structure of their products including trade discount, wholesale price,
dealers/stockist landing cost, open market rates, retailers margin, sales promotion schemes, etc., to monitor effective
implementation of price increase and determine price for distributors/whole sellers/retailers and end consumers, for
allocation of market amongst themselves on the basis of types/sizes of batteries and/or geographical areas, and to control
output to establish higher prices and control supply. The Commission noted that the information provided by Panasonic
India was crucial in assessing the domestic market structure of the zinc-carbon dry-cell batteries, nature and extent of
information exchanges amongst opposite parties with regard to the cartel and identifying the names, locations and email
accounts of key persons of opposite parties actively involved in the cartel activities. Also, since Panasonic was the first to
make the application, 100% reduction in penalty was granted. With respect to other applicants, the Commission noted that
the information/evidence on cartel submitted did not result in “significant value addition” as the incriminating documents
(both hard and soft copies) recovered and seized from the premises of the Manufacturers during the search and seizure
operations were independently sufficient to establish the contravention of section 3. However, in light of genuine, full,
continuous and expeditious cooperation during the course of investigation, the Commission decided to grant 30% and 20%
reduction in penalty to Eveready Industries India Ltd and Indo National Ltd respectively.
In another leniency application filed by Panasonic,70 it was disclosed that there existed a bilateral ancillary cartel between
Geep Industries (India) Pvt Ltd and itself in the institutional sales of dry-cell batteries. Panasonic had a primary cartel with
Eveready Industries India Ltd and Indo National Ltd whereby they co-ordinated the market prices of zinc-carbon dry-cell
batteries. Hence, Panasonic had the foreknowledge about the time of price increase to be affected by this primary cartel.
This foreknowledge was used by Panasonic as leverage to negotiate and increase the basic price of the batteries being sold
by it to Geep. Panasonic would lead Geep to believe that the Market Operating Price (MOP) and MRP of all the major
manufacturers would increase in the near future, and Geep would be in a position to pass on the increase in the basic price
to the consumers by such increased MOP/MRP. Panasonic and Geep used to agree on the market price of the batteries
being sold by them, so as to maintain price parity in the market. They also monitored the MOP of each other and of other
manufacturers, and inform each other in cases of any discrepancy noticed. Such price parity was in consonance with the
prices determined by the primary cartel. The Commission held the parties to be in violation of section 3(3)(a). In light of
the vital disclosures made by Panasonic and the evidences adduced which were found to be crucial in establishing
contravention of the provisions of section 3 of the Competition Act, 2002, 100% reduction in penalty was granted to
Panasonic.
Bid rigging of tenders for procurement broadcasting services of various sporting events was discovered after leniency
application was filed by Globecast. It was later admitted by both ESCL and Globecast that they were involved in the
exchange of commercially-sensitive information with each other for the tenders floated by various broadcasters. As a
result, they did not effectively compete in the bidding process and gave a pretence of competition to the broadcasters. The
Commission held that ESCL and Globecast operated a cartel in the sporting events held during the period 2011–2012.
They exchanged information and quoted bid prices as per their arrangements from July 2011 to May 2012 in violation of
section 3(3)(d).71 In light of the information (various vital evidences in the matter which disclosed the modus operandi of
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[s 46] Power to impose lesser penalty
the cartel) and support provided by the 1st applicant 100% reduction in penalty to Globecast was granted. The evidences
furnished by ESCL added value to the ongoing investigation and was thus, granted 30% reduction in penalty.
53 Came into force on 20 May 2009 vide Notification No. S.O. 1241(E), dated 15 May 2009.
54 Subs. by Act 39 of 2007, section 39(a) (w.e.f. 20 May 2009). Prior to its substitution, it
stood as under: Provided that lesser penalty shall not be imposed by the Commission in cases where proceedings for the violation
of any of the provisions of this Act or the rules or the regulations have been instituted or any investigation has been directed to be
made under section 26 before making of such disclosure:
55 Subs. by Act 39 of 2007, section 39(b), for the word “first” (w.e.f. 20 May 2009).
56 Ins. by Act 39 of 2007, section 39(c) (w.e.f. 20 May 2009).
57 Available at:
http://www.cci.gov.in/sites/default/files/advocacy_booklet_document/Leniency.pdf (last accessed in February 2019).
58 A Caruso, “Leniency Programmes and Protection of Confidentiality:
The Experience of the European Commission”, (2010) Journal of European Competition Law & Practice 454; N Zingales,
“European and American Leniency Programmes: Two Models towards Convergence?”, (2008) 5(1) Competition Law Review 6.
59 Regulation 2(i), (Lesser Penalty) Regulations, 2009, “vital disclosure”
means full and true disclosure of information or evidence by the applicant to the Commission, which is sufficient to enable the
Commission to form a prima facie opinion about the existence of a cartel or which helps to establish the contravention of the
provisions of section 3 of the Competition Act, 2002.
60 Competition Commission of India (Lesser Penalty) Regulations,
2009.
61 The Competition Commission of India (Lesser
Penalty) Amendment Regulations, 2017, No. L-3(4)/Reg-L.P./2017-18/CCI, dated 8 August 2017.
62 The Competition Commission of India (Lesser
Penalty) Amendment Regulations, 2017, No. L-3(4)/Reg-L.P./2017-18/CCI, dated 8 August 2017.
63 Id.
64 The Competition Commission of India (Lesser Penalty) Amendment
Regulations, 2017, No. L-3(4)/Reg-L.P./2017-18/CCI, dated 8 August 2017.
65 Id.
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[s 46] Power to impose lesser penalty
66 Id.
67 Id.
68 Re Cartelisation in respect of tenders floated by Indian Railways for
supply of Brushless DC Fans and other electrical items, Suo Moto Case No 03 of 2014 [CCI], decided on 18 January 2017.
69 Cartelisation in respect of zinc-carbon dry-cell batteries market in
India v. Eveready Industries India Ltd, Suo-Moto Case No. 02 of 2016 [CCI], decided on 19 April 2018.
70 Re Anticompetitive conduct in the Dry-Cell Batteries Market in India
v Panasonic Corp, Japan, Suo Motu Case No 02/2017, decided on 30 August 2018.
71 Re Cartelisation by broadcasting service providers by rigging the
bids submitted in response to the tenders floated by Sports Broadcasters v Essel Shyam Communication Ltd, Suo-motu Case No 02
of 2013 [CCI], decided on 11 August 2018.
End of Document
[s 47] Crediting sums realised by way of penalties to Consolidated Fund of India
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > CHAPTER
VI PENALTIES
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
CHAPTER VI PENALTIES
72[s 47] Crediting sums realised by way of penalties to Consolidated Fund of India
All sums realised by way of penalties under this Act shall be credited to the Consolidated Fund of India.
LEGISLATIVE BACKGROUND
Competition Act, 2002
This section was part of Official amendments moved during consideration and passing of the Competition Bill, 2000.
This section was enforced vide Notification No. S.O. 1241(E), dated 15 May 2009, w.e.f. 20 May 2009.
SCOPE OF THE SECTION
It has been specifically provided that penalty imposed by the Commission under sections 42–46 shall be credited to the
Consolidated Fund of India. The fees and cost realised by the Commission will, however, be credited to the Competition
Fund constituted under section 51.
72 Came into force on 20 May 2009 vide Notification No. S.O. 1241(E), dated 15 May 2009.
End of Document
[s 48] Contravention by companies
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > CHAPTER
VI PENALTIES
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
CHAPTER VI PENALTIES
73[s 48] Contravention by companies
(1) Where a person committing contravention of any of the provisions of this Act or of any rule, regulation, order
made or direction issued thereunder is a company, every person who, at the time the contravention was
committed, was in charge of, and was responsible to the company for the conduct of the business of the company,
as well as the company, shall be deemed to be guilty of the contravention and shall be liable to be proceeded
against and punished accordingly:
Provided that nothing contained in this sub-section shall render any such person liable to any punishment if
he proves that the contravention was committed without his knowledge or that he had exercised all due
diligence to prevent the commission of such contravention.
(2) Notwithstanding anything contained in sub-section (1), where a contravention of any of the provisions of this
Act, or of any rule, regulation, order made or direction issued thereunder has been committed by a company and
it is proved that the contravention has taken place with the consent or connivance of, or is attributable to any
neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager,
secretary or other officer shall also be deemed to be guilty of that contravention and shall be liable to be
proceeded against and punished accordingly.
Explanation.—For the purposes of this section,—
(a) “company” means a body corporate and includes a firm or other association of individuals; and
(b) “director”, in relation to a firm, means a partner in the firm.
LEGISLATIVE BACKGROUND
Competition Act, 2002
Notes on clauses of the Bill stated, thus:
Notes on clauses—This clause contains provisions relating to contravention by companies. This clause, inter alia, provides that
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[s 48] Contravention by companies
every person who, at the time of contravention of any of the provisions mentioned in that clause, was in charge of and was
responsible to the company as well as the company, shall be deemed to have acted in contravention of the said provision and shall
be liable to be proceeded against and punished accordingly. However, such person shall not be liable to punishment if he proves
that contravention was committed without his knowledge or that he had exercised all due diligence to prevent such contravention.
[Clause 46 of the Competition Bill, 2001].
This section was enforced vide Notification No. S.O. 1241(E), dated 15 May 2009, w.e.f. 20 May 2009.
SCOPE OF THE SECTION
This section provides for special provisions relating to offences committed by a company or a firm. A company registered
under the Companies Act, 1956 (now replaced by the Companies Act, 2013) is a “person” in the eyes of law. A company
acts through its officers, who must be responsible for any offence committed by the company. A company cannot be
subjected to punishment by way of imprisonment, although it may suffer punishment by way of fine. A firm, though not
clothed with a legal personality of its own, nonetheless is a recognised form of business organisation. Like a company, a
firm also acts through its partners. A firm, which is registered under the Indian Partnership Act, 1953 can even sue, and be
sued, in its own name. A company and a firm have, therefore, been covered like-wise by this section.
Sub-section (1) provides that in case contravention of any of the provisions of the Competition Act, 2002 or rules or
regulations, order made or direction issued thereunder has been committed by a company, every person who is in charge
of, and responsible to the company for the conduct of its business shall be deemed to be guilty of the offence and
punishable, apart from the company. The Commission must ascertain as to the officers who are “in charge of and are
responsible” for the conduct of the business of the company, in relation to the contravention of the Competition Act, 2002,
etc., committed by the company. The said expression has not been defined in the Competition Act, 2002 and may mean the
managing director, whole time director or any other principal officer. Any such accused person may take the plea in his
defence that the offence was committed without his knowledge or that he had exercised due diligence to prevent the
commission of the offence, to the satisfaction of the Commission.
Explanation to this section, inter alia, provides that a “company” also includes a firm or other association of individuals,
and “director” in relation to a firm, includes a partner of the firm. Accordingly, in case the offence is committed by a firm,
apart from the firm, the partner(s) in charge of, and responsible for, the conduct of the business of the firm, shall be liable
for the offence. Though association of individuals has also been referred to in the Explanation and equated with “firm”, it
has not been provided as to who shall be responsible for any offence committed by such association. The Explanation does
not provide that the members of the managing or Executive Committee of the association shall be guilty of the offence.
POWERS UNDER THE MONOPOLIES AND RESTRICTIVE TRADE PRACTICES ACT, 1969
VIS-À-VIS THE COMPETITION ACT, 2002
Section 48 of the Competition Act, 2002 corresponds to section 53 of the Monopolies and Restrictive Trade Practices Act,
1969, since repealed, with the only change that it refers to “offence” under the Competition Act, 2002 being committed
instead of “contravention of the provisions of the Act, rule, regulation, order or direction issued” under the Competition
Act, 2002. This is so, as the offences under the MRTP Act, 1969 attract punishment by way of imprisonment or fine while
contravention of any provision under the Competition Act, 2002 attracts punishment by way of penalty or fine.
CASES UNDER THE COMPETITION ACT, 2002
Section 48(1) of the Competition Act, 2002 provides that where a person committing contravention of any of the provisions
of this Act is a company (including a firm or an association), every person who, at the time the contravention was
committed, was in charge of, and was responsible for the conduct of the business of the company/association, shall be
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[s 48] Contravention by companies
deemed to be guilty of the contravention and shall be liable to be proceeded against and punished accordingly. Further, the
proviso to that sub-section entails that such person shall not be liable to any punishment if he proves that the contravention
was committed without his knowledge or that he had exercised all due diligence to prevent the occurrence of such
contravention. Furthermore, the provisions contained in section 48(2) provide that notwithstanding anything contained in
sub-section (1), where a contravention of any of the provisions of the Act or of any rule, regulation, order made or
direction issued thereunder, has been committed by a company and it is proved that the contravention has taken place with
the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other
officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that
contravention and shall be liable to be proceeded against and punished accordingly. By virtue of Explanation to section 48
of the Act, the word “company” has been defined as a body corporate including a firm or other association of individuals.
Burden of proof
The primary burden to prove that the person fell under the ambit of section 48 of the Competition Act, 2002 is upon the
informant or the investigating officer. The report even if it mentions that the person(s) were the members of the executive
committee and in such capacity, they had participated in the meetings where the anti-competitive decisions were taken, that
in itself cannot make them liable under section 48(1) of the Act. It needs to be proved with evidence that they were in fact
in charge of the affairs of the company and responsible for its business. If no such evidence is provided, the appellants then
cannot be called upon, penalised with the aid of section 48.
The primary burden to prove that the particular person was, at the time of contravention in charge of and was also responsible to
the company for the conduct of its business is on the one who makes such allegation and only after evidence has been led to prove
that the particular person was, in fact, at the time of commission of contravention, in charge of and responsible to the company for
the conduct of its business, the burden shifts on such person.74
Once section 48(1) of the Competition Act, 2002 was triggered, it was for such person/officer/office bearer to then prove
that the contravention was committed without his knowledge or that he had exercised all due diligence to prevent the
commission of such contravention, in order to be absolved of liability under section 48(1) of the Act. Juxtaposed to section
48(1), section 48(2) of the Act attributes liability on the basis of the de-facto involvement of an officer.75
Can section 48 be invoked only after the contravention of the provisions of the Competition
Act, 2002 by the company is established?
The Opposite Parties in the Monsanto case challenged the directions of the Commission76 to investigate the persons-in-
charge of the company. They relied on the COMPAT decision in AN Mohana Kurup v CCI,77 wherein it was held that the
Commission was not permitted to investigate the persons-in-charge until the companies were found to be in contravention,
as envisaged under section 27 and section 48 of the Competition Act, 2002. It was contended that section 48 can only be
invoked after the contravention of the provisions of the Act by the company was established. However, it was submitted by
the Informants who relied on various provisions of other statutes that are pari materia with section 48 of the Act to argue
that the prosecution of the company as well as of the officer who was sought to be made vicariously liable may be carried
out simultaneously and the order of acquittal or conviction against them may be passed at the same time. The Delhi High
Court had in Pran Mehra v CCI78 held that a person vicariously liable for acts of the company may be prosecuted
simultaneously along with the company. The informants referred to East India Commercial Co Ltd, Calcutta v Collector of
Customs, Calcutta79 to urge that the order of the High Court was binding on the Tribunal. The Commission did not agree
with the Applicants and accepted the submission of the Informants, and held that under section 27, the DG can investigate
the persons-in-charge along with the company. It held that Pran Mehra along with the various other High Court
decisions80 and the pari materia provisions of other statutes will supersede the Tribunal decision in M/s Alkem
Laboratories Ltd v CCI81 and thus, cannot be taken as a precedent. The Commission laid down the following as the
rationale for its decision:
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[s 48] Contravention by companies
1. Since the proceedings were regulatory in nature, they need to be disposed of at the earliest. Investigating a
company and letting lose the persons behind the conduct of the company for some more time to continue to cause
damage is not in the interest of competition in market.
2. The Competition Act, 2002 is a rule of reasoned law. It requires deep understanding of facts and circumstances
and what prompted the conduct. This is possible only if the persons who were in-charge of the operations are
allowed to explain the conduct at the right stage so that the proceeding does not result in false, negative and in
want of adequate reasoning.
3. The principle of natural justice is indispensable in a proceeding. The Commission stated that a person, who might
be ultimately condemned, must have an effective opportunity to defend himself at the appropriate stage. If the
company fails to defend itself properly and is found guilty, the person concerned would be left with no option but
to suffer consequences under section 48 of the Competition Act, 2002.
4. Section 26(1) envisages that the Commission shall direct the DG to cause an investigation to be made into the
“matter”. There is no suffix, no prefix, no proviso, no explanation, and no caveats of any form attached to the
word “matter”. Hence, it obviously means that the DG needs to investigate into the matter at one go in all its
dimensions comprehensively. The said section does not envisage either for the Commission or for the DG to
investigate into the matter in phases, unless it is necessitated by circumstances.
In light of the above observations, the Commission found the applications of the opposite parties to be devoid of any merit
and dismissed the same. In the course of the proceedings qua a company, it would be open to the key-persons to contend
that the contravention, if any, was not committed by them, and that, they had in any event employed due diligence to
prevent the contravention. These arguments can easily be advanced by key-persons without prejudice to the main issue, as
to whether or not the company had contravened, in the first place, the provisions of the Competition Act, 2002 as alleged
by the DG, in a given case.82
“Company” has been defined as a body corporate including a firm or other association of
individuals
In the case of Shivam Enterprises,83 the DG identified the office-bearers of Kiratpur Sahib Truck Operators Co-operative
Transport Society Ltd who were then members of its managing committee for individual liability in terms of the provisions
of section 48 of the Competition Act, 2002. The Commission held that after it was established that the impugned
acts/conduct of Society were in contravention of the provisions of sections 3 and 4 of the Act, the liability of the persons in
charge of the Society flowed vicariously from the provisions of section 48 of the Act. Since there was no evidence brought
to absolve them from the liability, the Commission apart from directing such persons to “cease and desist” from indulging
in the acts/conduct which had been found to be in contravention of the provisions of the Act, decided to impose penalty on
such persons at 5% of the average income of the last three financial years in respect of the persons whose financial details
were available.
In the case of Indian Sugar Mills Association v Indian Jute Mills Association,84 after it was established that the impugned
acts/conduct of Indian Jute Mills Association (IJMA) and Gunny Trade Association (GTA) were in contravention of the
provisions of section 3(1) read with section 3(3)(a)/3(3)(b) of the Competition Act, 2002 the liability of the persons in
charge of IJMA/GTA was held to flow vicariously from the provisions of section 48 of the Act. Diverse pleas such as
being members of the committees for only few years, having retired from the associations, not having vested with any
specific power or duty and otherwise explaining the nature of discussions pertaining to the general/labour issues faced by
the jute industry, etc., were rejected by the Commission as valid defenses. However, the Commission decided to impose
penalty upon only such of the persons who were in charge or responsible for the conduct of the Associations at the relevant
time post-enforcement of the provisions of section 3 of the Act. Resultantly, the Commission decided to impose penalty on
such persons who were members of the Executive Committee of IJMA and the Executive Committee and the Daily Price
Bulletin Sub-Committee of GTA at 5% of the average income of the last three financial years.85 The Tribunal, however,
by its order dated 1 July 2016 set aside the order of the Commission. It was held that there was no evidence on record to
prove that there was an agreement between GTA and IJMA about fixation of price of A-Twill jute bags or that the price of
Page 5 of 9
[s 48] Contravention by companies
such bags was fixed by GTA after discussion with IJMA. The COMPAT held that the finding of violation of section
3(3)(a) and 3(3)(b) were unsustainable and deserved to be set aside.
Anti-competitive decision or practice of the association can be attributed to the members who
are responsible for running the affairs of the association and actively participated in giving effect to the anti-
competitive decision or practice of the association
In the case of Bengal Chemist and Druggist Association (BCDA),86 the office-bearers in their common reply to the DG
report took the plea regarding non-application of the provisions of section 48 of the Competition Act, 2002 upon the office-
bearers and executive members of BCDA as their liability was limited as per the Memorandum of Association of BCDA,
being a non-profit company registered under section 25 of the Companies Act, 1956.
The Commission relying on Case No. 60/2012 (in the matter of M/s Arora Medical Hall, Ferozpur against Chemist &
Druggist Association, Ferozpur), reiterated that the provisions of section 27 of the Competition Act, 2002 were sufficient to
make office-bearers liable for contravention without the aid and assistance of the provisions of section 48 of the Act.
Additionally, the Commission noted from the records that BCDA was a company registered under section 25 of the
Companies Act, 1956 and provisions of section 48 of the Act were applicable to the BCDA. Thus, there was no occasion to
draw any distinction on the count. Therefore, the Commission was of the view that the office-bearers and executive
members of the BCDA were guilty of the contravention and were liable to be punished.87 However, the Tribunal in the
Bengal Chemist and Druggist Association case88 held that since the members were not given a copy of the main
investigation report, on the basis of which the alleged involvement of them was found, they were deprived of an effective
opportunity to reply of raise objections against the findings and hence, the penalty was liable to be set aside on the basis of
violation of principles of natural justice. The Tribunal relied upon the reasons recorded in another case Shib Shankar Nag
Sarkat v CCI89 to set aside the penalty because no evidence was produced to prove that they were in charge of and were
responsible to BCDA for the conduct of its business. The Jt DG was held to be under an obligation to collect evidence to
prove that if the particular office-bearers were in fact in charge of the decision-making, then only penalty could be imposed
on them with the aid of section 48(1) or section 48(2) of the Act.
In an appeal filed before the Tribunal,90 Mr Swapan Kumar questioned the penalty imposed on him by contending that the
finding recorded by the Jt DG, which was approved by the Commission, about his complicity in the decision taken by the
Executive Committee of BCDA to restrain the retailers from giving discounts to the customers was perverse. He pleaded
that no penalty could have been imposed on him under section 27 read with section 48 of the Competition Act, 2002
because he had resigned from the Executive Committee on 25 September 2011 and was not a party to the decision taken
for imposing restriction on the retailers to give discount to the customers. Further, it was contended that he was elected to
the Zonal Committee from Midnapur Zone and then to Paschim Midnapur District Committee and finally to the State
Committee as Executive Committee Member/Director of BCDA and continued in that capacity till he submitted
resignation on 25 September 2011. He admitted having attended the meetings of the Executive Committee till the
tendering of resignation, but categorically denied that any resolution was passed in such meetings for preventing sale of
medicines below the MRP or for restraining the retailers from giving discounts to the customers. The appellant pleaded
that he was not responsible for any discussion and/or resolution passed by the Executive Committee of the BCDA after his
resignation. The Tribunal noted that section 48(1) could be invoked only if the person against whom the proceedings are
drawn was in charge of and was responsible to the company for the conduct of its business. Sub-section (2) of section 48
could be invoked if it is proved that contravention has taken place with the consent or connivance of or is attributable to
any director, manager, secretary or other officer of the company. The Tribunal further noted that the exercise undertaken
by the Jt DG in the context of the appellant’s plea that he had resigned from the Executive Committee of BCDA on 25
September 2011, which was supported by copy of the resignation letter and letter dated 6 January 2012 addressed to the
Dy Registrar of Companies, Kolkata was, absolutely lopsided. The Tribunal observed:
... After taking cognizance of the appellant’s assertion that he had tendered resignation from the Executive Committee on 25
September 2011 and had not participated in the meetings of the Executive Committee held after that day, the minimum which Jt.
DG should have done was to summon the original record of BCDA to ascertain the fate of resignation letter dated 25 September
2011 tendered by the appellant. Unfortunately, he did not make any effort in that direction. Not only this, he solely relied upon the
minutes of various meetings of the Executive Committee, in which the appellant’s presence was shown without calling for the
original record including the registers in which those participating in the meetings must have signed. Therefore, there is no escape
Page 6 of 9
[s 48] Contravention by companies
from the conclusion that the Jt. DG and the Commission committed serious error by holding the appellant guilty of anticompetitive
conduct/activity with the help of section 48 of the Act.
The Tribunal, further, held that the mere recording of presence of the appellant in the minutes of various meetings cannot
be made a basis for presuming that he had, in fact, participated in the meetings of the Executive Committee held after 25
September 2011 and was associated with the decision taken to impose a ban on discounts by the retailers. If the appellant
was not associated with the offending decision, then the Commission could not have penalised him under section 27 read
with section 48(1) of the Competition Act, 2002. The Tribunal, therefore, allowed the appeal, set aside the finding recorded
by the Jt DG that the appellant was a party to the decision taken by the Executive Committee to ban discounts by the
retailers, later endorsed by the Commission and set aside and quashed the penalty of Rs 47,63,579 imposed by the
Commission.
In the Dumper Owner’s Association (DOA) case,91 the Commission noted that even though the said office-bearers of the
DOA denied the DG findings, they had not brought anything on record which could absolve them from their responsibility
in terms of section 48 of the Competition Act, 2002. Therefore, in concurrence with the DG’s finding based on the
material/evidence collected and collated by DG, the Commission was of the view that the office-bearers of DOA namely
Shri Amiya Kumar Sahoo, President; Shri Bhagaban Swain, Vice-President; Shri Tushar Kanta Bhoi, Secretary; Shri
Himanshu Pattanaik, Asst Secretary; and Shri Ajay Kumar Samal, Treasurer were equally responsible along with DOA in
the anti-competitive practices of controlling and limiting the provisions of dumper services for intra-port transportation of
cargos inside the Paradip Port-prohibited area which was in contravention of the provisions of section 3(1) read with
section 3(3) (b) of the Act and determining the prices of dumpers for intra-port transportation which is in contravention of
the provisions of section 3(1) read with section 3(3)(a) of the Act. Accordingly, the Commission to cause some sort of
deterrence effect in future decided to impose penalty on the office-bearers of DOA at 5% of the average income of the last
three financial years.
In the case of Royal Agency v Chemists & Druggists Association (CDA),92 the DG in his report named Sh Agostinho
Menezes, proprietor of M/s Drogaria Menezes & Cia and Sh Ramesh Chaturvedi, General Manager Distribution of M/s
Franco-Indian Pharmaceuticals Pvt Ltd As per the DG’s report, Sh Agostinho Menezes in the capacity of the Wholesaler’s
Chairman of the Association was a senior office-bearer, especially as regards distribution of CDA, who by entering into an
agreement/understanding as defined under section 2(b) of the Competition Act, 2002 with M/s Franco-Indian
Pharmaceuticals Pvt Ltd restrained the latter from supplying goods to the informant. He achieved this by conveying to M/s
Franco-Indian Pharmaceuticals Pvt Ltd his inability to place further orders on it. The liability on Sh Agostinho Menezes
was imputed in his dual capacity of being Wholesaler’s Chairman of CDA and also as the proprietor of M/s Drogaria
Menezes & Cia. The Commission accepted the findings by DG and noted that as senior office-bearer, and as an interested
party, being himself a distributor of M/s Franco-Indian Pharmaceuticals Pvt Ltd (Opposite Party-2), Mr Menezes was in a
position, and had the reason to influence the decisions of CDA and as regards his other capacity, that of proprietor of M/s
Drogaria & Cia, Mr Menezes was the key person to influence M/s Franco-Indian Pharmaceuticals Pvt Ltd, whose
distributorship his proprietary concern had for several years. Also, Sh Ramesh Chaturvedi as General Manager,
Distribution, of M/s Franco-Indian Pharmaceuticals Pvt Ltd, was held to play a direct role to stop supplies to the
Informant. Thus, for the purpose of section 48, Sh Agostinho Menezes and Sh Ramesh Chaturvedi were held liable.
In the case of Crown Theatre v Kerala Film Exhibitors Federation (KFEF),93 the Commission noted that Mr Basheer
Ahmed and Mr MC Bobby, being the President and General Secretary of KFEF, respectively, were responsible for the
conduct of KFEF as it was factually proved that they were involved in the key decisions of KFEF and they played an
active role in enforcing the directives of Opposite Party in controlling and restricting the exhibition of new movies across
Kerala (Mr Mukesh Mehta of M/s E4 Entertainment had categorically stated that he was directed by Mr Basheer Ahmed
over the phone to stop providing Tamil movies to the Informant and as a result of which, a movie namely, “Raja Rani”
which was released at the Informant’s theatre was taken down after three days). Moreover, it was noted that they failed to
adduce any evidence to establish that the anti-competitive decisions were made without their knowledge or that they had
exercised all due diligence to prevent their commissioning. The Commission, therefore, was of the view that both Mr
Basheer Ahmed and Mr MC Bobby, being in charge of and responsible for the conduct of business of Opposite Party
under section 48 of the Competition Act, 2002 were liable to be penalised. 94
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[s 48] Contravention by companies
The directions under sections 48 read with section 36 cannot be given casually
The Tribunal in the case of Eastern India Motion Picture Association,95 observed that although the Commission has the
authority under section 36(4) read with section 48 of the Competition Act, 2002 to direct the office-bearers to provide the
profit and loss statement/balance sheets/income statement of their individual or company/enterprise which they represent,
penal action cannot be taken against such individuals unless it was seen as to whether the failure on their part was
deliberate or intentional or as a result of the confusion caused on account of the vague language in the order. The Tribunal
noted that in the Commission’s order dated 29 September 2011, the appellants were not even named as parties. Further,
there was a complete silence on the part of the Commission in justifying its order dated 15 December 2011, as there was
no reason as to why the four officer-bearers were required to submit their individual accounts. The Tribunal observed that
there should be some application of mind before issuing such directions and the orders must reflect such application of
mind. The Tribunal therefore, in the absence of any reason, as to why such directions were necessary in spite of the
Commission’s finding of breach of its directions under section 36(4)(a) and (b) and the resultant penalty under section 43,
allowed the appeal and quashed the penalties inflicted in the impugned order.
In Chemists & Druggists Association case,96 the Tribunal considered the question as to whether the penalty imposed on
the office-bearers of the Association was legally sustainable. It was noted that part of the impugned order was liable to be
set aside on the ground that while remitting the matter to the DG for the limited purpose of fixing the responsibility of the
office-bearers, the Commission had unequivocally referred to section 48 of the Competition Act, 2002 and directed the DG
to issue notice to the office-bearers of the Managing Committee/Executive Body of the Association under section 48(2)
and gave them opportunity to explain their role in the decision-making in respect of practices/circulars/directions, etc.,
which were found anti-competitive. In compliance of the directive given by the Commission, the DG issued notices dated
3 July 2013 and gave them opportunity under proviso to section 48(1) of the Act and produced evidence to prove that
contravention of section 3(3)(b) read with section 3(1) was committed by the Association without their knowledge or that
they had exercised due diligence to prevent the Commission of such contravention. However, after receipt of
supplementary report dated 31 July 2013, in which the Jt DG recorded a conclusion that office bearers were complicit in
anti-competitive practice followed by the Association, the Commission gave up the idea of imposing penalty under section
48 of the Act apparently after realising that the ingredients of that section are not satisfied and reverted to section 27(b) for
the purpose of imposing penalty. The Tribunal held that after having resorted to section 48, the Commission could not
have reverted to section 27(b) for the purpose of imposing penalty and that too without giving an action-oriented notice
and reasonable opportunity of hearing the appellants in Appeal Nos. 22 to 28 of 2014 to show cause why the penalty may
not be imposed on them under section 27(b) of the Act. Further, if section 48(1) was to be invoked for penalising the
appellants, Gurpreet Singh and six others, the Jt DG was required to prove that they were in charge of and were
responsible for the company (Association) for the conduct of its business as well as the Association itself. However, no
such finding was recorded by the Jt DG. The Commission realised that these fundamental ingredients are not satisfied in
the present case. Therefore, it conveniently switched over to section 27(b) and imposed heavy penalties on the office-
bearers.
73 Came into force on 20 May 2009 vide Notification No. S.O. 1241(E), dated 15 May 2009.
74 Shib Sankar Nag Sarkar, Angshuman De v CCI, Director General
and Dr Chintamony Ghosh (Director, Directorate of Drugs Control), Appeal No 34 of 2014.
75 Re T G Vinayakumar (also known as Vinayan) Bharathim and
Association of Malayalam Movie Artists (AMMA), Film Employees Federation of Kerala (FEFKA), Case No 98 of 2014, decided
on 24 March 2017. See also Case No 71 of 2013, Re Maruti & Co, Bangalore Informant and Karnataka Chemists & Druggists
Association (KCDA), [CCI], decided on 28 July 2016.
76 Ministry of Agriculture and Farmers Welfare, Nuziveedu Seeds Ltd,
All India Kisan Sabha (AIKS), Department of Agriculture and Cooperation, State of Telangana, National Seeds Association of
Page 8 of 9
[s 48] Contravention by companies
India (NSAI) v M/s Mahyco Monsanto Biotech (India) Ltd, [2016] 135 CLA 83
.
77 AN Mohana Kurup v CCI, Appeal No 05 of 2016, decided on 10
May 2016 [DEL].
78 Writ Petitions No 6258/2014, 6259/2014 and 6669/2014.
79 East India Commercial Co Ltd, Calcutta v Collector of Customs,
Calcutta, AIR 1962 SC 1893 .
80 Sheoratan Agarwal v State of MP,
(1984) 4 SCC 352 ; Vasu Tech Ltd v Ratna Commercial Enterprises Ltd,
(2009) 160 DLT 591 ; Dilip S Dhanukar v Air Force Group Insurance Society,
(2007) ILR 1 Delhi 234; Sushila Devi v Securities and Exchange
Board of India, (2008) 1 Comp LJ 155 Delhi; Aneeta Hada
v M/s Godfather Travels and Tours Pvt Ltd, (2012) 5 SCC 661
(Second Case).
81 Alkem Laboratories Ltd v CCI, Appeal No 09/2016.
82 See Pran Mehra v CCI (Writ
Petitions No. 6258/2014, 6259/2014 and 6669/2014); Ministry of Agriculture v M/s Mahyco Monsanto Biotech Ltd, (Ref Case No.
02/2015, order dated 26 July 2016); Aneeta Hada v M/s Godfather Travels & Tours Pvt Ltd,
(2008) 13 SCC 70
cited in Cadila Healthcare Ltd v CCI, (12 September 2018 - DELHC).
83 Shivam Enterprises v Kiratpur Sahib Truck Operators Co-op
Transport Society Ltd, 2015 Comp LR 232 (CCI).
84 Indian Sugar Mills Association v Indian Jute Mills Association, 2014
Comp LR 225 (CCI).
85 Also see Swastik Stevedores Pvt Ltd v Dumper Owner’s Association,
2015 Comp LR 212 (CCI); Rohit Medical Store v Macleods Pharmaceutical Ltd, 2015 Comp LR 451(CCI); Kerala Cine Exhibitors
Association Film Chamber Building v Kerala Film Exhibitors Federation Cee Pee Building, 2015 Comp LR 666 (CCI).
86 Re Bengal Chemist and Druggist Association and Dr Chintamoni
Ghosh, [2014] 121 CLA 196 (CCI), 2014 Comp LR 221
(CCI).
87 Also see Sandhya Drug Agency v Assam Drug Dealers Association,
2014 Comp LR 61 (CCI); Varca Druggist & Chemist v Chemists & Druggists Association, Goa, 2012 Comp LR 838 (CCI); P V
Basheer Ahmed v Film Distributors Association, Kerala (Case 32/2013).
Note: SN DHINGRA, Member in his dissension opinion in M/s Sandhya Drug Agency v Assam Drug
Dealers Association, 2014 Comp LR 61 (CCI); M/s Santuka Associates Pvt Ltd v All India Organization of Chemists and
Druggists, Organisation of Pharmaceutical Producer of India, Indian Drug Manufacturers’ Association and USV Ltd, 2013 Comp
LR 223 (CCI); Varca Druggist & Chemist v Chemists & Druggists Association, Goa, 2012 CompLR 838 (CCI); M/s Peeveear
Medical Agencies v All India Organisation of Chemists and Druggists, 2014 Comp LR 10 (CCI) held that the liability of office-
Page 9 of 9
[s 48] Contravention by companies
bearers of association could be fixed only under section 48 of Competition Act, 2002 if office-bearer, in his individual capacity, was
also party to matter and his individual conduct was investigated for violation of Act. According to section 48 of Act, “company”
includes association of individuals but does not include in it association of firms/enterprises/companies. Therefore, office-bearer of
association of companies/enterprises/firms was not equivalent to company. Hence, officer-bearer of association of in their
individual capacity would not be liable for penalty under Act.
88 Bengal Chemist & Druggists Association v CCI, Appeal No 37 of
2014 [COMPAT].
89 Shib Shankar Nag Sarkat v CCI, Appeal No 34 of 2014.
90 Swapan Kumar Karak v CCI, 2016 Comp LR 1 (CompAT).
91 Swastik Stevedores Pvt Ltd v Dumper Owner’s Association, 2015
Comp LR 212 (CCI).
92 Royal Agency v Chemists & Druggists Association (CDA), Case No
63 of 2013, decided on 27 October 2015.
93 Crown Theatre v Kerala Film Exhibitors Federation (KFEF), Case
No 16 of 2014, decided on 8 September 2015.
94 Case No 45/2012, Kerala Cine Exhibitors Association v Kerala Film
Exhibitors Federation, 2015 Comp LR 666 (CCI). [It is relevant to mention that in Kerala Cine Exhibitors Association v Kerala
Film Exhibitors Federation, the Commission had already found these two office-bearers responsible under section 48 of the
Competition Act, 2002 and imposed a penalty at 7% of their average income accordingly.
95 Eastern India Motion Picture Association v Manju Tharad,
Proprietress, Manoranjan Films, [2013] 113 CLA 222
(CAT).
96 Chemists & Druggists Association v CCI, Appeal Nos 21/2014 to
28/2014, IA Nos. 31/2014 to 46/2014.
End of Document
[s 49] Competition advocacy
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > CHAPTER
VII COMPETITION ADVOCACY
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
CHAPTER VII COMPETITION ADVOCACY
1[s 49] Competition advocacy
2[(1)The Central Government may, in formulating a policy on competition (including review of laws related to
competition) or on any other matter, and a State Government may, in formulating a policy on competition or on
any other matter, as the case may be, make a reference to the Commission for its opinion on possible effect of
such policy on competition and on the receipt of such a reference, the Commission shall, within sixty days of
making such reference, give its opinion to the Central Government, or the State Government, as the case may be,
which may thereafter take further action as it deems fit].
(2) The opinion given by the Commission under sub-section (1) shall not be binding upon the Central Government
3[or the State Government, as the case may be,] in formulating such policy.
(3) The Commission shall take suitable measures 4[* * *] for the promotion of competition advocacy, creating
awareness and imparting training about competition issues.
HISTORICAL BACKGROUND
Competition Act, 2002
Notes on clauses of the Bill stated, thus:
Notes on clauses.—This clause contains provisions for competition advocacy by the Commission. In formulating policy, the
Central Government may make a reference to the Commission for its opinion on possible effects of such policy on competition.
The Commission is required to give its opinion to the Central Government within sixty days from the date of such reference. Such
opinion shall not be binding upon the Central Government. The Commission is also required to take suitable measures for the
promotion of competition advocacy creating awareness and imparting training about the competition issues as may be prescribed.
[Clause 47 of the Competition Bill, 2001].
Competition (Amendment) Act, 2007
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[s 49] Competition advocacy
Notes on clauses.—This clause seeks to amend section 49 of the Competition Act, 2002 relating to Competition advocacy.
Under the existing provisions contained in sub-section (1) of the said section the Central Government may, in formulating a policy
on competition (including review of laws related to competition), make a reference to the Commission for its opinion on possible
effect of such policy on competition and on receipt of such a reference, the Commission shall, within sixty days of making such
reference, give its opinion to the Central Government, which may thereafter, formulate the policy as it deems fit. The existing sub-
section (2) provides that the opinion given by the Commission shall not be binding upon the Central Government in formulating
such policy. The existing sub-section (3) provides that the Commission shall take suitable measures, for the promotion of
competition advocacy, creating awareness and imparting training about competition issues in the manner as may be prescribed by
rules.
It is proposed to amend sub-section (1) of the said section so as to enable the Central Government to make reference to the
Commission on any other matter also apart from the existing proviso of making a reference on policy on competition (including
review of laws related to competition) and also to enable the State Government to make a reference to the Commission in
formulating a policy on competition or on any other matter. It is also proposed to amend sub-section (2) of the said section to
provide that the opinion of the Commission shall not be binding on State Government as well as the Central Government. It is
further, proposed to amend sub-section (3) of the said section to provide that the Commission shall take suitable measures for the
promotion of competition advocacy, creating awareness and imparting training about competition issues in the manner as may be
decided by the Commission and not as may be prescribed by rules. [Clause 40 of the Competition (Amendment) Bill, 2007].
Raghavan committee—recommendations of
This section is based on recommendations of Raghavan Committee. The relevant extracts of the Report are as follows:
6.4.7 Competition Advocacy.—The mandate of the CCI needs to extend beyond merely enforcing the Competition Law. It needs to
participate more broadly in the formulation of the country’s economic policies, which may adversely affect competitive market
structure, business conduct and economic performance. The CCI therefore, needs to assume the role of competition advocate,
acting proactively to bring about Governmental policies, that lower barriers to entry, promote de-regulation and trade liberalisation
and promote competition in the market place. There is a direct relationship between competition advocacy and enforcement of
Competition Law. The aim of competition advocacy is to foster conditions that will lead to a more competitive market structure
and business behaviour without the direct intervention of the Competition Law Authority, namely, the CCI.
6.4.8 A successful competition advocacy can be viewed in terms of the following:
1. CCI must develop relationship with the Ministries and Departments of the Government, regulatory agencies and other
bodies that formulate and administer policies affecting demand and supply positions in various markets. Such
relationships will facilitate communication and a search for alternatives that are less harmful to competition and
consumer welfare.
2. CCI should encourage debate on competition and promote a better and more informed economic decision making.
3. Competition advocacy must be open and transparent to safeguard the integrity and capability of the CCI. When
confidentiality is required, CCI should publish news releases explaining why; and
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[s 49] Competition advocacy
4. Competition advocacy can be enhanced by the CCI establishing good media relations and explaining the role and
importance of Competition Policy/Law as an integral part of the Government’s economic framework.
SCOPE OF THE SECTION
Advocacy is the act of influencing or supporting a particular idea or policy. Public Policy advocacy is geared towards
changing particular public policy and involves taking a position on specific policy issues.5
Competition advocacy refers to those activities conducted by the competition authority related to the promotion of a competitive
environment for economic activities by means of non-enforcement mechanism, mainly through its relationship with other
governmental entities by increasing public awareness of the benefits of competition.6
Successful implementation of competition policy and law largely depends upon the willingness of the people to accept
these. Advocacy plays a vital role in securing the willingness and acceptability of competition policy and law.7
Competition advocacy can also be looked at as law enforcement without intervention. It has maximum impact with least
intervention and an effective way to garner support to attain competition policy objectives.8 For instance, the Competition
Commission has in the past forwarded its comments on competition issues in draft legislations in some sectors such as post
and telegraph, shipping trade practices, broadcasting, petroleum and natural gas, and warehousing. The Commission has
undertaken the competition assessment of economic policies, legislations and bills. It assessed a few bills/policies,
including Indian Financial Code, Draft Legal Framework on Insolvency & Bankruptcy and the Tamil Nadu Transparency
in Tenders Act, 1998.
The Commission has an advisory role to play on a reference made to it by the Central Government or State Government
for its opinion on possible effect of any policy on competition. The Commission will give its considered opinion thereon
within 60 days. It is for the Central Government or State Government, as the case may be to take appropriate action on the
opinion given by the Commission.
The Commission is also required to create awareness and impart training about Competition issues and take measures for
promotion of Competition Advocacy.
The Commission has been taking advocacy initiatives for creating awareness of competition law and more particularly,
about the Competition Act, 2002 to various stakeholders including business chambers/houses.
A summary of various advocacy initiatives taken by the Commission during last five years:9
Page 4 of 12
[s 49] Competition advocacy
Year No. of
Advocacy Programme Interns Issues of Fair Play Competition Tracker Annual Day Advocacy Booklets
2012–13 58 70 4 Reprint with updation +
Booklet on
Understanding
Competition Law
2013–14 69 75 4 1 Reprint with
Amendments
2014–15 49 79 4 1 1 Reprint with updation +
Booklet on Provisions
relating to Public
Procurement
2015–16 73 78 4 1 All the Booklets (No. 1
to 9) Reprinted with
modification/updation.
A consolidated single
volume comprising of
advocacy material
printed
2016–17 122 96 4 1 1 Prepared six booklets
for Competition
Resource Person
Page 5 of 12
[s 49] Competition advocacy
Note: Besides above advocacy initiatives includes publication of various advocacy booklets, quarterly newsletter “Fair
Play” which is widely circulated among various stakeholders.
TOOLS OF ADVOCACY
Various competition advocacy tools are available and have been effectively utilised by competition authorities in other
jurisdictions.
Seminars and Workshops
Seminars and workshops10 are effective tools for targeted audience. Published brochures, guidelines, articles and posting
them on website are able to carry the message far and wide.11
Competition Assessment of Legislations
An important tool of many competition authorities is the ability to give opinion on proposed legislation and public policy
on their own, so that the law makers and policy makers consider the competition dimensions and give reasons for deviating
from them for the benefit of the public. While law making and policy making strictly lie in the realm of Legislature and the
Government respectively, it is the right of the public to know what kind of public interest persuaded these authorities to
deviate from competition principles. Competition authorities also carry out market studies to understand the state of
competition in various sectors in order to advise the concerned authorities to make necessary changes so as to usher more
competition or to usher competition where there is weak competition or no competition, as the case may be. Wide
dissemination of results of market studies is an important tool of competition advocacy.
Many jurisdictions have programmes to evaluate the existing/upcoming economic legislations from the perspective of competition.
This aims to identify the elements that may have potential to restrict the ability of economic agents to effectively compete at the
market place or limit the choices of consumers. It is reported that Australian Government in mid1990s launched competition
impact assessment of its economic policies and found about 1,800 instances of competition distortions. Removal of these
distortions eventually allowed the economy to grow faster and benefitted the consumers substantially.12
In sync with its mandate and the role of competition in economic development, the Competition Commission of India, to assess
select economic legislations/bills from the perspective of competition and share the assessment with the associated stakeholders,
framed the Competition Assessment of Legislations and Bills Guidelines, 2015 [framed under section 49(1) and (3) of the
Competition Act, 2002].13 The objective of the Guidelines is to facilitate objective and transparent assessment of select economic
legislations enacted recently by Parliament or State Legislatures and also the economic bills pending or coming up before them in
near future from competition perspective. Based on the assessment, the Commission would suggest, if necessary, appropriate
modifications in the legislation or the bill, as the case may be, along with the reasons for the same from the competition
perspective, to the relevant stakeholders, including Parliament/State Legislature, the Administrative Ministry or the Department of
the Government which has piloted the legislation/bill, and the Standing/Select Committee of the Parliament/State Legislature that
examines the bill. This would complement the proactive role of the Commission in preventing any provision inadvertently
sneaking into law that may have potential appreciable adverse effect on competition.14
Criteria for Assessment
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[s 49] Competition advocacy
The legislation/bill shall be assessed from the competitive perspective. In particular, the assessment shall address if the
legislation/bill has any provision which could:
1. cause appreciable adverse effect on competition in the relevant market in India;
2. humble any of the salient features of a competitive market;
3. restrict the freedom of players in the market and choices of consumers; or
4. be in disharmony with the objectives of the Competition Act, 2002.
While determining the above, the assessment shall take into account the factors listed in sections 19(3), 19(4) and 20(4) of
the Act.
Empanelment of Institutions
After the evaluation of samples of competition assessment submitted by institutions, the Commission has empanelled the
following institutions:
1. Indian Institute of Management, Ahmedabad
2. The National Law Institute University, Bhopal
3. National Institute of Public Finance and Policy, Delhi
4. National Law University, Delhi
5. CUTS International (Consumer Unity and Trust Society), Jaipur
6. Indian Institute of Management, Lucknow
7. Indira Gandhi Institute of Development Research, Mumbai.
Sectoral Studies
The Commission should also continue to carry out market studies to understand the state of competition in various sectors
in order to advise the concerned authorities to make necessary changes so as to usher greater competition. The
Commission in the past has released various sector wise studies in collaboration with various organisations [Intellectual
Property Laws and Competition Law Policy; Competition Law and Indian Pharmaceutical Industry; Competitive
Assessment of Onion Markets in India; Competition Concerns in Concession Agreements in Infrastructure Sectors; Public
Enterprises, Government Policy and Impact on Competition: Indian Steel Industry; Public Enterprises, Government Policy
and Impact on Competition: Indian Petroleum Industry; Anti-dumping and Competition Law; Competition Issues in the
Air Transport Sector in India; Study of Cartel Case Laws in Select Jurisdictions–Learnings for the Competition
Commission of India (CCI); Competition Policy in Telecommunications in India; The Teeter-Totter of Regulation and
Competition: Why Indian Competition Authority Must Trump Sectoral Regulators; Clauses in Bilateral Trade Treaties:
Analysing the Issues in the Context of India’s Future Negotiating Strategy; Competition Issues in Regulated Industries:
Case of India’s Transport Sector; State Policies Affecting Competition: Passenger Road Transportation Sector; Assessing
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[s 49] Competition advocacy
the State Of Competition in Indian Manufacturing Sector: Case Study of the Paints and Tyre Industry; The State of
Competition in the Indian Manufacturing Sector; Assessing the State of Competition in Indian Manufacturing Sector:
Pesticides and Cement Industries; Competition Issues in the Road Goods Transport Industry in India with special reference
to the Mumbai Metropolitan Region; Competition in India’s Energy Sector].15
During the FY 2015/16, the Commission formed sectoral study groups for conducting in-depth study of four important
sectors of the economy. The four sectors identified for the sectoral study are: (a) Information and Communications
Technology including e-commerce (ICT), (b) Agriculture, (c) Pharmaceutical, and (d) Transport Sectors for identifying
competition issue(s) involved therein.16
Trade Treaties
Cooperation in competition advocacy through the trade treaties will boost the effort in this direction in terms of content,
quality, scope and extent.
Competition agencies worldwide are increasing their advocacy role to promote a market structure which is more
supportive of competition. Advocacy allows competition agencies to expand its reach and play an important role in areas
where its role is usually ignored. Advocacy can give a competition authority a window in the design of restructuring of
industries before privatisation or in the grant of concessions or in the way access rules are set. It is necessary not to restrict
the canvass of the Commission in its advocacy initiatives, which alone can foster a competition culture in our economy.17
Commission’s Proactive Interaction Required
The scope of advocacy activities to be undertaken has been widened in the Competition Act, 2002 by including the
measures required for creation of awareness and imparting training about competition issues in addition to advising the
Central Government on policies impacting competition and measures for promotion of competition advocacy per se. Under
the Act, the Commission is required to proactively interact with the Government Departments/Ministries, media and all
other stakeholders, such as, the business community and organisations, academia, consumer organisations and professional
bodies, as an advocate of competition, and foster conditions to create a more competitive policy regime, market structure
and business behaviour.18 Section 53 of the Competition Act, 2002 mandates the Commission to furnish, every year, to the
Central Government, particulars in regard to any proposed or existing measures for the promotion of competition
advocacy, creating awareness and imparting training about competition issues. The CCI (Return on Measures for the
promotion of competition Advocacy, Awareness and Training on Competition issues) Rules, 2008 have been made in this
regard.
The Commission has to transcend beyond being merely an authority to enforce competition law, and don the mantle of an
advocate of competition and take suitable non-enforcement measures under section 49, together with the enforcement
measures as prescribed under the Competition Act, 2002. Competition law enforcement is both the foundation and the tool
for fostering sustainable competitive markets that result in healthy inter-firm rivalry, opportunities for new entry,
entrepreneurship, increased economic efficiency and consumer welfare. Competition advocacy can augment these and
other benefits of competition. The measures to be taken under section 49, therefore, should aim to foster a competition
culture where voluntary compliance of competition law becomes a reality and competition is internalised as a key driver
for economic growth and consumer welfare by all the stakeholders. Competition Advocacy, thus quintessentially means
non-enforcement mechanism for compliance with competition law and creation of competition culture.19 In the context of
the aforesaid, the Commission envisages the following advocacy activities to be undertaken as a competition advocate:
Promotion of Competition Advocacy and creation of awareness about competition issues
Page 8 of 12
[s 49] Competition advocacy
1. The Commission shall endeavour and undertake programmes, activities etc. for the promotion of competition
advocacy and creation of awareness about competition issues in India and abroad as considered appropriate by
the Commission;
2. The Commission may constitute Advocacy Advisory Committee(s) with a view to have expert and stakeholder
participation and consultation, on continuous basis, to carry forward the agenda of competition advocacy and
creation of awareness about competition issues;
3. The Commission may develop and disseminate advocacy literature, including audio-visual and other material
with a view to promote competition advocacy and create awareness about competition issues. For doing so, the
Commission may outsource the professional services as deemed appropriate;
4. The Commission may make extensive use of the media, both print and electronic, for promotion of competition
advocacy and creation of awareness on competition issues, and, for this purpose may, inter alia convene media
meets, issue press notes, arrange publication and dissemination of articles/news, release advertisements and
undertake other publicity related activities on competition issues as deemed appropriate;
5. The Commission shall proactively interact with the organisations of stakeholders, academic community, sectoral
regulators, Central and State Governments, civil society and other organisations concerned with competition
matters to encourage debate on competition and also undertake activities, programmes, studies, research work
etc. relating to competition issues and may support such endeavours financially, as considered appropriate, to
promote a better and more informed economic decision making;
6. The Commission may undertake studies and market research for the purpose of competition advocacy and
creation of awareness about competition issues;
7. The Commission may assume the role of a competition advocate and proactively interact with the Central and
State Governments and other bodies in legislative policy and other areas, such as, but not limited to, trade
liberalisation, economic regulation, State aids, disinvestments; to bring about policies that lower barriers to entry,
promote de-regulation and trade liberalisation and promote competition in the market place. With this end in
view, the Commission may, inter alia, undertake studies and research on the Central and State Government
policies, and arrange for the dissemination of the reports thereof as deemed appropriate;
8. The Commission may encourage the academic and professional institutions to include competition law and policy
in the curricula administered by them.
Imparting Training about competition issues
1. The Commission shall arrange appropriate training in India and abroad for the Chairperson, Members, Officers
and other employees assisting the Commission, including the Director General, about competition issues and
participation in international events as considered necessary by the Commission;
2. The Commission may also arrange appropriate training in India or abroad for the stakeholders as considered
necessary;
3. The Commission may have arrangements with any national or international institution, as the case may be, for
such training and may undertake to set up a center on competition law and policy as deemed appropriate; and
4. The Commission may provide internship facilities to students and professionals sponsored by universities,
academic and professional institutions, for undertaking studies, research etc. on competition issues and may
extend financial assistance therefor as considered appropriate.
Compliance Manual for Enterprises20
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[s 49] Competition advocacy
The Commission has come out with detailed guidance and advice to enterprises and assist them in creating and enhancing
a competition culture in their organization. This Competition Law Compliance Manual contains the basic principles of
competition law that impact an enterprise’s relationship with competitors, agents, suppliers, distributors, customers and
other third parties. It also contains guidelines that are designed to help executives and employees of the enterprise to
distinguish between permissible business conduct and illegal anti-competitive behaviour. The Manual shall serve as a
guide to all enterprises for becoming competition compliant.
Diagnostic Tool for Procurement Officers21
The CCI’s “Diagnostic Tool for Procurement Officers” serves as a practical guide for procurement officials who can use it
for review of their public procurement system. The Diagnostic Tool consists of sets of questions along with the gap
analysis, improvement plans and references to the past cases decided by Commission. It also describes a range of methods
for detecting suspicious conduct, to deal with it internally and to also file a reference with the Commission.22
CASES UNDER COMPETITION ACT, 2002
In the case of Kannada Grahakara Koota,23 an association of viewers filed the complaint against Karnataka Films
Chamber of Commerce (KFCC), Karnataka Television Association (KTVA), KFDA, Kannada Film Producers Association
(KFPA), Kannada Chalanachitra Academy (KCA) and Karnataka Film Artists, Workers and Technicians Union
(KFAWTU) for alleged contravention of Competition Act, 2002 in “not allowing the release and broadcast of any dubbed
content, within the State of Karnataka”. According to the complaint, KFCC, which had significant influence over the
market, refused to deal with those who did not follow its directions of restricting the exhibition of non-regional films.
KTVA was alleged to pressurise TV channels not to telecast dubbed content. The other parties also indulged in similar
activities.
The Commission held the actions of KFCC, KTVA and KFPA as anti-competitive through this order, the Commission
retained the position it took in the Bengal case24 of treating such ban as anti-competitive. The Commission passed cease
and desist order against the three associations and imposed penalties on them.25 Interestingly, the Commission, in exercise
of its powers under section 27(g) of the Competition Act, 2002, also directed the parties to bring in place, a “competition
compliance manual” to educate its members about the basic tenets of competition law principles and to play an active role
in creating awareness amongst its members of the provisions of the Act through competition advocacy.26 The Commission
somehow, has not in the past, emphasised on compliance structures within the enterprises and has restricted itself to
imposing penalties and passing cease and desist orders. Efficient compliance structures are generally seen as mitigating
factors in deciding fines in case of competition law violations in many jurisdictions.
In the case of Ghanshyam Dass Vij Bajaj Corp Ltd,27 Sonipat Distributor (FMCG) Association (Regd.), and its office
bearers were directed to cease and desist from indulging in the acts/conduct which had been found to be in contravention
of the provisions of the Competition Act, 2002. Further, it was ordered that the Association should modify its bye-laws in
light of the contraventions found and observations made by the Commission in its order so as to bring the same in accord
with the provisions of the Act. Further, in exercise of the powers under section 27(g) of the Competition Act, 2002,the
Commission directed the Association to put in place, in letter and in spirit, a “Competition Compliance Manual” to educate
its members about the basic tenets of competition law principles and the Association was advised to play an active role in
creating awareness amongst its members of the provisions of the Act through competition advocacy.
COMPETITION ADVOCACY – INTERNATIONAL MEASURES
The World Bank, Organisation for Economic Co-operation and Development (OECD)28
Page 10 of 12
[s 49] Competition advocacy
The OECD document recognises three pre-requisites for competition advocacy:
1. Independence of the Regulator: Structural and operational independence is an important requirement for the
effective enforcement of competition ethos. The Regulator should have a degree of independence from political
influence from both inside and outside the Government.
2. The agency should have sufficient resources to support both its enforcement and advocacy functions. The
resource issue is well understood as critical to all aspects of a competition agency’s work.
3. The agency must acquire credibility as an effective and impartial advocate for competition. Its reputation must
extend throughout the public and private sectors; policymakers and their constituents – businesses, workers and
consumers – must understand how competition benefits an economy, and have confidence in the competition
agency as an advocate for sound competition policy. This requires a multi-faceted effort from the agency.29
Anti-trust Division – US
“The Anti-trust Division’s advocacy efforts focus on strengthening markets and preserving economic freedom and
fairness. These efforts include extensive cooperation and engagement with Federal agencies, as well as with Congress,
State agencies and legislatures, courts, and foreign anti-trust authorities. Through its competition advocacy efforts, the
Division works to promote economic freedom and fairness, and seeks to secure efficient and well-functioning markets for
American consumers. The items in its toolkit for these efforts are numerous, including regulatory comments or views,
letters on anti-trust exemptions, workshops, hearings, amicus briefs, speeches, articles, testimony, personnel details, video
conferences, and consultations with regulatory agencies, among others. The Division’s competition advocacy efforts
primarily focus on Federal and State regulations and regulatory frameworks in which competition and competitive
principles can produce better outcomes for consumers consistent with important regulatory goals. The Division’s
competition advocacy efforts span virtually the entire economy, including, but not limited to, the agricultural, banking,
communications, energy, healthcare, insurance, intellectual property, finance, media, professional and occupational
licensing, transportation, and real estate sectors. While the competition issues raised by regulation can be numerous and
factually diverse, the Division’s role is relatively simple: to promote reliance on competition rather than on regulation
where appropriate, and to ensure that where regulation is appropriate, it is aligned as much as possible with competition
principles. These goals should be reflected in all of the Division’s competition advocacy efforts.”30
1 Came into force on 19 June 2003 vide Notification No SO 715(E), dated 19 June 2003.
2 Subs. by Act 39 of 2007, section 40(a), for sub-section (1) (w.e.f. 12 October 2007). Sub-
section (1) before its substitution, stood as under:
(1) In formulating a policy on competition (including review of laws related to competition), the Central Government may
make a reference to the Commission for its opinion on possible effect of such policy on competition and on receipt of such a
reference, the Commission shall, within sixty days of making such reference, give its opinion to the Central Government,
which may thereafter formulate the policy as it deems fit.
Page 11 of 12
[s 49] Competition advocacy
3 Ins. by Act 39 of 2007, section 40(b) (w.e.f. 12 October 2007).
4 The words “, as may be prescribed,” omitted by Act 39 of 2007, section 40(c) (w.e.f. 12
October 2007).
5 Report of the Working Group on Competition Policy, Planning
Commission, Government of India, 2007. Available at:
http://planningcommission.nic.in/aboutus/committee/wrkgrp11/wg11_cpolicy.pdf (last accessed in February 2019).
6 First Annual ICN Conference, September (28–29, 2002), Naples,
Italy; para 6.1.2, Id.
7 Para 6.1.3, Id.
8 Para 6.1.4, Id.
9 CCI, Annual Report 2016–17, accessed January 2018, Available at :
https://www.cci.gov.in/sites/default/files/annual%20reports/CCI_AR-2016-17_English.pdf (last accessed in February 2019)
10 See Available at : http://www.cci.gov.in/events (last accessed
February 2019).
11 See Glimpses of Competition Advocacy Initiatives. Available at:
http://www.cci.gov.in/glimpses-competition-advocacy-initiatives (last accessed in February 2019).
12 Available at :
http://www.cci.gov.in/sites/default/files/CA/Competition%20Assessment%20Guidelines%20 2015.pdf (last accessed in February
2019).
13 Available at :
http://www.cci.gov.in/sites/default/files/CA/Competition%20Assessment%20Guidelines%20 2015.pdf (last accessed in February
2019).
14 Id.
15 Available at: http://www.cci.gov.in/study-report?page=1, (last
accessed in February 2019).
16 Annual Report 2015/16, Competition Commission of India, available
at http://www.cci.gov.in/sites/default/files/annual%20reports/annual%20report%202015-16.pdf (last accessed in February 2019).
17 Available at:
http://planningcommission.nic.in/aboutus/committee/wrkgrp11/wg11_cpolicy.pdf (last accessed in February 2019).
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[s 49] Competition advocacy
18 Concept note on Advocacy Activities of CCI. Available at:
http://www.competitioncommission.gov.in/advocacy/Concept_note_on_Advocacy_Activities_of_CCI.pdf (last accessed in
February 2019).
19 Id.
20 “Compliance Manual for Enterprises”, CCI, Available at :
https://www.cci.gov.in/sites/default/files/manual_compliance/manual_booklet.pdf (last accessed in February 2019)
21 “CCI’s Diagnostic Tool – Towards Competitive Tenders”, Available
at : https://www.cci.gov.in/sites/default/files/whats_newdocument/Final%20Diagnostic%20Tool%2019032018-1.pdf. (last
accessed in February 2019)
22 CCI’s Diagnostic Tool – Towards Competitive Tenders” (2018),
Available at : https://www.cci.gov.in/node/3759. (last accessed in February 2019)
23 Re Kannada Grahakara Koota Karnataka Films Chamber of
Commerce, (KFCC), Case No 58 of 2012, decided in 2015, 2015 Comp LR 697 (CCI).
24 Sajjan Khaitan Eastern India Motion Picture Association, Case No
16/2011.
25 Penalty of Rs 16,82,204 for KFCC, Rs 1,74,293 for KTVA and Rs
1,68,124 for KFPA.
26 Supra 2 para 9.
27 Ghanshyam Dass Vij Bajaj Corp Ltd, Case No 68 of 2013, decided
on 12 October 2015; for more discussion see section 3.
28 John Clark, “Competition Advocacy: Challenges for Developing
Countries”, OECD Journal: Competition Law and Policy, 2004, vol 6, issue 4, pp 69–80. Available at:
http://www.oecd.org/daf/competition/prosecutionandlawenforcement/32033710.pdf (last accessed in February 2019).
29 Id.
30 Available at: http://www.justice.gov/atr/file/761151/download (last
accessed in February 2019).
End of Document
[s 50] Grants by Central Government
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > CHAPTER
VIII FINANCE, ACCOUNTS AND AUDIT
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
CHAPTER VIII FINANCE, ACCOUNTS AND AUDIT
1[s 50] Grants by Central Government
The Central Government may, after due appropriation made by Parliament by law in this behalf, make to the Commission
grants of such sums of money as the Government may think fit for being utilised for the purposes of this Act.
LEGISLATIVE BACKGROUND
Competition Act, 2002
Notes on clauses of the Bill and Financial Memorandum stated, thus:
Notes on clauses.—This clause provides for grants to the Commission by the Central Government. The grants shall be made after
due appropriation made by Parliament. [Clause 48 of the Competition Bill, 2001].
Financial Memorandum.—Clause 48 of the Bill provides that the Central Government may, after due appropriation made by
Parliament by law, make to the Commission grants of such sums of money as the Government may think fit for being utilised for
the purposes of the proposed legislation. [Competition Bill, 2001]
Scope of the Section
The Central Government may make grants to the Commission for purposes of the Competition Act, 2002 that will form
part of the corpus of “Competition Fund” constituted under section 51.
Page 2 of 2
[s 50] Grants by Central Government
1 Came into force on 19 June 2003 vide Notification No. S.O. 715(E), dated 19 June 2003.
End of Document
[s 51] Constitution of Fund
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > CHAPTER
VIII FINANCE, ACCOUNTS AND AUDIT
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
CHAPTER VIII FINANCE, ACCOUNTS AND AUDIT
2[s 51] Constitution of Fund
(1) There shall be constituted a fund to be called the “Competition Fund” and there shall be credited thereto—
(a) all Government grants received by the Commission;
3[(b)* *
*](c)the fees received under this Act;
(d) the interest accrued on the amounts referred to in 4[clauses (a) and (c)].
(2) The Fund shall be applied for meeting—
(a) the salaries and allowances payable to the Chairperson and other Members and the administrative expenses
including the salaries, allowances and pension payable to the Director General, Additional, Joint, Deputy or
Assistant Directors General, the Registrar and officers and other employees of the Commission;
(b) the other expenses of the Commission in connection with the discharge of its functions and for the purposes
of this Act.
(3) The Fund shall be administered by a committee of such Members of the Commission as may be determined by
the Chairperson.
(4) The committee appointed under sub-section (3) shall spend monies out of the Fund for carrying out the objects
for which the Fund has been constituted.
LEGISLATIVE BACKGROUND
Competition Act, 2002
Notes on clauses of the Bill stated, thus:
Notes on clauses.—This clause provides for the constitution of a fund to be called the “Competition Fund”. There shall be credited
to the Fund all Government grants, monies received as costs and fees received and the interest accrued on the said amounts. The
Fund may be applied for meeting the various expenses of the Commission including payment of salary to the Chairperson and
Page 2 of 3
[s 51] Constitution of Fund
other Members, Director General, Additional, Joint, Deputy and Assistant Directors General, Registrar, officers and staff of the
Commission. The Fund shall be administered by a committee of such Members of the Commission as may be determined by the
Chairperson. [Clause 49 of the Competition Bill, 2001].
Competition (Amendment) Act, 2007
Notes on clauses.—This clause seeks to amend section 51 of the Competition Act, 2002 relating to constitution of fund.
The provisions contained in clause (b) of sub-section (1) of the said section, inter alia, provide that the monies received as costs
from parties to proceedings before the Commission shall be credited to the “Competition Fund” constituted by that section.
It is proposed to omit said clause (b). [Clause 41 of the Competition (Amendment) Bill, 2007].
SCOPE OF THE SECTION
Competition fund shall be constituted by the Chairperson. The corpus of the fund shall include grants given by the
Government, fees realised and interest thereon. The fund shall be utilised to pay salaries and to meet expenses of the
Commission and its staff. The Fund is administered by the Fund Administration Committee (FAC) constituted under
section 51(3) of the Competition Act, 2002. The FAC reviews the position of actual expenditure and requirement of funds
for the Commission every month.
It may be noted that penalty imposed by the Commission shall be credited to the Consolidated Fund of India and shall not
form part of the corpus of the Competition Fund.
Provisions under the Monopolies and Restrictive Trade Practices Act, 1969 (MRTP Act, 1969)
vis-a-vis Competition Act, 2002
These was no such provision under the MRTP Act, 1969. No fee was also payable for initiating proceedings before MRTP
Commission unlike under the Competition Act, 2002.
2 Came into force on 19 June 2003 vide Notification No. S.O. 715(E), dated 19 June 2003.
3 Clause (b), omitted by Act 39 of 2007, section 41(i) (w.e.f. 12 October 2007). Clause
(b), before omission, stood as under:
(b) the monies received as costs from parties to proceedings before the Commission;
Page 3 of 3
[s 51] Constitution of Fund
4 Subs. by Act 39 of 2007, section 41(ii), for “clauses (a) to (c)” (w.e.f. 12 October
2007).
End of Document
[s 52] Accounts and audit
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > CHAPTER
VIII FINANCE, ACCOUNTS AND AUDIT
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
CHAPTER VIII FINANCE, ACCOUNTS AND AUDIT
5[s 52] Accounts and audit
(1) The Commission shall maintain proper accounts and other relevant records and prepare an annual statement of
accounts in such form as may be prescribed by the Central Government in consultation with the Comptroller and
Auditor-General of India.
(2) The accounts of the Commission shall be audited by the Comptroller and Auditor-General of India at such
intervals as may be specified by him and any expenditure incurred in connection with such audit shall be payable
by the Commission to the Comptroller and Auditor-General of India.
Explanation.—For the removal of doubts, it is hereby declared that the orders of the Commission, being
matters appealable to the 6[Appellate Tribunal or the Supreme Court], shall not be subject to audit under this
section.
(3) The Comptroller and Auditor-General of India and any other person appointed by him in connection with the
audit of the accounts of the Commission shall have the same rights, privileges and authority in connection with
such audit as the Comptroller and Auditor-General of India generally has, in connection with the audit of the
Government accounts and, in particular, shall have the right to demand the production of books, accounts,
connected vouchers and other documents and papers and to inspect any of the offices of the Commission.
(4) The accounts of the Commission as certified by the Comptroller and Auditor-General of India or any other
person appointed by him in this behalf together with the audit report thereon shall be forwarded annually to the
Central Government and that Government shall cause the same to be laid before each House of Parliament.
LEGISLATIVE BACKGROUND
Competition Act, 2002
Notes and clauses of the Bill stated, thus:
Notes on clauses.—This clause provides that the Commission shall maintain proper accounts and other relevant records in the form
as may be prescribed by the Central Government in consultation with the Comptroller and Auditor-General of India and those
accounts shall be audited by the Comptroller and Auditor-General of India with the same rights and privileges as in the case of
Page 2 of 2
[s 52] Accounts and audit
audit of Government accounts. This clause also provides that the accounts of the Commission as certified by the Comptroller and
Auditor-General of India together with the audit report thereon shall be laid every year before each House of Parliament. It is
further provided that the orders of the Commission being matters appealable to the Supreme Court, shall not be subject to audit
under this clause. [Clause 50 of the Competition Bill, 2001].
Competition (Amendment) Act, 2007
Notes on clauses.—This clause seeks to amend section 52 of the Competition Act, 2002 relating to accounts and audit.
The Explanation to the existing sub-section (2) of the said section clarified that the orders of the Commission, being matters
appealable to the Supreme Court, shall not be subject to audit under this section.
It is proposed to amend the said Explanation so as to provide that the orders of the Commission, being matters appealable to the
Competition Appellate Tribunal shall also not be subject to audit under this section. [Clause 42 of the Competition (Amendment)
Bill, 2007].
For text of the Competition Commission of India (Form of Annual Statement of Accounts) Rules, 2009, refer to Appendix
18.
SCOPE OF THE SECTION
Since the Central Government gives grants to the Commission and since penalty imposed by the Commission is required to
be credited to the Consolidated Fund of India, the accounts maintained by the Commission will be subject to audit by
Comptroller & Auditor-General (C&AG). It is clarified by way of Explanation to sub-section (2) that the orders passed by
the Commission shall not be subject to audit by C&AG.
5 Came into force on 19 June 2003 vide Notification No. S.O. 715(E), dated 19 June 2003.
6 Subs. by Act 39 of 2007, section 42, for “Supreme Court” (w.e.f. 12 October 2007).
End of Document
[s 53] Furnishing of returns, etc., to Central Government
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > CHAPTER
VIII FINANCE, ACCOUNTS AND AUDIT
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
CHAPTER VIII FINANCE, ACCOUNTS AND AUDIT
7[s 53] Furnishing of returns, etc., to Central Government
(1) The Commission shall furnish to the Central Government at such time and in such form and manner as may be
prescribed or as the Central Government may direct, such returns and statements and such particulars in regard to
any proposed or existing measures for the promotion of competition advocacy, creating awareness and imparting
training about competition issues, as the Central Government may, from time to time, require.
(2) The Commission shall prepare once every year, in such form and at such time as may be prescribed, an annual
report giving a true and full account of its activities during the previous year and copies of the report shall be
forwarded to the Central Government.
(3) A copy of the report received under sub-section (2) shall be laid, as soon as may be after it is received, before
each House of Parliament.
Competition Act, 2002
Notes on clauses of the Bill stated, thus:
Notes on clauses.—This clause provides for furnishing of returns, etc., by the Commission to the Central Government. [Clause 51
of the Competition Bill, 2001].
SCOPE OF THE SECTION
The Central Government may prescribe the returns or statements or particulars in regard to promotion of Competition
Advocacy, creating awareness and imparting training, which may be furnished by the Commission to it.
The Commission shall also prepare an Annual report every year relating to its activities and forward the same to the
Central Government. A copy of the report shall also be laid on the Table of each House of Parliament.
Page 2 of 2
[s 53] Furnishing of returns, etc., to Central Government
Central Government has prescribed under sub-section (1), the Competition Commission of India (Return on Measures for
the Promotion of Competition Advocacy, Awareness and Training on Competition) Rules, 2008. For text of the Rules,
refer to Appendix 10.
The form and time of preparation of the annual report under sub-section (2) is prescribed by the Competition Commission
of India (Form and Time of Preparation of Annual Report) Rules, 2008. For text of the Rules, refer to Appendix 11.
7 Came into force on 19 June 2003 vide Notification No. S.O. 715(E), dated 19 June 2003.
End of Document
[s 53A] Establishment of Appellate Tribunal
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > [CHAPTER
VIIIA] COMPETITION APPELLATE TRIBUNAL
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
1[CHAPTER VIIIA] COMPETITION APPELLATE TRIBUNAL
The Union Government brought in multiple changes through the Finance Act, 2017. It scrapped eight AppellateTribunals,2 and
the Competition Appellate Tribunal (COMPAT) was one among them.3 Sections 171 and 172 of the Finance Act, 2017
amended the Competition Act, 2002 and the Companies Act, 2013, respectively. Section 171 amended sections 53A and 2(ba)
of the Competition Act, 2002 to the effect that the COMPAT has ceased to exist as the Appellate Tribunal, effective from 26
May 2017. The National Company Law Appellate Tribunal (NCLAT) will now be the Appellate Tribunal against the orders of
the Competition Commission of India (CCI). There will be a transition phase during which all pending matters before the
COMPAT stand transferred to the NCLAT. During this period, all such matters will be heard afresh by the NCLAT. The
procedural aspects of this transition have not been provided for yet.
Relevant provisions of the Finance Act, 2017 has been reproduced below:
(b) in Chapter VIIIA, for the heading, the following heading shall be substituted, namely:—
“APPELLATE TRIBUNAL”;
171(c) for section 53A, the following section shall be substituted, namely:—
[s 53A] The National Company Law Appellate Tribunal constituted under section 410 of the Companies Act, 2013 shall, on and
from the commencement of Part XIV of Chapter VI of the Finance Act, 2017, be the Appellate Tribunal for the purposes of this
Act and the said Appellate Tribunal shall—
(a) hear and dispose of appeals against any direction issued or decision made or order passed by the Commission under
sub-sections (2) and (6) of section 26, section 27, section 28, section 31, section 32, section 33, section 38, section 39,
section 43, section 43A, section 44, section 45 or section 46 of this Act; and
(b) adjudicate on claim for compensation that may arise from the findings of the Commission or the orders of the
Appellate Tribunal in an appeal against any finding of the Commission or under section 42A or under sub-section (2)
of section 53Q of this Act, and pass orders for the recovery of compensation under section 53N of this Act.”;
(c) sections 53C, 53D, 53E, 53F, 53G, 53H, 53-I, 53J, 53K, 53L, 53M and 53R shall be omitted;
(d) in section 63, in sub-section (2), clauses (mb), (mc) and (md) shall be omitted.
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[s 53A] Establishment of Appellate Tribunal
172. In the Companies Act, 2013,—
(a) in section 410, for the words “for hearing appeals against the orders of the Tribunal”, the following shall be
substituted, namely:—
“for hearing appeals against,—
(a) the order of the Tribunal under this Act; and
(b) any direction, decision or order referred to in section 53N of the Competition Act, 2002 in accordance with the
provisions of that Act.”;
(b) after section 417, the following section shall be inserted, namely:—
“417A. Notwithstanding anything contained in this Act, the qualifications, appointment, term of office, salaries
and allowances, resignation, removal and other terms and conditions of service of the Chairperson and other
Members of the Appellate Tribunal appointed after the commencement of Part XIV of Chapter VI of the Finance
Act, 2017, shall be governed by the provisions of section 184 of that Act:
Provided that the Chairperson and Member appointed before the commencement of Part XIV of Chapter VI of
the Finance Act, 2017, shall continue to be governed by the provisions of this Act and the rules made thereunder
as if the provisions of section 184 of the Finance Act, 2017 had not come into force.”
Although, the COMPAT and ceased to exist as laid out under the Finance Act, 2017, the NCLAT has been given the same
appellate powers as it vested in COMPAT. The following discussion therefore would be relevant in understanding the nature
and scope of jurisdiction of the appellate authority.
Position prior to Finance Act, 2017
[s 53A] Establishment of Appellate Tribunal
(1) The Central Government shall, by notification, establish an Appellate Tribunal to be known as Competition
Appellate Tribunal—
(a) to hear and dispose of appeals against any direction issued or decision made or order passed by the
Commission under sub-sections (2) and (6) of section 26, section 27, section 28, section 31, section 32,
section 33, section 38, section 39, section 43, section 43A, section 44, section 45 or section 46 of this Act;
(b) to adjudicate on claim for compensation that may arise from the findings of the Commission or the orders of
the Appellate Tribunal in an appeal against any finding of the Commission or under section 42A or under
sub-section (2) of section 53Q of this Act, and pass orders for the recovery of compensation under section
53N of this Act.
(2) The Headquarter of the Appellate Tribunal shall be at such place as the Central Government may, by notification,
specify.
LEGISLATIVE BACKGROUND
Competition (Amendment) Act, 2007
Page 3 of 9
[s 53A] Establishment of Appellate Tribunal
Notes on clauses.—This clause seeks to insert a new Chapter VIIIA of the Competition Act, 2002 relating to establishment of
Competition Appellate Tribunal.
The new Chapter VIIIA contains provisions for (a) establishment of Appellate Tribunal, (b) appeal to Appellate Tribunal, (c)
composition of Appellate Tribunal, (d) qualifications for appointment of Chairperson and Members of Appellate Tribunal, (e)
Selection Committee, (f) term of office of Chairperson and Members of Appellate Tribunal, (g) terms and conditions of service of
Chairperson and members of Appellate Tribunal, (h) vacancies, (i) resignation of Chairperson and Members, (j) Member to
Appellate Tribunal to act as Chairperson in certain cases, (k) removal and suspension of Chairperson and Members of Appellate
Tribunal, (l) restriction on employment of Chairperson and other members in certain cases, (m) Staff of Appellate Tribunal, (n)
Procedure for awarding compensation, (o) procedure and powers of Appellate Tribunal, (p) execution of orders of Appellate
Tribunal, (q) contravention of orders of Appellate Tribunal, (r) vacancy in Appellate Tribunal not to invalidate acts or proceedings,
(s) right to legal representation, (t) appeal to the Supreme Court and (u) power to punish for contempt. [Clause 43 of the
Competition (Amendment) Bill, 2007].
Appellate Tribunal established vide Notification No. S.O. 1240(E) dated 15 May 2009.
SCOPE OF THE SECTION
Substantial changes were made in the Competition Act, 2002 by the Competition (Amendment) Act, 2007 by inserting
Chapter VIIIA containing new sections 53A to 53U with the objective to establish Competition Appellate Tribunal to hear
appeals against the orders passed by the Commission and to adjudicate on claims for compensation that may arise from the
findings of the Commission. Additionally, the Appellate Tribunal were empowered to hear and dispose of pending
monopolistic and restrictive trade practices cases under the Monopolies and Restrictive Trade Practices Act, 1969 (MRTP
Act, 1969) before the MRTP Commission, since dissolved, in terms of section 66 of the Act, amended by the Competition
(Amendment) Act, 2007 and 2009.
Under section 53A, the Central Government was empowered to establish Competition Appellate Tribunal with powers:
(i) to hear and dispose of appeals against any direction or order of the Commission under sections 26(2)/(6), 27, 28,
31, 32, 33, 38, 39, 43, 43A, 44, 45 and 46 of the Competition Act, 2002,
(ii) to adjudicate on claims for compensation arising out of findings of the Commission or orders of Appellate
Tribunal in appeal against any finding of the Commission or under section 42A, 53Q(2) and pass orders on
recovery of compensation under section 53N.
The place where headquarters of the Appellate Tribunal will be situated was to be decided by the Central Government.
Presently, the Headquarters of the Appellate Tribunal is situated at New Delhi.
It may be noted that originally, section 40 provided for appeal against orders of the Commission before the Supreme Court.
Section 40 was omitted by the Competition (Amendment) Act, 2007 in view of insertion of new Chapter VIIIA in the Act.
PROVISIONS OF MRTP ACT, 1969 VIS-À-VIS THE COMPETITION ACT, 2002
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[s 53A] Establishment of Appellate Tribunal
There are no similar provisions under the MRTP Act, 1969. MRTP Commission had the power to award compensation
under section 12B and the appeal against the decisions of MRTP Commission could be preferred before the Supreme Court
under section 55 of MRTP Act, 1969.
CASES UNDER COMPETITION ACT, 2002
Whether the directions passed by the Commission in exercise of its powers under section 26(1) of the Competition Act,
2002 forming a prima facie opinion would be appealable in terms of section 53A(1) of the Act?
The Supreme Court in the case of CCI v Steel Authority of India Ltd4 held that in terms of section 53A(1)(a) of the
Competition Act, 2002 appeal will lie only against such directions, decisions or orders passed by the Commission before
the Tribunal which have been specifically stated under the provisions of section 53A(1)(a). The orders, which have not
been specifically made appealable, cannot be treated appealable by implication. Taking a prima facie view and issuing a
direction to the Director General for investigation would not be an order appealable under section 53A.
Grant of hearing at the stage of forming opinion
The Supreme Court in the SAIL case noted that no statutory duty has been cast on the Commission to issue notice or grant
hearing at the stage of formation of opinion by the Commission, in terms of section 26(1) of the Competition Act, 2002 that
a prima facie case exists for issuance of a direction to the Director General to cause an investigation to be made into the
matter. Also, no party can claim notice or grant of hearing as a matter of right. However, the Commission may, in its
discretion and in appropriate cases call upon the concerned party(ies) to render required assistance or produce requisite
information, as per its directive.5 The Commission is expected to form such prima facie view without entering upon any
adjudicatory or determinative process. The Commission is entitled to form its opinion without any assistance from any
quarter or even with assistance of experts or others. The Commission has the power in terms of regulation 17(2) of the
Regulations to invite not only the information provider, but, even “such other person,” which would include all persons,
even the affected parties, as it may deem necessary. In that event, it shall be “preliminary conference”, for whose conduct
of business the Commission is entitled to evolve its own procedure.
Direction under section 26(1) is a direction simpliciter
The Supreme Court6 has noted that the order passed by the Commission under section 26(2) is a final order as it puts an
end to the proceedings initiated upon receiving the information in one of the specified modes and this order has been
specifically made appealable under section 53A of the Competition Act, 2002. In contradistinction, the direction under
section 26(1) after formation of a prima facie opinion is a direction simpliciter to cause an investigation into the matter.
Issuance of such a direction is an administrative direction to one of its own wings departmentally and is without entering
upon any adjudicatory process. It does not effectively determine any right or obligation of the parties to the list. Closure of
the case causes determination of rights and affects a party, i.e., the informant; resultantly, the said party has a right to
appeal against such closure of case under section 26(2) of the Act. On the other hand, mere direction for investigation to
one of the wings of the Commission is akin to a departmental proceeding which does not entail civil consequences for any
person, particularly, in light of the strict confidentiality that is expected to be maintained by the Commission in terms of
section 57 of the Act and regulation 35 of the Regulations.7 Such direction which is at the preliminary stage and of
preparatory nature without recording findings which will bind the parties and where such order will only pave the way for
final decision, it would not make that direction as an order or decision which affects the rights of the parties and therefore,
is not appealable.
In the case of North East Petroleum Dealers Association,8 the Tribunal held that in light of the judgement of the Supreme
Court in CCI v Steel Authority of India Ltd,9 an order passed by the Commission under section 26(1) cannot be made
subject-matter of appeal under section 53B but legality and propriety of an order passed under section 26(2) can certainly
be subjected to judicial scrutiny by the Tribunal. In other words, if in exercise of the appellate power vested in it under
section 53B the Tribunal is satisfied that the negative opinion formed by the Commission on the issue of existence of a
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[s 53A] Establishment of Appellate Tribunal
prima facie case is vitiated by an error of law, then it can set aside the impugned order and direct an investigation under
section 26(1) of the Competition Act, 2002.
Silence of the Commission over Director General’s conclusions
In a case where the Commission had disagreed with many of the conclusions drawn by the Director General, the
Commission had remained silent on several other conclusions drawn by the Director General wherein he had found clear
violation of the Competition Act, 2002, it was argued before the COMPAT that the decision therefore handed out by the
Commission cannot be termed as one under section 26(8), but was actually a decision under section 27 and, therefore,
appealable. It was argued further that silence of the Commission with respect to some of the findings of violation in the
DG’s report should be considered as acceptance of the DG’s findings and should logically lead to passing of order under
section 27. The COMPAT, referring to the jurisprudence developed in cases like Jindal Steel & Power Ltd v CCI (Appeal
No.45 of 2012 order dated 3 April 2013) and Arshiya Rail Infrastructure Ltd v CCI (Appeal No.136/2012 order dated 4
April 2013) which established the exhaustive nature of the provisions of section 53A(1)(a) specifically mentioning the
sections, violations of which are appealable, rejected the argument. Although the Tribunal noted that the scheme of section
26 may be somewhat incomplete and unclear in some parts, it refused to intervene.10
Section 26 and issue of confidentiality: subject matter of appeal 53A
As per Regulation 35 of the Competition Commission of India (General) Regulations, 2009, the Commission shall
maintain confidentiality of the identity of an informant on a request made to it in writing. Also, any party may submit a
request in writing to the Commission or the Director General, as the case may be, that a document or documents, or a part
or parts thereof, be treated confidential. In the case of where the Commission refused to grant confidentiality to some
documents, appeal was filed to the Tribunal against the refusal to grant confidentiality. Appeal filed against the rejection of
its prayer for total and indefinite confidentiality to the documents furnished by it to the Director General was held to be not
maintainable under section 53A.11
On the question of maintainability of the appeal under section 53A of the Competition Act, 2002 which gave jurisdiction to
the Tribunal to hear and decide appeals only against any direction issued or decision made or order passed by the
Commission under various sections enumerated in subsection (1)(a) of section 53A, it was argued by the company that the
impugned order should be treated as one made under section 26 because denial of total confidentiality to the documents
would seriously prejudice the appellant because it had already entered into an agreement with the tyre companies not to
share the information with any party. The Tribunal however, rejected the argument and held that section 26 which relates
to investigation required to be conducted by the Director General and consideration of the investigation report by the
Commission and further inquiry, if any, by the latter, has no bearing on the issue of confidentiality, which is governed by
various clauses of Regulation 35 of the Regulations. Further, section 53A(1) which lays down that the Central Government
shall establish an Appellate Tribunal to hear and dispose of appeals against any direction or decision made or order passed
by the Commission under various sections specified therein, does not include Regulation 35.12 Therefore, an order passed
by the Director General under Regulation 35(8) or by the Commission under Regulation 35(10) cannot be the subject-
matter of appeal under section 53A of the Competition Act, 2002.13
Any direction issued or decision made or order passed by the Commission—- Expressum facit cessare tacitum [Express mention of
one thing implies the exclusion of other]
The Supreme Court in the SAIL14 case held that the word “or” cannot be read to defeat the intention of the legislature. It
was argued before the Court that the expression “any direction issued” should be read disjunctive and that gives a complete
right to a party to prefer an appeal under section 53A, against a direction for investigation, as that itself is an appealable
right independent of any decision or order which may be made or passed by the Commission.
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[s 53A] Establishment of Appellate Tribunal
Using the plain rule of construction the Supreme Court held that the section was clear and that the legislature intended to
provide a very limited right to appeal and the orders which can be appealed against have been specifically stipulated by
unambiguously excluding the provisions which the legislature did not intend to make appealable under the provisions of
the Competition Act, 2002.15
Further, it was held that section 53B(1) is an indicator of the restricted scope of appeals that shall be maintainable before
the Tribunal. It provides that the aggrieved party has a right of appeal against “any direction, decision or order referred to
in section 53A(1) (a)”. If the legislature intended to enlarge the scope and make orders, other than those, specified in
section 53A(1)(a), then the language of section 53B(1) ought to have been quite distinct from the one used by the
legislature.16
In the case of Arshiya Rail Infrastructure Ltd,17 it was argued that even though section 53A(l)(a) did not provide for an
appeal, the appeal would still be available via section 96 of the CPC, 1908 (CPC, 1908) as the impugned decision of the
Commission amounted to a decree. The Tribunal, however, rejected the argument and held that it was bound by the
specific language of the Competition Act, 2002. It was held that section 96 of CPC, 1908 cannot be used to enlarge the
scope of section 53A(l)(a) of the Act.18
In some cases filed before the Commission, a peculiar concern has been highlighted in the Commission’s orders. Once a
complaint is filed and a prime facie case is established, the Commission directs the Director General to conduct its
investigation. [Such orders are passed under section 26(1) of the Competition Act, 2002.] If the Director General submits a
report that there is a contravention of the Act, the Commission has to invite objections/suggestions from the parties. After
hearing the objections/suggestions, the Commission can only pass an order under sections 26(8) or under section 27,
neither of which permit it to go against the finding of the Director General where the Director General has held a
contravention. This situation was first examined by the Commission in the case of Pankaj Gas Cylinders Ltd v Indian Oil
Corp Ltd,19 and the correct interpretation of the Act was adopted in its dissenting order. The dissenting order rightfully
stated that “Under section 27 of the Act, an order can only be passed when a contravention is established. Therefore,
dropping of a case after DG has found a contravention is not authorized under the Act”. Since then, numerous cases have
been heard by the Commission where, despite the Director General’s confirmation of a contravention, the Commission
passed an order closing the case.20
Similar issue has arisen with the working of section 26, that an order of the Commission where the Commission finds no
contravention of the Competition Act, 2002 despite the Director General recommending that there was a contravention has
been held to be not appealable as such an order is not specifically mentioned as an appealable order under section 53A.
Relying on the Supreme Court decision in SAIL,21 the Tribunal in Jindal Steel & Power Ltd,22 observed that the only
orders which are appealable are those mentioned in section 53A(l)(a) of the Act. Further, section 26(2) is only meant where
the Commission does not find a prima facie case. Thus, there is no question of any report by the Director General as the
Commission does not find a prima facie case at all on the information supplied. While section 26(6) pertains to a situation,
where the Commission had directed the Director General to enquire into the matter and the Director General gives a report
that there is “no contravention” of the provisions of the Act. Once such report is received, the Commission has to invite the
objections and suggestions from the concerned parties and after the consideration of the objections and suggestions as
referred to in sub-section (5) if the Commission agrees with the recommendation of the DG, it orders for closure of the
matter. This situation is also not available in cases where the Director General has sent a recommendation that there was a
contravention of some of the provisions of this Act. All that the Commission is empowered to do under such situation is to
proceed under section 26(8) of the Act for inquiring into such contravention in accordance with the provisions of the Act.
In the present case, it went on to inquire under that provision and came to the conclusion that there was no contravention.
Again, an order is passed under section 26(8) of the Act, which is specifically excluded in section 53A(l)(a). Thus, with the
law having been stated in the clearest possible terms by the Apex Court, these appeals are not maintainable in law.23 There
is also an increasing trend of orders being challenged before the High Court in writ petitions when they are not appealable
orders.
Page 7 of 9
[s 53A] Establishment of Appellate Tribunal
1 Chapter VIIIA containing sections 53A to 53U inserted by Act 39 of 2007, section 43,
section 53A inserted with effect from 12 October 2007, section 53B inserted with effect from 20 May 2009, sections 53C to 53M
inserted with effect from 20 December 2007 and sections 53N to 53U inserted with effect from 20 May 2009.
2 Airports Economic Regulatory Authority Appellate Tribunal and Cyber Appellate Tribunal
would be replaced by the Telecom Disputes Settlement and Appellate Tribunal. Copyright Board would be dissolved and its
functions would be taken over by the Intellectual Property Appellate Board. The National Highways Tribunal would be replaced
and its functions would be taken over by the Airport Appellate Tribunal. The functions of Employees Provident Fund Appellate
Tribunal would be taken over by the Industrial Tribunal.
3 COMPAT has ceased to exist from 26 May 2017. [SO 1696(E), Notification, Ministry of
Finance, dated 26 May 2017].
4 CCI v Steel Authority of India Ltd,
(2010) 10 SCC 744 : [2010] 11 SCR 112
: [2010] 103 SCL 269 (SC) : 2010 (5) ALLMR (SC) 934 :
2010 Comp LR 61 (SC) : (2010) 4 Comp LJ 1 (SC) :
JT 2010 (10) SC 26 : (2011) 2 Mad LJ 271 (SC) : 2010 (9) Scale
291 : 2010 (8) UJ 4093 .
5 Para 22, Id
6 Id
7 Para 28–29, Id The Court made reference to foreign cases (Automec
Srl v Commission of the European Communities, (1990) ECR II 00367; Case 60/81 IBM v Commission,
[1981] ECR 2639 , at p 2651, para 8 et seq; Case 346/87 Bossi v Commission,
[1989] ECR 303 , especially at p 332 et seq) to note the non-
appealable nature of preparatory measures.
8 North East Petroleum Dealers Association v CCI, 2016 Comp LR 71
(COMPAT).
9 CCI v Steel Authority of India Ltd,
(2010) 10 SCC 744 : [2010] 11 SCR 112
: JT 2010 (10) SC 26 :
2010 (9) Scale 291 .
10 Saurabh Tripathy v CCI, Appeal No 16/2017 [COMPAT], decided
on 15 May 2017.
11 TPM Consultants Pvt Ltd v CCI, Appeal No 35 of 2016 [COMPAT],
decided on 4 July 2016.
12 35(2) Any party may submit a request in writing to the Commission
or the Director-General, as the case may be, that a document or documents, or a part or parts thereof, be treated confidential. (8) On
receipt of a request under sub-regulation (2), the Commission or the Director-General, as the case may be, if satisfied, shall direct
that the document or documents or a part or parts thereof shall be kept confidential for the time period to be specified. (10) In case
the Director-General has rejected the request of the party made under sub-regulation (2), the party may approach the Commission
for a decision regarding confidential treatment.”
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[s 53A] Establishment of Appellate Tribunal
13 TPM Consultants Pvt Ltd v CCI, Appeal No 35 of 2016 [COMPAT],
decided on 4 July 2016.
14 Supra.
15 Para 32, Id The Court referred to Super Cassettes Industries Ltd v
State of UP, AIR 2009 SC (Supp) 2932 : (2009) 10 SCC 531
: [2009 ]15 SCR 627 :
2009 (12) Scale 656 , JT 2009
(13) SC 272 ; Maria Cristina De Souza Sadder v Amria Zurana Pereira Pinto,
(1979) 1 SCC 92 ; M Ramnarain Pvt Ltd v State Trading Corp of India Ltd,
(1983) 3 SCC 75 ; Gujarat Agro Industries Co Ltd v Municipal Corp
of the City of Ahmedabad, (1999) 4 SCC 468 ; Kondiba Dagadu
Kadam v Savitribai Sopan Gujar, AIR 1999 SC 2213 :
(1999) 3 SCC 722 :
[1999] 2 SCR 728 : [1999] 2 Mad LJ 105 : 1968 69 ITR 586
: 1999 (2) Scale 633 : : (1999) 3 JT (SC) 163 : JT 1999 (3) SC 163
and Kashmir Singh v Harnam Singh, AIR 2008 SC 1749
: (2008) 12 SCC 796
: 2008 AIR SCW 2417 : 2008 (4) Scale 300 :
JT 2008 (4) SC 24 :
2008 (2) RCR (Civil) 688 and foreign cases; Green v Premier Glynrhonwy Slate Co,
(1928) 1 KB 561 ; Mersey Docks and Harbour Board v Henderson
Bros, (1888) 13 AC 603 (to observe that the right of appeal is not
a natural or inherent right and it cannot be assumed to exist unless expressly provided for by statute).
16 Also see Jindal Steel & Power Ltd v CCI and Prints India v Springer
(India) Pvt Ltd, 2013 Comp LR 531 (COMPAT); Barpeta District Drug Dealers Association v UOI,
2013 (5) GLT 30 .
17 Arshiya Rail Infrastructure Ltd v CCI,
[2013] 119 SCL 364 (CAT).
18 Section 26 of the Competition Act, 2002 mentions various situations
but does not provide for the case where the Commission might disagree with the Director General after it finds a contravention. On
receiving a case, the Commission directs the Director General to initiate an investigation into the allegations on which the Director
General needs to submit a report within a specified period of time. Based on the report, the Commission starts hearing the affected
parties. Only after completing its own proceedings does the Commission pass a final order as it deems fit. However, nowhere does
the Act facilitate the Commission to close a case if the Director General has found a contravention in its report. The absence of such
a provision leads to a situation where the affected party is left with no power to appeal with the higher authorities such as the
Competition Appellate Tribunal (COMPAT) or the Supreme Court once the case is struck down by the commission. The orders
being appealed in Arshiya; Jindal Steel and Prints India were final orders passed after a Director General investigation found a
violation of the Competition Act but the Commission disagreed with its finding and passed an order finding no violation. In these
cases, the issue was that the orders of the CCI were not passed under section 26(2) [as the CCI had found a prima facie case] or
26(6) [as the Director General had found a violation]. However, there have been cases where the Commission has closed the matter
post a contravention report by Director General. There is also an increasing trend of orders being challenged before the High Court
in writ petitions when they are not appealable orders.
19 Pankaj Gas Cylinders Ltd v Indian Oil Corp Ltd, Case No 10 of 2010
dated 22 June 2011.
20 All India Tyre Dealer’s Federation v Tyre Manufacturers, MRTP
Case: RTPE No 20 of 2008 dated 30 October 2012; Film and Television Producers Guild of India v Multiplex Association of India,
Mumbai, Case No 37 of 2011 dated 3 January 2013. [Note: The Competition (Amendment) Bill, 2012 proposed to expand the
Page 9 of 9
[s 53A] Establishment of Appellate Tribunal
scope of section 26(8) and to give CCI statutory provisions under which it can close a case even if the Director General finds a
contravention of the Act].
21 CCI v Steel Authority of India, 2010 Comp LR 61 (SC)
22 Jindal Steel & Power Ltd v CCI and Prints India v Springer (India)
Pvt Ltd, 2013 Comp LR 531 (COMPAT).
23 Also see Arshiya Rail Infrastructure Ltd v CCI,
[2013] 1 19 SCL 364 (CAT). The Competition Amendment Bill, 2012
proposed to clear the air by making orders under section 26(8) also appealable to the COMPAT under section 53A of the
Competition Act, 2002. “17. In section 53A of the principal Act, in sub-section (1), in clause (a), for the words, brackets and figures
“sub-sections (2) and (6),” the words, brackets and figures “sub-sections (2), (6), (7) and (8)” shall be substituted.”
End of Document
[s 53B] Appeal to Appellate Tribunal
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > [CHAPTER
VIIIA] COMPETITION APPELLATE TRIBUNAL
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
1[CHAPTER VIIIA] COMPETITION APPELLATE TRIBUNAL
The Union Government brought in multiple changes through the Finance Act, 2017. It scrapped eight AppellateTribunals,2 and
the Competition Appellate Tribunal (COMPAT) was one among them.3 Sections 171 and 172 of the Finance Act, 2017
amended the Competition Act, 2002 and the Companies Act, 2013, respectively. Section 171 amended sections 53A and 2(ba)
of the Competition Act, 2002 to the effect that the COMPAT has ceased to exist as the Appellate Tribunal, effective from 26
May 2017. The National Company Law Appellate Tribunal (NCLAT) will now be the Appellate Tribunal against the orders of
the Competition Commission of India (CCI). There will be a transition phase during which all pending matters before the
COMPAT stand transferred to the NCLAT. During this period, all such matters will be heard afresh by the NCLAT. The
procedural aspects of this transition have not been provided for yet.
Relevant provisions of the Finance Act, 2017 has been reproduced below:
(b) in Chapter VIIIA, for the heading, the following heading shall be substituted, namely:—
“APPELLATE TRIBUNAL”;
171(c) for section 53A, the following section shall be substituted, namely:—
[s 53A] The National Company Law Appellate Tribunal constituted under section 410 of the Companies Act, 2013 shall, on and
from the commencement of Part XIV of Chapter VI of the Finance Act, 2017, be the Appellate Tribunal for the purposes of this
Act and the said Appellate Tribunal shall—
(a) hear and dispose of appeals against any direction issued or decision made or order passed by the Commission under
sub-sections (2) and (6) of section 26, section 27, section 28, section 31, section 32, section 33, section 38, section 39,
section 43, section 43A, section 44, section 45 or section 46 of this Act; and
(b) adjudicate on claim for compensation that may arise from the findings of the Commission or the orders of the
Appellate Tribunal in an appeal against any finding of the Commission or under section 42A or under sub-section (2)
of section 53Q of this Act, and pass orders for the recovery of compensation under section 53N of this Act.”;
(c) sections 53C, 53D, 53E, 53F, 53G, 53H, 53-I, 53J, 53K, 53L, 53M and 53R shall be omitted;
(d) in section 63, in sub-section (2), clauses (mb), (mc) and (md) shall be omitted.
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[s 53B] Appeal to Appellate Tribunal
172. In the Companies Act, 2013,—
(a) in section 410, for the words “for hearing appeals against the orders of the Tribunal”, the following shall be
substituted, namely:—
“for hearing appeals against,—
(a) the order of the Tribunal under this Act; and
(b) any direction, decision or order referred to in section 53N of the Competition Act, 2002 in accordance with the
provisions of that Act.”;
(b) after section 417, the following section shall be inserted, namely:—
“417A. Notwithstanding anything contained in this Act, the qualifications, appointment, term of office, salaries
and allowances, resignation, removal and other terms and conditions of service of the Chairperson and other
Members of the Appellate Tribunal appointed after the commencement of Part XIV of Chapter VI of the Finance
Act, 2017, shall be governed by the provisions of section 184 of that Act:
Provided that the Chairperson and Member appointed before the commencement of Part XIV of Chapter VI of
the Finance Act, 2017, shall continue to be governed by the provisions of this Act and the rules made thereunder
as if the provisions of section 184 of the Finance Act, 2017 had not come into force.”
Although, the COMPAT and ceased to exist as laid out under the Finance Act, 2017, the NCLAT has been given the same
appellate powers as it vested in COMPAT. The following discussion therefore would be relevant in understanding the nature
and scope of jurisdiction of the appellate authority.
Position prior to Finance Act, 2017
*[s 53B] Appeal to Appellate Tribunal
(1) The Central Government or the State Government or a local authority or enterprise or any person, aggrieved by
any direction, decision or order referred to in clause (a) of section 53A may prefer an appeal to the Appellate
Tribunal.
(2) Every appeal under sub-section (1) shall be filed within a period of sixty days from the date on which a copy of
the direction or decision or order made by the Commission is received by the Central Government or the State
Government or a local authority or enterprise or any person referred to in that sub-section and it shall be in such
form and be accompanied by such fee as may be prescribed:
Provided that the Appellate Tribunal may entertain an appeal after the expiry of the said period of sixty days
if it is satisfied that there was sufficient cause for not filing it within that period.
(3) On receipt of an appeal under sub-section (1), the Appellate Tribunal may, after giving the parties to the appeal,
an opportunity of being heard, pass such orders thereon as it thinks fit, confirming, modifying or setting aside the
direction, decision or order appealed against.
(4) The Appellate Tribunal shall send a copy of every order made by it to the Commission and the parties to the
appeal.
Page 3 of 9
[s 53B] Appeal to Appellate Tribunal
(5) The appeal filed before the Appellate Tribunal under sub-section (1) shall be dealt with by it as expeditiously as
possible and endeavor shall be made by it to dispose of the appeal within six months from the date of receipt of
the appeal.
SCOPE OF THE SECTION
This section was inserted by Competition (Amendment) Act, 2007 empowering the Central or State Government or Local
authority, or an enterprise or any aggrieved person to prefer an appeal before the Appellate Tribunal against any order or
decision of the Commission, referred to in section 53A(a) of the Competition Act, 2002. The appeal shall be filed within 60
days of the order/decision of the Commission. However, the Appellate Tribunal may entertain the appeal after the expiry
of 60 days, if it is satisfied that there was sufficient cause for such delay.
On receipt of the appeal, the Appellate Tribunal shall hear the parties and dispose of the appeal, ordinarily within six
months. A copy of the order by the Appellate Tribunal will be sent to the Commission and the parties concerned for
compliance. The appeal before the Appellate Tribunal may lie on law or on facts, as the case may be.
In terms of section 7(2) of the Competition Act, 2002 the Commission is a body corporate having perpetual succession and
a common seal with power to sue and be sued in its name. In terms of section 53A, the Tribunal is constituted to hear and
dispose of appeals against any direction issued, decision made or order passed under the provisions stated therein. The
Tribunal is also vested with the power of determining the claim of compensation that may arise from the findings recorded
by the Commission. The procedure for entertaining the appeals is specified under section 53B of the Competition Act,
2002.24
The right to prefer an appeal is available to the Central Government, State Government or a local authority or enterprise or
any person aggrieved by any direction, decision or order referred to in clause (a) of section 53A. The appeal is to be filed
within the period specified and section 53B(3) further requires that the Tribunal, after giving the parties to appeal an
opportunity of being heard, to pass such orders, as it thinks fit, and send a copy of such order to the Commission and the
parties to the appeal. Section 53S contemplates that before the Tribunal a person may either appear “in person” or
authorize one or more chartered accountants or company secretaries, cost accountants or legal practitioners or any of its
officers to present its case before the Tribunal. However, the Commission’s right to legal representation in any appeal
before the Tribunal has been specifically mentioned under section 53S(2). It provides that the Commission may authorize
one or more of chartered accountants or company secretaries or cost accountants or legal practitioners or any of its officers
to act as presenting officers before the Tribunal.
AGGRIEVED PERSON
The appeal can only be filed by a “person aggrieved” by an order of the Commission. The expression “person aggrieved”,
has not been defined in the Competition Act, 2002. Normally, an appeal can be filed by any person to the prejudice of
whom the order has been passed or who has suffered any damage or injury. It was held in Ealing Borough Council v
Jones25 that
a person aggrieved is not a person who is disappointed or annoyed at a decision .... The word ‘aggrieved’ connotes some legal
grievances, e.g., a deprivation of something, an adverse effect on the title to something and so on”.
Where a particular section of a statute provided that any person who felt aggrieved by any order of a Court of summary
jurisdiction had a right of appeal, it was held that the person aggrieved must be a person who had a locus standi in the
proceedings when they were first taken before the Justices.26 Legal machinery under the Competition Commission cannot
be moved by a person who has no concern whatsoever with the subject.27 The person aggrieved must show that the order
Page 4 of 9
[s 53B] Appeal to Appellate Tribunal
tends to cause injury or damage to him in the legal sense of that word, indicating inter alia that: (i) the order confers a right
on a person to which he is not entitled or (ii) the order is not in accordance with law or (iii) the order affects his own right.
In a legislation like the Competition Act, 2002, which seeks to subserve the interests of the public at large, including the
traders and consumers, the expression “aggrieved person” has to be given the widest possible interpretation. On the said
premise, the following persons would normally be included in the category of aggrieved persons for the purpose of filing
an appeal under section 53B:—
(a) a party to the original order or decision;
(b) an objector to the proceedings in which the order or decision, referred to in (a) above, is made;
(c) a consumer or user of goods;
(d) a trade or consumers’ association;
(e) a trader, whose interest is affected, or likely to be affected by any monopolistic, restrictive or unfair trade practice
and
(f) Director-General in relation to any proceedings before the Commission.
MONOPOLIES AND RESTRICTIVE TRADE PRACTICES ACT, 1969 (MRTP ACT, 1969)
This section corresponds to section 55 of MRTP Act, 1969, since repealed, and is reproduced below:
Section 55. Appeals.—Any person aggrieved by any decision on any question referred to in clause (a), clause (b) or clause (c) of
section 2A, or any order made by the Central Government under Chapter III or Chapter IV, or, as the case may be, or the
Commission under section 12A or section 13 or section 36D or section 37, may, within 60 days from the date of the order, prefer
an appeal to the Supreme Court on one or more of the grounds specified in section 100 of the Code of Civil Procedure, 1908 (5 of
1908).
GROUNDS OF APPEAL
The appeal could be filed under section 55 of MRTP Act, 1969 on one or more of the grounds specified in section 100 of
the Code of Civil Procedure, 1908 (CPC, 1908). Prior to its amendment in 1976, these grounds were:—
(a) the decision being contrary to law or to some usage having the force of law;
(b) the decision having failed to determine some material issue of law or usage having the force of law and
(c) a substantial error or defect in procedure provided by the Code or any other law for the time being in force, which
may possibly have produced error or defect in the decision of the case upon the merits.
Page 5 of 9
[s 53B] Appeal to Appellate Tribunal
It may be mentioned that section 100 of the CPC, 1908, by the Amendment Act of 1976, provides for appeal only if a
substantial question of law is involved. The appeal under section 40 of the MRTP Act, 1969, it appears, lies on any of the
three grounds aforestated, notwithstanding the abrogation of these clauses in the Code and substitution, instead, of the only
ground that substantial question of law is involved.
The scope and ambit of an appeal under section 55 of MRTP Act, 1969, in the context of the provision of the CPC, 1908
came up for consideration in Mahindra and Mahindra Ltd v UOI,28 when the Supreme Court held that the reference to
section 100 of the CPC, 1908 must be construed as referring to the section as it stood before the amendment, and section
55 should be deemed to have incorporated the old section 100. It was observed by the Court that:
We have no doubt that section 55 is an instance of legislation by incorporation and not legislation by reference. Section 55
provides for an appeal to this Court on “one or more of the grounds specified in section 100.” It is obvious that the legislature did
not want to confer an unlimited right of appeal but wanted to restrict it and, turning to section 100, it found that the grounds there
set out were appropriate for restricting the right of appeal and hence it incorporated them in section 55. The right of appeal was
clearly intended to be limited to the grounds set out in the then existing section 100. These were the grounds, which were before
the legislature, and to which the legislature could have applied its mind, and it is reasonable to assume that it was with reference to
those specific and known grounds that the legislature intended to restrict the right of appeal. The legislature could never have
intended to limit the right of appeal to any ground or grounds, which might from time to time find place in section 100 without
knowing what these grounds were. The grounds specified in section 100 might be changed from time to time having regard to the
legislative policy relating to second appeals, and it is difficult to see any valid reason why the legislature should have thought it
necessary that these changes should also be in section 55 which deals with the right of appeal in a totally different context. We fail
to appreciate what relevance the legislative policy in regard to second appeals has to the right of appeal under section 55, so that
section 55 should be inseparably linked or yoked to section 100 and whatever changes take place in section 100 must be
automatically read into section 55. It must be remembered that the Act is a self-contained Code dealing with monopolies and
restrictive trade practices and it is not possible to believe that the legislature could have made the right of appeal under such a code
dependent on the vicissitudes through which a section in another statute might pass from time to time. The scope and ambit of the
appeal could not have been intended to fluctuate or vary with every change in the grounds set out in section 100. Apart from the
absence of any rational justification for doing so, such an indissoluble linking of section 55 with section 100 could conceivably
lead to a rather absurd and startling result. Take for example a situation where section 100 might be repealed altogether by the
legislature, a situation, which cannot be regarded wholly unthinkable. If the construction contended for on behalf of the
respondents were accepted, section 55 would in such a case be reduced to futility and the right of appeal would be wholly gone
because then there would be no ground on which an appeal could lie. Could such a consequence ever have been contemplated by
the legislature? The legislature clearly intended that there should be a right of appeal, though on limited grounds, and it would be
absurd to place on the language of section 55 an interpretation, which might, in a given situation, result in denial of the right of
appeal altogether and thus defeat the plain object and purpose of the section. We must, therefore, hold that on a proper
interpretation, the grounds specified in the then existing section 100 were incorporated in section 55 and the substitution of new
section 100 did not affect or restrict the grounds as incorporated and since the present appeal admittedly raises questions of law, it
is clearly maintainable under section 55.
Order XX-A of the Supreme Court Rules, 1966 contained the relevant rules for preferring an appeal under section 55 of the
MRTP Act, 1969.
“ANY PERSON”
The expression “any person” appearing in section 53B of the Competition Act, 2002 has to be construed liberally as the
provision first mentions specific government bodies, then local authorities and enterprises, which term, in any case, is of
generic nature and then lastly mentions “any person”. It is intended that expanded meaning be given to the term “persons”,
i.e., persons or bodies who are entitled to appeal. The right of hearing is also available to the parties to appeal.
Page 6 of 9
[s 53B] Appeal to Appellate Tribunal
In an appeal from a combination order in the Jet Etihad,29 matter, the COMPAT has discussed the phrase “any person
aggrieved” and limited the right to appeal to combination decisions. The Tribunal rejected the appeal filed and stressed on
the fact that in order to be able to file an appeal by any person he has to be an aggrieved person.
COMMISSION AS PROPER PARTY OR NECESSARY PARTY
The above stated provisions clearly indicate that the Commission, a body corporate, is expected to be party in the
proceedings before the Tribunal as it has a legal right of representation. Absence of the Commission before the Tribunal
will deprive it of presenting its views in the proceedings. Thus, it may not be able to effectively exercise its right to appeal
in terms of section 53 of the Competition Act, 2002. Furthermore, regulations30 14(4) and 51 of the CCI (General)
Regulations, 2009 support the view that the Commission can be a necessary or proper party in the proceedings before the
Tribunal. The Commission, in terms of section 19 read with section 26 of the Act, is entitled to commence proceedings suo
moto and adopt its own procedure for completion of such proceedings. Thus, the principle of fairness would demand that
such party should be heard by the Tribunal before any orders adverse to it are passed in such cases. The Court held that in
cases where proceedings are initiated suo moto by the Commission, the Commission is a necessary party (dominus litis).
However, in other cases the Commission being a regulatory body would be a proper party discharging inquisitorial,
regulatory as well as adjudicatory functions and its presence before the Tribunal, particularly, in light of the above stated
provisions, would be proper. The purpose is always to achieve complete, expeditious and effective adjudication.31
It would not only help in expeditious disposal, but the Commission, as an expert body, in any case, is entitled to participate
in its proceedings in terms of regulation 51. Thus, the assistance rendered by the Commission to the Tribunal could be
useful in complete and effective adjudication of the issue before it.32
Regulations33 24 to 26 define powers of the Commission to join or substitute parties in proceedings, permit person or
enterprises to take part in proceedings and strike out unnecessary parties. Out of these provisions regulation 25(1) has a
distinct feature as it lays down the criteria, which should be considered by the Commission while applying its mind in
regard to application of a party for impleadment. The person or enterprise sought to be impleaded should have substantial
interest in the outcome of the proceedings and/or that it is necessary in the public interest to allow such an application. In
other words, substantial interest in proceedings and serving of larger public interest, amongst others, are the criteria, which
could be considered by the Commission. This principle would obviously stand extended for exercise of jurisdiction by the
Tribunal. In our view, the Commission would have substantial interest in the outcome of the proceedings in most of the
cases as not only would the judgments of the Tribunal be binding on it, but they would also provide guidelines for
determining various matters of larger public interest and affect the economic policy of the country.34
CONDONATION OF DELAY
Section 53B(2) of the Competition Act, 2002 prescribes the period of 60 days for filing an appeal counted from the date of
receipt of the impugned direction or decision or order against any direction or decision or order of the Commission and
proviso thereto which empowers the Tribunal to entertain an appeal after the expiry of 60 days, provided that it is satisfied
that there was sufficient cause for not filing the same within that period. Though, the proviso of section 53B(2) is not
couched in language similar to section 5 of the Limitation Act, 1963, the principles laid down by the Courts for entertaining
an application filed under that section can certainly be applied for deciding whether the appellant has succeeded in
showing existence of sufficient cause for not filing an appeal within the prescribed period i.e., 60 days.
Liberal construction of the expression “sufficient cause” is intended to advance substantial justice which itself presupposes
no negligence or inaction on the part of the applicant, to whom want of bona fide is imputable. There can be instances
where the Court should condone the delay; equally there would be cases where the Court must exercise its discretion
against the applicant for want of any of these ingredients or where it does not reflect “sufficient cause” as understood in
law.35 The expression “sufficient cause” implies the presence of legal and adequate reasons. The word “sufficient” means
adequate enough, as much as may be necessary to answer the purpose intended. It embraces no more than that which
provides a plenitude which, when done, suffices to accomplish the purpose intended in the light of existing circumstances
and when viewed from the reasonable standard of practical and cautious men. The sufficient cause should be such as it
Page 7 of 9
[s 53B] Appeal to Appellate Tribunal
would persuade the Court, in exercise of its judicial discretion, to treat the delay as an excusable one. These provisions
give the Courts enough power and discretion to apply a law in a meaningful manner, while assuring that the purpose of
enacting such a law does not stand frustrated. It would be unnecessary to discuss here the instances, which would fall
under either of these classes of cases. The party should show that besides acting bona fide, it had taken all possible steps
within its power and control and had approached the Court without any unnecessary delay. The test is whether or not a
cause is sufficient to see whether it could have been avoided by the party by the exercise of due care and attention.36
In the case of A Ganesh v CCI,37 Appellants A Ganesh, former Honorary Secretary, Karnataka Film Chamber of
Commerce (KFCC) and K Manju, for Vice President, KFCC questioned orders dated 12 April 2012 and 12 June 2012
passed by the Commission and also filed applications for condonation of delay. The Appellants tried to absolve themselves
from the responsibility of showing sufficient cause by stating that they were actually not involved in the Executive Body of
KFCC and that they were being dragged in the case merely because they were office-bearers. It was also contended that
they did not challenge the penalty orders because KFCC had assured them that necessary steps would be taken to protect
their interest. Further, it was argued that that they ceased to be the office-bearers of KFCC on 29 September 2012 and as a
result of that they lost track of the proceedings initiated by the Commission.
The Tribunal held that there was no valid ground or justification for overlooking the delay of 1,127 days and 1,061 days in
challenging the orders dated 12 April 2012 and 12 June 2012 respectively. The Tribunal found that the appellants were
holding the offices of Honorary Secretary and Vice President of KFCC and they ceased to be office-bearers only on 29
September 2012. Also, no details on the contended assurance were provided. Therefore, there was no reason for them not
to challenge orders dated 12 April 2012 and 12 June 2012 within 60 days.
USE OF CAVEAT APPLICATION
In the case of DLF Ltd v CCI,38 the Tribunal held that a Caveat Petition, which has a concept covered under section 148A
of the CPC, 1908, has no application to an appeal filed under section 53B of the Competition Act, 2002. It was noted that
even though certain provisions of CPC, 1908 are made applicable, Caveat in terms of section 148A of the CPC, 1908
cannot be one of them. Therefore, the Caveat Petition was not entertained.
CONDITION OF PRE-DEPOSIT
Section 53B does not impose any condition of pre-deposit for entertaining the appeal. Therefore, right to file the appeal
and have the said appeal decided on merits, if it is filed within the period of limitation, is conferred by the statute and that
cannot be taken away by imposing the condition of deposit of an amount leading to dismissal of the main appeal itself if
the said condition is not satisfied. Position would have been different if the provision of appeal itself contained a condition
of pre-deposit of certain amount.
In a matter39 before the Supreme Court, it was argued by the appellant that the NCLAT had granted stay on the penalty
imposed by the Commission on the condition that it deposits at least 10% of the penalty. The Appellant could not deposit
the said amount after repeated chances being given by the appellate forum. The Appellate forum dismissed the appeal on
this ground. The Apex Court has held that condition of deposit was attached to the order of stay. In case of noncompliance
of the said condition, the consequence would be that stay has ceased to operate as the condition for stay is not fulfilled.
However, non-compliance of the conditional order of stay would have no bearing insofar as the main appeal is concerned.
1 Chapter VIIIA containing sections 53A to 53U inserted by Act 39 of 2007, section 43,
section 53A inserted with effect from 12 October 2007, section 53B inserted with effect from 20 May 2009, sections 53C to 53M
inserted with effect from 20 December 2007 and sections 53N to 53U inserted with effect from 20 May 2009.
Page 8 of 9
[s 53B] Appeal to Appellate Tribunal
2 Airports Economic Regulatory Authority Appellate Tribunal and Cyber Appellate Tribunal
would be replaced by the Telecom Disputes Settlement and Appellate Tribunal. Copyright Board would be dissolved and its
functions would be taken over by the Intellectual Property Appellate Board. The National Highways Tribunal would be replaced
and its functions would be taken over by the Airport Appellate Tribunal. The functions of Employees Provident Fund Appellate
Tribunal would be taken over by the Industrial Tribunal.
3 COMPAT has ceased to exist from 26 May 2017. [SO 1696(E), Notification, Ministry of
Finance, dated 26 May 2017].
* Instituted by Act 39 of 2007, section 43 (with effect from 20 May 2009).
24 CCI v Steel Authority of India Ltd,
(2010) 10 SCC 744 : [2010] 103 SCL 269
(SC) : [2010] 11 SCR 112 : 2010 (5) ALL MR (SC)
934 : 2010 Comp LR 61 (SC) : (2010) 4 Comp LJ 1 (SC) :
JT 2010 (10) SC 26 : (2011) 2 Mad LJ 271 (SC) : 2010 (9)
Scale 291 : 2010 (8) UJ 4093 .
25 Ealing Borough Council v Jones,
(1959) 1 All ER 286 .
26 R v Andover, (1886) 16 QBD 711
DC.
27 Jeetender Gupta v CCI, Appeal No 30/2014 decided on 4 July 2014.
28 Mahindra and Mahindra Ltd v UOI,
AIR 1979 SC 798 : (1979) 2 SCC 529
: 1979 2 SCR 1038 : 49 Comp Cases 419 :
1979 Tax LR 2064 .
29 Appeal No 44 of 2013.
30 The Competition Commission of India (General) Regulations, 2009,
see Appendix 1.
31 The Supreme Court in Brahm Dutt v UOI,
AIR 2005 SC 730 : (2005) 2 SCC 431
: JT 2005 (1)SC 421 , while considering the constitutional validity of
section 8 of the Act observed that the Commission is an expert body which has been created in consonance with international
practice. The Court observed that it might be appropriate if two bodies are created for performing two kinds of functions, one,
advisory and regulatory and other adjudicatory. Though the Tribunal has been constituted by the Competition (Amendment) Act,
2007, the Commission continues to perform both the functions stated by this Court in that case. Cumulative effect of the above
reasoning is that the Commission would be a necessary and/or a proper party in the proceedings before the Tribunal (Para 84).
32 Para 78, CCI v Steel Authority of India Ltd, 2010 Comp LR 61 (SC).
33 The Competition Commission of India (General) Regulations, 2009,
see Appendix 1.
Page 9 of 9
[s 53B] Appeal to Appellate Tribunal
34 CCI v SAIL, Civil Appeal No 7779 of 2010 : 2010 Comp LR 61 (SC).
35 P RAMANATHA AIYAR, Advanced Law Lexicon, 2nd Edn, 1997.
36 P RAMANATHA AIYAR: Advanced Law Lexicon, 3rd Edn, 2005.
37 A Ganesh v CCI, 2015 Comp LR 900 (COMPAT).
38 DLF Limited v CCI, I.A. No 19/2011 & Appeal No 20 of 2011 &
Caveat No 2/2011, I.A. No. 20/2011 & Appeal No 22 of 2011 and Caveat No 3/2011, I.A. No 21/2011 and Appeal No 23 of 2011
and I.A. No 22/2011 in Appeal No 2 of 2011.
39 B Himmatlal Agrawal v CCI, Civil Appeal No 5029 of 2018
End of Document
[s 53C] Composition of Appellate Tribunal
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > [CHAPTER
VIIIA] COMPETITION APPELLATE TRIBUNAL
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
1[CHAPTER VIIIA] COMPETITION APPELLATE TRIBUNAL
The Union Government brought in multiple changes through the Finance Act, 2017. It scrapped eight AppellateTribunals,2 and
the Competition Appellate Tribunal (COMPAT) was one among them.3 Sections 171 and 172 of the Finance Act, 2017
amended the Competition Act, 2002 and the Companies Act, 2013, respectively. Section 171 amended sections 53A and 2(ba)
of the Competition Act, 2002 to the effect that the COMPAT has ceased to exist as the Appellate Tribunal, effective from 26
May 2017. The National Company Law Appellate Tribunal (NCLAT) will now be the Appellate Tribunal against the orders of
the Competition Commission of India (CCI). There will be a transition phase during which all pending matters before the
COMPAT stand transferred to the NCLAT. During this period, all such matters will be heard afresh by the NCLAT. The
procedural aspects of this transition have not been provided for yet.
Relevant provisions of the Finance Act, 2017 has been reproduced below:
(b) in Chapter VIIIA, for the heading, the following heading shall be substituted, namely:—
“APPELLATE TRIBUNAL”;
171(c) for section 53A, the following section shall be substituted, namely:—
[s 53A] The National Company Law Appellate Tribunal constituted under section 410 of the Companies Act, 2013 shall, on and
from the commencement of Part XIV of Chapter VI of the Finance Act, 2017, be the Appellate Tribunal for the purposes of this
Act and the said Appellate Tribunal shall—
(a) hear and dispose of appeals against any direction issued or decision made or order passed by the Commission under
sub-sections (2) and (6) of section 26, section 27, section 28, section 31, section 32, section 33, section 38, section 39,
section 43, section 43A, section 44, section 45 or section 46 of this Act; and
(b) adjudicate on claim for compensation that may arise from the findings of the Commission or the orders of the
Appellate Tribunal in an appeal against any finding of the Commission or under section 42A or under sub-section (2)
of section 53Q of this Act, and pass orders for the recovery of compensation under section 53N of this Act.”;
(c) sections 53C, 53D, 53E, 53F, 53G, 53H, 53-I, 53J, 53K, 53L, 53M and 53R shall be omitted;
(d) in section 63, in sub-section (2), clauses (mb), (mc) and (md) shall be omitted.
Page 2 of 3
[s 53C] Composition of Appellate Tribunal
172. In the Companies Act, 2013,—
(a) in section 410, for the words “for hearing appeals against the orders of the Tribunal”, the following shall be
substituted, namely:—
“for hearing appeals against,—
(a) the order of the Tribunal under this Act; and
(b) any direction, decision or order referred to in section 53N of the Competition Act, 2002 in accordance with the
provisions of that Act.”;
(b) after section 417, the following section shall be inserted, namely:—
“417A. Notwithstanding anything contained in this Act, the qualifications, appointment, term of office, salaries
and allowances, resignation, removal and other terms and conditions of service of the Chairperson and other
Members of the Appellate Tribunal appointed after the commencement of Part XIV of Chapter VI of the Finance
Act, 2017, shall be governed by the provisions of section 184 of that Act:
Provided that the Chairperson and Member appointed before the commencement of Part XIV of Chapter VI of
the Finance Act, 2017, shall continue to be governed by the provisions of this Act and the rules made thereunder
as if the provisions of section 184 of the Finance Act, 2017 had not come into force.”
Although, the COMPAT and ceased to exist as laid out under the Finance Act, 2017, the NCLAT has been given the same
appellate powers as it vested in COMPAT. The following discussion therefore would be relevant in understanding the nature
and scope of jurisdiction of the appellate authority.
Position prior to Finance Act, 2017
*[s 53C] Composition of Appellate Tribunal40
The Appellate Tribunal shall consist of a Chairperson and not more than two other Members to be appointed by the Central
Government.
SCOPE OF THE SECTION
This section was inserted by Competition (Amendment) Act, 2007 to provide for the constitution of the Appellate
Tribunal, which shall consist of the Chairperson and not more than two other Members to be appointed by the Central
Government.
NCLAT is now the Appellate Tribunal to hear and dispose of appeals against any direction issued or decision made or
order passed by the CCI as per the amendment brought to Section 410 of the Companies Act, 2013 by section 172 of the
Finance Act, 2017, with effect from 26 May 2017. Hon’ble Justice Shri SJ Mukhopadhaya, former Judge of the Supreme
Court, is now the Chairperson of NCLAT. Hon’ble Mr Balvinder Singh, former Deputy CAG is Member (Technical).
NCLAT is functioning from:–
Page 3 of 3
[s 53C] Composition of Appellate Tribunal
Pt Deen Dayal Antyodaya Bhawan, 3rd Floor,
CGO Complex, Lodhi Road, New Delhi - 110003
1 Chapter VIIIA containing sections 53A to 53U inserted by Act 39 of 2007, section 43,
section 53A inserted with effect from 12 October 2007, section 53B inserted with effect from 20 May 2009, sections 53C to 53M
inserted with effect from 20 December 2007 and sections 53N to 53U inserted with effect from 20 May 2009.
2 Airports Economic Regulatory Authority Appellate Tribunal and Cyber Appellate Tribunal
would be replaced by the Telecom Disputes Settlement and Appellate Tribunal. Copyright Board would be dissolved and its
functions would be taken over by the Intellectual Property Appellate Board. The National Highways Tribunal would be replaced
and its functions would be taken over by the Airport Appellate Tribunal. The functions of Employees Provident Fund Appellate
Tribunal would be taken over by the Industrial Tribunal.
3 COMPAT has ceased to exist from 26 May 2017. [SO 1696(E), Notification, Ministry of
Finance, dated 26 May 2017].
40 This provision has now been omitted by the Finance Act, 2017.
* Sections 53C to 53M, inserted by Act 39 of 2007, section 43 (w.e.f. 20 December 2007).
End of Document
[s 53D] Qualifications for appointment of Chairperson and Members of Appellate
Tribunal
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > [CHAPTER
VIIIA] COMPETITION APPELLATE TRIBUNAL
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
1[CHAPTER VIIIA] COMPETITION APPELLATE TRIBUNAL
The Union Government brought in multiple changes through the Finance Act, 2017. It scrapped eight AppellateTribunals,2 and
the Competition Appellate Tribunal (COMPAT) was one among them.3 Sections 171 and 172 of the Finance Act, 2017
amended the Competition Act, 2002 and the Companies Act, 2013, respectively. Section 171 amended sections 53A and 2(ba)
of the Competition Act, 2002 to the effect that the COMPAT has ceased to exist as the Appellate Tribunal, effective from 26
May 2017. The National Company Law Appellate Tribunal (NCLAT) will now be the Appellate Tribunal against the orders of
the Competition Commission of India (CCI). There will be a transition phase during which all pending matters before the
COMPAT stand transferred to the NCLAT. During this period, all such matters will be heard afresh by the NCLAT. The
procedural aspects of this transition have not been provided for yet.
Relevant provisions of the Finance Act, 2017 has been reproduced below:
(b) in Chapter VIIIA, for the heading, the following heading shall be substituted, namely:—
“APPELLATE TRIBUNAL”;
171(c) for section 53A, the following section shall be substituted, namely:—
[s 53A] The National Company Law Appellate Tribunal constituted under section 410 of the Companies Act, 2013 shall, on and
from the commencement of Part XIV of Chapter VI of the Finance Act, 2017, be the Appellate Tribunal for the purposes of this
Act and the said Appellate Tribunal shall—
(a) hear and dispose of appeals against any direction issued or decision made or order passed by the Commission under
sub-sections (2) and (6) of section 26, section 27, section 28, section 31, section 32, section 33, section 38, section 39,
section 43, section 43A, section 44, section 45 or section 46 of this Act; and
(b) adjudicate on claim for compensation that may arise from the findings of the Commission or the orders of the
Appellate Tribunal in an appeal against any finding of the Commission or under section 42A or under sub-section (2)
of section 53Q of this Act, and pass orders for the recovery of compensation under section 53N of this Act.”;
(c) sections 53C, 53D, 53E, 53F, 53G, 53H, 53-I, 53J, 53K, 53L, 53M and 53R shall be omitted;
(d) in section 63, in sub-section (2), clauses (mb), (mc) and (md) shall be omitted.
Page 2 of 3
[s 53D] Qualifications for appointment of Chairperson and Members of Appellate Tribunal
172. In the Companies Act, 2013,—
(a) in section 410, for the words “for hearing appeals against the orders of the Tribunal”, the following shall be
substituted, namely:—
“for hearing appeals against,—
(a) the order of the Tribunal under this Act; and
(b) any direction, decision or order referred to in section 53N of the Competition Act, 2002 in accordance with the
provisions of that Act.”;
(b) after section 417, the following section shall be inserted, namely:—
“417A. Notwithstanding anything contained in this Act, the qualifications, appointment, term of office, salaries
and allowances, resignation, removal and other terms and conditions of service of the Chairperson and other
Members of the Appellate Tribunal appointed after the commencement of Part XIV of Chapter VI of the Finance
Act, 2017, shall be governed by the provisions of section 184 of that Act:
Provided that the Chairperson and Member appointed before the commencement of Part XIV of Chapter VI of
the Finance Act, 2017, shall continue to be governed by the provisions of this Act and the rules made thereunder
as if the provisions of section 184 of the Finance Act, 2017 had not come into force.”
Although, the COMPAT and ceased to exist as laid out under the Finance Act, 2017, the NCLAT has been given the same
appellate powers as it vested in COMPAT. The following discussion therefore would be relevant in understanding the nature
and scope of jurisdiction of the appellate authority.
Position prior to Finance Act, 2017
[s 53D] Qualifications for appointment of Chairperson and Members of Appellate
Tribunal41
(1) The Chairperson of the Appellate Tribunal shall be a person, who is, or has been a Judge of the Supreme Court or
the Chief Justice of a High Court.
(2) A Member of the Appellate Tribunal shall be a person of ability, integrity and standing having special knowledge
of, and professional experience of not less than twenty-five years in, competition matters, including competition
law and policy, international trade, economics, business, commerce, law, finance, accountancy, management,
industry, public affairs, administration or in any other matter which in the opinion of the Central Government,
may be useful to the Appellate Tribunal.
SCOPE OF THE SECTION
This section was inserted by Competition (Amendment) Act, 2007 to provide that Chairman of the Appellate Tribunal
shall be a person who is or has been a Judge of the Supreme Court or Chief Justice of a High Court and a Member of the
Tribunal shall be a person of ability, integrity and standing having experience of at least 25 years in competition matters,
international trade, commerce, law, finance, etc.
Page 3 of 3
[s 53D] Qualifications for appointment of Chairperson and Members of Appellate Tribunal
While the Chairman is from higher judiciary, the other Members may be drawn from other fields, which in the opinion of
the Central Government may be useful to the Appellate Tribunal.
1 Chapter VIIIA containing sections 53A to 53U inserted by Act 39 of 2007, section 43,
section 53A inserted with effect from 12 October 2007, section 53B inserted with effect from 20 May 2009, sections 53C to 53M
inserted with effect from 20 December 2007 and sections 53N to 53U inserted with effect from 20 May 2009.
2 Airports Economic Regulatory Authority Appellate Tribunal and Cyber Appellate Tribunal
would be replaced by the Telecom Disputes Settlement and Appellate Tribunal. Copyright Board would be dissolved and its
functions would be taken over by the Intellectual Property Appellate Board. The National Highways Tribunal would be replaced
and its functions would be taken over by the Airport Appellate Tribunal. The functions of Employees Provident Fund Appellate
Tribunal would be taken over by the Industrial Tribunal.
3 COMPAT has ceased to exist from 26 May 2017. [SO 1696(E), Notification, Ministry of
Finance, dated 26 May 2017].
41 This provision has now been omitted by the Finance Act, 2017.
End of Document
[s 53E] Selection Committee
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > [CHAPTER
VIIIA] COMPETITION APPELLATE TRIBUNAL
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
1[CHAPTER VIIIA] COMPETITION APPELLATE TRIBUNAL
The Union Government brought in multiple changes through the Finance Act, 2017. It scrapped eight AppellateTribunals,2 and
the Competition Appellate Tribunal (COMPAT) was one among them.3 Sections 171 and 172 of the Finance Act, 2017
amended the Competition Act, 2002 and the Companies Act, 2013, respectively. Section 171 amended sections 53A and 2(ba)
of the Competition Act, 2002 to the effect that the COMPAT has ceased to exist as the Appellate Tribunal, effective from 26
May 2017. The National Company Law Appellate Tribunal (NCLAT) will now be the Appellate Tribunal against the orders of
the Competition Commission of India (CCI). There will be a transition phase during which all pending matters before the
COMPAT stand transferred to the NCLAT. During this period, all such matters will be heard afresh by the NCLAT. The
procedural aspects of this transition have not been provided for yet.
Relevant provisions of the Finance Act, 2017 has been reproduced below:
(b) in Chapter VIIIA, for the heading, the following heading shall be substituted, namely:—
“APPELLATE TRIBUNAL”;
171(c) for section 53A, the following section shall be substituted, namely:—
[s 53A] The National Company Law Appellate Tribunal constituted under section 410 of the Companies Act, 2013 shall, on and
from the commencement of Part XIV of Chapter VI of the Finance Act, 2017, be the Appellate Tribunal for the purposes of this
Act and the said Appellate Tribunal shall—
(a) hear and dispose of appeals against any direction issued or decision made or order passed by the Commission under
sub-sections (2) and (6) of section 26, section 27, section 28, section 31, section 32, section 33, section 38, section 39,
section 43, section 43A, section 44, section 45 or section 46 of this Act; and
(b) adjudicate on claim for compensation that may arise from the findings of the Commission or the orders of the
Appellate Tribunal in an appeal against any finding of the Commission or under section 42A or under sub-section (2)
of section 53Q of this Act, and pass orders for the recovery of compensation under section 53N of this Act.”;
(c) sections 53C, 53D, 53E, 53F, 53G, 53H, 53-I, 53J, 53K, 53L, 53M and 53R shall be omitted;
(d) in section 63, in sub-section (2), clauses (mb), (mc) and (md) shall be omitted.
Page 2 of 3
[s 53E] Selection Committee
172. In the Companies Act, 2013,—
(a) in section 410, for the words “for hearing appeals against the orders of the Tribunal”, the following shall be
substituted, namely:—
“for hearing appeals against,—
(a) the order of the Tribunal under this Act; and
(b) any direction, decision or order referred to in section 53N of the Competition Act, 2002 in accordance with the
provisions of that Act.”;
(b) after section 417, the following section shall be inserted, namely:—
“417A. Notwithstanding anything contained in this Act, the qualifications, appointment, term of office, salaries
and allowances, resignation, removal and other terms and conditions of service of the Chairperson and other
Members of the Appellate Tribunal appointed after the commencement of Part XIV of Chapter VI of the Finance
Act, 2017, shall be governed by the provisions of section 184 of that Act:
Provided that the Chairperson and Member appointed before the commencement of Part XIV of Chapter VI of
the Finance Act, 2017, shall continue to be governed by the provisions of this Act and the rules made thereunder
as if the provisions of section 184 of the Finance Act, 2017 had not come into force.”
Although, the COMPAT and ceased to exist as laid out under the Finance Act, 2017, the NCLAT has been given the same
appellate powers as it vested in COMPAT. The following discussion therefore would be relevant in understanding the nature
and scope of jurisdiction of the appellate authority.
Position prior to Finance Act, 2017
[s 53E] Selection Committee42
(1) The Chairperson and Members of the Appellate Tribunal shall be appointed by the Central Government from a
panel of names recommended by the Selection Committee consisting of—
(a) the Chief Justice of India or his nominee... Chairperson;
(b) the Secretary in the Ministry of Corporate Affairs... Member;
(c) the Secretary in the Ministry of Law and Justice... Member.
(2) The term of the Selection Committee and the manner of selection of panel of names shall be such as may be
prescribed.
SCOPE OF THE SECTION
This section was inserted by Competition (Amendment) Act, 2007 to provide for Chairperson and Members of the
selection committee for selection of the Chairperson and Members of Appellate Tribunal. The selection committee will be
headed by the Chief Justice of India or his nominee and assisted by Secretary in the Ministry of Law and Corporate
Affairs, as Members.
Page 3 of 3
[s 53E] Selection Committee
For text of Competition Appellate Tribunal (Term of the Selection Committee and the Manner of Selection of Panel of
Names) Rules, 2008, refer to Appendix 7.
1 Chapter VIIIA containing sections 53A to 53U inserted by Act 39 of 2007, section 43,
section 53A inserted with effect from 12 October 2007, section 53B inserted with effect from 20 May 2009, sections 53C to 53M
inserted with effect from 20 December 2007 and sections 53N to 53U inserted with effect from 20 May 2009.
2 Airports Economic Regulatory Authority Appellate Tribunal and Cyber Appellate Tribunal
would be replaced by the Telecom Disputes Settlement and Appellate Tribunal. Copyright Board would be dissolved and its
functions would be taken over by the Intellectual Property Appellate Board. The National Highways Tribunal would be replaced
and its functions would be taken over by the Airport Appellate Tribunal. The functions of Employees Provident Fund Appellate
Tribunal would be taken over by the Industrial Tribunal.
3 COMPAT has ceased to exist from 26 May 2017. [SO 1696(E), Notification, Ministry of
Finance, dated 26 May 2017].
42 This provision has now been omitted by the Finance Act, 2017.
End of Document
[s 53F] Term of office of Chairperson and Members of Appellate Tribunal
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > [CHAPTER
VIIIA] COMPETITION APPELLATE TRIBUNAL
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
1[CHAPTER VIIIA] COMPETITION APPELLATE TRIBUNAL
The Union Government brought in multiple changes through the Finance Act, 2017. It scrapped eight AppellateTribunals,2 and
the Competition Appellate Tribunal (COMPAT) was one among them.3 Sections 171 and 172 of the Finance Act, 2017
amended the Competition Act, 2002 and the Companies Act, 2013, respectively. Section 171 amended sections 53A and 2(ba)
of the Competition Act, 2002 to the effect that the COMPAT has ceased to exist as the Appellate Tribunal, effective from 26
May 2017. The National Company Law Appellate Tribunal (NCLAT) will now be the Appellate Tribunal against the orders of
the Competition Commission of India (CCI). There will be a transition phase during which all pending matters before the
COMPAT stand transferred to the NCLAT. During this period, all such matters will be heard afresh by the NCLAT. The
procedural aspects of this transition have not been provided for yet.
Relevant provisions of the Finance Act, 2017 has been reproduced below:
(b) in Chapter VIIIA, for the heading, the following heading shall be substituted, namely:—
“APPELLATE TRIBUNAL”;
171(c) for section 53A, the following section shall be substituted, namely:—
[s 53A] The National Company Law Appellate Tribunal constituted under section 410 of the Companies Act, 2013 shall, on and
from the commencement of Part XIV of Chapter VI of the Finance Act, 2017, be the Appellate Tribunal for the purposes of this
Act and the said Appellate Tribunal shall—
(a) hear and dispose of appeals against any direction issued or decision made or order passed by the Commission under
sub-sections (2) and (6) of section 26, section 27, section 28, section 31, section 32, section 33, section 38, section 39,
section 43, section 43A, section 44, section 45 or section 46 of this Act; and
(b) adjudicate on claim for compensation that may arise from the findings of the Commission or the orders of the
Appellate Tribunal in an appeal against any finding of the Commission or under section 42A or under sub-section (2)
of section 53Q of this Act, and pass orders for the recovery of compensation under section 53N of this Act.”;
(c) sections 53C, 53D, 53E, 53F, 53G, 53H, 53-I, 53J, 53K, 53L, 53M and 53R shall be omitted;
(d) in section 63, in sub-section (2), clauses (mb), (mc) and (md) shall be omitted.
Page 2 of 3
[s 53F] Term of office of Chairperson and Members of Appellate Tribunal
172. In the Companies Act, 2013,—
(a) in section 410, for the words “for hearing appeals against the orders of the Tribunal”, the following shall be
substituted, namely:—
“for hearing appeals against,—
(a) the order of the Tribunal under this Act; and
(b) any direction, decision or order referred to in section 53N of the Competition Act, 2002 in accordance with the
provisions of that Act.”;
(b) after section 417, the following section shall be inserted, namely:—
“417A. Notwithstanding anything contained in this Act, the qualifications, appointment, term of office, salaries
and allowances, resignation, removal and other terms and conditions of service of the Chairperson and other
Members of the Appellate Tribunal appointed after the commencement of Part XIV of Chapter VI of the Finance
Act, 2017, shall be governed by the provisions of section 184 of that Act:
Provided that the Chairperson and Member appointed before the commencement of Part XIV of Chapter VI of
the Finance Act, 2017, shall continue to be governed by the provisions of this Act and the rules made thereunder
as if the provisions of section 184 of the Finance Act, 2017 had not come into force.”
Although, the COMPAT and ceased to exist as laid out under the Finance Act, 2017, the NCLAT has been given the same
appellate powers as it vested in COMPAT. The following discussion therefore would be relevant in understanding the nature
and scope of jurisdiction of the appellate authority.
Position prior to Finance Act, 2017
[s 53F] Term of office of Chairperson and Members of Appellate Tribunal43
The Chairperson or a Member of the Appellate Tribunal shall hold office as such for a term of five years from the date on
which he enters upon his office, and shall be eligible for re-appointment:
Provided that no Chairperson or other Member of the Appellate Tribunal shall hold office as such after he has attained,—
(a) in the case of the Chairperson, the age of sixty-eight years;
(b) in the case of any other Member of the Appellate Tribunal, the age of sixty-five years.
SCOPE OF THE SECTION
This section was inserted by Competition (Amendment) Act, 2007 to provide that Chairman and Members of the Appellate
Tribunal shall hold office for five years, at a time until the age of 68 years, in case of Chairman and 65 years, in case of
Members.
Page 3 of 3
[s 53F] Term of office of Chairperson and Members of Appellate Tribunal
1 Chapter VIIIA containing sections 53A to 53U inserted by Act 39 of 2007, section 43,
section 53A inserted with effect from 12 October 2007, section 53B inserted with effect from 20 May 2009, sections 53C to 53M
inserted with effect from 20 December 2007 and sections 53N to 53U inserted with effect from 20 May 2009.
2 Airports Economic Regulatory Authority Appellate Tribunal and Cyber Appellate Tribunal
would be replaced by the Telecom Disputes Settlement and Appellate Tribunal. Copyright Board would be dissolved and its
functions would be taken over by the Intellectual Property Appellate Board. The National Highways Tribunal would be replaced
and its functions would be taken over by the Airport Appellate Tribunal. The functions of Employees Provident Fund Appellate
Tribunal would be taken over by the Industrial Tribunal.
3 COMPAT has ceased to exist from 26 May 2017. [SO 1696(E), Notification, Ministry of
Finance, dated 26 May 2017].
43 This provision has now been omitted by the Finance Act, 2017.
End of Document
[s 53G] Terms and conditions of service of Chairperson and Members of Appellate
Tribunal
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > [CHAPTER
VIIIA] COMPETITION APPELLATE TRIBUNAL
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
1[CHAPTER VIIIA] COMPETITION APPELLATE TRIBUNAL
The Union Government brought in multiple changes through the Finance Act, 2017. It scrapped eight AppellateTribunals,2 and
the Competition Appellate Tribunal (COMPAT) was one among them.3 Sections 171 and 172 of the Finance Act, 2017
amended the Competition Act, 2002 and the Companies Act, 2013, respectively. Section 171 amended sections 53A and 2(ba)
of the Competition Act, 2002 to the effect that the COMPAT has ceased to exist as the Appellate Tribunal, effective from 26
May 2017. The National Company Law Appellate Tribunal (NCLAT) will now be the Appellate Tribunal against the orders of
the Competition Commission of India (CCI). There will be a transition phase during which all pending matters before the
COMPAT stand transferred to the NCLAT. During this period, all such matters will be heard afresh by the NCLAT. The
procedural aspects of this transition have not been provided for yet.
Relevant provisions of the Finance Act, 2017 has been reproduced below:
(b) in Chapter VIIIA, for the heading, the following heading shall be substituted, namely:—
“APPELLATE TRIBUNAL”;
171(c) for section 53A, the following section shall be substituted, namely:—
[s 53A] The National Company Law Appellate Tribunal constituted under section 410 of the Companies Act, 2013 shall, on and
from the commencement of Part XIV of Chapter VI of the Finance Act, 2017, be the Appellate Tribunal for the purposes of this
Act and the said Appellate Tribunal shall—
(a) hear and dispose of appeals against any direction issued or decision made or order passed by the Commission under
sub-sections (2) and (6) of section 26, section 27, section 28, section 31, section 32, section 33, section 38, section 39,
section 43, section 43A, section 44, section 45 or section 46 of this Act; and
(b) adjudicate on claim for compensation that may arise from the findings of the Commission or the orders of the
Appellate Tribunal in an appeal against any finding of the Commission or under section 42A or under sub-section (2)
of section 53Q of this Act, and pass orders for the recovery of compensation under section 53N of this Act.”;
(c) sections 53C, 53D, 53E, 53F, 53G, 53H, 53-I, 53J, 53K, 53L, 53M and 53R shall be omitted;
(d) in section 63, in sub-section (2), clauses (mb), (mc) and (md) shall be omitted.
Page 2 of 3
[s 53G] Terms and conditions of service of Chairperson and Members of Appellate Tribunal
172. In the Companies Act, 2013,—
(a) in section 410, for the words “for hearing appeals against the orders of the Tribunal”, the following shall be
substituted, namely:—
“for hearing appeals against,—
(a) the order of the Tribunal under this Act; and
(b) any direction, decision or order referred to in section 53N of the Competition Act, 2002 in accordance with the
provisions of that Act.”;
(b) after section 417, the following section shall be inserted, namely:—
“417A. Notwithstanding anything contained in this Act, the qualifications, appointment, term of office, salaries
and allowances, resignation, removal and other terms and conditions of service of the Chairperson and other
Members of the Appellate Tribunal appointed after the commencement of Part XIV of Chapter VI of the Finance
Act, 2017, shall be governed by the provisions of section 184 of that Act:
Provided that the Chairperson and Member appointed before the commencement of Part XIV of Chapter VI of
the Finance Act, 2017, shall continue to be governed by the provisions of this Act and the rules made thereunder
as if the provisions of section 184 of the Finance Act, 2017 had not come into force.”
Although, the COMPAT and ceased to exist as laid out under the Finance Act, 2017, the NCLAT has been given the same
appellate powers as it vested in COMPAT. The following discussion therefore would be relevant in understanding the nature
and scope of jurisdiction of the appellate authority.
Position prior to Finance Act, 2017
[s 53G] Terms and conditions of service of Chairperson and Members of Appellate
Tribunal44
(1) The salaries and allowances and other terms and conditions of service of the Chairperson and other Members of
the Appellate Tribunal shall be such as may be prescribed.
(2) The salaries, allowances and other terms and conditions of service of the Chairperson and other Members of the
Appellate Tribunal shall not be varied to their disadvantage after their appointment.
SCOPE OF THE SECTION
This section was inserted by Competition (Amendment) Act, 2007 to provide that salary and allowances of the Chairman
and Members of the Appellate Tribunal shall be prescribed by the Central Government and the same shall not be varied to
their disadvantage, after their appointment.
For text of Competition Appellate Tribunal (Salaries and allowances and other terms and conditions of service of
Chairperson and other Members) Rules, 2009, refer to Appendix 12.
Page 3 of 3
[s 53G] Terms and conditions of service of Chairperson and Members of Appellate Tribunal
1 Chapter VIIIA containing sections 53A to 53U inserted by Act 39 of 2007, section 43,
section 53A inserted with effect from 12 October 2007, section 53B inserted with effect from 20 May 2009, sections 53C to 53M
inserted with effect from 20 December 2007 and sections 53N to 53U inserted with effect from 20 May 2009.
2 Airports Economic Regulatory Authority Appellate Tribunal and Cyber Appellate Tribunal
would be replaced by the Telecom Disputes Settlement and Appellate Tribunal. Copyright Board would be dissolved and its
functions would be taken over by the Intellectual Property Appellate Board. The National Highways Tribunal would be replaced
and its functions would be taken over by the Airport Appellate Tribunal. The functions of Employees Provident Fund Appellate
Tribunal would be taken over by the Industrial Tribunal.
3 COMPAT has ceased to exist from 26 May 2017. [SO 1696(E), Notification, Ministry of
Finance, dated 26 May 2017].
44 This provision has now been omitted by the Finance Act, 2017.
End of Document
[s 53H] Vacancies
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > [CHAPTER
VIIIA] COMPETITION APPELLATE TRIBUNAL
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
1[CHAPTER VIIIA] COMPETITION APPELLATE TRIBUNAL
The Union Government brought in multiple changes through the Finance Act, 2017. It scrapped eight AppellateTribunals,2 and
the Competition Appellate Tribunal (COMPAT) was one among them.3 Sections 171 and 172 of the Finance Act, 2017
amended the Competition Act, 2002 and the Companies Act, 2013, respectively. Section 171 amended sections 53A and 2(ba)
of the Competition Act, 2002 to the effect that the COMPAT has ceased to exist as the Appellate Tribunal, effective from 26
May 2017. The National Company Law Appellate Tribunal (NCLAT) will now be the Appellate Tribunal against the orders of
the Competition Commission of India (CCI). There will be a transition phase during which all pending matters before the
COMPAT stand transferred to the NCLAT. During this period, all such matters will be heard afresh by the NCLAT. The
procedural aspects of this transition have not been provided for yet.
Relevant provisions of the Finance Act, 2017 has been reproduced below:
(b) in Chapter VIIIA, for the heading, the following heading shall be substituted, namely:—
“APPELLATE TRIBUNAL”;
171(c) for section 53A, the following section shall be substituted, namely:—
[s 53A] The National Company Law Appellate Tribunal constituted under section 410 of the Companies Act, 2013 shall, on and
from the commencement of Part XIV of Chapter VI of the Finance Act, 2017, be the Appellate Tribunal for the purposes of this
Act and the said Appellate Tribunal shall—
(a) hear and dispose of appeals against any direction issued or decision made or order passed by the Commission under
sub-sections (2) and (6) of section 26, section 27, section 28, section 31, section 32, section 33, section 38, section 39,
section 43, section 43A, section 44, section 45 or section 46 of this Act; and
(b) adjudicate on claim for compensation that may arise from the findings of the Commission or the orders of the
Appellate Tribunal in an appeal against any finding of the Commission or under section 42A or under sub-section (2)
of section 53Q of this Act, and pass orders for the recovery of compensation under section 53N of this Act.”;
(c) sections 53C, 53D, 53E, 53F, 53G, 53H, 53-I, 53J, 53K, 53L, 53M and 53R shall be omitted;
(d) in section 63, in sub-section (2), clauses (mb), (mc) and (md) shall be omitted.
Page 2 of 3
[s 53H] Vacancies
172. In the Companies Act, 2013,—
(a) in section 410, for the words “for hearing appeals against the orders of the Tribunal”, the following shall be
substituted, namely:—
“for hearing appeals against,—
(a) the order of the Tribunal under this Act; and
(b) any direction, decision or order referred to in section 53N of the Competition Act, 2002 in accordance with the
provisions of that Act.”;
(b) after section 417, the following section shall be inserted, namely:—
“417A. Notwithstanding anything contained in this Act, the qualifications, appointment, term of office, salaries
and allowances, resignation, removal and other terms and conditions of service of the Chairperson and other
Members of the Appellate Tribunal appointed after the commencement of Part XIV of Chapter VI of the Finance
Act, 2017, shall be governed by the provisions of section 184 of that Act:
Provided that the Chairperson and Member appointed before the commencement of Part XIV of Chapter VI of
the Finance Act, 2017, shall continue to be governed by the provisions of this Act and the rules made thereunder
as if the provisions of section 184 of the Finance Act, 2017 had not come into force.”
Although, the COMPAT and ceased to exist as laid out under the Finance Act, 2017, the NCLAT has been given the same
appellate powers as it vested in COMPAT. The following discussion therefore would be relevant in understanding the nature
and scope of jurisdiction of the appellate authority.
Position prior to Finance Act, 2017
[s 53H] Vacancies45
If, for any reason other than temporary absence, any vacancy occurs in the office of the Chairperson or a Member of the
Appellate Tribunal, the Central Government shall appoint another person in accordance with the provisions of this Act to
fill the vacancy and the proceedings may be continued before the Appellate Tribunal from the stage at which the vacancy
is filled.
SCOPE OF THE SECTION
This section was inserted by the Competition (Amendment) Act, 2007 to provide for an enabling provision to fill vacancies
in the office of Chairman and Members of Appellate Tribunal due to resignation, death or long illness, by the Central
Government.
1 Chapter VIIIA containing sections 53A to 53U inserted by Act 39 of 2007, section 43,
section 53A inserted with effect from 12 October 2007, section 53B inserted with effect from 20 May 2009, sections 53C to 53M
inserted with effect from 20 December 2007 and sections 53N to 53U inserted with effect from 20 May 2009.
Page 3 of 3
[s 53H] Vacancies
2 Airports Economic Regulatory Authority Appellate Tribunal and Cyber Appellate Tribunal
would be replaced by the Telecom Disputes Settlement and Appellate Tribunal. Copyright Board would be dissolved and its
functions would be taken over by the Intellectual Property Appellate Board. The National Highways Tribunal would be replaced
and its functions would be taken over by the Airport Appellate Tribunal. The functions of Employees Provident Fund Appellate
Tribunal would be taken over by the Industrial Tribunal.
3 COMPAT has ceased to exist from 26 May 2017. [SO 1696(E), Notification, Ministry of
Finance, dated 26 May 2017].
45 This provision has now been omitted by the Finance Act, 2017.
End of Document
[s 53I] Resignation of Chairperson and Members of Appellate Tribunal
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > [CHAPTER
VIIIA] COMPETITION APPELLATE TRIBUNAL
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
1[CHAPTER VIIIA] COMPETITION APPELLATE TRIBUNAL
The Union Government brought in multiple changes through the Finance Act, 2017. It scrapped eight AppellateTribunals,2 and
the Competition Appellate Tribunal (COMPAT) was one among them.3 Sections 171 and 172 of the Finance Act, 2017
amended the Competition Act, 2002 and the Companies Act, 2013, respectively. Section 171 amended sections 53A and 2(ba)
of the Competition Act, 2002 to the effect that the COMPAT has ceased to exist as the Appellate Tribunal, effective from 26
May 2017. The National Company Law Appellate Tribunal (NCLAT) will now be the Appellate Tribunal against the orders of
the Competition Commission of India (CCI). There will be a transition phase during which all pending matters before the
COMPAT stand transferred to the NCLAT. During this period, all such matters will be heard afresh by the NCLAT. The
procedural aspects of this transition have not been provided for yet.
Relevant provisions of the Finance Act, 2017 has been reproduced below:
(b) in Chapter VIIIA, for the heading, the following heading shall be substituted, namely:—
“APPELLATE TRIBUNAL”;
171(c) for section 53A, the following section shall be substituted, namely:—
[s 53A] The National Company Law Appellate Tribunal constituted under section 410 of the Companies Act, 2013 shall, on and
from the commencement of Part XIV of Chapter VI of the Finance Act, 2017, be the Appellate Tribunal for the purposes of this
Act and the said Appellate Tribunal shall—
(a) hear and dispose of appeals against any direction issued or decision made or order passed by the Commission under
sub-sections (2) and (6) of section 26, section 27, section 28, section 31, section 32, section 33, section 38, section 39,
section 43, section 43A, section 44, section 45 or section 46 of this Act; and
(b) adjudicate on claim for compensation that may arise from the findings of the Commission or the orders of the
Appellate Tribunal in an appeal against any finding of the Commission or under section 42A or under sub-section (2)
of section 53Q of this Act, and pass orders for the recovery of compensation under section 53N of this Act.”;
(c) sections 53C, 53D, 53E, 53F, 53G, 53H, 53-I, 53J, 53K, 53L, 53M and 53R shall be omitted;
(d) in section 63, in sub-section (2), clauses (mb), (mc) and (md) shall be omitted.
Page 2 of 3
[s 53I] Resignation of Chairperson and Members of Appellate Tribunal
172. In the Companies Act, 2013,—
(a) in section 410, for the words “for hearing appeals against the orders of the Tribunal”, the following shall be
substituted, namely:—
“for hearing appeals against,—
(a) the order of the Tribunal under this Act; and
(b) any direction, decision or order referred to in section 53N of the Competition Act, 2002 in accordance with the
provisions of that Act.”;
(b) after section 417, the following section shall be inserted, namely:—
“417A. Notwithstanding anything contained in this Act, the qualifications, appointment, term of office, salaries
and allowances, resignation, removal and other terms and conditions of service of the Chairperson and other
Members of the Appellate Tribunal appointed after the commencement of Part XIV of Chapter VI of the Finance
Act, 2017, shall be governed by the provisions of section 184 of that Act:
Provided that the Chairperson and Member appointed before the commencement of Part XIV of Chapter VI of
the Finance Act, 2017, shall continue to be governed by the provisions of this Act and the rules made thereunder
as if the provisions of section 184 of the Finance Act, 2017 had not come into force.”
Although, the COMPAT and ceased to exist as laid out under the Finance Act, 2017, the NCLAT has been given the same
appellate powers as it vested in COMPAT. The following discussion therefore would be relevant in understanding the nature
and scope of jurisdiction of the appellate authority.
Position prior to Finance Act, 2017
[s 53I] Resignation of Chairperson and Members of Appellate Tribunal46
The Chairperson or a Member of the Appellate Tribunal may, by notice in writing under his hand addressed to the Central
Government, resign his office:
Provided that the Chairperson or a Member of the Appellate Tribunal shall, unless he is permitted by the Central
Government to relinquish his office sooner, continue to hold office until the expiry of three months from the date of receipt
of such notice or until a person duly appointed as his successor enters upon his office or until the expiry of his term of
office, whichever is the earliest.
SCOPE OF THE SECTION
This section was inserted by the Competition (Amendment) Act, 2007 to provide that the Chairman or Member of the
Appellate Tribunal may resign from his office.
The resignation of the Chairperson or the Member becomes effective from the date of acceptance of the resignation. Until
it is accepted, he will continue to function as Chairperson or Member, subject to earliest occurrence of any of the following
events:
Page 3 of 3
[s 53I] Resignation of Chairperson and Members of Appellate Tribunal
(a) expiry of three months from the date of receipt of notice; or
(b) appointment of a successor or
(c) expiry of term of office.
1 Chapter VIIIA containing sections 53A to 53U inserted by Act 39 of 2007, section 43,
section 53A inserted with effect from 12 October 2007, section 53B inserted with effect from 20 May 2009, sections 53C to 53M
inserted with effect from 20 December 2007 and sections 53N to 53U inserted with effect from 20 May 2009.
2 Airports Economic Regulatory Authority Appellate Tribunal and Cyber Appellate Tribunal
would be replaced by the Telecom Disputes Settlement and Appellate Tribunal. Copyright Board would be dissolved and its
functions would be taken over by the Intellectual Property Appellate Board. The National Highways Tribunal would be replaced
and its functions would be taken over by the Airport Appellate Tribunal. The functions of Employees Provident Fund Appellate
Tribunal would be taken over by the Industrial Tribunal.
3 COMPAT has ceased to exist from 26 May 2017. [SO 1696(E), Notification, Ministry of
Finance, dated 26 May 2017].
46 This provision has now been omitted by the Finance Act, 2017.
End of Document
[s 53J] Member of Appellate Tribunal to act as its Chairperson in certain cases
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > [CHAPTER
VIIIA] COMPETITION APPELLATE TRIBUNAL
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
1[CHAPTER VIIIA] COMPETITION APPELLATE TRIBUNAL
The Union Government brought in multiple changes through the Finance Act, 2017. It scrapped eight AppellateTribunals,2 and
the Competition Appellate Tribunal (COMPAT) was one among them.3 Sections 171 and 172 of the Finance Act, 2017
amended the Competition Act, 2002 and the Companies Act, 2013, respectively. Section 171 amended sections 53A and 2(ba)
of the Competition Act, 2002 to the effect that the COMPAT has ceased to exist as the Appellate Tribunal, effective from 26
May 2017. The National Company Law Appellate Tribunal (NCLAT) will now be the Appellate Tribunal against the orders of
the Competition Commission of India (CCI). There will be a transition phase during which all pending matters before the
COMPAT stand transferred to the NCLAT. During this period, all such matters will be heard afresh by the NCLAT. The
procedural aspects of this transition have not been provided for yet.
Relevant provisions of the Finance Act, 2017 has been reproduced below:
(b) in Chapter VIIIA, for the heading, the following heading shall be substituted, namely:—
“APPELLATE TRIBUNAL”;
171(c) for section 53A, the following section shall be substituted, namely:—
[s 53A] The National Company Law Appellate Tribunal constituted under section 410 of the Companies Act, 2013 shall, on and
from the commencement of Part XIV of Chapter VI of the Finance Act, 2017, be the Appellate Tribunal for the purposes of this
Act and the said Appellate Tribunal shall—
(a) hear and dispose of appeals against any direction issued or decision made or order passed by the Commission under
sub-sections (2) and (6) of section 26, section 27, section 28, section 31, section 32, section 33, section 38, section 39,
section 43, section 43A, section 44, section 45 or section 46 of this Act; and
(b) adjudicate on claim for compensation that may arise from the findings of the Commission or the orders of the
Appellate Tribunal in an appeal against any finding of the Commission or under section 42A or under sub-section (2)
of section 53Q of this Act, and pass orders for the recovery of compensation under section 53N of this Act.”;
(c) sections 53C, 53D, 53E, 53F, 53G, 53H, 53-I, 53J, 53K, 53L, 53M and 53R shall be omitted;
(d) in section 63, in sub-section (2), clauses (mb), (mc) and (md) shall be omitted.
Page 2 of 3
[s 53J] Member of Appellate Tribunal to act as its Chairperson in certain cases
172. In the Companies Act, 2013,—
(a) in section 410, for the words “for hearing appeals against the orders of the Tribunal”, the following shall be
substituted, namely:—
“for hearing appeals against,—
(a) the order of the Tribunal under this Act; and
(b) any direction, decision or order referred to in section 53N of the Competition Act, 2002 in accordance with the
provisions of that Act.”;
(b) after section 417, the following section shall be inserted, namely:—
“417A. Notwithstanding anything contained in this Act, the qualifications, appointment, term of office, salaries
and allowances, resignation, removal and other terms and conditions of service of the Chairperson and other
Members of the Appellate Tribunal appointed after the commencement of Part XIV of Chapter VI of the Finance
Act, 2017, shall be governed by the provisions of section 184 of that Act:
Provided that the Chairperson and Member appointed before the commencement of Part XIV of Chapter VI of
the Finance Act, 2017, shall continue to be governed by the provisions of this Act and the rules made thereunder
as if the provisions of section 184 of the Finance Act, 2017 had not come into force.”
Although, the COMPAT and ceased to exist as laid out under the Finance Act, 2017, the NCLAT has been given the same
appellate powers as it vested in COMPAT. The following discussion therefore would be relevant in understanding the nature
and scope of jurisdiction of the appellate authority.
Position prior to Finance Act, 2017
[s 53J] Member of Appellate Tribunal to act as its Chairperson in certain cases47
(1) In the event of the occurrence of any vacancy in the office of the Chairperson of the Appellate Tribunal by reason
of his death or resignation, the senior-most Member of the Appellate Tribunal shall act as the Chairperson of the
Appellate Tribunal until the date on which a new Chairperson appointed in accordance with the provisions of this
Act to fill such vacancy enters upon his office.
(2) When the Chairperson of the Appellate Tribunal is unable to discharge his functions owing to absence, illness or
any other cause, the senior-most Member or, as the case may be, such one of the Members of the Appellate
Tribunal, as the Central Government may, by notification, authorise in this behalf, shall discharge the functions
of the Chairperson until the date on which the Chairperson resumes his duties.
SCOPE OF THE SECTION
This section was inserted by the Competition (Amendment) Act, 2007 with a view to fill vacancy in the office of
Chairperson in the event of his death or resignation or in case he is unable to discharge his functions due to illness or any
other cause. In such a case, the senior-most Member shall act as Chairperson of the Appellate Tribunal, until a new
Chairman assumes office.
Page 3 of 3
[s 53J] Member of Appellate Tribunal to act as its Chairperson in certain cases
1 Chapter VIIIA containing sections 53A to 53U inserted by Act 39 of 2007, section 43,
section 53A inserted with effect from 12 October 2007, section 53B inserted with effect from 20 May 2009, sections 53C to 53M
inserted with effect from 20 December 2007 and sections 53N to 53U inserted with effect from 20 May 2009.
2 Airports Economic Regulatory Authority Appellate Tribunal and Cyber Appellate Tribunal
would be replaced by the Telecom Disputes Settlement and Appellate Tribunal. Copyright Board would be dissolved and its
functions would be taken over by the Intellectual Property Appellate Board. The National Highways Tribunal would be replaced
and its functions would be taken over by the Airport Appellate Tribunal. The functions of Employees Provident Fund Appellate
Tribunal would be taken over by the Industrial Tribunal.
3 COMPAT has ceased to exist from 26 May 2017. [SO 1696(E), Notification, Ministry of
Finance, dated 26 May 2017].
47 This provision has now been omitted by the Finance Act, 2017.
End of Document
[s 53K] Removal and suspension of Chairperson and Members of Appellate Tribunal
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > [CHAPTER
VIIIA] COMPETITION APPELLATE TRIBUNAL
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
1[CHAPTER VIIIA] COMPETITION APPELLATE TRIBUNAL
The Union Government brought in multiple changes through the Finance Act, 2017. It scrapped eight AppellateTribunals,2 and
the Competition Appellate Tribunal (COMPAT) was one among them.3 Sections 171 and 172 of the Finance Act, 2017
amended the Competition Act, 2002 and the Companies Act, 2013, respectively. Section 171 amended sections 53A and 2(ba)
of the Competition Act, 2002 to the effect that the COMPAT has ceased to exist as the Appellate Tribunal, effective from 26
May 2017. The National Company Law Appellate Tribunal (NCLAT) will now be the Appellate Tribunal against the orders of
the Competition Commission of India (CCI). There will be a transition phase during which all pending matters before the
COMPAT stand transferred to the NCLAT. During this period, all such matters will be heard afresh by the NCLAT. The
procedural aspects of this transition have not been provided for yet.
Relevant provisions of the Finance Act, 2017 has been reproduced below:
(b) in Chapter VIIIA, for the heading, the following heading shall be substituted, namely:—
“APPELLATE TRIBUNAL”;
171(c) for section 53A, the following section shall be substituted, namely:—
[s 53A] The National Company Law Appellate Tribunal constituted under section 410 of the Companies Act, 2013 shall, on and
from the commencement of Part XIV of Chapter VI of the Finance Act, 2017, be the Appellate Tribunal for the purposes of this
Act and the said Appellate Tribunal shall—
(a) hear and dispose of appeals against any direction issued or decision made or order passed by the Commission under
sub-sections (2) and (6) of section 26, section 27, section 28, section 31, section 32, section 33, section 38, section 39,
section 43, section 43A, section 44, section 45 or section 46 of this Act; and
(b) adjudicate on claim for compensation that may arise from the findings of the Commission or the orders of the
Appellate Tribunal in an appeal against any finding of the Commission or under section 42A or under sub-section (2)
of section 53Q of this Act, and pass orders for the recovery of compensation under section 53N of this Act.”;
(c) sections 53C, 53D, 53E, 53F, 53G, 53H, 53-I, 53J, 53K, 53L, 53M and 53R shall be omitted;
(d) in section 63, in sub-section (2), clauses (mb), (mc) and (md) shall be omitted.
Page 2 of 3
[s 53K] Removal and suspension of Chairperson and Members of Appellate Tribunal
172. In the Companies Act, 2013,—
(a) in section 410, for the words “for hearing appeals against the orders of the Tribunal”, the following shall be
substituted, namely:—
“for hearing appeals against,—
(a) the order of the Tribunal under this Act; and
(b) any direction, decision or order referred to in section 53N of the Competition Act, 2002 in accordance with the
provisions of that Act.”;
(b) after section 417, the following section shall be inserted, namely:—
“417A. Notwithstanding anything contained in this Act, the qualifications, appointment, term of office, salaries
and allowances, resignation, removal and other terms and conditions of service of the Chairperson and other
Members of the Appellate Tribunal appointed after the commencement of Part XIV of Chapter VI of the Finance
Act, 2017, shall be governed by the provisions of section 184 of that Act:
Provided that the Chairperson and Member appointed before the commencement of Part XIV of Chapter VI of
the Finance Act, 2017, shall continue to be governed by the provisions of this Act and the rules made thereunder
as if the provisions of section 184 of the Finance Act, 2017 had not come into force.”
Although, the COMPAT and ceased to exist as laid out under the Finance Act, 2017, the NCLAT has been given the same
appellate powers as it vested in COMPAT. The following discussion therefore would be relevant in understanding the nature
and scope of jurisdiction of the appellate authority.
Position prior to Finance Act, 2017
[s 53K] Removal and suspension of Chairperson and Members of Appellate
Tribunal48
(1) The Central Government may, in consultation with the Chief Justice of India, remove from office the Chairperson
or any other Member of the Appellate Tribunal, who—
(a) has been adjudged an insolvent; or
(b) has engaged at any time, during his term of office, in any paid employment; or
(c) has been convicted of an offence which, in the opinion of the Central Government, involves moral turpitude;
or
(d) has become physically or mentally incapable of acting as such Chairperson or other Member of the Appellate
Tribunal; or
(e) has acquired such financial or other interest as is likely to affect prejudicially his functions as such
Chairperson or Member of the Appellate Tribunal; or
(f) has so abused his position as to render his continuance in office prejudicial to the public interest.
(2) Notwithstanding anything contained in sub-section (1), no Chairperson or a Member of the Appellate Tribunal
shall be removed from his office on the ground specified in clause (e) or clause (f) of sub-section (1) except by an
order made by the Central Government after an inquiry made in this behalf by a Judge of the Supreme Court in
Page 3 of 3
[s 53K] Removal and suspension of Chairperson and Members of Appellate Tribunal
which such Chairperson or Member had been informed of the charges against him and given a reasonable
opportunity of being heard in respect of those charges.
SCOPE OF THE SECTION
This section was inserted by the Competition (Amendment) Act, 2007 to provide for the circumstances in which the
Chairperson and any Member of the Appellate Tribunal may be removed or suspended by the Central Government.
Sub-section (1) lays down six grounds for removal of Chairperson or any Member of the Appellate Tribunal:
(a) insolvency;
(b) engaged in any paid employment;
(c) conviction of an offence involving moral turpitude;
(d) physical or mental incapacity;
(e) acquisition of financial interest as is prejudicial to his functioning and
(f) abused his position.
Their removal has to be in consultation of Chief Justice of India. In case of removal on grounds specified in clauses (e) and
(f), the removal must be preceded with an inquiry by a Judge of the Supreme Court, after giving reasonable opportunity of
hearing to the Chairperson or Member concerned. Only if the charge is proved after the inquiry can the person be removed
from his office. Although not stated, the Central Government may suspend from office of Chairperson or Member in
respect of whom reference has been made to the Judge of the Supreme Court.
1 Chapter VIIIA containing sections 53A to 53U inserted by Act 39 of 2007, section 43,
section 53A inserted with effect from 12 October 2007, section 53B inserted with effect from 20 May 2009, sections 53C to 53M
inserted with effect from 20 December 2007 and sections 53N to 53U inserted with effect from 20 May 2009.
2 Airports Economic Regulatory Authority Appellate Tribunal and Cyber Appellate Tribunal
would be replaced by the Telecom Disputes Settlement and Appellate Tribunal. Copyright Board would be dissolved and its
functions would be taken over by the Intellectual Property Appellate Board. The National Highways Tribunal would be replaced
and its functions would be taken over by the Airport Appellate Tribunal. The functions of Employees Provident Fund Appellate
Tribunal would be taken over by the Industrial Tribunal.
3 COMPAT has ceased to exist from 26 May 2017. [SO 1696(E), Notification, Ministry of
Finance, dated 26 May 2017].
48 This provision has now been omitted by the Finance Act, 2017.
End of Document
[s 53L] Restriction on employment of Chairperson and other Members of Appellate
Tribunal in certain cases
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > [CHAPTER
VIIIA] COMPETITION APPELLATE TRIBUNAL
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
1[CHAPTER VIIIA] COMPETITION APPELLATE TRIBUNAL
The Union Government brought in multiple changes through the Finance Act, 2017. It scrapped eight AppellateTribunals,2 and
the Competition Appellate Tribunal (COMPAT) was one among them.3 Sections 171 and 172 of the Finance Act, 2017
amended the Competition Act, 2002 and the Companies Act, 2013, respectively. Section 171 amended sections 53A and 2(ba)
of the Competition Act, 2002 to the effect that the COMPAT has ceased to exist as the Appellate Tribunal, effective from 26
May 2017. The National Company Law Appellate Tribunal (NCLAT) will now be the Appellate Tribunal against the orders of
the Competition Commission of India (CCI). There will be a transition phase during which all pending matters before the
COMPAT stand transferred to the NCLAT. During this period, all such matters will be heard afresh by the NCLAT. The
procedural aspects of this transition have not been provided for yet.
Relevant provisions of the Finance Act, 2017 has been reproduced below:
(b) in Chapter VIIIA, for the heading, the following heading shall be substituted, namely:—
“APPELLATE TRIBUNAL”;
171(c) for section 53A, the following section shall be substituted, namely:—
[s 53A] The National Company Law Appellate Tribunal constituted under section 410 of the Companies Act, 2013 shall, on and
from the commencement of Part XIV of Chapter VI of the Finance Act, 2017, be the Appellate Tribunal for the purposes of this
Act and the said Appellate Tribunal shall—
(a) hear and dispose of appeals against any direction issued or decision made or order passed by the Commission under
sub-sections (2) and (6) of section 26, section 27, section 28, section 31, section 32, section 33, section 38, section 39,
section 43, section 43A, section 44, section 45 or section 46 of this Act; and
(b) adjudicate on claim for compensation that may arise from the findings of the Commission or the orders of the
Appellate Tribunal in an appeal against any finding of the Commission or under section 42A or under sub-section (2)
of section 53Q of this Act, and pass orders for the recovery of compensation under section 53N of this Act.”;
(c) sections 53C, 53D, 53E, 53F, 53G, 53H, 53-I, 53J, 53K, 53L, 53M and 53R shall be omitted;
(d) in section 63, in sub-section (2), clauses (mb), (mc) and (md) shall be omitted.
Page 2 of 3
[s 53L] Restriction on employment of Chairperson and other Members of Appellate Tribunal in certain cases
172. In the Companies Act, 2013,—
(a) in section 410, for the words “for hearing appeals against the orders of the Tribunal”, the following shall be
substituted, namely:—
“for hearing appeals against,—
(a) the order of the Tribunal under this Act; and
(b) any direction, decision or order referred to in section 53N of the Competition Act, 2002 in accordance with the
provisions of that Act.”;
(b) after section 417, the following section shall be inserted, namely:—
“417A. Notwithstanding anything contained in this Act, the qualifications, appointment, term of office, salaries
and allowances, resignation, removal and other terms and conditions of service of the Chairperson and other
Members of the Appellate Tribunal appointed after the commencement of Part XIV of Chapter VI of the Finance
Act, 2017, shall be governed by the provisions of section 184 of that Act:
Provided that the Chairperson and Member appointed before the commencement of Part XIV of Chapter VI of
the Finance Act, 2017, shall continue to be governed by the provisions of this Act and the rules made thereunder
as if the provisions of section 184 of the Finance Act, 2017 had not come into force.”
Although, the COMPAT and ceased to exist as laid out under the Finance Act, 2017, the NCLAT has been given the same
appellate powers as it vested in COMPAT. The following discussion therefore would be relevant in understanding the nature
and scope of jurisdiction of the appellate authority.
Position prior to Finance Act, 2017
[s 53L] Restriction on employment of Chairperson and other Members of Appellate
Tribunal in certain cases49
The Chairperson and other Members of the Appellate Tribunal shall not, for a period of two years from the date on which
they cease to hold office, accept any employment in, or connected with the management or administration of, any
enterprise, which has been a party to a proceeding before the Appellate Tribunal under this Act:
Provided that nothing contained in this section shall apply to any employment under the Central Government or a State
Government or a local authority or in any statutory authority or in any corporation established by or under any Central,
State or Provincial Act or a Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956).
SCOPE OF THE SECTION
This section was inserted by the Competition (Amendment) Act, 2007 to place restriction on employment of Chairperson
and Members of the Appellate Tribunal, after they cease to hold office. They cannot accept any employment elsewhere for
two years from the date of their retirement. However, this restriction shall not apply to any employment under the
Central/State Government, local authority, or any Corporation established under any Central/State Act or any Government
company.
Page 3 of 3
[s 53L] Restriction on employment of Chairperson and other Members of Appellate Tribunal in certain cases
1 Chapter VIIIA containing sections 53A to 53U inserted by Act 39 of 2007, section 43,
section 53A inserted with effect from 12 October 2007, section 53B inserted with effect from 20 May 2009, sections 53C to 53M
inserted with effect from 20 December 2007 and sections 53N to 53U inserted with effect from 20 May 2009.
2 Airports Economic Regulatory Authority Appellate Tribunal and Cyber Appellate Tribunal
would be replaced by the Telecom Disputes Settlement and Appellate Tribunal. Copyright Board would be dissolved and its
functions would be taken over by the Intellectual Property Appellate Board. The National Highways Tribunal would be replaced
and its functions would be taken over by the Airport Appellate Tribunal. The functions of Employees Provident Fund Appellate
Tribunal would be taken over by the Industrial Tribunal.
3 COMPAT has ceased to exist from 26 May 2017. [SO 1696(E), Notification, Ministry of
Finance, dated 26 May 2017].
49 This provision has now been omitted by the Finance Act, 2017.
End of Document
[s 53M] Staff of Appellate Tribunal
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > [CHAPTER
VIIIA] COMPETITION APPELLATE TRIBUNAL
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
1[CHAPTER VIIIA] COMPETITION APPELLATE TRIBUNAL
The Union Government brought in multiple changes through the Finance Act, 2017. It scrapped eight AppellateTribunals,2 and
the Competition Appellate Tribunal (COMPAT) was one among them.3 Sections 171 and 172 of the Finance Act, 2017
amended the Competition Act, 2002 and the Companies Act, 2013, respectively. Section 171 amended sections 53A and 2(ba)
of the Competition Act, 2002 to the effect that the COMPAT has ceased to exist as the Appellate Tribunal, effective from 26
May 2017. The National Company Law Appellate Tribunal (NCLAT) will now be the Appellate Tribunal against the orders of
the Competition Commission of India (CCI). There will be a transition phase during which all pending matters before the
COMPAT stand transferred to the NCLAT. During this period, all such matters will be heard afresh by the NCLAT. The
procedural aspects of this transition have not been provided for yet.
Relevant provisions of the Finance Act, 2017 has been reproduced below:
(b) in Chapter VIIIA, for the heading, the following heading shall be substituted, namely:—
“APPELLATE TRIBUNAL”;
171(c) for section 53A, the following section shall be substituted, namely:—
[s 53A] The National Company Law Appellate Tribunal constituted under section 410 of the Companies Act, 2013 shall, on and
from the commencement of Part XIV of Chapter VI of the Finance Act, 2017, be the Appellate Tribunal for the purposes of this
Act and the said Appellate Tribunal shall—
(a) hear and dispose of appeals against any direction issued or decision made or order passed by the Commission under
sub-sections (2) and (6) of section 26, section 27, section 28, section 31, section 32, section 33, section 38, section 39,
section 43, section 43A, section 44, section 45 or section 46 of this Act; and
(b) adjudicate on claim for compensation that may arise from the findings of the Commission or the orders of the
Appellate Tribunal in an appeal against any finding of the Commission or under section 42A or under sub-section (2)
of section 53Q of this Act, and pass orders for the recovery of compensation under section 53N of this Act.”;
(c) sections 53C, 53D, 53E, 53F, 53G, 53H, 53-I, 53J, 53K, 53L, 53M and 53R shall be omitted;
(d) in section 63, in sub-section (2), clauses (mb), (mc) and (md) shall be omitted.
Page 2 of 3
[s 53M] Staff of Appellate Tribunal
172. In the Companies Act, 2013,—
(a) in section 410, for the words “for hearing appeals against the orders of the Tribunal”, the following shall be
substituted, namely:—
“for hearing appeals against,—
(a) the order of the Tribunal under this Act; and
(b) any direction, decision or order referred to in section 53N of the Competition Act, 2002 in accordance with the
provisions of that Act.”;
(b) after section 417, the following section shall be inserted, namely:—
“417A. Notwithstanding anything contained in this Act, the qualifications, appointment, term of office, salaries
and allowances, resignation, removal and other terms and conditions of service of the Chairperson and other
Members of the Appellate Tribunal appointed after the commencement of Part XIV of Chapter VI of the Finance
Act, 2017, shall be governed by the provisions of section 184 of that Act:
Provided that the Chairperson and Member appointed before the commencement of Part XIV of Chapter VI of
the Finance Act, 2017, shall continue to be governed by the provisions of this Act and the rules made thereunder
as if the provisions of section 184 of the Finance Act, 2017 had not come into force.”
Although, the COMPAT and ceased to exist as laid out under the Finance Act, 2017, the NCLAT has been given the same
appellate powers as it vested in COMPAT. The following discussion therefore would be relevant in understanding the nature
and scope of jurisdiction of the appellate authority.
Position prior to Finance Act, 2017
[s 53M] Staff of Appellate Tribunal50
(1) The Central Government shall provide the Appellate Tribunal with such officers and other employees as it may
think fit.
(2) The officers and other employees of the Appellate Tribunal shall discharge their functions under the general
superintendence and control of the Chairperson of the Appellate Tribunal.
(3) The salaries and allowances and other conditions of service of the officers and other employees of the Appellate
Tribunal shall be such as may be prescribed.
SCOPE OF THE SECTION
This section was inserted by the Competition (Amendment) Act, 2007 to provide for staff of the Appellate Tribunal who
shall discharge their functions under the general superintendence of the Chairperson.
Page 3 of 3
[s 53M] Staff of Appellate Tribunal
1 Chapter VIIIA containing sections 53A to 53U inserted by Act 39 of 2007, section 43,
section 53A inserted with effect from 12 October 2007, section 53B inserted with effect from 20 May 2009, sections 53C to 53M
inserted with effect from 20 December 2007 and sections 53N to 53U inserted with effect from 20 May 2009.
2 Airports Economic Regulatory Authority Appellate Tribunal and Cyber Appellate Tribunal
would be replaced by the Telecom Disputes Settlement and Appellate Tribunal. Copyright Board would be dissolved and its
functions would be taken over by the Intellectual Property Appellate Board. The National Highways Tribunal would be replaced
and its functions would be taken over by the Airport Appellate Tribunal. The functions of Employees Provident Fund Appellate
Tribunal would be taken over by the Industrial Tribunal.
3 COMPAT has ceased to exist from 26 May 2017. [SO 1696(E), Notification, Ministry of
Finance, dated 26 May 2017].
50 This provision has now been omitted by the Finance Act, 2017.
End of Document
*[s 53N] Awarding compensation
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > [CHAPTER
VIIIA] COMPETITION APPELLATE TRIBUNAL
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
1[CHAPTER VIIIA] COMPETITION APPELLATE TRIBUNAL
The Union Government brought in multiple changes through the Finance Act, 2017. It scrapped eight AppellateTribunals,2 and
the Competition Appellate Tribunal (COMPAT) was one among them.3 Sections 171 and 172 of the Finance Act, 2017
amended the Competition Act, 2002 and the Companies Act, 2013, respectively. Section 171 amended sections 53A and 2(ba)
of the Competition Act, 2002 to the effect that the COMPAT has ceased to exist as the Appellate Tribunal, effective from 26
May 2017. The National Company Law Appellate Tribunal (NCLAT) will now be the Appellate Tribunal against the orders of
the Competition Commission of India (CCI). There will be a transition phase during which all pending matters before the
COMPAT stand transferred to the NCLAT. During this period, all such matters will be heard afresh by the NCLAT. The
procedural aspects of this transition have not been provided for yet.
Relevant provisions of the Finance Act, 2017 has been reproduced below:
(b) in Chapter VIIIA, for the heading, the following heading shall be substituted, namely:—
“APPELLATE TRIBUNAL”;
171(c) for section 53A, the following section shall be substituted, namely:—
[s 53A] The National Company Law Appellate Tribunal constituted under section 410 of the Companies Act, 2013 shall, on and
from the commencement of Part XIV of Chapter VI of the Finance Act, 2017, be the Appellate Tribunal for the purposes of this
Act and the said Appellate Tribunal shall—
(a) hear and dispose of appeals against any direction issued or decision made or order passed by the Commission under
sub-sections (2) and (6) of section 26, section 27, section 28, section 31, section 32, section 33, section 38, section 39,
section 43, section 43A, section 44, section 45 or section 46 of this Act; and
(b) adjudicate on claim for compensation that may arise from the findings of the Commission or the orders of the
Appellate Tribunal in an appeal against any finding of the Commission or under section 42A or under sub-section (2)
of section 53Q of this Act, and pass orders for the recovery of compensation under section 53N of this Act.”;
(c) sections 53C, 53D, 53E, 53F, 53G, 53H, 53-I, 53J, 53K, 53L, 53M and 53R shall be omitted;
(d) in section 63, in sub-section (2), clauses (mb), (mc) and (md) shall be omitted.
172. In the Companies Act, 2013,—
Page 2 of 37
*[s 53N] Awarding compensation
(a) in section 410, for the words “for hearing appeals against the orders of the Tribunal”, the following shall be
substituted, namely:—
“for hearing appeals against,—
(a) the order of the Tribunal under this Act; and
(b) any direction, decision or order referred to in section 53N of the Competition Act, 2002 in accordance with the
provisions of that Act.”;
(b) after section 417, the following section shall be inserted, namely:—
“417A. Notwithstanding anything contained in this Act, the qualifications, appointment, term of office, salaries
and allowances, resignation, removal and other terms and conditions of service of the Chairperson and other
Members of the Appellate Tribunal appointed after the commencement of Part XIV of Chapter VI of the Finance
Act, 2017, shall be governed by the provisions of section 184 of that Act:
Provided that the Chairperson and Member appointed before the commencement of Part XIV of Chapter VI of
the Finance Act, 2017, shall continue to be governed by the provisions of this Act and the rules made thereunder
as if the provisions of section 184 of the Finance Act, 2017 had not come into force.”
Although, the COMPAT and ceased to exist as laid out under the Finance Act, 2017, the NCLAT has been given the same
appellate powers as it vested in COMPAT. The following discussion therefore would be relevant in understanding the nature
and scope of jurisdiction of the appellate authority.
Position prior to Finance Act, 2017
*[s 53N] Awarding compensation
(1) Without prejudice to any other provisions contained in this Act, the Central Government or a State Government
or a local authority or any enterprise or any person may make an application to the Appellate Tribunal to
adjudicate on claim for compensation that may arise from the findings of the Commission or the orders of the
Appellate Tribunal in an appeal against any finding of the Commission or under section 42A or under sub-section
(2) of section 53Q of the Act, and to pass an order for the recovery of compensation from any enterprise for any
loss or damage shown to have been suffered, by the Central Government or a State Government or a local
authority or any enterprise or any person as a result of any contravention of the provisions of Chapter II, having
been committed by the enterprise.
(2) Every application made under sub-section (1) shall be accompanied by the findings of the Commission, if any,
and also be accompanied with such fees as may be prescribed.
(3) The Appellate Tribunal may, after an inquiry made into the allegations mentioned in the application made under
sub-section (1), pass an order directing the enterprise to make payment to the applicant, of the amount determined
by it as realisable from the enterprise as compensation for the loss or damage caused to the applicant as a result of
any contravention of the provisions of Chapter II having been committed by such enterprise:
Provided that the Appellate Tribunal may obtain the recommendations of the Commission before passing an
order of compensation.
(4) Where any loss or damage referred to in sub-section (1) is caused to numerous persons having the same interest,
one or more of such persons may, with the permission of the Appellate Tribunal, make an application under that
sub-section for and on behalf of, or for the benefit of, the persons so interested, and thereupon, the provisions of
Page 3 of 37
*[s 53N] Awarding compensation
Rule 8 of Order I of the First Schedule to the Code of Civil Procedure, 1908 (5 of 1908), shall apply subject to
the modification that every reference therein to a suit or decree shall be construed as a reference to the application
before the Appellate Tribunal and the order of the Appellate Tribunal thereon.
Explanation.—For the removal of doubts, it is hereby declared that—
(a) an application may be made for compensation before the Appellate Tribunal only after either the
Commission or the Appellate Tribunal on appeal under clause (a) of sub-section (1) of section 53A of the
Act, has determined in a proceeding before it that violation of the provisions of the Act has taken place, or if
provisions of section 42A or sub-section (2) of section 53Q of the Act are attracted.
(b) enquiry to be conducted under sub-section (3) shall be for the purpose of determining the eligibility and
quantum of compensation due to a person applying for the same, and not for examining afresh the findings of
the Commission or the Appellate Tribunal on whether any violation of the Act has taken place.
SCOPE OF THE SECTION
The Commission does not entertain private antitrust petitions for any claim of compensation. However, the Tribunal under
section 53N of the Competition Act, 2002 can award compensation to the Central Government, a state government, a local
authority or any enterprise or person on an application made by such a government, authority, enterprise or person. No
cause of action for the adjudication of a compensation claim would arise if there is no finding of violations of the
provisions of the Competition Act, 2002, by the Commission or the Tribunal on any appeal against the findings of the
Commission or contravention of the orders of the Commission under section 42A, or contravention of the orders of
Tribunal under section 53Q of the Act. Loss or damage has to be shown by the applicant to claim compensation.
The term “compensation” is not defined under the Competition Act, 2002. However, as per section 53N(3) of the Act,
Tribunal can be approached for compensation for any loss or damage shown to have been suffered by the applicant before
Tribunal as a result of any contravention of the provisions of Chapter II of the Act by the enterprise from whom
compensation is being claimed. In these circumstances, it is probable that the term “compensation” will be interpreted in
its most general sense, meaning “something meant to make good any loss or damage shown to have been suffered by the
applicant”. As regards quantification of compensation, a claim for “compensation” for the purposes of an application under
section 53N(1) of the Act will have to be supported by documentary or oral evidence, or both, demonstrating the loss or
damage that such a party may have suffered as a result of any contravention of the provisions of the Act or of order(s) of
the Commission or the Tribunal, having been committed by an enterprise.
Under section 53N of the Competition Act, 2002 damages actions can be pursued through applications to the Competition
Appellate Tribunal and not to the Competition Commission, a slightly different set-up from the MRTP Act, 1969. The
explanation to section 53N explicitly states that such applications can only be made after the Commission or Tribunal has
found evidence of violations and no compensation application requiring new investigations would be permitted. The
claimants are therefore required to attach the findings of the Competition Commission or the Tribunal with respect to
public enforcement in their application. The explanation to section 53N of the Competition Act makes it clear that
compensation decisions by the Tribunal would be based on the evidence obtained under public enforcement, and the task
of the Tribunal would be only to determine the eligibility and quantum of the compensation due and not to reassess
whether there has been a violation of the Competition Act. Thus public enforcement evidence would guide private
enforcement.51
LEGISLATIVE BACKGROUND
Section 12B of MRTP Act, 1969, since repealed provided for the power of MRTP Commission to award damages, as
follows:
Provisions under the MRTP Act, 1969
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Section 12B. Power of the Commission to award compensation.—(1) Where, as a result of the monopolistic or restrictive, or unfair
trade practice, carried on by any undertaking or any person, any loss or damage is caused to the Central Government, or any State
Government or any trader or class of traders or any consumer, such Government or, as the case may be, trader or class of traders or
consumer may, without prejudice to the right of such Government, trader or class of traders or consumer to institute a suit for the
recovery of any compensation for the loss or damage so caused, make an application to the Commission for an order for the
recovery from that undertaking or owner thereof or, as the case may be, from such person, of such amount as the Commission may
determine, as compensation for the loss or damage so caused.
(2) Where any loss or damage referred to in sub-section (1) is caused to numerous persons having the same interest, one or more of
such persons may, with the permission of the Commission, make an application, under that sub-section, for and on behalf of, or for
the benefit of, the persons so interested, and thereupon the provisions of Rule 8 of Order I of the First Schedule to the Code of Civil
Procedure, 1908 (5 of 1908), shall apply subject to the modification that every reference therein to a suit or decree shall be
construed as a reference to the application before the Commission and the order of the Commission thereon.
(3) The Commission may, after an inquiry made into the allegations made in the application filed under sub-section (1), make an
order directing the owner of the undertaking or other person to make payment, to the applicant, of the amount determined by it as
realisable from the undertaking or the owner thereof, or, as the case may be, from the other person, as compensation for the loss or
damage caused to the applicant by reason of any monopolistic or restrictive, or unfair, trade practice carried on by such
undertaking or other person.
(4) Where a decree for the recovery of any amount as compensation for any loss or damage referred to in sub-section (1) has been
passed by any court in favour of any person or persons referred to in sub-section (1) or, as the case may be, sub-section (2), the
amount, if any, paid or recovered in pursuance of the order made by the Commission under sub-section (3) shall be set off against
the amount payable under such decree and the decree shall, notwithstanding anything contained in the Code of Civil Procedure,
1908 (5 of 1908) or any other law for the time being in force, be executable for the balance, if any, left after such set off.
Sachar Committee
The said provisions were based on the recommendations of Sachar Committee, reproduced below:
In all the legislations the world over, provision exists enabling an affected party to seek remedy for being compensated for loss or
damage suffered by it at the hands of a person who has indulged in prohibited practices. Thus, section 7 of the Sherman Act and
section 4 of Clayton Act (USA) provide that any person who has been injured in his business or property by reason of anything
forbidden or declared to be unlawful may sue with respect to the amount in controversy and recover three-fold the damages
sustained and the cost. Similarly, section 6 of the Federal Act (Switzerland) also provides that any person whose interests are
affected by unlawful interference with the competition may request damages for any wrongful act or omission.
Section 6 of the Competition Act, 2002 against Restraint of Competition (Spain) also provides for a person, who suffers
damages by reason of restrictive trade practices that are declared to be prohibited, to recover damages.
Section 25 of the Competition Act, 2002 concerning Prohibition of Private Monopoly and Maintenance of Fair Trade Act
(Japan) makes an entrepreneur, who has employed unfair business practices, to be liable to indemnify the person injured.
Section 82 of the Trade Practices Act, 1974 (Australia) as amended up to 1977, also provides that a person who suffers
loss or damages by conduct of a person which is in violation of the provisions relating to restrictive trade practices and
unfair trade practices may recover the amount of loss or damages by action against that other person.52
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Similarly, the Combines Investigation Act of Canada, amended by the Competition Bill, 1977, also provides by section
31.1 the right of any party to recover damages from the person who has indulged in trade practices, which are prohibited.
Power to award damages has quite frequently and liberally been used by Courts in America, West Germany and elsewhere,
when it has been found that any party has acted against competition and indulged in any of the prohibited practices. One of
the most important cases relating to the award of damages in America relates to the Tetracycline case. In that case, the
Federal Trade Commission charged three companies, viz, Pfizer, Cyanamide and Bristol, for having monopolised and
fixed the price of tetracycline and two chemically related antibiotics. Claims were filed by the cities and their political sub-
divisions for reimbursement for purchases of the antibiotics made at a retail store by welfare patients. Ultimately in 1969,
the companies agreed to pay $120 million and final claims to the cities, states and others. One of the important cases
decided by the US Supreme Court more recently relates to the treble damage suit brought in the United States by the
Governments of India, Iran and Philippines for alleged price fixing by six major United States pharmaceutical companies
in respect of their sales of broad range of antibiotic drugs (Pfizer Inc v Government of India et al no 76-749, decision 11
January 1978). In this case, the United States Supreme Court has confirmed that foreign Governments damaged by
restrictive business practices of United States enterprises contravening United States Restrictive Business Practices
Legislation are entitled to sue for treble damages.
The provision for claiming damages are thus an established principle. It is also logical and equitable to provide that any
person who is affected by any prohibited practice should have a remedy to recover damages and compensation from the
guilty party. We, therefore, feel that a similar provision as in Australian and Canadian Acts should be made in our Act to
the effect that any person, authority, Central or State Government who has suffered loss or damage as a result of conduct
of another person having indulged in any of the prohibited practices, viz, monopolistic trade practices, restrictive trade
practices and unfair trade practices, will be entitled to recover the amount of loss or damage including costs suffered by
him from the party who has indulged in any of the prohibited practices. We feel that such a provision in our country will
have a salutary effect and that it may prevent the prohibited practices from being indulged. The remedy by way of damages
will act as a deterrent to these prohibited practices right from incipiency and motivate the producers and suppliers
themselves to desist from indulging in such practices.
We are including Central and States Governments and other authorities in this provision for the reason that the
Governments, like any other person, also make mass purchases of many goods for their use in hospitals, stores, canteens
and messes etc, and if as a result of prohibited practice, they have suffered damages, it is only natural that they should also
be in a position to recover the same.
There is also to be found a procedure for recovery of damages not only at the instance of an individual but through what is
called “class action”. In this kind of action, proceedings are brought by one or more members of a class on behalf of
persons who are permitted to do so by the Court, if it finds that questions of law or of fact or causes of action are common
to the members of a class and predominate over questions affecting only individual members and that there are sufficient
members of that class who are likely to have suffered significant quantum of loss or damage. In such a case, the Court
permits one or two members of the class to bring action on behalf of that class. Where the Court finds that a claim has been
proved, it awards compensation and damages to all the members of the class and may give judgement in favour of each
member also. Of course, before trying a “class action,” general notice would have to be given for the benefit of those
persons on whose behalf class action is sought to be brought and, unless any person specifically excludes himself from that
action the result of a judgment in a class action will constitute a final judgment between each member of the class in
question and each person against whom the class action was taken with respect to the conduct or failure alleged was
brought. The necessity for providing this procedure of class action is that it is possible that a large number of persons who
may have suffered damages at the hands of a producer, or supplier or seller but, being poor and not possessed of sufficient
resources, may not be able to bring individually separate proceedings against the delinquent. In such a case, if individual
action was insisted on, the result will be to deprive large number of such poor persons from the benefit of the consumer
protection legislation. Detailed procedure for such class action is provided in section 39.1 of the Competition Bill, 1977 of
Canada.
Case law under Monopolies and Restrictive Trade Practices Act, 1969 (MRTP Act)
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Section 12B of the MRTP Act, 1969 was provided by the legislature by way of remedy and with a view to providing a
deterrence to prohibited trade practices, even where they arise out of contractual transactions.53
In Devendra Kumar Chandu Lal Shah v Indian Rayon Corp Ltd,54 in an enquiry under MRTP Act, 1969, it was contended
by the petitioner that in an earlier UTP Enquiry No 5/1987 against the respondent, the Commission by its order dated 22
May 1987 passed a “cease and desist” order with the observation that
in case any loss or damage if at all suffered by any investor, he has to seek redress under section 12B of the MRTP Act.
The complainant’s case was that influenced by the misleading advertisements made by the respondent, he was led to sell
certain number of shares in the market at a lesser rate of Rs 63.50 per share as against Rs 76.50 per share, the ruling price
on the date of the advertisement and thereby suffered a total loss of Rs 1,162.50 and a further notional loss of Rs 1,300,
i.e., the difference between the expected price of Rs 76.50 per share and the actual price to be received at Rs 63.50 per
share, had he also sold the further 100 shares received after conversion of debentures. He also contended that he should be
allowed to file a representative claim on behalf of other investors/debenture holders, on the assumption that the total loss
suffered by them would be of the order of Rs 22 crores, having regard to the size of the Debenture issue, and the likely
number of debenture holders based on an average of 100 debentures for each such holder. The Commission dismissed the
application of the complainant made by him, under section 12B(2) of the MRTP Act, 1969, with the following
observations:
In the first instance, the basis for the representative claim to be filed on behalf of numerous debenture holders of the Respondent’s
company is totally hypothetical without specification of the interest of all such debenture holders. There is no indication
whatsoever in regard to the names and particulars of such possible claimants, the number of debentures held by them and the fact
whether they had actually sold their shares after conversion at the market rate prevailing at the same time when the applicant had
claimed to have sold the same. It is common knowledge that market price of shares keeps on changing. Apparently, the nature of
their claim, if at all, would be different depending upon whether they at all sold those shares at the lower prices and at what time.
The complainant had proceeded on the law of averages without giving even the basic minimum requirements to make such a law
operative. In the absence of details, it is well-nigh impossible to say that the claims of any such claimants if they really intend to
make a claim will be even similar—much less the same, as required under Order 1 Rule 8 of the Code of Civil Procedure.
Section 12B(2) of the Act stipulates that where any loss or damage referred to in sub-section (1) is caused to numerous persons
having the same interest, one or more of such persons may, with the permission of the Commission, make an application for and on
behalf of, or for the benefit of the persons so interested, and thereupon the provisions of Rule 8 of order I of the First Schedule to
the Code of Civil Procedure shall apply. The provisions of Order I Rule 8 of the Code of Civil Procedure stipulate ‘same’ and not
only ‘similar’ interest of the claimants in a particular claim or suit and also the specification of the same interest of the numerous
claimants. The nature and exact particulars of interest of various claimants have to be specified in a representative claim so as to
enable the court to be satisfied that the interest is the same and in case of default by the person who is allowed to sue in
representative capacity, the matter may be entrusted to some other person representing therein to avoid a common loss to others.
As pointed out above, in the instance case, there is no specification of exact interest of the potential claimants against the said
Respondent. So it cannot be said that they have the same interest. The word ‘same’ is not equivalent to ‘similar’ or even ‘common’
interest. In the absence of the ‘same’ interest, a representative suit cannot be allowed. Herein, the so-called interest of the various
claimants on whose behalf representative claim is sought to be made has not even been specified—much less to show that they
have the same interest.
The claim of the potential claimants, if any, cannot possibly be the ‘same’. It is of course understandable that they may have a
common interest inasmuch as if they might have actually sold their shares at substantially lower price and thereby suffered a loss
by reason of alleged unfair trade practice indulged in by the Respondent. But that by itself is not a ground to allow the application
under section 12B(2) of the Act. Significantly, it had already been specifically provided in the Commission’s order dated 22 May
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1987 that in case of any loss or damage suffered by any investor, he has to seek redress under section 12B of the Act. In the
absence of such specific direction it could possibly be said that there is at least some common interest between such potential
claimants, i.e., proof of unfair trade practice on the part of the investors before making a specific claim. That is also not the case
here. As pointed out above, the commonality of interest is not the same thing as ‘the same interest’ within the meaning of section
12B(2) of the Act read with Order I Rule 8 of the C.P.C.
In an application for compensation under section 12B of MRTP Act, 1969, the Commission held that two parallel
proceedings under different forums cannot be allowed to go together, following the decisions in Pragati Construction Co v
Otis Elavators Co (India) Ltd;55 Oriental Agencies v Tata Oil Mills Co Ltd;56 DG (I & R) v Sahyadri Motors Agencies
and Mahindra & Mahindra Ltd57 and Radheyshyam Agarwal v Regional Manager, Maharashtra State Financial Corp.58
Unlike section 11 and section 36C, there was no provision in section 12B for preliminary investigation by Director General
into the allegations levelled in the claim petition. A preliminary inquiry was, therefore, not a condition precedent to the
maintainability of claim under section 12B. The rule of audi alteram partem did not superimpose an obligation on the
Commission to issue a prior notice to the party against whom a claim was lodged; hear him and then decide whether to
proceed with the claim preferred under section 12B.59
In Corporation Bank v Navin,60 the Commission rejected out of hand the offer made by the supplier to replace the
machine without prejudice to its contentions that the first machine was defective. No explanation was called for from the
party as to why it did not respond to the offer. In the circumstances, the Commission erred in holding the respondent guilty
of restrictive trade practice (RTP) or unfair trade practice (UTP) and in allowing compensation. It would be inequitable
after long time lapse to ask the supplier to replace the machine. Besides, it was the contention of the supplier all along that
the party had used the machine. The order of the Commission was accordingly set aside.61
An application for compensation under section 12B will not be thrown out for trivial irregularities, like failure to file an
affidavit in accordance with MRTP Regulations, 1991.62
Order of the Commission only after enquiry
Under sub-section (2) of section 34, the Commission can order compensation only after making an enquiry into the
allegations made in the application. The enquiry under section 34 needs to be more detailed for it involves the question of
adjudicating on a claim for compensation. Therefore, much more evidence than what would be necessary for passing a
cease and desist order would be called for. Also the type of evidence to be led and the cross-examination would tend to be
more complicated and involved in view of the monetary consequences that such an enquiry would ultimately result into. A
question that arises in that connection is whether a finding made by the Commission in the enquiry under sections 19 or 20
of the Competition Act, 2002 can be used as evidence in respect of a claim for compensation under section 34. Although,
the finding in the proceeding under section 19 or 20 may be helpful, it is possible that the respondent to the enquiry desires
to agitate those findings de novo in view of the monetary detriments he might have to face ultimately. Also where under
section 19 or 20 of the Act, the respondent to the enquiry has consented to the passing of cease and desist order, that itself
would not be conclusive, for a claim for compensation under section 34. In short, the proceedings in an enquiry for award
of compensation under section 34 would be more detailed and thorough besides being technical (mostly at the instance of
the respondent) as the result of the enquiry may be the parting with of the money by way of compensation by the
respondent to the enquiry. As already observed, in compensation claim proceedings, it is not possible to be mathematically
precise. Where the facts of the case are such that it is not possible to precisely quantify the compensation payable, it is
permissible in the light of judicial authority, abroad, for the Commission to estimate the compensation payable. No doubt,
it would not be a mere exercise in prophesying but would be an exercise in approximation.
Of the few cases for award of compensation for loss or damage, which came up before the MRTP Commission, the more
interesting ones are discussed below:
Re Sheri Louise Slimming Centre Pvt Ltd,63 the respondent had been falsely advertising that patients undergoing treatment
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with them could lose 10 kilograms of weight in 23 days without use of drugs, exercise, hunger and gadgets gimmicks.
Actually, it has been administering such drugs, which reduce appetite. Among those drugs, Amphetamine was one having
adverse reaction on the health of the patient. The respondent made a representation in their advertisement captioned “Dr
claims Sheri Louise—a safe health weight loss programme”, whereas the Doctor said to have been interviewed in the
above advertisement, is an employee of the respondent. A false representation was also made by the respondent that in
their weight loss programme, only unwanted abnormal fat is removed. False representation was also made that they have
affiliation in USA, Europe and Middle East. It was wrongly claimed that its programme was internationally tested and
approved. On the prayer made, the respondents were directed by the Commission to issue corrective advertisements. In
regard to award of compensation, on the basis of negotiations between the complainant and the respondent, the
Commission directed the four respondents to pay the amount of Rs 37,234.31 to the complainants, and cost of Rs 5,000
was awarded to the Director General. It was clarified that this order will not affect in any way the applications under
section 12B, which have already been filed and which might be filed afterwards.
Re Eskay Electronics (India) Pvt Ltd,64 the respondent No 1 offered to exchange Black & White TV for Bigston Colour
TV Deluxe Model for Rs 6,800, after obtaining discount by way of adjustment of Rs 1,850 for the applicant’s Black and
White TV. The applicant asked for compensation for the following amounts:
(1) Rs 6,800 being the cost of purchase of the TV and return of Sharp Black and White TV or Rs 1,850 in lieu of it.
(2) Rs 200 pm as compensation for loss of viewing pleasure of TV for each month the defect in the TV continued.
(3) Rs 200 towards charges incurred for travelling to the factory/office/showroom of the above named firm to seek
rectification of defects.
(4) Costs of these proceedings to the Petitioner.
The Applicant purchased the TV set for Rs 8,650 as per the invoice issued by the respondent through cash payment
amounting to Rs 6,800 and the balance Rs 1,850 being the amount adjusted on account of Bigston Black & White TV
exchanged. The Commission awarded to the applicant the entire claim of Rs 8,650.
The compensation claimed “for loss of viewing pleasure” was considered too intangible and variable factor to be computed
in terms of money and the claim for compensation on this score was not accepted. The claim of Rs 200 incurred for
travelling was accepted, considering the distance between the applicant’s residence and the factory of the respondent. The
claim towards cost of the proceedings was not quantified and hence was not accepted. Accordingly, a total compensation
of Rs 8,850 and interest at 12% per annum from the date of the order till the recovery of the amount was awarded.
Re Medical Hair Centre,65 the respondent claimed growth of hair on the bald scalp of the patients under various age
groups after receiving treatment from them. The applicant paid Rs 6,750 and after receiving treatment, no improvement in
the growth of hair was found. In the instant case, the respondent falsely represented that their services are of a particular
standard, quality or grade. The Commission passed a decree for Rs 14,100 with interest at 12% per annum from 13
February 1989 till the date of the order and further interest at 12% per annum till the recovery of the amount.
Re Superfine Typewriters,66 the Commission held that compensation under section 12B implies that the person, who
suffers damage or loss, is to be re-compensated or put into the same position, as he would have been if the unfair trade
practice would not have been committed. Under section 73 of the Indian Contract Act, 1872 compensation is recoverable
for any loss or damage arising naturally in the usual course of things from the breach, or which the parties knew at the time
of the contract as likely to result from the breach.
Re Dhantak & Co,67 the respondent promised that in the “TV Quiz Contest” organised by it the prizes would be free, but it
was not so. The respondent filed an undertaking that in future such type of contest will not be held. Accordingly, further
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proceedings were dropped by the Commission, observing that this order will not debar any application that may be filed
under section 12B.
In MK Menon v Orient Finance & Exchange Co,68 the respondent was already held to have committed unfair trade
practice by an earlier order69 of the Commission in accepting deposits from public through false representation. On the
application under section 12B, the Commission passed a decree for Rs 17,000 (being the deposit made by the petitioner
with the respondent) with interest at 12% per annum from the date of the order till the recovery of the amount in favour of
the petitioner. Since some properties of the respondent were attached on account of some other decrees, the Commission
observed that (i) benefit of that attachment can be availed of by the present decree, also and (ii) further proceedings in
respect of execution of the decree passed by the Commission shall be taken along with the execution proceedings already
pending.
In Y Satyavani v Bharat TV Ltd and Raja Agencies,70 a TV set was sold to the petitioner for Rs 9,150 and thereby
collecting higher amount than the one mentioned in the undertaking given by Bharat TV, the manufacturer to the
Government in connection with the import of components of televisions. The price at the time of giving the undertaking
was so fixed as to include a reasonable margin of profit, but the respondent manipulated the prices in such a manner as to
earn higher margin of profit. The Commission passed a decree for Rs 1,650 with interest at 12% from the date of purchase
of the TV till realisation of the amount in favour of the petitioner and against both the respondents making them liable to
pay the decretal amount jointly and severally.
In Neeru Anand v Sheri Louise Slimming Centre,71 Randana Chadha v Sheri Louise Slimming Centre,72 and Neera Gupta
v Sheri Louise Slimming Centre,73 the common grievance was that the advertisement of the respondent in the newspaper
dailies and other magazines was completely misleading as the advertisements inter alia claim that in order to reduce the
weight one does not have to undergo any dieting, no exercise and no drugs; Doctors and other staff of the said centre
prescribed treatment for each individual. It was alleged that money, which the respondent charged, was collected under
fraudulent means, as at the start of the course the respondent did not reveal that the applicant would have to follow strict
dieting. As a result of starvation caused by heavy dieting and control of food intake, the applicant Neeru Anand alleged
that ulcer developed in her oesophagus, liver became weak and she suffered from low blood pressure and anaemia, and she
started appearing over-aged as a result of which not only her professional and social standing was adversely affected, but
her marriage prospects were also damaged. In brief, it was asserted that the respondent had ruined the applicant both
physically and mentally with wrongful motive to earn money. Similar allegations were made by the other two applicants,
viz, Mrs Randana Chadha and Neera Gupta. They claimed pecuniary damages for medical & related damages, damages for
fall in earnings, damages for increase in professional expenditure and also non-pecuniary damages, all of the order of Rs
3.54 lakhs, Rs 4.07 lakhs and Rs 5.02 lakhs, respectively. The claims for compensation, as aforesaid were allowed by the
Commission, passing decrees in favour of the said applicants and against the respondent, besides costs. In its order in the
case of Neeru Anand, the Commission while holding that the arrangement between the applicant and the respondent was
not a contract of personal service, inter alia, made the following observations:74
‘Compensation’ in section 12B is used in the sense of reparation for the loss or damage caused. The compensation is, thus, a
monetary equivalent of any loss or damage, and may include namely:
(i) the actual pecuniary loss sustained which can be quantified with precision;
(ii) the indirect pecuniary loss which is nevertheless consequential to the alleged indulging in of an unfair trade practice i.e.,
loss of profits, loss of reputation, loss of business or loss of credit;
(iii) the mental suffering like anxiety, worry, tension and
(iv) bodily suffering like pain, illness, loss of limb, etc.
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The term “loss” refers to both pecuniary and non-pecuniary loss. “Damage” refers to the disadvantage that a person suffers
as a result of the act or omission by another. While this is so, the measurement of compensation is probably one of the
difficult aspects of the law as it stands at present, as the law nowhere provides any suitable yardstick to measure
compensation for loss or damage envisaged under section 12B. In the absence of such a statutory yardstick what should be
awarded as compensation, or more rightly what should be the proper measure of compensation becomes very important. It
is well-settled law that all losses or damages are not compensable. Only those which have a causal connection with the
unfair trade practice or which are the proximate (and not remote) consequences of such unfair trade practices are
compensable. Subject to this broad and acceptable parameter, what should be the measure of compensation yet remains to
be resolved, for the measurement of compensation in tort. In an action for damages for fraudulent misrepresentation, the
amount of damages to which the applicant is entitled is, prima facie “The amount by which the price he has paid exceeds
the true value of the thing bought at the time when he bought it. The basic principle for measure of damages in tort is that
there should be restitution in integrum. In an action for deceit, the proper starting point for the assessment of damages is to
compare the position of the applicant as it was before the fraudulent statement was made to him with his position as it
become as a result of reliance upon the statement. An important factor to be taken into account is whether the victim has
endeavoured to mitigate the loss arising from the tortious act. The applicant must take reasonable steps in this regard. In
short it can be generally stated that restitution in integrum is the object of damages for pecuniary loss and compensation is
the object of damages for non-pecuniary loss though both may overlap many a time”.
In Vijay M Kamath v Marudhar Services Ltd,75 the Commission passed a decree under section 12B of the MRTP Act, 1967
for return of the principal amount and interest thereon against the respondent, for his failure to refund the investment made
by the petitioner; the respondent in this case claimed to have acquired land near Sohna (Gurgaon) and had invited the
public to invest, making false and misleading representations and false promises.
Re Seema Seth v Neha Deep Estates,76 the petitioner Miss Seth purchased a flat from the respondent-builder. In terms of
the agreements entered into, the builder was to complete the flat by 31 December 1987, inter alia, by providing plumbing
lines, laying electric wires, installing of lift, installing overhead water tank coupled with pump, painting/finishing the
common stair case/approach, etc. The respondent-builder having not honoured his promise, a complaint was filed before
the Commission, under section 36A of the MRTP Act, 1969, as also a compensation application under section 12B claiming
Rs 10,64,408 from the respondent-builder, as compensation for not honouring the promises. The Commission held that
non-fulfilment of the promises are not attracted by the definition of the term “service” and as such section 36A of the
MRTP Act, 1969 is not attracted. The Commission, accordingly, observed that the remedy of the petitioner is by way of
filing a suit in Civil Court.
Re Sukhbir Singh Bahl, Advocate,77 the Commission held that an application under section 12B is maintainable only if the
right of compensation arises out of an unfair or restrictive trade practice adopted by the respondent; the right to claim
damages for breach of contract, which does not involve any RTP or UTP, is a civil remedy and may be enforced by filing a
civil suit.
Re Marudhar Services Ltd,78 the Commission ruled against the Respondent that compensation application is not
maintainable without institution of a civil suit as the dispute relates to alleged breach of the terms of the contract. The
Commission also held that the alleged UTP having been rectified/corrected by suitable measures already taken by the
Respondent as per the directions of the Commission, does not take away the right of any investor to apply for
compensation under section 12B, which was saved in the Commission’s earlier order.
Re Kores India Ltd,79 the Respondent failed to repair the copier machine purchased by the complainant despite complaints
during the warranty period, and on the expiry of the said period coerced the complainant to enter into service contract on
further payment, before the fault in the machine could be attended to. The Commission held that to be unfair trade practice
attracting clause (vii) of section 36A(1). The Commission awarded compensation of Rs 43,100, being the cost of machine
paid by the complainant along with interest at 18% per annum, as the machine remained non-operative right from
inception, leaving it open to the respondent to take back his machine. The applicant was also awarded cost of the
proceedings amounting to Rs 2,000. His claim for compensation for loss of goodwill and profits which he would have
otherwise earned as also telephone expenses, rental of the shop, etc., was however, rejected in the absence of satisfactory
evidence for such loss.
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Re Unit Trust of India,80 for its inordinate and unjustified delay in sending the certificates in respect of units under Master
Share Plus Unit Scheme, 1991 (Master Plus), the Commission awarded to the complainant, Dr Ashok Kumar Aggarwal
damages of Rs 300 on account of postage, typing etc., Rs 1,100 on account of cost of filing petition and Rs 1,000 towards
cost of efforts and time spent for the negligence and apathy of the UTI.
In SK Gianchandani v Ghaziabad Development Authority,81 the applicant purchased a plot of land from Ghaziabad
Development Authority (GDA) on payment of full price thereof. Instead of giving possession of the plot, the applicant was
informed about reduction in the size of the plot and was told to take refund of the difference in the cost of the plot. The
Commission allowed the applicant’s claim of compensation of Rs 42,215 against the GDA, by way of refund of principal
amount with interest at 18%, interest at 6% for delay in handing over the plot as advertised and miscellaneous expenditure
for pursuing the respondent and the compensation claim case.
In Kanta Dhir v Jaina Properties Pvt Ltd,82 the Commission dismissed the application under section 12B filed by the
complainant, for intentionally suppressing the fact of legal proceeding between the parties under the Consumer Protection
Act, 1986, and further stated that the application under the MRTP Act, 1969, is barred on the general principle of res
judicata inasmuch as the matter in issue before the Commission has already been decided by a competent authority under
the analogous Act, viz, the Consumer Protection Act, 1986. The Commission also rejected the complainant’s contention
that the question of alleged misrepresentation on the part of the respondent in advertising the sale of commercial space in
its publicity campaigns, having not been decided by the authorities under the Consumer Protection Act, 1986, should be
taken cognizance of by the Commission in the proceedings before it, on the ground that the case before the Commission
did not relate to enquiry against the Respondent, but a case for claim of compensation as a result of unfair trade practice on
the part of the Respondent.
Re Indian Rayon Corp Ltd,83 the Commission rejected the claim for compensation made by the applicant in representative
capacity on behalf of the buyers of convertible debentures and for the loss suffered by him as he was led to sell a certain
number of his shares in the market at a lesser price having been influenced by the misleading advertisement of the
respondent, following the Commission’s order in DG v Indian Rayon Corp Ltd (RTP Enquiry No 5/1987, order dated 22
May 1987), wherein it was provided that if any loss is suffered by any investor he may seek redress under section 12B of
the MRTP Act, 1969. The Commission opined that commonality of interest is not the same thing as the same interest
within the meaning of section 12B(2) of the MRTP Act, 1969 read with Order I, Rule 8 of the CPC, 1908. It went on to say
that provisions of Order I, Rule 8 of CPC, 1908 (referred to in section 12B(2)] stipulate “same” and not “similar” interest
of claimants in a particular claim or suit and also the specification of the same interest of the numerous claimants.
At the hearing of the Compensation Application84 filed by Ballarpur Industries Limited against Sinar Mas (a foreign
company), holding the validity of notice of enquiry issued, the Commission, inter alia, observed that:
(1) In view of section 4 of the MRTP Act, which lays down that the provisions of the Act are in addition to, and not
in derogation of, any other law, a Civil Court as well as the MRTP Commission are both available for redress in
the matter of Civil Contractual dispute giving rise to claim of compensation on alleged breach of contract
between private parties; a party can, therefore, choose either of the two forum. If the allegations relate to a
prohibited trade practice—unfair, restrictive or monopolistic, the MRTP Commission has complete and undiluted
jurisdiction to entertain such complaint.85
(2) There is nothing infirm, illegal or untenable in the Commission entertaining an application under section 12B,
even when a main complaint in terms of section 36B of the Act has not been filed. A section 12B application is
not dealt with purely on determination of the quantum of compensation, but invariably is preceded by an
ascertainment whether any prohibited trade practice has been committed. Therefore, the compensation
application filed by the applicant under section 12B, on the facts of the case, is maintainable notwithstanding that
a separate enquiry on unfair trade practice has not been initiated. For the purpose of section 12B application, a
complaint under section 36B is not a pre-requisite.86
(3) By covering the Central or State Government, any trader, class of traders or any consumer in section 12B, the
legislature has taken care of “public interest” and there is no conflict whatsoever between the focus of public
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interest in the MRTP Act and the provisions of section 12B. It cannot be said that compensation application is not
maintainable as no public interest is involved.
(4) Section 14 of the Act bring within its purview trading activities which fall within the mischief of a prohibited
trade practice, irrespective of the residence of the parties alleged to be indulging in such practices and regardless
of whether the parties connected with such activities are doing any business in India or not. The mere fact that the
party is a foreign company or that it does not carry on any business or engage in trading activity within the
jurisdiction of India cannot by itself confer any immunity on it from the proceedings launched against it under the
Act. The definition of ‘restrictive trade practice’ as contained in the Act is an effect-oriented or result-based
definition; and if its effects are visible in India, the trade practice must be taken to be carried on in India
notwithstanding the facts, inter alia, that origin of the goods was outside India, contract was concluded outside
India and consideration for goods was paid outside India.87
(5) A Compensation application cannot be rendered non-maintainable, merely because there is no repetitive of the
alleged action or alleged omission. Even a single or isolated action of a person in relation to any trade has been
categorically brought under the definition of ‘trade practice’ in section 2(u).88
(6) In as much as regulation 77(2) of the MRTPC Regulations, 1991 use the word “makes it discretionary for the
Commission to order an investigation or not by the Director General. Also, there is no requirement to obtain the
complainee’s comments before issuing a notice of enquiry by the Commission, and this very process is to enable
the Respondent to offer its explanation, reply or comments on the allegations contained in the compensation
application.
MRTP Commission has no jurisdiction to entertain a complaint in respect of a dispute arising between a Member of a Co-
operative Society and the Society itself.89
If there is breach of terms of a contract, it can be enforced by civil court and not under the MRTP Act, 1969.90
It is not for the MRTP Commission to go into the question of cost of flats, which has to be determined by the building
authority or the builder.91
Limitation
As no limitation was prescribed for preferring claims for compensation under section 12B of the MRTP Act, 1969, the
claim had to be filed within a reasonable period of time. The reasonable time depended on the facts of each case. As the
claim in all cases in the present case was for money the reasonable period to raise a claim in a matter of this nature was
three years.92 Earlier, relying on the ruling of Supreme Court in the case,93 it was held by the Commission that there is no
provision in the MRTP Act, 1969 making the Law of Limitation applicable to any application that may be made under any
provision thereof.94
The Competition Act, 2002 itself does not, either by reference or incorporation, provide for any period of limitation for the
purposes of filing an application before the COMPAT to adjudicate on a claim for compensation arising from the findings
of the CCI or from the orders of the COMPAT or under sections 42A or 53Q(2) of the Competition Act, 2002.
In cases where no period of limitation is prescribed, Indian courts generally adhere to a principle known as the “doctrine of
laches,” which provides that proceedings ought to have been initiated within a “reasonable period of time” and that a
failure to do so results in serious prejudice and harm to the defendant and adversely affects the ability of the defendant to
defend itself.
CONTEMPORARY FOREIGN LEGISLATIONS
Australian Law
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A provision providing for compensation for loss or damage was there in the Trade Practices Act, 1974, of Australia.
Section 82 of that Act states:
(1) A person who suffers loss or damage by conduct of another person that was done in contravention of a provision
of Part IV or V may recover the amount of the loss or damage by action against that other person or against any
person involved in the contravention.
(2) An action under sub-section (1) may be commenced at any time within three years after the date on which the
cause of action accrued.
Trade Practices Act, 1974 was repealed and was replaced by the Competition and Consumer Act, 2010. The new
legislation includes similar provision with respect to recovery of damages. Section 82 of the new Act states:
(1) A person who suffers loss or damage by conduct of another person that was done in contravention of a provision
of Part IV or IVB, or of section 60C or 60K, may recover the amount of the loss or damage by action against that
other person or against any person involved in the contravention.
(2) An action under subsection (1) may be commenced at any time within six years after the day on which the cause
of action that relates to the conduct accrued.
As evident, the time limit for commencement of action under the section has been increased from three to six years.
Law in the USA
The American Law does provide for triple damages for violation of the provisions of the Anti-Trust laws, namely, the
Sherman and the Clayton Acts. There is however no provision for recovery of damages by an individual wronged
consumer in the Federal Trade Commission Act, 1914 which particularly deals with protection of consumers against
deceptive acts and practices in trade and commerce.
Under both the Sherman Act, 1940 [Section 7] and the Clayton Act, 1914 [Section 4] any private person “injured in his
business or property by reason of anything forbidden in the anti-trust laws ... shall recover three-fold the damages
sustained by him, and the cost of suit, including a reasonable attorney’s fee”. Such a remedy not only compensates private
persons for their injuries, but gives them a powerful financial incentive to enforce the anti-trust laws. The result is that
public enforcement, which is inevitably selective and least likely to concern itself with local, episodic, or less than flagrant
violations is supplemented by private enforcement, which increases the likelihood that a violator will be found out, greatly
enlarges his penalties, and thereby helps discourage illegal conduct. But the treble damage remedy has another and less
desirable side. It allows private suitors to harass competitors or suppliers.
Public injury
The injury to the public must be alleged in a private anti-trust case. But the conclusion that the conduct offends the anti-
trust laws is inherently a declaration that it offends the public interest.95 Proving harmful effects to the economy is
sometimes an essential element of the anti-trust violation. In that event, the private plaintiff—as well as the Government
plaintiff—must prove it. But where defendant’s conduct is illegal without proof of market effects, the Government would
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prevail merely by proving the conduct. The private plaintiff should also prevail in these circumstances—subject of course
of proving direct injury to himself.
Direct injury to business or property
In order to recover, the plaintiff must first prove that he has suffered an identifiable injury to his “business or property.”
Because it is as unlawful to prevent a person from engaging in a business as it is to drive him from it, the courts may be
faced with a plaintiff who is not “in” business but claims that he would have been. To determine whether such a plaintiff
may sue, the courts usually look to plaintiff’s background and experience in his prospective “business,” his ability to
finance the undertaking, and the depth of his actual or potential financial or contractual involvement.96 The plaintiff must
also show the “directness” of his loss, for he cannot recover if the injury is held to be secondary, remote, incidental, or
indirect. Where, for example, the immediate impact of defendant’s alleged anti-trust violation is a loss of sales by X, treble
damage actions are not usually available to X’s patent licensor losing royalties; X’s shareholders, officers, or creditors
losing dividends, bonuses, or safe credit margins;97 X’s landlord losing rents on a percentage lease; or suppliers losing
sales to X.98 The plaintiff may prevail even though other factors have contributed to his injury; nevertheless, if there are
losses attributable to the plaintiff’s mismanagement, inefficiency, failure to seek business, inability to produce the quality
of goods desired by consumers, and the like, a court may conclude that the attribution of plaintiff’s losses or harms to
defendant’s allegedly unlawful conduct is too speculative and conjectural to sustain the private damage action.99
Proving damages
Once the plaintiff has proved a rather clear and direct injury to his business or property, he must show the amount of his
damages. The courts seem to require more proof of the fact of injury than of the quantum of injury. Even so, it is difficult
to prove actual damages with any precision. Some cases refer to plaintiff’s profits before or after the period of anti-trust
violation, or to those of a predecessor, or to those of competitors, or to those in related lines of business.
Even where the defendant by his own wrong has prevented a more precise computation, the injury may not render a verdict based
on speculation or guesswork. But ... “juries are allowed to act upon probable and inferential, as well as direct and positive proof.”
... The most elementary conceptions of justice and public policy require that the wrong doer shall bear the risk of the uncertainty
which his own wrong has created.100
“Passing on defense”
In Hanover Shoe, Inc v United Shoe Mach Corp,101 the Supreme Court disallowed a “passing-on defense.” It had been
determined that defendant’s monopolistic practices had resulted in an overcharge to the plaintiff for the use of shoe-making
machinery leased by the defendant to the plaintiff. Defendant claimed that plaintiff had passed on this overcharge to those
who purchased plaintiff’s shoes. In disallowing this defense, the Court observed:
Even if it could be shown that the buyer raised his price in response to, and in the amount of, the overcharge and that his margin of
profit and total sales had not thereafter declined, there would remain the nearly inseparable difficulty of demonstrating that the
particular plaintiff could not or would not have raised his prices about the overcharge or maintained the higher price had the
overcharge been discontinued. Since establishing the applicability of the passing-on defense would require a convincing showing
of each of these virtually unascertainable figures, the task would normally prove insurmountable.
The Court asserted that permitting the defense would have an adverse effect on the private enforcement of the anti-trust
laws:
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In addition, if buyers are subjected to the passing-on defense, those who buy from them would also have to meet the challenge that
they passed on the higher price to their customers. These ultimate consumers, in today’s case the buyers of a single pairs of shoe,
would have only a tiny stake in a lawsuit and little interest in attempting a class action. In consequence, those who violate anti-trust
laws by price fixing or monopolizing would retain the fruits of their illegality because no one was available who would bring suit
against them. Treble damage actions, the importance of which the Court has many times emphasized, would be substantially
reduced in effectiveness.
The Court did suggest, however that:
there might be situations, for instance, when an overcharged buyer has a pre-existing ‘cost-plus’ contract, thus making it easy to
prove that he had not been damaged, where the considerations requiring that the passing-on defense not be permitted in this case
would not be present.
Res Judicata
Litigation has the same conclusive powers in anti-trust as elsewhere. Criminal conviction or acquittal does not preclude
civil suit by the Government. Defendant’s victory in a Government civil suit precludes neither FTC proceedings under
Federal Trade Commission Act, 1914102 nor private suit, although either would be unlikely. Nor would defendant’s
victory in a Government action preclude a later Glovernment suit on the same theory for defendant’s later repetition of the
very conduct held lawful in the prior suit. The later court may follow the earlier ruling, but that would illustrate stare
decisis rather than res judicata.103
Law in the UK
In the erstwhile Fair Trading Act of United Kingdom there were curial provisions no doubt, but there was no provision for
recovery of compensation by an individual consumer. Section 47A of the Competition Act, 1998 gives a person who has
suffered loss or damages by virtue of an infringement of EU or UK competition law (established by a decision of the
European Commission or the UK competition regulators) the right to bring a monetary claim before the Competition
Appeal Tribunal (CAT). Rule 31 of The Competition Appeal Tribunal Rules, 2003 (SI 2003/1372) (the CAT Rules)
establishes a two-year deadline for bringing a damages claim, beginning with the “relevant date.”
The relevant date is the latter of the date on which the cause of action accrued, the date on which a right to bring an appeal
expires, or the date of the final judgment in an appeal (Rule 31(2)).
COMPENSATION—MEANING OF
“Compensation” in section 34 is used in the sense of reparation for the loss or damage caused. The compensation is, thus, a
monetary equivalent of any loss or damage and the word is used in this sense only in section 34. Compensation would,
therefore, include loss or damage of the following types namely:—
(i) the actual pecuniary loss sustained which can be quantified with precision;
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(ii) the indirect pecuniary loss which is nevertheless consequential to the alleged indulging in anti-competitive
agreements, abuse of dominant position or combination loss of profits, loss of reputation, loss of business or loss
of credit;
(iii) the value of time lost;
(iv) the mental suffering like anxiety, worry, tension, etc; and
(v) the sense of wrong or insult.
In Baker v Willoughby104 it was held that:
a man is not compensated for the physical injury; he is compensated for the loss which he suffers as a result of that injury. His loss
is not in having a stiff leg. It is in his inability to lead a full life, his inability to enjoy those amenities which depend on freedom of
movement and his inability to earn as much as he used to earn or could have earned if there had been no accident.
Thus, “compensation” refers to the monetary equivalent of the loss or damage suffered by a party, though the equivalent is
not mathematically quite perfect for reasons of difficulty in so quantifying. A few excerpts from judicial dictionaries:
Compensation is making things equivalent; satisfying or making amends, a reward for the apprehension of criminals: also,
that equivalent in money, which is paid to the owners and occupiers of land taken or injuriously affected for public
purposes and under Act of Parliament, money paid to amend loss or injury. A party who suffers because of a breach of
contract is entitled to receive compensation for any loss or damage caused to him thereby.105
In ordinary parlance, the word “compensation” means anything given to make things equivalent; a thing given to or to
make amends for loss, recompense, remuneration or pay; it need not therefore necessarily be in terms of money.106
Although compensation connotes equivalency, it may under a statute indicate what the legislature treats as equivalent.107
Compensation denotes a sum of money payable to a person on account of the loss or damage caused to him by the breach
of contract.108
The expression “compensation” is not defined in the Constitution. In ordinary parlance the expression, “compensation”
means anything given to make thing equivalent; a thing given to or to make amends for loss, recompense, remuneration or
pay; it need not therefore necessarily be in terms of money. The phraseology of the constitutional provision also indicates
that compensation need not necessarily be in terms of money, because it expressly provides that the law may specify the
principles on which, and the manner in which, compensation is to be determined and “given.” If it were to be in terms of
money alone, the expression “paid” would have been more appropriate.109 [See Constitution of India Article 31(2)].110
The expression “compensation” is not ordinarily used as an equivalent to damages, although compensation may often have
to be measured by the same rule as damage in an action for the breach. The term “compensation” as pointed out in Oxford
Dictionary, signifies that which is given in recompense;, an equivalent rendered damages, on the other hand, constitute the
sum of money claimed or adjudged to be paid in compensation for loss or injury sustained, the value estimated in money,
of something lost or withheld. The term “compensation” etymologically suggests the image of balancing one thing against
another. Its primary signification is equivalence, and the secondary and more common meaning is something given or
obtained as an equivalent.111
Loss or damage
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The term “loss” refers to both pecuniary and non-pecuniary loss. “Damage” refers to the disadvantage that a person suffers
as a result of the act or omission by another.112
Thus, “loss” would include pecuniary losses, i.e., loss of money and, profits, if any, consequential thereto and non-
pecuniary loss such as pain, suffering loss of expectation of life, injury, illness, shock, discomfort, etc.
“Damage” would include damage to the property, person or reputation of an individual.
Now an extract from some judicial dictionaries as an aid to understanding the meaning of the word “damages”:
Neither in common parlance, nor in legal phraseology, is the word ‘damage’ used as applicable to injuries done to the person; but
solely as applicable to mischief done to property. We speak indeed of ‘damages’ as compensation for injury done to the person; but
the term ‘damages’ is not employed interchangeably with the term ‘injury’ with reference to mischief wrongfully occasioned to the
person.113
This definition, which reads so simple and clear, is nothing more than the central bone of contention in a series of cases
distinguished by a remarkable conflict of judicial opinion, the last word in which has, at last, been spoken.114
Damage may be controlled by the context and can certainly mean personal injury; and, therefore, where a packet company issued a
passenger’s ticket containing a special provision respecting loss, damage or detention of luggage, and then, by a separate clause
dealing with passengers personally, obtained exemption for ‘loss or damage’ from certain specified causes it was held that included
injury to life or limb from the causes enumerated.115
The words ‘damage’ and ‘injury’ are given as synonyms for each other. The first is generally used in respect to property and the
second in relation to persons ‘Damage’ has, I think, a more restricted meaning then ‘injury’ as the latter word may mean a wrong,
which ‘damage’ never does. The word ‘damage’ includes injury when the letter word is used to denote physical harm to
persons.116
The words ‘damage’ and ‘damages’ form more than one meaning. It may mean injury; the words may mean sums paid as has been
held in the case of Swansea Corpn. v Harpar,117 under the order of the Court for compensation for a breach of contract. Damage
means any loss whether actionable as an injury or not. It may be defined as a pecuniary compensation which the law awards to a
person for the injury he has sustained by reason of the act or default of another where that act or default is a breach of contract or a
tort; or can more shortly, damages are the recompense given by process of law to a person for the wrong that another has done to
him.118
Damage—loss or harm resulting from injury to person, property or reputation; compensation in money realisable by law
for loss or injury. Loss, injury, destruction, and deterioration.119
Measurement of compensation
This is probably one of the difficult aspects of the law as it stands at present. The Competition Act, 2002 nowhere provides
any suitable yardstick to measure compensation for loss or damage envisaged under section 34. In the absence of such a
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statutory yardstick what should be awarded as compensation, or more rightly what should be the proper measure of
compensation becomes very important. No doubt, not all losses or damages are compensable. Only those, which have a
causal connection with the contravention of the provisions of Chapter II of the Competition Act, 2002 or which are the
proximate (and not remote) consequences of such contravention are compensable. Subject to this broad and acceptable
parameter, what should be the measure of compensation yet remains to be resolved, for, the measurement of compensation
in contracts is different from measurement of compensation in tort. Damages in actions on contract are only compensation.
In contractual relationships in assessing compensation payable under section 70/73 of the Indian Contract Act, 1872 the
Court shall take into account what the parties contemplated to be reasonable compensation at the time of entering into the
contract and for this purpose the terms of the contract are to be interpreted very strictly. On the other hand in torts,
compensation payable is liberal than that for breach of contract.
Compensation in contract and in torts: an analysis
It would be relevant at this stage to study the principles to be applied in breach of contracts and in a tort. What damages are
recoverable for a breach of contract in England has been judicially laid down, rather unassailably in the leading case of
Hadley v Baxendale.120 In that case the facts were as follows:
The plaintiff, a miller had employed the defendant, a carrier, to convey a broken shaft belonging to the mill, to be delivered to an
engineer for the purpose of making a new shaft on its model. At the time of making the contract (to carry) the defendant’s clerk
was informed that the mill had been compelled to stop work and that the shaft must be immediately sent. The defendant made an
unreasonable delay in delivering it to the engineer, who was unable to make the new shaft in proper time, and consequently the
mill remained idle for a considerable time. In an action for breach of contract against the carrier the plaintiff claimed as special
damages the loss of profits for the period during which the mill was idle as a result of the defendant’s delay. The Court was
prepared to allow that, if the carrier had been made aware that a loss of profits would result from delay on his part, and that the mill
was lying idle for want of the shaft, he would have been answerable. But as it did not appear that he knew that the want of the shaft
was the only thing, which was keeping the mill idle, he could not be made responsible for loss of profits. The Court said: “We
think that the proper rule in such a case as the present is this: where two parties have made a contract which one of them has
broken. Damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and
reasonably be considered either arising naturally, that is according to the usual course of things, from such breach of contract itself
or such as may reasonably be supposed to have been in the contemplation of both parties at the time they made the contract, as the
probable result of the breach of it. Now if the special circumstances under which the contract was actually made, were
communicated by the plaintiffs to the defendant, and thus known to both parties, the damages resulting from the breach of such a
contract which they would reasonably contemplate, would be the amount of an injury which would ordinarily flow from a breach
of contract under these special circumstances so known and contemplated. But on the other hand, if these special circumstances
were wholly unknown to the party breaking the contract, he at the most could only be supposed to have had in his contemplation
the amount of injury which would arise generally and in a great multitude of cases, not affected by any special circumstances from
such a breach of contract, for had the special circumstances been known, the parties might have specially provided for the breach
of contract by special terms as a damage in that case, and of this advantage it would be very unjust to deprive them. The above
principles are those by which we think the jury ought to be guided in estimating the measure of damages arising out of any breach
of contract.
Thus Hadley v Baxendale lays down, in brief the following rules, namely:—
1. Damages, which naturally arise from a breach of contract according to the usual course of things are recoverable.
2. Damages which would not arise in the usual course of things from a breach of contract, but which do arise from
circumstances peculiar to the case, are not recoverable unless the special circumstances are known to the
defendant who has broken the contract.
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3. Where special circumstances are known or have been communicated to the person who breaks the contract, and
where the damage complained of flows naturally from the breach of the contract in those special circumstances,
such special damages must be supposed to have been contemplated by the parties and hence is recoverable.
Thus in breach of contract damages naturally arising from breach are called ordinary damages and damages such as may
reasonably be considered to have been in the contemplation of the parties at the time they made the contract as the
probable result of it are the special damages. In the latter case, the following questions are to be answered:
(i) What are the damages, which actually resulted from the breach of the contract?
(ii) Was the breach of the contract made under special circumstances, and if so, what are they?
(iii) What, at the time of making the contract, was the common knowledge of the parties to the contract?
(iv) What may the Court reasonably supposed to have been in the contemplation of the parties as the probable result
of a breach of the contract assuming the parties to have applied their minds to the contingency of their being such
a breach?
The principles in Hadley v Baxendale are embodied in section 73 of the Contract Act, 1872, which runs as follows:
Section 73. Compensation for loss or damage caused by breach of contract.—When a contract has been broken, the party who
suffers by such breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage
caused to him thereby, which naturally arose in the usual course of things from such breach or which the parties knew, when they
made the contract, to be likely to result from the breach of it.121
Explanation.—In estimating the loss or damage arising from a breach of contract, the means which existed of remedying the
inconvenience caused by the non-performance of the contract must be taken into account.
On the other hand the tests of remoteness of damage in tort are not the same as in contracts. In tort the test is not what was
contemplated as the probable consequences of the breach but whether the damages are not direct consequences of the
breach. Once culpability is established there is no question of foreseen or unforeseen consequences. SCR=ON J brought
out the distinction in the measure of damages in contract and tort succinctly in his dissenting judgement in The Arpad122 in
the following words:
It is often said that the measure of damages in contract and tort is the same, I do not think it is strictly accurate. The second breach
of the rule in Hadley v Baxendale, requires in the case of breach of contract, when the damages are alleged to flow from the
existence of another special contract which is affected by the breach of the first contract, that that consequences may be supposed
to be in the contemplation of both parties as the result of the breach and notice of the special contract being made, is required to
affect the defendant with liability for damage flowing from the special contract being affected by the breach of contract. An
instance of the sort of notice required is where the plaintiff is known to be buying for resale, though he has not yet resold...In the
case of claims in tort, damages are constantly given for consequences of which the defendant had no notice. You negligently run
down a shabby looking man in the street, and he turns out to be a millionaire engaged in a very profitable business, which the
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accident disables him from carrying on, or you negligently and ignorantly injure the favourite for the Derby whereby he cannot
run. You have to pay damages resulting from the consequences of which you have no notice.
You have to pay the actual loss to the man or his goods at the time of the tort. The real distinction is, I think, between a tort, the
damages for which do not require notice to the wrong-doer of their probability, and contract, where Hadley v Baxendale requires
the consequence to be in the contemplation of the parties.
Vicarious liability123
Another closely related topic in torts for the purposes of this book is vicarious liability. Such a liability arises for the acts
done by others. Briefly stated, vicarious liability connotes the liability, which X incurs to Z for the damage caused to Z by
the tort committed by Y. This arises because of a particular relationship shared by X and Y, for instance where X is the
master and Y his servant. So also is the case where an agent has specific authority from his principal.
Master and servant
Many a time injury or loss is caused by the servant to a stranger, like for instance the employee of a company causes injury
by an act of deceit to a third party. In such cases there are some essential conditions to be fulfilled before a master can be
held liable, namely:
(a) there must be master and servant relationship and
(b) the servant must have been, while committing the wrong, acting in the course of employment.
Firstly, to fasten liability on the master there must be a master and servant relationship. This leads to the question, “who is
a servant”. The relationship of master and servant creates what is called a contract of service and not contract for service.
The “control” test has been a traditional one to decide whether a person is a servant or not. The contract of service was
held to be one by virtue of which the employer can not only order or require what is to be done, but how it shall be done.
(Collins v Hertfordshire County Council).124 In Short v J&W Henderson Ltd125 four indicia of a contract of service were
stated to be:—
(a) the master’s power of selection of his servant;
(b) the payment of wages or other remuneration;
(c) the master’s right to control the method of doing the work and
(d) the master’s right of suspension or dismissal.
But in Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance,126 the following three
conditions were held essential for a contract of service:
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(a) the servant agrees that, in consideration of a wage or other remuneration, he will provide his own work and skill
in the performance of some service for his master;
(b) he agrees, expressly or impliedly that in the performance of that service, he will be subject to the other’s control
in a sufficient degree to make that other’s master and
(c) the other provisions of the contract are consistent with its being a contract of service.
DAMAGES
The most traditional remedy for torts is the award of damages, although other remedies in the form of injunction or
restitution of properties are also available. The primary object of awarding damages is to grant pecuniary compensation to
the party injured. In American Restatement of the Law of Tort, damages refer to “a sum of money awarded at the discretion
of the Court, to a person who has been wronged by the act of another, not exceeding the sum claimed by such person.”
Kinds of Damages
Normally an award of damages is to compensate the victim for injury. Where the award is non-compensatory in character
it may be (i) contemptuous, (ii) nominal or (iii) exemplary or punitive.
Contemptuous damages are derisory in character and suggest that the Court has very low opinion of the plaintiff’s bare
claim or that his conduct was such that he deserved what the defendant did to him. In actions for libel such damages are
common to come across.
Nominal damages are awarded in recognition of the existence of a legal right of the plaintiff and not by way of
compensation for any loss. They are awarded in torts actionable per se which give rise to an action for damages without
regard to the amount of harm done.
Exemplary or punitive damages are such as are in excess of any material loss actually suffered by the plaintiff.
These are awarded in cases where there has been great injury by reason of aggravating circumstances accompanying the wrong; no
attempt is made to measure compensation by any numerical rule, but a heavy amount is awarded as an expression of indignation at
the conduct of the defendant, whenever he has shown a conscious and contumacious disregard of the plaintiff’s right and
convenience. Thus, exemplary damages may be obtained in cases of gross defamation actuated by sheer spite or jealousy. Such
damages are intended at once to offer solatium to the plaintiff, and to serve as a punishment of the defendant, taking account of the
defendant’s moral conduct.127
Measure of damages
How much compensation can the victim recover for the consequences of breach of legal duty is an important question. It is
well settled that damages are not recoverable for remote consequences of a tortious act. The basic principle for measure of
damages in tort is that there should be restitutio in integrum.128
Apart from cases in which exemplary damages are awarded, where injury is to be compensated by damages, in settling the sum of
money to be given for reparation of damages you should as nearly as possible get at that sum of money which will put the party
who has been injured, or who has suffered, in the same position as he would have been in if he has not sustained the wrong for
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which he is now getting his compensation or reparation. So in an action for deceit, the proper starting point for the assessment of
damages is to compare the position of the plaintiff as it was before the fraudulent statement was made to him with his position as it
became as a result of his reliance upon the statement. In the case of personal injury too, this criterion can and should be applied to
the pecuniary elements of the plaintiff’s loss such as his loss of earning, but it is difficult to see that it can be applied to the non-
pecuniary elements such as pain and suffering and there the plaintiff receives compensation and not restitution. Indeed
compensation in the literal sense is no more possible than restitution, and what is given is described “notional or theoretical
compensation to take the place of that which is not possible, namely, actual compensation.129
An important factor to be taken into account is whether the victim has endeavoured (as he should) to mitigate the loss
arising from the tortious act. The plaintiff should have taken reasonable steps in this regard. In short it can be generally
stated that restitutio in integrum is the object of damages for pecuniary loss and compensation is the object of damages for
non-pecuniary loss though both may overlap many a time.130 Now a brief discussion on non-pecuniary and pecuniary loss.
Non-pecuniary loss
Pain and suffering may result as a result of a tort. If there is no pain experienced by the plaintiff it is not compensable,
such as in a case where he remained unconscious or was otherwise incapable of experiencing pain—Wise v Kaye.131 If the
pain is not the cause of or attributable to the tortious act, no compensation is recoverable—Cutler v Vauxhall Motors
Ltd.132
Damages for pecuniary loss
Non-pecuniary losses are compensable in money terms. Apart from such losses there can be pecuniary losses also. Loss of
earnings may be the consequence of a tortious act. This is usually done by capitalising future loss of earnings by a suitable
multiplier.
Judicial observations as to the principles applicable in awarding damages
It may be pertinent to know some of the important judicial observations by Court on the question of quantifying the
damages and more particularly the principles, which provide the standard for application in consumer law. Australian law
provides a fairly definite clue in this connection, the US cases being few on the point of unfair trade practices.133
Moreover, as already observed Indian law is strikingly analogous to the provisions of the Australian Trade Practices Act,
1974 and therefore it would be instructive to refer to some of them. Incidentally, Australian Courts have had occasion to
refer to English Law also and deduce suitable guides for application to consumer law matters. Just as the Indian Act does
not provide any statutory guide in quantifying damages, Australian law also does not. This is all the more the reason to
know how the law on damages has developed in Australia over the period of two decades, with a significant dose of
amendments in the year 1977 and later in 2010.
The correct way to approach the assessment of damages is to compare the position in which the applicants might have been
expected to be if the misleading conduct had not occurred with the situation they were in as a result of acting in reliance on
the conduct.134
The damages to be recovered are to be determined in a manner similar to deceit cases. The principles to be applied are
similar to those applied in determining the measure of damages in tort, not for breach of contract.135
If the conduct of the respondent influenced the decision of the applicant but if such conduct was not the sole influence
affecting the applicant, but was a factor affecting the applicant in making such decisions, that is sufficient for claiming
compensation for loss or damage.136
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There must be a causal connection between the conduct and the loss or damage.137
In an action for damages for fraudulent misrepresentation, the amount of damages to which plaintiff is entitled is, prima
facie, “the amount by which the price which he has paid exceeds the true value of the thing bought at the time when he
bought it”.138
In Toteff v Antonas,139 DIXON J as he then was, observed:
In an action of deceit a plaintiff is entitled to recover as damages a sum representing the prejudice or disadvantage he has suffered
in consequence of his altering his position under the inducement of the fraudulent misrepresentations made by the defendant. When
what he has been induced to do is to make a purchase from the defendant and part with his money to him in payment of the price,
then, if the transaction stands and is not disaffirmed or rescinded, what is recoverable is the difference between the real value of the
property, and the sum which the plaintiff was induced to give for it—per ABBOT LCJ in Pearson v Wheeler.140 As Sir James
Hannen P in Peek v Derry,141 pointed out the question is how much worse off is the plaintiff than if he had not entered into the
transaction. If he had not done so he would have had the purchase money in his pocket. To ascertain his loss you must deduct from
the amount he paid the real value of the thing he got.
The measure of damages in an action of deceit consists in the loss or expenditure incurred by the plaintiff in consequence
of the inducement on which he relied diminished by the corresponding advantage in money or money’s worth obtained by
him on the other side.142 You look to what he has been induced to part with as the initial step. He is entitled to say that but
for the fraud he would never have parted with his money: per COLERIDGE LCJ in Twycross v Grant.143 But he cannot
recover the entire price he has paid unless the thing proves wholly worthless. If the thing has any appreciable value, the
damages must be reduced pro tanto: per COCKBURN LCJ Twycross v Grant (at 543). It must not be forgotten that after all
deceit is an action on the case for special damage incurred in consequence of the defendant’s fraudulent inducement.
When consequential losses are not caused by the conduct of the respondent but by the actions of the applicant, the
applicant is not entitled to recover damages over and above the difference in value of what it got and what it bargained to
get.144 Where shops have been leased out on certain representation as to facilities, walk-a-ways frontage, etc. and they turn
out to be false, the amount of damages to be recovered by the applicant is to be determined by reference to the difference
between what were the reasonable rents and the liability to pay apportionable outgoings as provided for in the lease on the
other.145 Reasonable values of rent can be obtained by reputed valuers.
Where the claimant even after becoming aware of the falsity of representations on the basis of which he entered into a
lease, chooses to affirm the lease, and thereafter comes with a prayer for award of damages by commencing proceedings
for award of damages, such a conduct would be relevant for refusing consequential losses to the business, as then such
losses are not caused by the conduct of the respondent but by the actions of the applicant.146
In State of South Australia v Johnson,147 there was an elaborate discussion on the question of damages. Though the tort
principle in general was held applicable, there seemed to be a slight departure, in that, in the view of the Court the
relevance of tort principle may only serve as a guide. The relevant observations in that case make an interesting reading:
(4) Damages
The principle, which underlines the award of damages in tort is, generally speaking, that of restitutio in integrum. The object is to
restore the plaintiff to the position in which he would have been placed if the wrongful act had not been committed. The measure
will vary as between deceit and negligence. In deceit, the plaintiff recovers the difference between the amount paid and the value
of the property acquired, the object being to place him in a position equivalent to that which he would have occupied had the
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transaction not taken place. The defendant being guilty of a deliberate wrong, the damages will include the whole loss directly
flowing from fraudulent inducement because, as Lord Denning MR declared in Doyle v Olby (Ironmongers) Ltd.148—’it does not
lie in the mouth of the fraudulent person to say that they could not reasonably have been foreseen.’
It is otherwise in cases of negligent misrepresentation. Although the wrongdoer is liable for the damage, which flows directly from
his wrongful act or omission, the plaintiff’s damages are limited to that which was reasonably foreseeable. This limitation applies
in accordance with the general principle in negligence.
Subject to this limitation, the consequence is that if the effect of the negligent misrepresentation is that the victim has lost profits or
income, which he would otherwise have earned, he should recover damages in respect of them. We are speaking here, not of loss
of profits under a contract into which the plaintiff enters by reason of the misrepresentation, but of profits which the plaintiff would
have made had he not acted on the misrepresentation.
Referring to the judgment in Johnson’s case149 (Supra) FITZGERALD J held in Frith v Gold Cost Mineral Springs Pty
Ltd:150
Similarly, in my opinion, whilst common law rules as to the measure of damages in tort may, in appropriate circumstances, provide
a useful guide, no justification exists for confining the damages which are recoverable under sections 82 and 87 of the Act by
reference to common law tests. The only limitations, which exist in proceedings under the Act are those expressed or inherent in
the statutory provisions themselves.
It seems plain that the statutory right to damages now under consideration serves a wider purpose and is intended to have a broader
ambit than the common law actions of tort or negligent misstatement. There is no indication of a legislative intention that the
relevant common law rules should be first discovered, the reasons that led to their development, understood, and then that they
should be adopted or adapted consistently with the policy of the Act, before the court performs its duty of assessing the amount to
which applicants are entitled under the Act. It seems an arid exercise to enter upon such problems when what is in question is a
claim founded on the Act. Particularly this is so, where, as in the case of deceit, there is scope for at least a degree of uncertainty as
to what is the appropriate measure of damage.
The broad statement of the appropriate measure of damages in deceit which was adopted in Dolby’s case (supra), accords with the
statutory test, if, as I think, applicants who establish a cause of action under the Act are entitled to those losses which are the
immediate result of the offending conduct and also to consequential losses if sufficiently direct. It is on that footing that I proceed
in this case.
There is a further matter to be kept in mind in some cases, and this is one, in which damages are sought under the Act. A purchase
of property may be one element in a course of conduct, which is embarked upon in reliance on conduct, which is misleading or
deceptive or likely to mislead or deceive. The statutory entitlement to compensation is not restricted to losses involved in the single
element constituted by the transaction of purchase. Applicants for relief under the Act are entitled to have each act or omission
shown to have been taken in reliance upon offending conduct considered for the purpose of a determination of whether they
thereby suffered loss or damage.
In my opinion, therefore, irrespective of how the applicant’s damages might have been calculated had their claim been made and
pressed in deceit, it is appropriate, in the determination in these proceedings of the damages to which they are entitled under the
Act, merely to seek to identify what were the immediate and what were the direct consequential losses sustained by the applicants
by the conduct of the respondent. The operation of that test will, as in all cases, depend on the circumstances.
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Particularly perhaps where damages claimed relate to alleged consequential losses, care is needed to be satisfied that there is a
sufficient causal connection and not a mere following on between the offending conduct of the respondents on the one hand and on
the other hand, the losses of an applicant and that the chain of causation has not been broken by some conduct or event. For that
purpose, investigation will often be needed of the relationship between the offending conduct of a respondent, the act or omissions
of an applicant which are said to have been taken as a result and which are alleged to have been consequence. Commonly, and this
case is a prime example, the evidence will be something less than comprehensive and detailed. Whilst in some cases, precise
calculation may be necessary or possible, in circumstances such as the present, after the general process of reasoning has been
exposed, the final step necessarily involves a broad subjective estimate.
Factors abating compensation
It is equally important to know that compensation though becomes payable to the applicant, would get abated under certain
circumstances. For instance where a misleading statement or conduct has led to some loss or injury, the claimant shall have
done all that is necessary to mitigate the loss or injury. Where the loss or injury has been aggravated by the conduct of the
claimant, suitable abatement would become necessary. Also where there are intervening circumstances, the Commission
would probe whether any part of the loss or damage claimed is attributable to those intervening circumstances. There may
be other relevant circumstances, which may go to abate compensation claims like—
(i) wanton carelessness on the part of the applicant;
(ii) ignoring the written and/or oral instructions;
(iii) the level of competence and knowledge that the applicant by reason of his attainments should have possessed and
of which he should have drawn upon reasonably. This may happen when the applicant is a skilled person, like an
engineer, doctor, etc.
SCOPE OF THE SECTION
This section was inserted by the Competition (Amendment) Act, 2007 empowering the Appellate Tribunal to award
compensation for any loss or damage arising from:
(a) the finding of the CCI; or
(b) orders of the Appellate Tribunal in appeal against any finding of the Commission; or
(c) application for recovery of compensation ordered in terms of section 42A or section 53Q(2).
An application has to be made to the Appellate Tribunal for the purpose along with the prescribed fee. The Tribunal may
pass order after making an inquiry in the allegations made in the application. If necessary, the Appellate Tribunal may
obtain recommendations of the Commission for its consideration. Application may be made either after the Commission or
the Appellate Tribunal has determined that violation of the provisions of the Competition Act, 2002 has taken place or
where compensation has already been arrived at and not recovered. It has also been clarified that enquiry will be made by
the Appellate Tribunal for determining the eligibility and quantum of compensation and not for examining afresh the
findings of the Commission or the Tribunal.
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ESSENTIAL INGREDIENTS
The essential ingredients of compensation application are, as under:
(i) there must be loss or damage;
(ii) loss or damage must be the result of contravention of the provisions of sections 3 to 6 of the Competition Act,
2002;
(iii) the loss or damage must be caused to the Central of State Government, or a local authority, or any enterprise, or
any person and
(iv) the application shall be made by such an aggrieved person to the Appellate Tribunal.
CLASS ACTION
Sub-section (4) recognises class action i.e., action brought by one or more members of a class on behalf of other persons,
where the cause of action is common to all the members of that particular class or all members have same interest. For the
purpose, provisions of rule 8 of order of the First Schedule to CPC, 1908 has been made applicable. It is necessary for the
Appellate Tribunal to accord permission for a class action to be initiated in terms of the aforesaid Rule 8 of Order 1, which
deals with suits in representative capacity.
Rule 8 of Order I of the First Schedule to the CPC, 1908, reads as follows: One person may sue or defend on behalf of all
in same interest—
(1) Where there are numerous persons having the same interest in one suit—
(a) one or more of such persons may, with the permission of the Court, sue or be sued, or may defend such suit,
on behalf of, or for the benefit of, all persons so interested;
(b) the Court may direct that one or more of such persons may sue or be sued, or may defend such suit, on behalf
of, or for the benefit of, all persons so interested.
(2) The Court shall, in every case where a permission or direction is given under sub-rule (1), at the plaintiff’s
expense, give notice of the institution of the suit to all persons so interested, either by personal service, or, where,
by reason of the number of persons or any other cause, such service is not reasonably practicable, by public
advertisement, as the Court in each case may direct.
(3) Any person on whose behalf or for whose benefit, a suit is instituted, or defended under sub-rule (1), may apply
to the Court to be made a party to such suit.
(4) No part of the claim in any such suit shall be abandoned under sub-rule (1), and no such suit shall be withdrawn
under sub-rule (3) of Rule 1 of Order XXIII, and no agreement, compromise or satisfaction shall be recorded in
any such suit under Rule 3 of that Order, unless the Court has given at the plaintiff’s expense, notice to all
persons so interested in the manner specified in sub-rule (2).
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(5) Where any person suing or defending in any such suit does not proceed with due diligence in the suit or defence,
the Court may substitute in his place any other person having the same interest in the suit.
(6) A decree passed in a suit under this rule shall be binding on all persons on whose behalf, or for whose benefit, the
suit is instituted, or defended as the case may be.
Explanation: For the purpose of determining whether the persons who sue or are sued, or defend, have the
same interest in one suit, it is not necessary to establish that such persons have the same cause of action as
the persons on whose behalf, or for whose benefit, they sue or are sued, or defend the suit as the case may be.
It is necessary for the Appellate Tribunal to accord permission for a class action to be initiated. For this purpose, Rule 8 of
Order I of the CPC, 1908 would be applicable which deals with suits in a representative capacity. It is necessary that there
must be a number of parties to the suit and that they must have the same interest. The word “numerous” used in the sub-
section implies a group of persons such as would make it inconvenient to implead all of them individually. The word does
not, however, suggest that the group should consist of numberless persons. It would be, however, beneficial for a consumer
organisation to bring out a list of persons who might have been affected by particular trade practice and submit the same to
the Appellate Tribunal with a request that more persons similarly placed should be joined in the inquiry so as to broad-base
the compensation payable and to ensure remedy to maximum number of persons who had been the victim of an unfair or
restrictive trade practice. It is not unusual for consumer organisations to make suitable announcement in the newspapers
regarding the proposed action to be initiated so that interested persons may submit the details of their names and addresses
as well as other supporting evidence namely, invoice, memos, etc to them. This sounds an easy proposal but it is beset with
other consequences also, for instance, the persons against whom the consumer organisation proposes to launch an enquiry
and in respect of which a newspaper announcement is made may face an action for defamation and this may blunt the
consumer protection endeavour of the association espousing the cause of the consumer. It is, therefore, desirable to present
an application to the Commission with a request that the Commission invite other persons similarly placed to join the
enquiry and thereafter convert the proceeding, into a representative proceeding.
CONSUMER PROTECTION ACT, 1986
Under the Consumer Protection Act, 1986 the Consumer Redressal Authorities have not been vested with the power to
grant compensation to the aggrieved complainant for the loss or damage suffered in the manner provided in the
Competition Act, 2002. Section 14 of the Consumer Protection Act, 1986 only empowers the Redressal Authorities to
remove the defect in the goods or replace the goods by new goods of similar description if the goods suffer from any defect
and in case of deficiency in service rendered to return to the complainant the price or the charges paid by him.
Compensation may, however, be awarded to the consumer151 for any loss or injury suffered by him due to the negligence
of the opposite party.
Case law on relief by way of award of compensation under the Consumer Protection Act, 1986
— The consumer disputes redressal authority cannot give relief for damages in excess of limits prescribed under a
contract. There must be a finding that the respondent was responsible for the deficiency in service, the
consequence of which would be that he had incurred the liability for loss or damage suffered by the consumer.
When the parties have contracted and limited their liabilities, the parties are bound in terms of the contract.152
— Deficiency in service has been defined under clause (g) of section 2(1) of the Consumer Protection Act, 1986 as:
“deficiency” means any fault, imperfection, shortcoming or inadequacy in the quality, nature and manner of
performance which is required to be maintained by or under any law for the time being in force or has been
undertaken to be performed by a person in pursuance of a contract or otherwise in relation to any service. If some
person has undertaken to render service pursuant to a contract or otherwise and seeks consideration, which in the
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opinion of the hirer is exorbitant, it cannot be said to be a deficiency in rendering of service.153
— In respect of any complaint regarding deficiency in service, it is sufficient for the complainant to specify the
deficiency therein. There is no requirement that the complaint regarding deficiency in service must indicate or
quantify the loss or damage suffered by the complainant due to that deficiency. It is for the consumer disputes
Redressal Authority to assess the loss and grant the relief. Also, the Redressal Authority is not debarred from
granting relief not prayed for.154
— The term “compensation” signifies that which is given in recompense, as equivalent rendered damages on the
other hand constitute the sum of money claimed or adjusted to be paid in compensation for loss or injury
sustained, the value estimated in money of something lost or withheld. The term “Compensation” is used to
indicate what constitutes or is regarded as equivalent or recompense for loss or privation. In such proceedings,
finding as to valuation of loss, generally speaking, can, and is allowed to be ascertained on the preponderance of
the probabilities of the particular case. The Redressal Authorities are empowered to direct the opposite party to
pay such amount as compensation to the consumer for any loss or injury suffered by the consumer due to the
negligence of the opposite party.
Failure of the consignor to disclose the valuable nature of the contents of the consignment and in the absence of knowledge
of contents of the consignment, the courier is responsible only for failure to carry the consignment safely and deliver it to
the consignee, but not for the liability for loss of its valuable contents.155
The essence of the provision is that the loss or injury, for which compensation is to be adjudged and awarded, should be
found to have been caused by the negligence of the opposite party. The complainant has, therefore, to establish that there
was negligence on the part of the opposite party and that as a consequence thereof loss or injury was suffered by him. It is
only in such event that compensation would be warranted under the provisions of clause (d) of section 14. Where
suspension of banking operation was the direct consequence of an illegal strike involving unlawful obstruction by the
striking workmen, who did not permit the entry/exist of the bank’s officers and willing members of staff from the Bank’s
premises, the inconvenience, loss or injury caused to the constituents of the Bank (i.e., the public) was not the result of any
negligence on the part of the Bank.156 The award of compensation by the Forums established under the Consumer
Protection Act, 1986 has to be made only on well-recognised legal principles governing the quantification of damages or
compensation. The compensation to be awarded has to be quantified on a rational basis on a consideration of material
produced before the adjudicating Forum showing the extent of injury suffered, and manner in which and the extent to
which monetary loss has been caused thereby to the complainant. In case no material showing the extent of loss or injury
caused to the complainant on account of wrongful act of the other party is forthcoming, the Commission may award only
nominal damages.157 For any wrongful loss suffered, interest may be awarded to compensate the complainant.158
— Responsibility regarding post-sale service rests jointly on both manufacturer as well as dealer.159
— Compensation can be claimed for monetary and physical loss and mental agony, e.g., for delay in completing the
construction and handing over the possession of the house by a Housing Development Authority, and allowing its
occupation unauthorisedly by someone else.160 Likewise, compensation can be claimed for deficiency in service
involving neglect to settle the insurance claim, for harassment, pain and, expense caused to a complainant.161
— While section 14 empowers award of compensation for any loss or injury suffered by a consumer on account of
negligence of the opposite party, the claim must be substantiated by sufficient evidence and the compensation has
to be assessed not arbitrarily, but on the basis of well-accepted legal principles.162 In a complaint about unfair
trade practice, the complainant has to indicate the loss or damage suffered; but in respect of a complaint
regarding deficiency in service it is sufficient for the complainant to specify the deficiency without specifying the
quantum of loss or damage suffered.163
— The Consumer Forums could consider the claim for compensation under section 14(1)(d) for any liquidated
damages only in case it was established that the complainant had suffered loss due to deficiency in service and
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negligence on the part of the respondent.164 Thus, bursting of a gas cylinder due to defective pin in the valve
resulting in death of a member of customer’s family, being deficiency in service, the complainant was entitled to
award of compensation.165
— Compensation, which is awarded, must have a rational relation to the nature and extent of the injury,
inconvenience or physical and mental suffering caused to the complainant by the action or omission of the
opposite party. Status of a person is not of much relevance while awarding compensation or exemplary
compensation.166
1 Chapter VIIIA containing sections 53A to 53U inserted by Act 39 of 2007, section 43,
section 53A inserted with effect from 12 October 2007, section 53B inserted with effect from 20 May 2009, sections 53C to 53M
inserted with effect from 20 December 2007 and sections 53N to 53U inserted with effect from 20 May 2009.
2 Airports Economic Regulatory Authority Appellate Tribunal and Cyber Appellate Tribunal
would be replaced by the Telecom Disputes Settlement and Appellate Tribunal. Copyright Board would be dissolved and its
functions would be taken over by the Intellectual Property Appellate Board. The National Highways Tribunal would be replaced
and its functions would be taken over by the Airport Appellate Tribunal. The functions of Employees Provident Fund Appellate
Tribunal would be taken over by the Industrial Tribunal.
3 COMPAT has ceased to exist from 26 May 2017. [SO 1696(E), Notification, Ministry of
Finance, dated 26 May 2017].
51 Albert A Foer, Jonathan W Cuneo Cuneo, Gilbert & La Duca, “The
International Handbook on Private Enforcement of Competition Law,” Edward Elgar Cheltenham, UK, 2010,
52 Trade Practices Act, 1974 has been now replaced by the Competition
and Consumer Act, 2010. Section 82 of the new Act has similar provision.
53 Ballarpur Industries Ltd v Sinarman (MRTPC), (1996) 87 Comp
Cases 159 at p 160.
54 Devendra Kumar Chandu Lal Shah v Indian Rayon Corp Ltd,
Compensation Application No 2001/1989 in LJTP Enquiry No 5/1987.
55 Pragati Construction Co v Otis Elavators Co (India) Ltd, (1992) CTJ
at 307 (MRTPC).
56 Oriental Agencies v Tata Oil Mills Co Ltd, (1995) CTJ at 227
(MRTPC).
57 DG (I&R) v Sahyadri Motors Agencies and Mahindra & Mahindra
Ltd, (1997) 5 CTJ at 78 (MRTPC).
58 Radheyshyam Agarwal v Regional Manager, Maharashtra State
Financial Corp, CA No 152 of 1995, decided on 8 December 2001.
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59 Pennwalt (I) Ltd v MRTP Commission, (1999) 97 Comp Cases 163 :
(1998) 32 CLA 463 (Del).
60 Corporation Bank v Navin,
AIR 2000 SC 761 : 2000 (2) SCC 628
: 2000 AIR SCW 304 : 2000 WLC (SC) CVL 137 : 2000 (3) BCLR 215 : 2000 BankJ 285 :
2000 (3) Pat LJR 1 : 2000 (2) CPR 13 :
2000 (1) Supreme 282 : 2000 CLC 537
: 2000 (38) All LR 562 :
2000 (2) BLJR 998 :
2000 (1) Scale 243 : 2000 (2) SRJ 269 : 2000 (1) UJ(SC) 642 :
2000 (2) Civ LJ 732 : 2000 (100) Com Cas 160
: 2000 (2) Comp LJ 161
SC : 2000 CorLA(BL Supp) 203 SC : 2000 (3) ICC 427 : 2000 (1) CPJ 13
: 2000 (1) JT 317 : 2000 (2) Mad LJ 119 : (2000) 2 Mad LJ 119 : 2000 (2) RCR (Civil) 18.
61 Super Engg Corp v Maheshwari Bros, (2005) 125 Comp Cases 375
(SC).
62 Sunder Dass Aggarwal Charitable Trust v Eskay Engg Industries,
(1997) 27 CLA 120 (MRTPC).
63 Re Sheri Louise Slimming Centre Pvt Ltd, UTP Enquiry No
26/1986, Order dated 19 February 1987.
64 Re Eskay Electronics (I) Pvt Ltd, UTP Enquiry No 325/1988, order
dated 5 October 1989.
65 Re Medical Hair Centre, Compensation Application No 216 of
1989, Order dated 27 October 1989.
66 Re Superfine Typewriters, UTP Enquiry No 492/1987.
67 Re Dhantak & Co, UTP Enquiry No 382/1988, Order dated 27
March 1989.
68 MK Menon v Orient Finance & Exchange Co, Compensation
Application No 970/1987, Order dated 29 March 1988.
69 UTP Enquiry No 54/1987, order dated 15 July 1987.
70 Y Satyavani v Bharat TV Ltd and Raja Agencies, Compensation
Application No 22/1986, Order dated 22 July 1988.
71 Neeru Anand v Sheri Louise Slimming Centre, Compensation
Application No 3/1987, Order dated 14 May 1990.
72 Randana Chadha v Sheri Louise Slimming Centre, Compensation
Application No 4/1987, Order dated 14 May 1990.
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*[s 53N] Awarding compensation
73 Neera Gupta v Sheri Louise Slimming Centre, Compensation
Application No 2/1987, Order dated 14 May 1990.
74 Similar observations were made by the Commission in the other
two cases instituted by Randana Chadha and Neera Gupta.
75 Neera Gupta v Sheri Louise Slimming Centre, CA No 258/1989,
Order of December 1990.
76 Re Seema Seth v Neha Deep Estates, RA No 9/1990 in CA No
168/1990, Order dated 28 December 1990.
77 Re Sukhbir Singh Bahl, Advocate, Compensation File No 30 (9473)-
UTP/1992, order dated 14 May 1992.
78 Re Marudhar Services Ltd, Compensation Application No 24/1988
in UTP enquiry No 109/1986 order dated 12 December 1991.
79 Re Kores India Ltd, Compensation Application No 194 of 1992,
order dated 9 March 1993.
80 Re Unit Trust of India, Compensation Application No 135/1993,
decided on 7 October 1993.
81 SK Gianchandani v Ghaziabad Development Authority,
Compensation Application No 245 of 1994, decided on 24 July 1996.
82 Kanta Dhir v Jaina Properties Pvt Ltd, Compensation Application
No 69/1992, order dated 18 February 1993.
83 Re Indian Rayon Corp Ltd, CA Application No 2001/1987 in UTP
Inquiry No 5/1987, order dated 11 February 1991.
84 Compensation Application No 261 of 1993, heard on 4 April 1996,
(1996) 5 Comp LJ 622 (MRTPC).
85 Reliance was placed on the Full Bench
Judgement of the Commission in YP Mahna v Bharat Television, (1994) 81 Comp Cases 277 (MRTPC) (FB), wherein it was stated
that section 12B has been introduced to fill the gap in the MRTP Act, 1969 to enable the Commission to award compensation for
loss or damage suffered as a result of any prohibited trade practice.
86 See Saligram v Remal Public School,
Compensation Application No 1317 of 1988, Order dated 28 November 1989.
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*[s 53N] Awarding compensation
87 See Surlex Diagnostics Ltd v Advanced Medical
Systems (India) Pvt Ltd, (1993) 1 CTJ 146 (MRTPC), Universal Petro-Chemicals Ltd v Indomitsu Kosan Co Ltd, IA No 108 of
1994, order dated 16 November 1995.
88 See Re Ingal das Damodar Mody Co,
(1983) 3 Comp LJ 221 (MRTPC), which
also refers to Allahabad High Court’s ruling in RD Saxena v JK Synthetics, (S.A. No 249 of 1976).
89 Vasant Rao Shankar Rao Kulkarni v Bombay Mercantile Co-op
Bank Ltd, 2006 CTJ 47 (MRTPC).
90 Tajindra Khanna v Shivalik Orchards and Gardens Pvt Ltd, 2006
CTJ 62 (MRTPC).
91 Frabodh Kumar Kansal v Ghaziabad Development Authority, 2006
CTJ 74 (MRTPC).
92 MS Shoes East Ltd v MRTP Commission, (2005) 128 Comp Cases
945 at p 946 (Del) : (2004) 58 CLA 24 (Del) :
(2004) 52 SCL 628 (Del).
93 Madras Port Trust v Hymanshu International,
AIR 1979 SC 1144 .
94 Rakesh Pawar v National Insurance Co Ltd,
(1997) 27 CLA 113 (MRTPC). Also see NS Ahluwalia v Hindustan Motors,
(1997) 26 CLA 16 (MRTPC).
95 Klor’s Inc v Broadway Hale Stores Inc, 359 US 207 (1959).
96 Martin v Phillips Petroleum Co, 365 F.2d 629 (1966).
97 Gerli v Silk Association of America, 36 F.2d 959 (1929).
98 Snow Crest Beverages Inc v Recipe Foods, Inc, 147 F Supp 907
(1956).
99 Atlas Building Products Co v Diamond Block and Gravel Co, 269
F.2d 950 (1959).
100 Bigelow v RKO Radio Pictures, Inc, 327 US 251
(1946).
101 Hanover Shoe, Inc v United Shoe Mach Corp, 392 US 481 (1968).
102 FTC v Cement Institute, 333 US 683 (1948).
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*[s 53N] Awarding compensation
103 USA v United Shoe Mach Corp, 110 F. Supp 295 (1953).
104 Baker v Willoughby, (1969) 3 All
ER 1528 .
105 DR AR BISWAS, Biswas on Encyclopaedic Law Dictionary, Debooks
Eastern Law House, Calcutta, 1979, p 173.
106 State of Gujarat v Shantilal Mangaldas,
AIR 1969 SC 634 : 1969 1 SCC 509
: 72 Bom LR 1.
107 CCIT v Sham Lal, AIR 1963 P&H 411
.
108 Dhapai v Dalla, AIR 1970 All 206
.
109 State of Gujarat v Shantilal Mangaldas,
AIR 1969 SC 634 at 644 : (1969) 1 SCC 509
: (1969) 1 SCA 461 : (1969) 2 SC J 322 : (1969) 2 Mad LJ
(SC) 59 : (1969) 2 Andh WR (SC) 59); (1969) 2 SC WR 366 : 72 Bom LR 1.
110 Justice TP Mukherjee and KK Singh, The Law Lexicon, 3rd Edn, p
1382.
111 Mohamad Mozahrul Azad v Mohamad Azizuddin Bhaniya,
AIR 1923 Cal 507 at 511. JUSTICE TP MUKHERJEE AND KK SINGH, The Law
Lexicon, 3rd Edn, p 1382.
112 In the Competition and Consumer Act, 2010 and the erstwhile
Restrictive Trade Practices Act, 1974 of Australia, loss or damage is expressly defined to include injury. Section 4K in both the
Acts read:— 4K. In this Act,
(a) a reference to loss or damage, other than a reference to the amount of any loss or damage, includes a reference to injury; and
(b) a reference to the amount of any loss or damage includes a reference to damages in respect of any injury.
113 Smith v Brown, 40 LJQB 218, per COCKBURN CJ.
114 John S James, Stroud’s Judicial Dictionary of Words and Phrases,
4th Edn, Sweet and Maxwell Ltd (1972), p 674.
115 Haigh v Royal Mail Steam Packet Co, 52 LJQB 395.
Page 34 of 37
*[s 53N] Awarding compensation
116 Provincial Secretary, Treasurer v York, (1957) 16 DLR (2d) 198,
per Bridges J, at pp 204 and 205. John B Saunders, Words and Phrases legally defined, 2nd Edn (1969), Butterworths London, vol
11, p 3.
117 Swansea Corp v Harpar, (1912) 3
KB 493 .
118 Benoy Bhusan v Sabitri, AIR
1977 Cal 199 at 204. Justice TP Mukherjee and KK Singh: The Law Lexicon, 3rd Edn (1982),
Central Law Agency, Allahabad, p 461.
119 Dr AR Biswas, Biswas on Encyclopaedic Law Dictionary, Debooks,
Eastern Law House, Calcutta, (1979), p 211.
120 Hadley v Baxendale, 1854 Exch 341 : 156 ER 145.
121 Such compensation is not to be given for any remote and indirect
loss or damage sustained by reason of the breach.
122 The Arpad, (1934) Ex Ch, p 189.
123 See Winfield and Jolowicz on Tort, 12th Edn, p 575.
124 Collins v Hertfordshire County Council,
(1947) KB 598 , 615 per Hilbery J.
125 Short v J &W Henderson Ltd,
(1946) Tax LR 427 , 429.
126 Ready Mixed Concrete (South East) Ltd v Minister of Pensions and
National Insurance, (1968) 2 QB 497 .
127 Durga Das Basu, Law of Torts, 10th Edn, p 64.
128 This is so even in breaches of contract.
129 Winfield and Jolowicz on Tort, 12th Edn, pp 622, 623.
130 See Winfield and Jolowicz on Tort for further comments on this at pp
623, 624.
131 Wise v Kaye, (1962) 1 QB 638
.
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*[s 53N] Awarding compensation
132 Cutler v Vauxhall Motors Ltd,
(1971) 1 QB 418 .
133 Triple damages are more in Competition cases in the USA.
134 See Esso Petroleum Co Ltd v Mardon,
(1976) 1 QB 801 : (1976) All ER 5
.
135 Figgins Pty Ltd v Centrepoint Freeholds Pty Ltd,
(1981) 36 ALR 23 .
136 Id at p 57.
137 Brown v Southport Motors Pyt Ltd,
(1982) 43 ALR 183 .
138 Mc Allister v Richmond Brewing Co (NSW) Pty Ltd, (1942) 42 SR
(NSW) 187 per John CJ at 192 cited in 36 ALR 23, at p 58.
139 Toteff v Antonas, (1952)
87 CLR 647 at 650-1 also quoted in (1982) 43 ALR
313 .
140 Pearson v Wheeler, (1925) Ry & Mood 303 at 304 :
171 ER 1028 at 1029.
141 Peek v Derry,
(1987) 37 ChD 541 at p 594 : cf (1889) 14 App Cas 337
.
142 Potts v Miller, (1940) 64 CLR 282
at 297.
143 Twycross v Grant, (1877) 2
CPD 469 at 491.
144 Centrepoint case, 36 ALR 23 at p 60.
145 Ibid, at p 59.
146 Figgins Pty Ltd v Centre Point Freeholds Pty Ltd,
(1981) 36 ALR 23 .
147 State of South Australia v Johnson,
(1982) 42 ALR 161 .
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*[s 53N] Awarding compensation
148 Doyle v Olby (Ironmongers) Ltd,
(1969) 2 QB 158 at 67.
149 State of South Australia v Johnson,
(1982) 42 ALR 161 .
150 Frith v Gold Cost Mineral Springs Pty Ltd, 47 ALR 547, at p 561.
151 “Consumer” under the Consumer Protection Act, 1986 it may be
noted, does not include a person who obtains goods for resale or for commercial purpose.
152 Re Bharathi Knitting Co, on appeal before
Supreme Court against the order of National Commission, dated 17 January 1996.
153 Re Industrial Development Corp of Maharashtra
Ltd, 1 (1995) CPJ 164 (NC).
154 Tuticorin Plastic Pvt Ltd v Ebenezer, 1993 (1)
CPR 338 (TN SC); (1991) 2 CPR 17 (NC), followed.
155 Skypack Courier Pvt Ltd v Karar Vyasa Bank, (1994) 1 CPR 85
(NC).
156 Consumer Unity and Trust Society, Calcutta v The Chairman and
Managing Director, Bank of Baroda, (1989) 2 Comp LJ 293
(Judgment dated 18 May 1989 of National Commission); followed in Federal Bank, Bistpur, Jamshedpur v Bijon Mishra
Managing Trustee, Consumer Guidance Society of Jamshedpur, (1989) 2 Comp LJ 323
(Judgment dated 18 May 1989 of National Commission).
157 The Commercial Officer, Office of the Telecom v Bihar State
Warehousing Corp, before National Commission in First Appeal No 2/1988, Judgment dated 18 October 1989 (against order dated
1 August 1988 of State Commission, Bihar); UOI v Dr Satya Bhama Thakur, before National Commission, First Appeal No
14/1989, Judgment dated 15 December 1989.
158 Giriraj Sharma v Regional Commissioner, Coal Mines Provident
Fund, Case No 21/89 decided by State Commission, Rajasthan, Judgment dated 28 July 1989.
159 Padma V Amraporkar v William & Co, (1991) 1
CPR 287.
160 Harbans Singh v Lucknow Development Authority,
1994 (1) CPR 98 (NC).
161 Shadiram Raghubir Saran v National Insurance
Co Ltd, R.P. No 422 of 1992, decided on 13 April 1993 (NC).
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*[s 53N] Awarding compensation
162 Bharat Tractors, Muzaffarpur v Ramchandra
Pandey, (1989) 2 Comp LJ 351 (Judgment of
National Commission in first Appeal No 1 of 1989, Judgment dated 15 May 1989).
163 District Manager, Patna Telephones v Tarun
Bharthaur, (1991) 1 CPR 171 : (1991) Comp Cases 64.
164 Ramnarayan Parameshwara Iyer v Larsen &
Toubro Ltd, F.A. No 265 of 1991, decided on 2 November 1992 (NC).
165 Indian Oil Corp v V Venkataraman, F.A. No 82 of
1992, decided on 18 December 1992 (NC).
166 South Eastern Railway v Anand Prasad Sinha,
1991 (1) CPR 145 : (1989) 3 Comp LJ 269
: 1991 (1) CPJ 10 (NC). See also Consumer
Unity & Trust Society v UOI, 1991(1) CPR 21 : (1990) 1 Comp LJ 314
: 1992 (1) CPJ 56 (NC);
UOI v Dr Satya Bhama Thakur, 1991 (1) CPJ 31
: 1991 (1) CPR 43 (NC); Kailash Kumari v Shankar & Co, 1992 (2) CPJ 443
: 1991 (1) CPR 107 (NC); United India Insurance Co Ltd v N Bhavani, 1991 (2) CPR 467 :
1992 (2) CPJ 495 (NC); Ashok Kumar Singh v Gujarat Cycles
Ltd, (1992) 3 Comp LJ : 1992 (2) CPJ 454 : 1993
(2) CPR 304 (NC); Ishwar Das v Vinay Kumar Gupta, 1992 (3) Comp LJ 61
: 1992 (1) CPR 432 : 1992 (1) CPJ 118
(NC); Dept of Telephones v R Subramanian, 1992 (3) CPJ 77
(NC); Mahanagar Telephone Nigam Ltd v Raja S Bhosale, 1993 (2) CPR 359 :
1993 (2) CPJ 222 (NC); Hindustan Motors Ltd v Rajendra
Kumar Ganeshbhai Prajapati, 1993 (3) CPR 274 : 1993 (3) CPJ 275
(NC); Consumer Protection Council TN v Thiruvalluvar Transport Corp,
1993 (3) CPJ 341 : 1993 (3) CPR 379 (NC); Air Linkers v Systems Marketing &
Service, 1994 (2) CPJ 50 (NC).
End of Document
[s 53O] Procedure and powers of Appellate Tribunal
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > [CHAPTER
VIIIA] COMPETITION APPELLATE TRIBUNAL
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
1[CHAPTER VIIIA] COMPETITION APPELLATE TRIBUNAL
The Union Government brought in multiple changes through the Finance Act, 2017. It scrapped eight AppellateTribunals,2 and
the Competition Appellate Tribunal (COMPAT) was one among them.3 Sections 171 and 172 of the Finance Act, 2017
amended the Competition Act, 2002 and the Companies Act, 2013, respectively. Section 171 amended sections 53A and 2(ba)
of the Competition Act, 2002 to the effect that the COMPAT has ceased to exist as the Appellate Tribunal, effective from 26
May 2017. The National Company Law Appellate Tribunal (NCLAT) will now be the Appellate Tribunal against the orders of
the Competition Commission of India (CCI). There will be a transition phase during which all pending matters before the
COMPAT stand transferred to the NCLAT. During this period, all such matters will be heard afresh by the NCLAT. The
procedural aspects of this transition have not been provided for yet.
Relevant provisions of the Finance Act, 2017 has been reproduced below:
(b) in Chapter VIIIA, for the heading, the following heading shall be substituted, namely:—
“APPELLATE TRIBUNAL”;
171(c) for section 53A, the following section shall be substituted, namely:—
[s 53A] The National Company Law Appellate Tribunal constituted under section 410 of the Companies Act, 2013 shall, on and
from the commencement of Part XIV of Chapter VI of the Finance Act, 2017, be the Appellate Tribunal for the purposes of this
Act and the said Appellate Tribunal shall—
(a) hear and dispose of appeals against any direction issued or decision made or order passed by the Commission under
sub-sections (2) and (6) of section 26, section 27, section 28, section 31, section 32, section 33, section 38, section 39,
section 43, section 43A, section 44, section 45 or section 46 of this Act; and
(b) adjudicate on claim for compensation that may arise from the findings of the Commission or the orders of the
Appellate Tribunal in an appeal against any finding of the Commission or under section 42A or under sub-section (2)
of section 53Q of this Act, and pass orders for the recovery of compensation under section 53N of this Act.”;
(c) sections 53C, 53D, 53E, 53F, 53G, 53H, 53-I, 53J, 53K, 53L, 53M and 53R shall be omitted;
(d) in section 63, in sub-section (2), clauses (mb), (mc) and (md) shall be omitted.
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[s 53O] Procedure and powers of Appellate Tribunal
172. In the Companies Act, 2013,—
(a) in section 410, for the words “for hearing appeals against the orders of the Tribunal”, the following shall be
substituted, namely:—
“for hearing appeals against,—
(a) the order of the Tribunal under this Act; and
(b) any direction, decision or order referred to in section 53N of the Competition Act, 2002 in accordance with the
provisions of that Act.”;
(b) after section 417, the following section shall be inserted, namely:—
“417A. Notwithstanding anything contained in this Act, the qualifications, appointment, term of office, salaries
and allowances, resignation, removal and other terms and conditions of service of the Chairperson and other
Members of the Appellate Tribunal appointed after the commencement of Part XIV of Chapter VI of the Finance
Act, 2017, shall be governed by the provisions of section 184 of that Act:
Provided that the Chairperson and Member appointed before the commencement of Part XIV of Chapter VI of
the Finance Act, 2017, shall continue to be governed by the provisions of this Act and the rules made thereunder
as if the provisions of section 184 of the Finance Act, 2017 had not come into force.”
Although, the COMPAT and ceased to exist as laid out under the Finance Act, 2017, the NCLAT has been given the same
appellate powers as it vested in COMPAT. The following discussion therefore would be relevant in understanding the nature
and scope of jurisdiction of the appellate authority.
Position prior to Finance Act, 2017
[s 53O] Procedure and powers of Appellate Tribunal
(1) The Appellate Tribunal shall not be bound by the procedure laid down in the Code of Civil Procedure, 1908 (5 of
1908), but shall be guided by the principles of natural justice and, subject to the other provisions of this Act and
of any rules made by the Central Government, the Appellate Tribunal shall have power to regulate its own
procedure including the places at which they shall have their sittings.
(2) The Appellate Tribunal shall have, for the purposes of discharging its functions under this Act, the same powers
as are vested in a civil court under the Code of Civil Procedure, 1908 (5 of 1908), while trying a suit in respect of
the following matters, namely:—
(a) summoning and enforcing the attendance of any person and examining him on oath;
(b) requiring the discovery and production of documents;
(c) receiving evidence on affidavit;
(d) subject to the provisions of sections 123 and 124 of the Indian Evidence Act, 1872 (1 of 1872), requisitioning
any public record or document or copy of such record or document from any office;
(e) issuing commissions for the examination of witnesses or documents;
(f) reviewing its decisions;
(g) dismissing a representation for default or deciding it Ex parte;
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[s 53O] Procedure and powers of Appellate Tribunal
(h) setting aside any order of dismissal of any representation for default or any order passed by it Ex parte;
(i) any other matter which may be prescribed.
(3) Every proceedings before the Appellate Tribunal shall be deemed to be judicial proceedings within the meaning
of sections 193 and 228, and for the purposes of section 196, of the Indian Penal Code, 1860 (45 of 1860) and the
Appellate Tribunal shall be deemed to be a civil court for the purposes of section 195 and Chapter XXVI of the
Code of Criminal Procedure, 1973 (2 of 1974).
SCOPE OF THE SECTION
This section was inserted by the Competition (Amendment) Act, 2007 to vest powers of a civil court on the Appellate
Tribunal, while trying a suit, under the CPC, 1908 in respect of the following matters:
(a) summoning and enforcing attendance of any person and examining him on oath, these are contained in order IX,
XVI and XVIII of CPC, 1908;
(b) discovery and production of documents; these are contained in Order XI of CPC, 1908;
(c) reception of evidence on affidavits; these are contained in Order XIX of CPC, 1908;
(d) requisitioning any public record or record from any office; these are contained in order XIII and XVI of CPC,
1908;
(e) issuing commission for examination of witnesses or documents; these are contained in order XXVI;
(f) reviewing its decisions; these are contained in Order XLVII of CPC, 1908;
(g) dismissing a representation for default or deciding it Ex parte: these are contained in order of CPC, 1908;
(h) setting aside order of dismissal of any representation for default or any ex-parte order; these are contained in
Order XXI of CPC, 1908; and
(i) any other matter prescribed by rules.
It may be noted that although the Appellate Tribunal exercises the aforesaid powers of the court, it is not a Court.
POWERS OF APPELLATE TRIBUNAL UNDER CPC AND IPC
Under sub-section (3), the Appellate Tribunal shall be deemed to be a civil court for purposes of section 195 (contempt of
lawful authority of public servants for offences against public justice and relating to documents tendered in evidence) and
Chapter XXVI (offences effecting the administration of justice) of the CPC, 1973.
Every proceeding before the Appellate Tribunal shall be deemed to be a judicial proceeding within the meaning of section
193 (prescribing punishment for false evidence and section 228 (prescribing punishment for insult or interruption to public
servants sitting in judicial proceedings) and for purpose of section 196 (prescribing penalty for tendering false evidence) of
Indian Penal Code, 1860 (IPC, 1860).
PRINCIPLES OF NATURAL JUSTICE
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[s 53O] Procedure and powers of Appellate Tribunal
Under sub-section (1), the Appellate Tribunal shall be guided by principles of natural justice.
The requirement of natural justice would be read into statutory provisions unless excluded explicitly or by implication.167
The doctrine of natural justice is synonymous with fairness.168 The object of the doctrine is not only to promote justice
but also to prevent miscarriage of justice.169
In the exercise of its powers and discharge of its functions, the Appellate Tribunal shall be guided by the principles of
natural justice. It is a well-settled principle of administrative law that a quasi-judicial body should act according to the
principles of natural justice. “Natural justice is a great humanising principle intended to invest law with fairness and to
secure justice and over the years it has grown into a widely pervasive rule affecting large areas of administrative
action”,170 per BHAGWATI J By developing the principles of natural justice, the courts have devised a kind of code of fair
administrative procedure.171 According to LORD MORRIS, “natural justice is but fairness writ large”.172 “The aim of the
rules of natural justice is to secure justice or to put it negatively to prevent miscarriage of justice. These rules can operate
only in areas not covered by any law validly made. In other words, they do not supplant the law of the land but supplement
it. The concept of natural justice has undergone a great deal of change in recent years. In the past, it was thought that it
included just two rules”,173 per HEGDE, J But in the course of years, many more subsidiary rules came to be added to the
rules of natural justice. These and many other rules are merely extensions or refinements of the two main principles which
are the essential characteristics of natural justice and are the twin pillars supporting it, i.e., no man shall be a judge in his
own cause; and both sides shall be heard.
The requirements of natural justice vary with the varying constitution of the different quasi-judicial authorities and the
statutory provisions under which they function. Hence, the question whether or not any rule of natural justice has been
contravened in any particular case should be decided not under any pre-conceived notions, but in the light of the relevant
statutory provisions, the constitution of the Tribunal and the circumstances of each case.174 The extent and application of
the doctrine of natural justice cannot be imprisoned within the straitjacket of a rigid formula. The application of the
doctrine depends upon the nature of the jurisdiction conferred on the administrative authority, upon the character of the
rights of the persons affected, the scheme and policy of the statute and other relevant circumstances disclosed in the
particular case.175
The Supreme Court has emphasized in KL Tripathi v State Bank of India176 that whether any particular principle of
natural justice would be applicable to a particular situation, or the question whether there has been any infraction of the
application of that principle, has to be judged on the facts and circumstances of each case. The basic requirements are that
there must be fair play and the decision must be arrived at in a just and objective manner with regard to the relevance of
the materials and reasons “ ... The rules of natural justice are flexible and cannot be put on any rigid formula”.177
The requirement of acting judicially in essence is nothing but a requirement to act justly and fairly and not arbitrarily or
capriciously. The procedures which are considered inherent in the exercise of a judicial power are merely those which facilitate if
not to ensure just and fair decision. In recent years, the concept of quasi-judicial power has been undergoing a radical change.
What was considered as an administrative power some years back is now being considered as a quasi-judicial power.178
The requirement of natural justice can be excluded by statute. Where the statute does not do so or a statute gives this right
by a specific provision, it cannot be taken away by the court on the ground of practical convenience. In this particular case,
however the court found that price fixation was wholly an administrative matter and was in the nature of legislative action.
Rules of natural justice were not applicable.179
The writ of certiorari will lie where a judicial or quasi-judicial authority has violated the principles of natural justice even
though the authority has acted within its jurisdiction.
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[s 53O] Procedure and powers of Appellate Tribunal
Given above is an outline of the principles affecting “natural justice” and “discretion” according to which the Appellate
Tribunal has to exercise its powers and discharge its functions. Detailed account of the subject can be available from Jain
and Jain, Administrative Law; Wade, Administrative Law and De Smith, Judicial Review of Administrative Action.
Basic principles of natural justice
The two basic principles of natural justice are discussed below:
(a) Audi alteram partem rule
This Latin maxim means that “hear the other side”. Another rule rendering the same idea is “audiatur et altera pars”
which means “no man should be condemned unheard.” Quasi-judicial authority cannot make any decision adverse to any
party without giving him an effective opportunity of meeting any relevant allegation against him.180 It requires that every
person whose civil right is affected must have a reasonable notice of the case he has to meet. He must be furnished with the
information upon which the action is based.181 He must have a reasonable opportunity of being heard in his defence or to
meet the case against him.182 He must also have the opportunity of adducing all relevant evidence on which he relies.183
The requirements of audi alteram partem rule are:
1. Notice.—A basic principle of natural justice is that before adjudication, the persons who are likely to be affected by the
decision should be given notice. Any proceeding taken without notice would violate natural justice.184 The notice must
give a reasonable opportunity to comply with its requirements.185 A notice, which is vague, is not a proper notice in law.
The court’s conscience must be satisfied that the individual had a fair chance to know the details of the action proposed to
be taken against him.186
Absence of notice when only one conclusion could be drawn would not be vitiative of the action taken without notice.187
Notice is not necessary when the consequences are already stated in the provision and, therefore, known, Hyderabad
Karnataka Education Society v Registrar of Societies.188 Non-compliance with principles of natural justice unless causing
prejudice, does not automatically entitle one to relief under Article 226 of the Constitution. There has been gradual
relaxation of the rigours of the rule of natural justice which is to be noticed in case law. There can be certain situations in
which an order passed in violation of natural justice need not be set aside under Article 226 of the Constitution of India.
For example, where no prejudice is caused to the person concerned. In Ridge v Baldwin,189 it was held that breach of
principles of natural justice was in itself treated as prejudice and that no other “de facto” prejudice needed to be proved.
But, since then the rigour of the rule has been relaxed not only in England but also in India. The principle that in addition
to breach of natural justice, prejudice must also be proved has been developed by the Supreme Court in several cases.
Since, in KL Tripathi v State Bank of India,190 the Supreme Court has consistently applied the principle of prejudice in
several cases. The “useless formality” theory is an exception. Apart from the class of cases of “admitted or indisputable
facts leading only to one conclusion” there has been considerable debate on the application of that theory in other cases. In
the ultimate analysis the applicability of the theory would depend on the facts of a particular case.191 Before setting aside
a sale on ground of defective proclamation (as in this case), it was held that it was necessary for the appropriate authority
to give the highest bidder a notice and allow him a hearing as his rights would be adversely affected by the setting aside of
the sale.192
No notice was considered necessary for recovering from an employee overpaid house rent and city compensatory
allowance.193
The State Government while declaring the territorial area of Gram Sabha and establishing Gram Sabha does not exercise
judicial or quasi-judicial function. It is rather in the nature of a legislative power. Rules of natural justice are not attracted.
Giving opportunity of hearing to residents was not necessary.194
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[s 53O] Procedure and powers of Appellate Tribunal
2. Hearing.—The requirement of the rule is that the parties whose civil rights are to be affected by a quasi-judicial
authority must have a reasonable opportunity of being heard in their defence.
Stating it broadly and without intending it to be exhaustive ... rules of natural justice require that a party should have the
opportunity of adducing all relevant evidence on which he relies, that the evidence of the opponent should be taken in his presence
and that he should be given the opportunity of cross-examining the witness examined by that party, and that no materials should be
relied on against him without his being given an opportunity of explaining them.195
It is now well settled that a mere opportunity to explain the conduct is not sufficient and the applicant should have the
opportunity to produce his defence.196 He should have fair opportunity to state his case and to meet the accusations made
against him. He should have full opportunity to correct or contradict a relevant statement prejudicial to him. Whether a
reasonable opportunity has been given in a particular case will depend on its own circumstances, there being no uniform
formula or rigid rules for the purpose. The duty to offer a reasonable opportunity of being heard does not include any
obligation to hear a party in person,197 or by a lawyer.198 Ordinarily, an opportunity of making a written representation
against the proposed action will meet the requirement of natural justice, (Jyoti Prakash case, supra). Whether a personal
hearing should be given or not will depend on the circumstances of each case. See further199 where the Supreme Court in
the matter of Bhopal Gas disaster said that where a statute conferring the power is silent with regard to the giving of a pre-
decisional hearing to the person affected, a decision arrived at without hearing but providing post decisional hearing may
also be good.
When the affected party requests the adjudicatory body to exercise its power to summon witness and documents to prove
his defence, it would be a denial of natural justice to him if his request is not taken care of.200 When the adjudicator lacks
coercive power to compel attendance of witnesses and production of documents, it is enough if he takes evidence of such
witnesses as are produced before him by the party affected. The adjudicator may help the party to secure the attendance of
witnesses by issuing letters of request to them though in the absence of any legal provision to compel their attendance, they
may or may not appear in answer thereto.201
Appearance of a lawyer is not claimable as a matter of right. But in a case where complicated questions of law and fact
arise, where the evidence is elaborate and the party concerned may not be in a position to meet the situation himself
effectively, denial of legal assistance may amount to a denial of natural justice.202
Where the right to be heard is specifically conferred by a statute, the court cannot take it away on the ground of practical
convenience.203 It is only where there is nothing in the statute to actually prohibit the giving of an opportunity to be heard,
but on the other hand, the nature of the statutory duty imposed itself necessarily implied an obligation to hear before
deciding, that the audi alteram partem rule could be imported.204
For cases on principles of natural justice, see section 36
(b) Nemo debet esse judex in propria suo causa rule
(1) Rules against bias.—This Latin maxim is a rule against bias and means that no man shall be a judge in his own cause.
In the words of BOWEN, LJ: “Judges, like Caesar’s wife, should be above suspicion”. The idea underlying the rule
prohibiting a judge to adjudicate upon a case to which he is a party or in which he is interested has most salutary influence
on the adjudicatory tribunals. LORD CRANWORTH LC said:
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... a judge ought to be, and is supposed to be, indifferent between the parties. He has, or is supposed to have, no bias inducing him
to lean to the one side rather than to the other. In ordinary cases it is just ground of exception to a judge that he is not indifferent,
and the fact that he is himself a party, or interested as a party, affords the strongest proof that he cannot be indifferent.205
It is well settled that every member of a tribunal that is called upon to try issues in judicial or quasi-judicial proceedings
must be able to act judicially; and it is of the essence of the judicial decision and judicial administration that judges should
be able to act impartially, objectively and without bias.206 The test always is and must be whether a litigant could
reasonably apprehend that a bias attributable to a member of the tribunal might have operated against him in the final
decision of the tribunal. The principle is not confined to Judges but extends to any authority vested with quasi-judicial
functions.
Pecuniary interest, however small, would wholly disqualify a person from acting as a judge.207 Personal bias towards a
party owing to relationship and the like the personal hostility to a party may equally disqualify a Judge.208
In the case of official bias, the officer is not actuated by any personal ill-will. He is so imbued with the desire to promote
the departmental policy that he becomes blind to the existence of the interest of the private individuals. Official bias is not
tolerated by Courts even if it is sanctioned by statute. In this connection, the observations of SUBBA RAO, J in Gullapalli
Nageswara Rao v State of AP,209 are noteworthy:
It is not out of place here to notice that in England the Parliament is supreme and, therefore, statutory law, however repugnant to
the principles of natural justice, is valid; whereas in India, the law made by Parliament or a State legislature should stand the test of
fundamental rights declared in Part II of the Constitution.
A quasi-judicial body is not to be directed as to how it should decide a specific matter. “In the case of administrative or
executive authorities, the Government could direct them to carry out their functions in a particular manner. But the same
cannot be said of a quasi-judicial authority. Although, the Government may have appointed it, may be paying it and may
have the right to take disciplinary action against it in certain eventualities, yet, in the very nature of thing, where the rule of
law prevails, it is not open to the Government to control the functioning of a quasi-judicial authority and to direct it to
decide a particular matter before it in particular manner”.210 Where a tribunal consists of several members, bias on the
part of one of the members is sufficient to vitiate the decision.211 In deciding the question of bias, human probabilities and
ordinary course of human conduct have to be taken into consideration. In a group deliberation and decision like that of a
Selection Board, the members do not function as computers. Each member of the group or board is bound to influence the
others. More so if the member concerned is a person with special knowledge. His bias is likely to operate in a subtle
manner.212
The decision of a quasi-judicial authority must be based on materials before it and not on the findings or directions of any
outside authority, however eminent it may be.213 This principle is violated even where the quasi-judicial tribunal feels
that he cannot refuse to comply with the directions of an administrative superior except for reasons to be recorded.214 It is
a basic principle of judicial procedure that the person who hears must decide the case and not another person.215 Hence, if
an officer, who is bound under the law to give a personal hearing, is transferred, his successor-in-office cannot decide the
matter without giving a fresh hearing,216
Bias negates fairness and reasonableness and leads to arbitrariness and mala fides. Fairness is synonymous with
reasonableness. Bias stands included within the attributes and broader purview of the word “malice” which in common
acceptation means and implies “spite” or “ill will”. Mere general statements will not be sufficient for the purposes of
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[s 53O] Procedure and powers of Appellate Tribunal
indication of ill will. There must be cogent evidence available on record to come to the conclusion as to whether, in fact,
there was a bias or a mala fide move, which resulted in the miscarriage of justice.217
The doctrine of fairness and the duty to act fairly is a doctrine developed in the administrative law field to ensure the rule
of law and to prevent failure of justice. It is a principle of good conscience and equity since the law courts are to act fairly
and reasonably in accordance with the law. Unreasonableness is opposed to the doctrine of fairness and reasonableness
will have its play.218 There must be factual support for the allegations of mala fides. Mere use of word mala fide would
not by itself make a petition entertainable. The court must scan factual aspect and come to its own conclusion.219
(2) Fair Procedure.—The doctrine of natural justice is not only to secure justice but to prevent miscarriage of justice. In
Ridge v Baldwin,220 the doctrine was held to be incapable of exact definition but what a reasonable man would regard as a
fair procedure in particular circumstances. A question arises as to who is a reasonable man. In India, a reasonable man
cannot but be a common man similarly placed.221
3. Reasoned decisions.—Speaking orders.—An extension of the principle of natural justice requires a reasoned decision.
A quasi-judicial tribunal must give reasons for its order, Siemens Engg and Mfg Co v UOI,222 the supervisory jurisdiction
of the superior Courts under Article 136 or 226 or 227 of the Constitution will be rendered nugatory.223 This does not
mean that such authority should write out a judgment, like that of a Court of law, but that it must give an outline of the
process of reasoning by which it arrives at its decision, Rama Vilas Service v Chandrasekaran,224 or that reasons must be
recorded separately even where the order speaks for itself as regards the reasons which have led to it, Board of Mining
Exams v Ramjee,225 or the impugned order merely concurs with a statutory report of another authority, which gives
reasons, Tara Chand v Municipal Corporation of Delhi.226 Nor does it follow that, in the absence of any statutory
requirement, a statutory tribunal must give its judgment in writing or that it must always give reasons for its decisions
immediately with its pronouncement, Maharashtra SRTC v Balwant.227 The adjudicator will have to give such reasons for
his decision as may be regarded fair and legitimate by a reasonable man and thus it will minimize chances of irrelevant or
extraneous considerations from entering his decisional process, and it will minimize chances of unconscious infiltration of
personal bias or unfairness in the conclusion. Statement of reasons also gives satisfaction to the party against whom the
decision is made. Justice should not only be done but should also seem to be done. An unreasoned decision may be just but
may not appear to be so to the person affected. A reasoned decision, on the other hand, will have the appearance of justice.
Subba Rao J, in MP Industries v UOI.228 Lord Denning in Breen v Amalgamated Engineering Union:229
Recording of reasons is the only visible safeguard against possible injustice and arbitrariness. Reasons, if given, substitute
objectivity for subjectivity. Reasons, if recorded, indicate whether the adjudicatory or administrative authority has acted bona fide
or otherwise.230
The faith of the people in administrative tribunals can be sustained only if the tribunals act fairly and dispose of the matters
before them by well-considered orders.231 The Supreme Court said that a recording of reasons serves a statutory purpose,
e.g., it excludes chances of arbitrariness and assures a degree of fairness in the process of decision making. The court
followed its own decision in Raipur Development Authority v Chokhamal Contractors.232
In Bombay Oil Industries Pvt Ltd v UOI (supra), the Supreme Court observed in the context of MRTP Act, 1969 that we
must, however, impress upon the Government that while disposing of applications under sections 21, 22 and 23 of the
Monopolies and Restrictive Trade Practices Act, 1969, it must give good reason in support of its order and not merely state
its bald conclusion. The faith of the people in an administrative tribunal can be sustained only if the tribunals act fairly and
dispose of the matters before them by well-considered orders. The relevant material must be made available to the
objectors because, without it, they cannot possibly meet the claim or contentions of the applications under sections 21, 22
and 23 of the MRTP Act, 1969. The refusal of the Government to furnish such material to the objectors can amount to a
denial of a reasonable opportunity to the objectors to meet the applicant’s case. And denial of a reasonable opportunity to
meet the other man’s case is denial of natural justice. On the question of the need to give reasons in support of the
conclusions to which the Government has come, the authorities concerned may, with profit, see the Judgments of this
Court in UOI v Mohan Lal Capoor,233 the Supreme Court held that where a selection committee is composed of men of
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high status who are unquestionably impartial and their function is also of administrative nature the court would not lightly
interfere in the decision of the Committee and statement of reasons would not be necessary. The Court followed in this
respect.234 Where the court held that sufficient compliance with the requirement of natural justice was made when the
enquiry committee afforded the full opportunity of hearing to the judge in question in respect of contesting the charges
against him.
The giving of reasons in support of their conclusions by judicial and quasi-judicial authorities when exercising initial
jurisdiction is essential for various reasons. First, it is meant to prevent unfairness or arbitrariness in reaching the
conclusions. The very search for reasons will put the authority on the alert and minimise the chances of infiltration of
personal bias in the conclusion. Secondly, it is a well-known principle that justice should not only been done but should
also appear to have been done. Unreasoned conclusions may be just but they may not appear to be just to those who read
them. Reasoned conclusions, on the other hand, will have also the appearance of justice. Thirdly, it should be noted that an
appeal generally lies from the decision of judicial and quasi-judicial authorities to the High Court and Supreme Court by
special leave granted under Article 136. A judgment, which does not disclose the reasons, will be of little assistance to the
court.235
When a statute itself requires reasons to be recorded for taking an action of a quasi-judicial character, the provision is
treated as mandatory and the failure to record reasons would be fatal to the action taken. In Verma (CL) v State of MP,236
the Supreme Court emphasised that a statutory rule would prevail over administrative instructions.237 Where the Supreme
Court distinguishes administrative action from a quasi-judicial decision and prescribes the requirement of fairness in all
cases.
The Supreme Court has also emphasised the need to give reasons for passing ex-parte orders of injunction.238
Procedure to be followed by Appellate Tribunal
Under sub-section (1), it is provided that the Appellate Tribunal shall have power to regulate its own procedure including
the places at which they shall have their sittings.
Case law under MRTP Act, 1969 on Commission’s power of revision
In Mahindra & Mahindra Ltd v UOI,239 it was held that:
any order made by the Commission may be amended or revoked at any time in the manner in which it was made. The words ‘in the
manner in which it was made’ merely indicate the procedure to be followed by the Commission in amending or revoking the order.
They have no bearing on the context of the power granted under section 13(2) or on its scope and ambit..... One thing is clear that
the power conferred under section 13(2) is a corrective or rectificatory power and it is conferred in terms of widest amplitude.
There are no fetters placed by the legislature to inhibit the width and amplitude of the power and in this respect it is unlike section
22 of the English Restrictive Trade Practices Act, 1956 which limits the power of the Court under that section to discharge a
previous order made by it by providing in terms clear and explicit that leave to make an application for discharging previous order
made by it shall not be granted except on prima facie evidence of material change in the relevant circumstances. This provision is
markedly absent in section 13(2) and the express limitations placed on the power conferred under that section.
It is left to the discretion of the Commission whether the power should be exercised in a given case, and if so, to what extent......
But it must be remembered that the discretion being a judicial or in any event a quasi-judicial, discretion cannot be ‘arbitrary,
vague or fanciful’; it must be guided by relevant considerations. It is not possible to enumerate exhaustively the various relevant
considerations which may legitimately weigh with the Commission in exercising its discretion nor would it be prudent or wise to
do so, since the teeming multiplicity of circumstances and situations which may arise from time to time in this kaleidoscopic world
cannot be cast in any definite or rigid mould or be imprisoned in any straightjacket formula. Every case of an application under
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[s 53O] Procedure and powers of Appellate Tribunal
section 13(2) would have to be decided on its own distinct facts and the Commission would have to find whether it is a proper case
in which, having regard to the relevant considerations, the order made by it should be amended or revoked.... The fact that an
appeal lies against the order under section 55 but has not been preferred, would be no ground for refusing to exercise the power
under section 13(2). The power conferred on the Commission under section 13(2) is an independent power which has nothing to do
with the appellate power under section 55. There is no question of using section 13(2) as a substitute for section 55. Both are
distinct and independent powers... The scope of section 13(2) is not cut down by the provision for appeal under section 55. It is,
perhaps, because the right of appeal given under section 55 is limited to a question of law that a wide and unlimited power is
conferred on the Commission to amend or revoke an order in appropriate cases.
The mere fact that an appeal could be filed against an order or that the revoking of the previous order can amount to
exercising those powers which an appellate court can exercise, does not debar the entertaining and giving relief under
section 13(2) because according to the Supreme Court the powers under section 13(2) of the MRTP Act, 1969 are
unfettered to amend or revoke an order in an appropriate case.240
While disposing off an application filed under section 13 of the MRTP Act, 1969 and section 155 of the CPC by Avery
India Ltd241 in regard to Monopolistic Trade Practice Enquiry against it, the Commission observed that:
Where, therefore, as here, the very basis which constitutes the grounds for issuance of show-cause notice had undergone a total
change, we do think the Commission can give the matter a fresh look.” In holding the above view, the Commission, inter alia
relied upon the following observations of the Supreme Court:242 So also there may be material change in the relevant
circumstances subsequent to the making of the order, which may affect the essential reasoning on which the order is based and this
too may necessitate a reconsideration of the order .... After all, an order under section 37 is made in a given constellation of
economic facts and circumstances and if that constellation undergoes material change, the order would have to be reviewed in the
light of the changed economic situation. No order under section 37 can be immutable. It is by its very nature transient or pro
tempore and must be liable to be altered or revoked according as there is material change in the relevant economic facts and
circumstances. It is obviously for this reason that such a wide and unusual power is conferred on the Commission under section
13(2) to amend or revoke an order at any time.243 Referring to its earlier order in the matter of Association of State Road
Transport Undertakings v Premier Tyres Limited,244 the Commission also rejected the contention put forth on behalf of the
Director General that the Commission having only issued a show cause notice and there being no final order in this case, the Avery
India Limited, the respondent cannot invoke the provisions of section 13(2).
The power is intended to ensure that the order passed by the Commission is and continues to be in conformity with the
requirements of the MRTP Act, 1969 and the trade practice condemned by the order is really and truly a restrictive trade
practice and it must, therefore, be construed in a wide sense so as to effectuate the object and purpose of the grant of the
power. It must be pointed out that it cannot be construed to be so wide as to permit re-hearing on the same matter without
anything more, with a view to showing the order is wrong on facts.
The provisions of sub-section (2) of section 37 of MRTP Act, 1969 have to be read in conjunction with regulations 78 and
79245 and the provisions of section 114 and Order XLVII of the CPC, 1908, referred to in the said regulation. An order
made by the Commission can be amended or revoked, in appropriate circumstances e.g., when there is any material change
in the situation which was the basic foundation of the Commission’s decision,246 or when there has been some mistake or
error of fact apparent on record, or if there is discovery of any new matter or evidence of substantial importance which
despite due diligence the applicant could not produce at the hearing. Also, in the event an Ex parte order is passed by the
Commission on the failure of a person to attend the hearing, if the person is able to show that he was prevented by
sufficient cause from being present, e.g., his counsel was grossly negligent and/or he failed to inform the respondent about
the date of hearing whereby he was precluded from submitting his case before the Commission, the Commission may, in
view of the provision of regulation 13 of the MRTPC Regulations read with Order IX of Rule 13 of the CPC, 1908 revoke
its Ex parte order.247 While the Commission’s powers to vary its order are large enough, it, however, does not permit a de
novo hearing on the same material without anything more.248 Also, any contention by the respondent that the direction
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[s 53O] Procedure and powers of Appellate Tribunal
given or obligation imposed by the Commission in its order would or would have caused difficulties in carrying on the
business by him would not warrant for revision of the order, inasmuch as such difficulties, could have been visualised
when the order was passed.249 Where, however, an order passed by the Commission runs contrary to a view taken in any
other case by the Supreme Court (to which appeal lies from the orders of the Commission), the Commission may revoke
its order.250 On the mere fact that the order passed by the Commission was a consent order would not, however, deprive
that respondent of his remedy to seek a revision of the order under sub-section (2) but then he would have to justify the
circumstances warranting such a course of action by the Commission.251 Scope of section 13(2) cannot be enlarged and
an application under the said section is not maintainable if it relates to a matter which was not before the Commission
while passing the original order. Also any prayer made in an application under section 13(2) cannot be entertained by the
Commission where it may put an extra burden upon the dealers, which is not one of the terms and conditions in the
agreement. Conditions in the agreement can be incorporated only with the consent of the dealer and not by the
Commission.252
A plain reading of Order XLVII of the CPC demonstrates that the application for review does not lie on the ground of
discovery of new matter or evidence which the applicant alleges was not within his knowledge or could not be adduced by
him when the decree or order was passed or made without strict proof of such allegation. The Supreme Court also in the
case of Mahindra & Mahindra v UOI as reported in the AIR 1979 Supreme Court page 798
has laid down the law in respect of scope and ambit of section 13(2) of the MRTP Act, 1969 and has inter
alia stated “but however, large may be amplitude of this power, it must be pointed out that it cannot be construed to be so
wide as to promote re-hearing on same material without anything more, with a view to showing that the order is wrong on
facts.”253
1 Chapter VIIIA containing sections 53A to 53U inserted by Act 39 of 2007, section 43,
section 53A inserted with effect from 12 October 2007, section 53B inserted with effect from 20 May 2009, sections 53C to 53M
inserted with effect from 20 December 2007 and sections 53N to 53U inserted with effect from 20 May 2009.
2 Airports Economic Regulatory Authority Appellate Tribunal and Cyber Appellate Tribunal
would be replaced by the Telecom Disputes Settlement and Appellate Tribunal. Copyright Board would be dissolved and its
functions would be taken over by the Intellectual Property Appellate Board. The National Highways Tribunal would be replaced
and its functions would be taken over by the Airport Appellate Tribunal. The functions of Employees Provident Fund Appellate
Tribunal would be taken over by the Industrial Tribunal.
3 COMPAT has ceased to exist from 26 May 2017. [SO 1696(E), Notification, Ministry of
Finance, dated 26 May 2017].
167 State Government Houseless Harijan Employees’ Association v State
of Karnataka, AIR 2001 SC 437 :
(2001) 1 SCC 610 .
168 Kumaon Mandal Vikas Nigam Ltd v Girja Shankar Pant,
AIR 2001 SC 24 : (2001) 1 SCC 182
: (2001) 1 LLJ 583 :
2001(I) CLR 12 : 2000 (7) Scale 19
.
169 Ibid.
170 Maneka Gandhi v UOI, AIR 1978
SC 597 , 625.
Page 12 of 19
[s 53O] Procedure and powers of Appellate Tribunal
171 HWR Wade, Administrative Law, 5th Edn.
172 Furnell v Whangarei High Schools Board,
(1973) AC 660 , 697 : [1973] 1 All ER 400
.
173 AK Kraipak v UOI, AIR 1970
SC 150 , 156 : AIR 1979 SC 150 5
: 1969 (2) SCC 262 : (1970) 1
SCR 457 .
174 Suresh Koshy v University of Kerala,
AIR 1969 SC 198 .
175 UOI v PK Roy, AIR 1968 SC 850
, 858 : 1968 2 SCR 186 :
1968 2 SCJ 503 : (1970) 1 LLJ 633
: 1968 2 SCWR 41 , per Ramaswami, J.
176 KL Tripathi v State Bank of India,
AIR 1984 SC 273 : 1984 1 SCC 43
, 1984 SCC (Lab) 62 : [1984] 1 SCR 184 :
(1984) 1 LLJ 2 : 1983 Lab IC 1680
: 1983 2 Serv LJ 623 : 1983 63 FJR 312 :
1984 1 LLJ 2 : 1983 (2) Scale 587
: 1984 48 FLR 38 : 1984 1 LabLN 19 :
1984 1 SCWR 150 : 1984 16 Lawyers 76.
177 Ibid. Jain and Jain, Principles of Administrative Law, Supplement
1989 by MP Jain, (1986), 4th Edn, p 24.
178 Kraipak (AK) v UOI, AIR 1970
SC 150 : 969 (2) SCC 262 : (1970) 1 SCR 457
at 154 followed in Baburao Vishwanath Mathpati v State, AIR 1996 Bom 227
at 241.
179 WB Electricity Regulatory Commission v CESC Ltd,
AIR 2002 SC 3588 : 2002 AIR SCW 4212 : (2002) 8
SCC 715 .
180 Dhakeswari Cotton Mills v CIT,
AIR 1955 SC 65 : AIR 1955 SC 154
: 1955 SCR 941 :
1955 SCJ 122 : 1954 26 ITR 775
: 1955 Andh LT (Civil) 61 : 1955 1
Mad LJ (SC) 60 : 1955 SCA 96..
181 SL Kapoor v Jagmohan, AIR 1981
SC 136 : (1980) 4 SCC 379 :
[1981] 1 SCR 746 .
Page 13 of 19
[s 53O] Procedure and powers of Appellate Tribunal
182 State of MP v Chintaman, AIR 1961
SC 1623 .
183 UOI v TR Verma, AIR 1957
SC 882 : (1958) 2 LLJ 259 .
184 East India Commercial Co v Collector of Customs,
AIR 1962 SC 1893 : (1963) 3
SCR 338 : 1963 1 SCA 622 :
1983 13 ELT 1342 .
185 CIT v Bombay Trust Corp Ltd,
AIR 1936 PC 269 .
186 Fedco Pvt Ltd v Bilgrami SN,
AIR 1960 SC 415 : 1960 2 SCR 408
: 1960 62 Bom LR 293 :
1960 1 SCA 369 : 1960 Mad LJ (Cri) 184 : 1960 1 Mad LJ (SC) 71 : 1960 1
Andh WR (SC) 71, 1960 SCJ 235 :
1999 110 ELT 92 .
187 Aligarh Muslim University v Mansoor Ali Khan,
AIR 2000 SC 2783 : : 2000 AIR SCW 2976 :
(2000) 7 SCC 527 : (2000 ) 7 SCC 529
: JT 2000 (9) SC 502 :
2000 (6) Scale 125 .
188 Hyderabad Karnataka Education Society v Registrar of Societies,
AIR 2000 SC 301 : JT 1999
(9) SC 482 : 1999 (7) Scale 361
: (2000) 1 SCC 566 .
189 Ridge v Baldwin, (1963) 2
All ER 66 (HL).
190 KL Tripathi v State Bank of India,
AIR 1984 SC 273 : 1984 1 SCC 43
, 1984 SCC (Lab) 62 : [1984] 1 SCR 184 : (1984) 1 LLJ 2
: 1983 Lab IC 1680 : 1983 2 Serv LJ 623 :
1983 63 FJR 312 : 1984 1
Lab LJ 2 : 1983 (2) Scale 587
: 1984 48 FLR 38 : 1984 1 Lab LN 19 :
1984 1 SCWR 150 : 1984 16 Lawyers 76.
191 Aligarh Muslim University v Mansoor Ali Khan,
AIR 2000 SC 2783 : 2000 AIR SCW 2976 :
(2000 )7 SCC 529 : (2000) 7 SCC 527
: JT 2000 (9) SC 502 :
2000 (6) Scale 125 .
Page 14 of 19
[s 53O] Procedure and powers of Appellate Tribunal
192 Piara Singh v State of Punjab,
AIR 2000 SC 2352 : 2000 (5) SCC 765
: 2000 AIR SCW 2473 : 2000 (2) CurLJ(CCR) 568 :
2000 (7) JT 516 : 2000 (2) UJ(SC) 1187 : 2000 (3) Land LR 76
: 2000 (126) Punj LR 843 :
2000 (5) Supreme 38 : 2000 (4)
RCR (Civil) 183 : 2000 (7) SRJ 239 : 2000 (5) Scale 133
: 2000 (3) LRI 149 : 2000 (5) Scale 133
: JT 2000 (7) SC 516 .
193 State of Karnataka v Mangalore University Non-Teaching
Employees Association, AIR 2002 SC 1223 : 2002 AIR
SCW 1010 : 2002 AIR Kant 912 : 2002 (3) SCC 302 :
(2002) 2 LLJ 820 : 2002 (2)
Scale 367 : 2002 (4) SRJ 164 : 2002 (2) SCJ 223
: 2002 (2) LabLN 459 : 2002 (2) LLJ 820 :
2002 (93) FLR 657 : 2002 (1) LRI 537 :
2002 (2) JT 419 : 2002 (2)
ESC 41 : 2002 (2) Supreme 252
: 2002 Lab IC 965 :
2002 (2) UPLBEC 1206 : 2002 (2) SLT 276
: 2002 (2) SCT 377 : 2002 (2)
Serv LR 654 : 2002 (2) Serv LJ 403 SC.
194 State of Punjab v Tehal Singh,
AIR 2002 SC 533 : AIR 1979 SC 1347
: 2002 (2) SCC 7 : 2002 AIR SCW
105 : 2002 (1) SCJ 177 ,
2002 (1) SLT 84 : [2002] 1 SCR 27
: 2002 (1) Scale 18 : 2002 (2) SRJ 443 :
2002 (1) Supreme 7 :
2002 (2) Punj LR 347 : 2002 (1) Land LR 270
: 2002 (2) SCC 7 :
2002 (2) RCR (Civil) 1 : 2002 (2) CurLJ (CCR) 513 : 2002 (1)
ICC 584 : 2002 (5) JT 40 : 2002 (1) LRI 50 : JT 2002 (5) SC 40
: 2002 (1) Scale 18 .
195 UOI v TR Verma, AIR
1957 SC 882 : (1958) 2 LLJ 259
.
196 Mukhtar Singh v State, AIR 1957
All 297 .
197 UOI v Jyoti Prakash, AIR 1971
SC 1093 : (1971 ) 1 SCC 396
: 1971 2 SCJ 501 :
1971 3 SCR 483 : (1971) 1 LLJ 256
:: 1972 1 SCA 82 :: 1971 Serv LR 203
: 1971 1 Lab LJ 256 : 1971 1 Civ App J (SC) 400.
198 Mulchand Gulab Chand v Mukund Shivram,
AIR 1952 Bom 296 .
199 Charanlal Sahu v UOI, AIR 1990
SC 1480 : (1990) 1 SCC 613 .
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[s 53O] Procedure and powers of Appellate Tribunal
200 Sita Ram v UOI, AIR 1967 Del 38
.
201 CMP Co-op Society v State of MP,
AIR 1967 SC 1815 : 1968 1 SCR 138
: 1967 3 SCR 329 :
1968 1 SCJ 444 : 1968 MPWR 135
: 1968 MPLJ 305 ::
1968 BLJR 159 : 1968 All LJ 189 :
1968 Jab LJ 175 : 13 Law Rep 561 :.
202 Board of Trustees of the Port of Bombay v DR Nadkarni,
AIR 1983 SC 109 : AIR 1972
SC 542 : 1983 (1) SCC 124 ,
AIR 1983 SC 109 (4); CL Subramaniam v Collector of
Customs, AIR 1972 SC 2178 :
(1972) 3 SCC 542 : (1972) 3 SCR 485
: (1972) 1 LLJ 465 .
203 WB Electricity Regulatory Commission v CESC Ltd,
AIR 2002 SC 3588 : 2002 AIR SCW 4212 :
(2002) 8 SCC 715 .
204 Schedule Caste & Weaker Section Welfare Association v State of
Karnataka, AIR 1991 SC 1117 :
1991 (2) SCC 604 : 1991 AIR SCW 1010 :
1991 (1) SCR 974 : 1991 (1) UJ (SC) 628 : JT 1991 (2) SC 184
: 1991 (1) Ren CR 690 : 1991 (1) Ren CJ 520 : 1991 (2)
JT 184 : 1991 (2) AP LJ 1 .
205 Ranger v Great Western Railway Co, (1854) 5 HLC 72.
206 Manaklal v Dr Prem Chand Singhvi,
AIR 1957 SC 425 : (1957) SCR 575
.
207 Manaklal v Prem Chand, AIR 1957
SC 425 : (1957) SCR 575 .
208 AK Kraipak v UOI, AIR 1970
SC 150 : AIR 1979 SC 150 5
: 1969 (2) SCC 262 :
(1970) 1 SCR 457 .
209 Gullapalli Nageswara Rao v State of AP,
AIR 1959 SC 1376 : 1960 1 SCR 580
: 1960 SCJ 53 : 1960 1
Andh WR (SC) 13 : 1960 1 Mad LJ (SC) 13.
Page 16 of 19
[s 53O] Procedure and powers of Appellate Tribunal
210 Ramamurthy Reddiar v Chief Commissioner, Pondicherry,
AIR 1963 SC 1464 :
[1964] 1 SCR 656 .
211 Narayana v State of AP, AIR 1958
AP 636 .
212 G Sarana v Lucknow University,
AIR 1976 SC 2428 : 1976 3 SCC 585
: 1977 1 SCR 64 : 1976 SLWR 456 : 1976 Serv
LJ 562 : 1976 Lab IC 1546 :
1976 2 SCWR 213 : 1977 1 Lab LJ 68
: 1976 Serv LC 447 : (1977) 1 LLJ 68 : 1976 2
Serv LR 509 : 1976 Cur LJ (Civ) 474 : 1976 UJ (SC) 701 : 1976 (2) Serv LR 509.
213 Rajagopala v STAT, AIR 1964
SC 1573 : 1964 2 Mad LJ (SC) 131 : (1964) 2 Mad LJ 13 :
[1964] 7 SCR 1 : 1964 2 SCJ 570
: 1964 2 An WR (SC ) 131 .
214 New Prakash Transport Co Ltd v New Suwarna Transport Co Ltd,
AIR 1957 SC 232 .
215 Gullapalli Nageswara Rao v APSRTC,
AIR 1959 SC 308 : (1959) 2 An WR (SC) 156
.
216 Calcutta Tanneries (1944) Ltd v Commissioner of IT,
AIR 1960 Cal 543 .
217 State of Punjab v VK Khanna,
AIR 2001 SC 343 : (2001) 2 SCC 330
: 2000 (7) Scale 731 .
218 Tata Iron & Steel Co Ltd v UOI,
(2001) 2 SCC 41 .
219 State of UP v Sahaguram Arya,
2000 SCC (L&S) 1104 : (2000) 3 CLR 319
: (2000) 5 Serv LR 244; Prabodh Sagar v Punjab SEB, AIR 2000 SC 1684
: 2000 AIR SCW 1656 : (2000) 5 SCC 630
: (2000) 2 LLJ 1089 :
2000 (4) Scale 408 : JT 2000
(5) SC 378 .
220 Ridge v Baldwin, (1963) 2
All ER 66 (HL).
221 Kumaon Mandal Vikas Nigam Ltd v Girja Shankar Pant,
AIR 2001 SC 24 : (2001) 1
SCC 182 : 2001 SCC 182 :
Page 17 of 19
[s 53O] Procedure and powers of Appellate Tribunal
(2001) 1 LLJ 583 :
2001(I) CLR 12 : 2000 (7) Scale 19
.
222 Siemens Engg and Mfg Co v UOI,
AIR 1976 SC 1785 : AIR 1985 SC 1121
: (1976) 2 SCC 981 : [1976 ] Supp SCR
489; RB Desai v UOI, (1987) 3 Comp LJ 111 (Del); Anil
Kumar v Presiding Officer, AIR 1985 SC 1121 : 1985 SCC
(Lab) 815 : 1985 3 SCC 378 :
(1986) 1 LLJ 101 : 1985 (2) Scale 1365
: 1985 UJ (SC) 639 : 1985 67 FJR 85
: 1985 Lab IC 1219 : 1985 2 Lab LN 579; Oranco
Chemicals Pvt Ltd v Gwalior Rayon Silk Mfg & Wvg Co Ltd, AIR 1987 SC 1564
.
223 Harinagar Sugar Mills Ltd v Shyam Sunder,
AIR 1961 SC 1669 : (1961) 31 Comp Cases 387 : 1962 2 SCR 339 :
1963 1 SCJ 471 ; Govindrao v State of MP,
AIR 1965 SC 1222 : [1965] 1 SCR 678
: 1966 1 SCJ 480 :
1965 Mah LJ 502 : 1965 1 SCWR 1043
: 1965 MPLJ 566 :
1964 JAB LJ 613 .
224 Rama Vilas Service v Chandrasekaran,
AIR 1965 SC 107 .
225 Board of Mining Exams. v Ramjee,
AIR 1977 SC 965 : (1977) 2 SCC 256
: [1977] 2 SCR 904 .
226 Tara Chand v Municipal Corp of Delhi,
AIR 1977 SC 567 : (1977) 1 SCC 472
: [1977] 2 SCR 198 :
(1977) 1 LLJ 331 .
227 Maharashtra S.R.T.C. v Balwant,
AIR 1969 SC 329 : AIR 1969 SC 329
(7) : [1969] 1 SCR 808 .
228 M.P. Industries v UOI, AIR 1966
SC 671 : 1966 1 SCR 466 .
229 Breen v Amalgamated Engineering Union,
(1971) 1 All ER 1148 .
230 Cited in Manab Kumar Mitra v Orissa,
AIR 1997 Ori 52 at 54.
Page 18 of 19
[s 53O] Procedure and powers of Appellate Tribunal
231 Bombay Oil Industries Pvt. Ltd v UOI, (1984) 55 Comp Cases 356 :
AIR 1984 SC 160 . Reiterating the same thing in SN
Mukherjee v UOI, AIR 1990 SC 1984 , 1995.
232 Raipur Development Authority v Chokhamal Contractors,
AIR 1990 SC 1426 :
JT 1989 (2) SC 285 : 1989 (1) Scale 1279
: 1989 (2) SCC 721 .
233 UOI v Mohan Lal Capoor, 1974 (1)
SCR 797 , Siemens Engineering & Manufacturing Co of India Ltd v UOI,
AIR 1976 SC 1785 : (1976) 2 SCC 981
: [1976] Supp SCR 489 and Uma Charan v State of MP, AIR 1981
SC 1915 : 1981 SCC (Lab) 582 : 1981 4 SCC 102
: (1981) 4 SCC 120 : 1981 UJ (SC) 736 :
1981 2 Serv LJ 252 : 1981 2 Lab LJ 303 .
Distinguishing this in National Institute of Mental Health and Nuro Sciences v KK Raman,
AIR 1992 SC 1806 , 1808.
234 RS Dass v UOI, AIR 1987 SC 593
: JT 1986 (1) SC 1043 :
[1987] 1 SCR 527 . See further Sarojini Ramaswami v UOI,
AIR 1992 SC 2219 , 2265 :
(1992) 4 SCC 506 : JT 1992 (5) SC 1
.
235 Woolcombers of India Ltd v Woolcombers Workers’ Union,
AIR 1973 SC 2758 :
1973 (27) FLR 38 .
236 Verma (CL) v State of MP, AIR 1990
SC 463 .
237 See also Neelima Misra v Harinder Kaur Paintal,
AIR 1990 SC 1402 , 1408 : AIR 1990
SC 1402 101 : (1990) 2 SCC 746
: JT 1990 (2) SC 103 .
238 Shiv Kumar Chadha v Municipal Corp of Delhi,
(1993) 3 SCC 161 : (1993) 3 SCR 522
: 1993 2 Scale 772 :
JT 1993 (3) SC 238 .
239 Mahindra & Mahindra Ltd v UOI,
AIR 1979 SC 798 : 1979 2 SCC 529
: 1979 2 SCR 1038 : (1979) 49 Comp Cases 419 : 1979 Tax LR 2064.
240 Re Pressure Cooker Appliances Ltd, UTP Enquiry No 30/1986, order
dated 16 January 1989.
241 MTP Enquiry No 1 of 1975.
Page 19 of 19
[s 53O] Procedure and powers of Appellate Tribunal
242 Mahindra & Mahindra Ltd v UOI,
AIR 1979 SC 798 , at p 813 : 1979 2 SCC 529
: 1979 2 SCR 1038 : 49
Comp Cases 419 : 1979 Tax LR 2064 .
243 Para 12, Mahindra & Mahindra Ltd v UOI,
AIR 1979 SC 798 : 1979 2 SCC 529
: 1979 2 SCR 1038 : [1979] 49 Comp Cases 419 (SC) : 1979 Tax LR 2064.
244 Association of State Road Transport Undertakings v Premier Tyres
Ltd, RTP Enquiry No 78 of 1984, order dated 3 December 1993 : (1994) 2 Comp LJ 146
(MRTPC).
245 MRTPC Regulations, 1991. See Appendix 3, vol 2.
246 Delhi Pipe Dealer’s Association v Indian Tube Co Ltd,
(1975) Tax LR 2034 (MRTPC).
247 Re Ramgopal Maheshwari and Sons, (1979) 49 Comp Cases 202
(MRTPC).
248 Mahindra & Mahindra Ltd v UOI,
AIR 1979 SC 798 : 1979 2 SCC 529
: 1979 2 SCR 1038 : 49 Comp Cases 419 :
1979 Tax LR 2064 ; RRTA v Mysore Kirlosker Ltd, (1978) 48
Comp Cases 837 (MRTPC).
249 Telco Ltd v RRTA, AIR 1977
SC 973 : (1977)2 SCC 55 :
[1977] 2 SCR 685 : (1977) 47 Comp Cases 520 (SC) :
1977 Tax LR 1789 .
250 Re Malayala Manorama Co Ltd, (RTPE No 71/75), order dated 5
March 1981.
251 Re Anil Hard Boards Ltd, (1979) 49 Comp Cases 278 (MRTPC).
252 Re VST Tillers Tractors Ltd, RTP Enquiry No 379/1988.
253 Re Simpson & Co Ltd, (UTPE No 257/87).
End of Document
[s 53P] Execution of orders of Appellate Tribunal
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > [CHAPTER
VIIIA] COMPETITION APPELLATE TRIBUNAL
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
1[CHAPTER VIIIA] COMPETITION APPELLATE TRIBUNAL
The Union Government brought in multiple changes through the Finance Act, 2017. It scrapped eight AppellateTribunals,2 and
the Competition Appellate Tribunal (COMPAT) was one among them.3 Sections 171 and 172 of the Finance Act, 2017
amended the Competition Act, 2002 and the Companies Act, 2013, respectively. Section 171 amended sections 53A and 2(ba)
of the Competition Act, 2002 to the effect that the COMPAT has ceased to exist as the Appellate Tribunal, effective from 26
May 2017. The National Company Law Appellate Tribunal (NCLAT) will now be the Appellate Tribunal against the orders of
the Competition Commission of India (CCI). There will be a transition phase during which all pending matters before the
COMPAT stand transferred to the NCLAT. During this period, all such matters will be heard afresh by the NCLAT. The
procedural aspects of this transition have not been provided for yet.
Relevant provisions of the Finance Act, 2017 has been reproduced below:
(b) in Chapter VIIIA, for the heading, the following heading shall be substituted, namely:—
“APPELLATE TRIBUNAL”;
171(c) for section 53A, the following section shall be substituted, namely:—
[s 53A] The National Company Law Appellate Tribunal constituted under section 410 of the Companies Act, 2013 shall, on and
from the commencement of Part XIV of Chapter VI of the Finance Act, 2017, be the Appellate Tribunal for the purposes of this
Act and the said Appellate Tribunal shall—
(a) hear and dispose of appeals against any direction issued or decision made or order passed by the Commission under
sub-sections (2) and (6) of section 26, section 27, section 28, section 31, section 32, section 33, section 38, section 39,
section 43, section 43A, section 44, section 45 or section 46 of this Act; and
(b) adjudicate on claim for compensation that may arise from the findings of the Commission or the orders of the
Appellate Tribunal in an appeal against any finding of the Commission or under section 42A or under sub-section (2)
of section 53Q of this Act, and pass orders for the recovery of compensation under section 53N of this Act.”;
(c) sections 53C, 53D, 53E, 53F, 53G, 53H, 53-I, 53J, 53K, 53L, 53M and 53R shall be omitted;
(d) in section 63, in sub-section (2), clauses (mb), (mc) and (md) shall be omitted.
Page 2 of 3
[s 53P] Execution of orders of Appellate Tribunal
172. In the Companies Act, 2013,—
(a) in section 410, for the words “for hearing appeals against the orders of the Tribunal”, the following shall be
substituted, namely:—
“for hearing appeals against,—
(a) the order of the Tribunal under this Act; and
(b) any direction, decision or order referred to in section 53N of the Competition Act, 2002 in accordance with the
provisions of that Act.”;
(b) after section 417, the following section shall be inserted, namely:—
“417A. Notwithstanding anything contained in this Act, the qualifications, appointment, term of office, salaries
and allowances, resignation, removal and other terms and conditions of service of the Chairperson and other
Members of the Appellate Tribunal appointed after the commencement of Part XIV of Chapter VI of the Finance
Act, 2017, shall be governed by the provisions of section 184 of that Act:
Provided that the Chairperson and Member appointed before the commencement of Part XIV of Chapter VI of
the Finance Act, 2017, shall continue to be governed by the provisions of this Act and the rules made thereunder
as if the provisions of section 184 of the Finance Act, 2017 had not come into force.”
Although, the COMPAT and ceased to exist as laid out under the Finance Act, 2017, the NCLAT has been given the same
appellate powers as it vested in COMPAT. The following discussion therefore would be relevant in understanding the nature
and scope of jurisdiction of the appellate authority.
Position prior to Finance Act, 2017
[s 53P] Execution of orders of Appellate Tribunal
(1) Every order made by the Appellate Tribunal shall be enforced by it in the same manner as if it were a decree
made by a court in a suit pending therein, and it shall be lawful for the Appellate Tribunal to send, in case of its
inability to execute such order, to the court within the local limits of whose jurisdiction,—
(a) in the case of an order against a company, the registered office of the company is situated; or
(b) in the case of an order against any other person, place where the person concerned voluntarily resides or
carries on business or personally works for gain, is situated.
(2) Notwithstanding anything contained in sub-section (1), the Appellate Tribunal may transmit any order made by it
to a civil court having local jurisdiction and such civil court shall execute the order as if it were a decree made by
that court.
SCOPE OF THE SECTION
This section was inserted by the Competition (Amendment) Act, 2007 for execution of orders of the Appellate Tribunal.
An order passed by the Tribunal shall be enforced by it as if it were a decree made by a court in a suit and in case of its
inability, it may send to the court within the local limits of whose jurisdiction the registered office of the company is
situated or place where the person concerned voluntarily resides.
Page 3 of 3
[s 53P] Execution of orders of Appellate Tribunal
Order XXI of the CPC, 1908 specifies the procedure for execution of order and decrees issued by a court.
It may be noted that under section 39, for execution of orders of the Commission for payment of penalty, the procedure
provided under the Income Tax Act, 1961 may be followed.
1 Chapter VIIIA containing sections 53A to 53U inserted by Act 39 of 2007, section 43,
section 53A inserted with effect from 12 October 2007, section 53B inserted with effect from 20 May 2009, sections 53C to 53M
inserted with effect from 20 December 2007 and sections 53N to 53U inserted with effect from 20 May 2009.
2 Airports Economic Regulatory Authority Appellate Tribunal and Cyber Appellate Tribunal
would be replaced by the Telecom Disputes Settlement and Appellate Tribunal. Copyright Board would be dissolved and its
functions would be taken over by the Intellectual Property Appellate Board. The National Highways Tribunal would be replaced
and its functions would be taken over by the Airport Appellate Tribunal. The functions of Employees Provident Fund Appellate
Tribunal would be taken over by the Industrial Tribunal.
3 COMPAT has ceased to exist from 26 May 2017. [SO 1696(E), Notification, Ministry of
Finance, dated 26 May 2017].
End of Document
[s 53Q] Contravention of orders of Appellate Tribunal
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > [CHAPTER
VIIIA] COMPETITION APPELLATE TRIBUNAL
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
1[CHAPTER VIIIA] COMPETITION APPELLATE TRIBUNAL
The Union Government brought in multiple changes through the Finance Act, 2017. It scrapped eight AppellateTribunals,2 and
the Competition Appellate Tribunal (COMPAT) was one among them.3 Sections 171 and 172 of the Finance Act, 2017
amended the Competition Act, 2002 and the Companies Act, 2013, respectively. Section 171 amended sections 53A and 2(ba)
of the Competition Act, 2002 to the effect that the COMPAT has ceased to exist as the Appellate Tribunal, effective from 26
May 2017. The National Company Law Appellate Tribunal (NCLAT) will now be the Appellate Tribunal against the orders of
the Competition Commission of India (CCI). There will be a transition phase during which all pending matters before the
COMPAT stand transferred to the NCLAT. During this period, all such matters will be heard afresh by the NCLAT. The
procedural aspects of this transition have not been provided for yet.
Relevant provisions of the Finance Act, 2017 has been reproduced below:
(b) in Chapter VIIIA, for the heading, the following heading shall be substituted, namely:—
“APPELLATE TRIBUNAL”;
171(c) for section 53A, the following section shall be substituted, namely:—
[s 53A] The National Company Law Appellate Tribunal constituted under section 410 of the Companies Act, 2013 shall, on and
from the commencement of Part XIV of Chapter VI of the Finance Act, 2017, be the Appellate Tribunal for the purposes of this
Act and the said Appellate Tribunal shall—
(a) hear and dispose of appeals against any direction issued or decision made or order passed by the Commission under
sub-sections (2) and (6) of section 26, section 27, section 28, section 31, section 32, section 33, section 38, section 39,
section 43, section 43A, section 44, section 45 or section 46 of this Act; and
(b) adjudicate on claim for compensation that may arise from the findings of the Commission or the orders of the
Appellate Tribunal in an appeal against any finding of the Commission or under section 42A or under sub-section (2)
of section 53Q of this Act, and pass orders for the recovery of compensation under section 53N of this Act.”;
(c) sections 53C, 53D, 53E, 53F, 53G, 53H, 53-I, 53J, 53K, 53L, 53M and 53R shall be omitted;
(d) in section 63, in sub-section (2), clauses (mb), (mc) and (md) shall be omitted.
Page 2 of 3
[s 53Q] Contravention of orders of Appellate Tribunal
172. In the Companies Act, 2013,—
(a) in section 410, for the words “for hearing appeals against the orders of the Tribunal”, the following shall be
substituted, namely:—
“for hearing appeals against,—
(a) the order of the Tribunal under this Act; and
(b) any direction, decision or order referred to in section 53N of the Competition Act, 2002 in accordance with the
provisions of that Act.”;
(b) after section 417, the following section shall be inserted, namely:—
“417A. Notwithstanding anything contained in this Act, the qualifications, appointment, term of office, salaries
and allowances, resignation, removal and other terms and conditions of service of the Chairperson and other
Members of the Appellate Tribunal appointed after the commencement of Part XIV of Chapter VI of the Finance
Act, 2017, shall be governed by the provisions of section 184 of that Act:
Provided that the Chairperson and Member appointed before the commencement of Part XIV of Chapter VI of
the Finance Act, 2017, shall continue to be governed by the provisions of this Act and the rules made thereunder
as if the provisions of section 184 of the Finance Act, 2017 had not come into force.”
Although, the COMPAT and ceased to exist as laid out under the Finance Act, 2017, the NCLAT has been given the same
appellate powers as it vested in COMPAT. The following discussion therefore would be relevant in understanding the nature
and scope of jurisdiction of the appellate authority.
Position prior to Finance Act, 2017
[s 53Q] Contravention of orders of Appellate Tribunal
Without prejudice to the provisions of this Act, if any person contravenes, without any reasonable ground, any order of the
Appellate Tribunal, he shall be liable for a penalty of not exceeding rupees one crore or imprisonment for a term up to
three years or with both as the Chief Metropolitan Magistrate, Delhi may deem fit:
Provided that the Chief Metropolitan Magistrate, Delhi shall not take cognizance of any offence punishable under this sub-
section, save on a complaint made by an officer authorised by the Appellate Tribunal.
(2) Without prejudice to the provisions of this Act, any person may make an application to the Appellate Tribunal for
an order for the recovery of compensation from any enterprise for any loss or damage shown to have been
suffered, by such person as a result of the said enterprise contravening, without any reasonable ground, any order
of the Appellate Tribunal or delaying in carrying out such orders of the Appellate Tribunal.
SCOPE OF THE SECTION
This section was inserted by the Competition (Amendment) Act, 2007 to provide that any violation of the order of the
Appellate Tribunal shall be liable for a penalty, not exceeding Rupees one crore or imprisonment up to 3 years or both as
deemed fit by Chief Metropolitan Magistrate, Delhi. For the purpose, a complaint shall be made to CMM by an authorised
Page 3 of 3
[s 53Q] Contravention of orders of Appellate Tribunal
officer of the Tribunal. The accused person may plead in his defence that there was “reasonable ground” in not complying
with the order of the Tribunal.
The person who has suffered any loss or damage for not complying with the order of the Appellate Tribunal may also
apply to the Tribunal for recovery of compensation.
1 Chapter VIIIA containing sections 53A to 53U inserted by Act 39 of 2007, section 43,
section 53A inserted with effect from 12 October 2007, section 53B inserted with effect from 20 May 2009, sections 53C to 53M
inserted with effect from 20 December 2007 and sections 53N to 53U inserted with effect from 20 May 2009.
2 Airports Economic Regulatory Authority Appellate Tribunal and Cyber Appellate Tribunal
would be replaced by the Telecom Disputes Settlement and Appellate Tribunal. Copyright Board would be dissolved and its
functions would be taken over by the Intellectual Property Appellate Board. The National Highways Tribunal would be replaced
and its functions would be taken over by the Airport Appellate Tribunal. The functions of Employees Provident Fund Appellate
Tribunal would be taken over by the Industrial Tribunal.
3 COMPAT has ceased to exist from 26 May 2017. [SO 1696(E), Notification, Ministry of
Finance, dated 26 May 2017].
End of Document
[s 53R] Vacancy or Appellate Tribunal not to invalidate acts or proceedings
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > [CHAPTER
VIIIA] COMPETITION APPELLATE TRIBUNAL
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
1[CHAPTER VIIIA] COMPETITION APPELLATE TRIBUNAL
The Union Government brought in multiple changes through the Finance Act, 2017. It scrapped eight AppellateTribunals,2 and
the Competition Appellate Tribunal (COMPAT) was one among them.3 Sections 171 and 172 of the Finance Act, 2017
amended the Competition Act, 2002 and the Companies Act, 2013, respectively. Section 171 amended sections 53A and 2(ba)
of the Competition Act, 2002 to the effect that the COMPAT has ceased to exist as the Appellate Tribunal, effective from 26
May 2017. The National Company Law Appellate Tribunal (NCLAT) will now be the Appellate Tribunal against the orders of
the Competition Commission of India (CCI). There will be a transition phase during which all pending matters before the
COMPAT stand transferred to the NCLAT. During this period, all such matters will be heard afresh by the NCLAT. The
procedural aspects of this transition have not been provided for yet.
Relevant provisions of the Finance Act, 2017 has been reproduced below:
(b) in Chapter VIIIA, for the heading, the following heading shall be substituted, namely:—
“APPELLATE TRIBUNAL”;
171(c) for section 53A, the following section shall be substituted, namely:—
[s 53A] The National Company Law Appellate Tribunal constituted under section 410 of the Companies Act, 2013 shall, on and
from the commencement of Part XIV of Chapter VI of the Finance Act, 2017, be the Appellate Tribunal for the purposes of this
Act and the said Appellate Tribunal shall—
(a) hear and dispose of appeals against any direction issued or decision made or order passed by the Commission under
sub-sections (2) and (6) of section 26, section 27, section 28, section 31, section 32, section 33, section 38, section 39,
section 43, section 43A, section 44, section 45 or section 46 of this Act; and
(b) adjudicate on claim for compensation that may arise from the findings of the Commission or the orders of the
Appellate Tribunal in an appeal against any finding of the Commission or under section 42A or under sub-section (2)
of section 53Q of this Act, and pass orders for the recovery of compensation under section 53N of this Act.”;
(c) sections 53C, 53D, 53E, 53F, 53G, 53H, 53-I, 53J, 53K, 53L, 53M and 53R shall be omitted;
(d) in section 63, in sub-section (2), clauses (mb), (mc) and (md) shall be omitted.
Page 2 of 3
[s 53R] Vacancy or Appellate Tribunal not to invalidate acts or proceedings
172. In the Companies Act, 2013,—
(a) in section 410, for the words “for hearing appeals against the orders of the Tribunal”, the following shall be
substituted, namely:—
“for hearing appeals against,—
(a) the order of the Tribunal under this Act; and
(b) any direction, decision or order referred to in section 53N of the Competition Act, 2002 in accordance with the
provisions of that Act.”;
(b) after section 417, the following section shall be inserted, namely:—
“417A. Notwithstanding anything contained in this Act, the qualifications, appointment, term of office, salaries
and allowances, resignation, removal and other terms and conditions of service of the Chairperson and other
Members of the Appellate Tribunal appointed after the commencement of Part XIV of Chapter VI of the Finance
Act, 2017, shall be governed by the provisions of section 184 of that Act:
Provided that the Chairperson and Member appointed before the commencement of Part XIV of Chapter VI of
the Finance Act, 2017, shall continue to be governed by the provisions of this Act and the rules made thereunder
as if the provisions of section 184 of the Finance Act, 2017 had not come into force.”
Although, the COMPAT and ceased to exist as laid out under the Finance Act, 2017, the NCLAT has been given the same
appellate powers as it vested in COMPAT. The following discussion therefore would be relevant in understanding the nature
and scope of jurisdiction of the appellate authority.
Position prior to Finance Act, 2017
[s 53R] Vacancy or Appellate Tribunal not to invalidate acts or proceedings254
No act or proceeding of the Appellate Tribunal shall be questioned or shall be invalid merely on the ground of existence of
any vacancy or defect in the constitution of the Appellate Tribunal.
SCOPE OF THE SECTION
This section has been inserted by the Competition (Amendment) Act, 2007. The purport of this section is that an act of the
Appellate Tribunal shall not be questioned on the ground only of any defect in its constitution. This means that acts of the
Tribunal can be questioned on other grounds, namely, acting mala fide, acting on the basis of untenable oral or
documentary evidence, etc., and when an act of the Tribunal is challenged on such other ground, defect in its constitution
or existence of any vacancy in the Tribunal may also be urged as an additional ground.
The entire system of administrative adjudication whereunder quasi-judicial powers are conferred on administrative
authorities would fall into disrepute if officers performing such functions are inhibited in performing their functions
without fear or favour because of constant threat of disciplinary proceedings.255
Page 3 of 3
[s 53R] Vacancy or Appellate Tribunal not to invalidate acts or proceedings
1 Chapter VIIIA containing sections 53A to 53U inserted by Act 39 of 2007, section 43,
section 53A inserted with effect from 12 October 2007, section 53B inserted with effect from 20 May 2009, sections 53C to 53M
inserted with effect from 20 December 2007 and sections 53N to 53U inserted with effect from 20 May 2009.
2 Airports Economic Regulatory Authority Appellate Tribunal and Cyber Appellate Tribunal
would be replaced by the Telecom Disputes Settlement and Appellate Tribunal. Copyright Board would be dissolved and its
functions would be taken over by the Intellectual Property Appellate Board. The National Highways Tribunal would be replaced
and its functions would be taken over by the Airport Appellate Tribunal. The functions of Employees Provident Fund Appellate
Tribunal would be taken over by the Industrial Tribunal.
3 COMPAT has ceased to exist from 26 May 2017. [SO 1696(E), Notification, Ministry of
Finance, dated 26 May 2017].
254 This provisision has now been omitted by the Finance Act, 2017.
255 Zujarrao Bhikaji Nagarkar v UOI,
AIR 1999 SC 2881 : (1999) 7 SCC 409
: 1999 (4) Scale 480 : JT 1999 (5)
SC 366 : (2000) 1 LLJ 728 :
1999 112 ELT 772 .
End of Document
[s 53S] Right to legal representation
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > [CHAPTER
VIIIA] COMPETITION APPELLATE TRIBUNAL
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
1[CHAPTER VIIIA] COMPETITION APPELLATE TRIBUNAL
The Union Government brought in multiple changes through the Finance Act, 2017. It scrapped eight AppellateTribunals,2 and
the Competition Appellate Tribunal (COMPAT) was one among them.3 Sections 171 and 172 of the Finance Act, 2017
amended the Competition Act, 2002 and the Companies Act, 2013, respectively. Section 171 amended sections 53A and 2(ba)
of the Competition Act, 2002 to the effect that the COMPAT has ceased to exist as the Appellate Tribunal, effective from 26
May 2017. The National Company Law Appellate Tribunal (NCLAT) will now be the Appellate Tribunal against the orders of
the Competition Commission of India (CCI). There will be a transition phase during which all pending matters before the
COMPAT stand transferred to the NCLAT. During this period, all such matters will be heard afresh by the NCLAT. The
procedural aspects of this transition have not been provided for yet.
Relevant provisions of the Finance Act, 2017 has been reproduced below:
(b) in Chapter VIIIA, for the heading, the following heading shall be substituted, namely:—
“APPELLATE TRIBUNAL”;
171(c) for section 53A, the following section shall be substituted, namely:—
[s 53A] The National Company Law Appellate Tribunal constituted under section 410 of the Companies Act, 2013 shall, on and
from the commencement of Part XIV of Chapter VI of the Finance Act, 2017, be the Appellate Tribunal for the purposes of this
Act and the said Appellate Tribunal shall—
(a) hear and dispose of appeals against any direction issued or decision made or order passed by the Commission under
sub-sections (2) and (6) of section 26, section 27, section 28, section 31, section 32, section 33, section 38, section 39,
section 43, section 43A, section 44, section 45 or section 46 of this Act; and
(b) adjudicate on claim for compensation that may arise from the findings of the Commission or the orders of the
Appellate Tribunal in an appeal against any finding of the Commission or under section 42A or under sub-section (2)
of section 53Q of this Act, and pass orders for the recovery of compensation under section 53N of this Act.”;
(c) sections 53C, 53D, 53E, 53F, 53G, 53H, 53-I, 53J, 53K, 53L, 53M and 53R shall be omitted;
(d) in section 63, in sub-section (2), clauses (mb), (mc) and (md) shall be omitted.
Page 2 of 3
[s 53S] Right to legal representation
172. In the Companies Act, 2013,—
(a) in section 410, for the words “for hearing appeals against the orders of the Tribunal”, the following shall be
substituted, namely:—
“for hearing appeals against,—
(a) the order of the Tribunal under this Act; and
(b) any direction, decision or order referred to in section 53N of the Competition Act, 2002 in accordance with the
provisions of that Act.”;
(b) after section 417, the following section shall be inserted, namely:—
“417A. Notwithstanding anything contained in this Act, the qualifications, appointment, term of office, salaries
and allowances, resignation, removal and other terms and conditions of service of the Chairperson and other
Members of the Appellate Tribunal appointed after the commencement of Part XIV of Chapter VI of the Finance
Act, 2017, shall be governed by the provisions of section 184 of that Act:
Provided that the Chairperson and Member appointed before the commencement of Part XIV of Chapter VI of
the Finance Act, 2017, shall continue to be governed by the provisions of this Act and the rules made thereunder
as if the provisions of section 184 of the Finance Act, 2017 had not come into force.”
Although, the COMPAT and ceased to exist as laid out under the Finance Act, 2017, the NCLAT has been given the same
appellate powers as it vested in COMPAT. The following discussion therefore would be relevant in understanding the nature
and scope of jurisdiction of the appellate authority.
Position prior to Finance Act, 2017
[s 53S] Right to legal representation
(1) A person preferring an appeal to the Appellate Tribunal may either appear in person or authorise one or more
chartered accountants or company secretaries or cost accountants or legal practitioners or any of its officers to
present his or its case before the Appellate Tribunal.
(2) The Central Government or a State Government or a local authority or any enterprise preferring an appeal to the
Appellate Tribunal may authorise one or more chartered accountants or company secretaries or cost accountants
or legal practitioners or any of its officers to act as presenting officers and every person so authorised may
present the case with respect to any appeal before the Appellate Tribunal.
(3) The Commission may authorise one or more chartered accountants or company secretaries or cost accountants or
legal practitioners or any of its officers to act as presenting officers and every person so authorised may present
the case with respect to any appeal before the Appellate Tribunal.
Explanation.—The expressions “chartered accountant” or “company secretary” or “cost accountant” or
“legal practitioner” shall have the meanings respectively assigned to them in the Explanation to section 35.
SCOPE OF THE SECTION
Page 3 of 3
[s 53S] Right to legal representation
This section was inserted by the Competition (Amendment) Act, 2007 empowering practicing Chartered Accounts,
Company secretaries and Cost Accountants as also Advocates to appear for parties before the Appellate Tribunal. If
deemed fit, parities may also appear in person. The Central or State Government or local authority or the Commission may
also authorise its officers to appear before the Tribunal.
Section 53S contemplates that before the Tribunal a person may either appear “in person” or authorize one or more
chartered accountants or company secretaries, cost accountants or legal practitioners or any of its officers to present its
case before the Tribunal. However, the Commission’s right to legal representation in any appeal before the Tribunal has
been specifically mentioned under section S(3). It provides that the Commission may authorize one or more of chartered
accountants or company secretaries or cost accountants or legal practitioners or any of its officers to act as presenting
officers before the Tribunal.256
1 Chapter VIIIA containing sections 53A to 53U inserted by Act 39 of 2007, section 43,
section 53A inserted with effect from 12 October 2007, section 53B inserted with effect from 20 May 2009, sections 53C to 53M
inserted with effect from 20 December 2007 and sections 53N to 53U inserted with effect from 20 May 2009.
2 Airports Economic Regulatory Authority Appellate Tribunal and Cyber Appellate Tribunal
would be replaced by the Telecom Disputes Settlement and Appellate Tribunal. Copyright Board would be dissolved and its
functions would be taken over by the Intellectual Property Appellate Board. The National Highways Tribunal would be replaced
and its functions would be taken over by the Airport Appellate Tribunal. The functions of Employees Provident Fund Appellate
Tribunal would be taken over by the Industrial Tribunal.
3 COMPAT has ceased to exist from 26 May 2017. [SO 1696(E), Notification, Ministry of
Finance, dated 26 May 2017].
256 CCI v Steel Authority of India Ltd,
(2010) 10 SCC 744 : JT 2010 (10) SC 26
: (2010) 9 Scale 291 .
End of Document
[s 53T] Appeal to Supreme Court
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > [CHAPTER
VIIIA] COMPETITION APPELLATE TRIBUNAL
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
1[CHAPTER VIIIA] COMPETITION APPELLATE TRIBUNAL
The Union Government brought in multiple changes through the Finance Act, 2017. It scrapped eight AppellateTribunals,2 and
the Competition Appellate Tribunal (COMPAT) was one among them.3 Sections 171 and 172 of the Finance Act, 2017
amended the Competition Act, 2002 and the Companies Act, 2013, respectively. Section 171 amended sections 53A and 2(ba)
of the Competition Act, 2002 to the effect that the COMPAT has ceased to exist as the Appellate Tribunal, effective from 26
May 2017. The National Company Law Appellate Tribunal (NCLAT) will now be the Appellate Tribunal against the orders of
the Competition Commission of India (CCI). There will be a transition phase during which all pending matters before the
COMPAT stand transferred to the NCLAT. During this period, all such matters will be heard afresh by the NCLAT. The
procedural aspects of this transition have not been provided for yet.
Relevant provisions of the Finance Act, 2017 has been reproduced below:
(b) in Chapter VIIIA, for the heading, the following heading shall be substituted, namely:—
“APPELLATE TRIBUNAL”;
171(c) for section 53A, the following section shall be substituted, namely:—
[s 53A] The National Company Law Appellate Tribunal constituted under section 410 of the Companies Act, 2013 shall, on and
from the commencement of Part XIV of Chapter VI of the Finance Act, 2017, be the Appellate Tribunal for the purposes of this
Act and the said Appellate Tribunal shall—
(a) hear and dispose of appeals against any direction issued or decision made or order passed by the Commission under
sub-sections (2) and (6) of section 26, section 27, section 28, section 31, section 32, section 33, section 38, section 39,
section 43, section 43A, section 44, section 45 or section 46 of this Act; and
(b) adjudicate on claim for compensation that may arise from the findings of the Commission or the orders of the
Appellate Tribunal in an appeal against any finding of the Commission or under section 42A or under sub-section (2)
of section 53Q of this Act, and pass orders for the recovery of compensation under section 53N of this Act.”;
(c) sections 53C, 53D, 53E, 53F, 53G, 53H, 53-I, 53J, 53K, 53L, 53M and 53R shall be omitted;
(d) in section 63, in sub-section (2), clauses (mb), (mc) and (md) shall be omitted.
Page 2 of 5
[s 53T] Appeal to Supreme Court
172. In the Companies Act, 2013,—
(a) in section 410, for the words “for hearing appeals against the orders of the Tribunal”, the following shall be
substituted, namely:—
“for hearing appeals against,—
(a) the order of the Tribunal under this Act; and
(b) any direction, decision or order referred to in section 53N of the Competition Act, 2002 in accordance with the
provisions of that Act.”;
(b) after section 417, the following section shall be inserted, namely:—
“417A. Notwithstanding anything contained in this Act, the qualifications, appointment, term of office, salaries
and allowances, resignation, removal and other terms and conditions of service of the Chairperson and other
Members of the Appellate Tribunal appointed after the commencement of Part XIV of Chapter VI of the Finance
Act, 2017, shall be governed by the provisions of section 184 of that Act:
Provided that the Chairperson and Member appointed before the commencement of Part XIV of Chapter VI of
the Finance Act, 2017, shall continue to be governed by the provisions of this Act and the rules made thereunder
as if the provisions of section 184 of the Finance Act, 2017 had not come into force.”
Although, the COMPAT and ceased to exist as laid out under the Finance Act, 2017, the NCLAT has been given the same
appellate powers as it vested in COMPAT. The following discussion therefore would be relevant in understanding the nature
and scope of jurisdiction of the appellate authority.
Position prior to Finance Act, 2017
[s 53T] Appeal to Supreme Court
The Central Government or any State Government or the Commission or any statutory authority or any local authority or
any enterprise or any person aggrieved by any decision or order of the Appellate Tribunal may file an appeal to the
Supreme Court within sixty days from the date of communication of the decision or order of the Appellate Tribunal to
them:
Provided that the Supreme Court may, if it is satisfied that the applicant was prevented by sufficient cause from filing the
appeal within the said period, allow it to be filed after the expiry of the said period of sixty days.
SCOPE OF THE SECTION
This section was inserted by the Competition (Amendment) Act, 2007 providing for an appeal to the Supreme Court
against the decision or order of the Appellate Tribunal within 60 days of the communication of the order. The Supreme
Court may condone the delay in filing the appeal on showing sufficient cause.
AGGRIEVED PERSON
Page 3 of 5
[s 53T] Appeal to Supreme Court
The appeal can also be filed by any person aggrieved by the decision or order of the Appellate Tribunal. The expression
“person aggrieved” has not been defined in the MRTP Act, 1969. Normally, the appeal may be filed by any person when it
operates directly and injuriously upon his personal, pecuniary or proprietary rights.257 A person who feels disappointed
with the result of a case is not a person aggrieved. The order must cause him a legal grievance by wrongfully depriving
him of something.258
SUFFICIENT CAUSE
The Supreme Court may entertain the appeal even after 60 days if the appellant is prevented by “sufficient cause”. The
Supreme Court has held that “sufficient cause” should receive a liberal contraction so as to advance substantial justice,
when no negligence, nor inaction, nor want of bona fides is imputable to the appellant.259 The true guide for the court in
its exercise of such discretion is whether the appellant had acted with reasonable diligence in prosecuting his appeal. But
the circumstances of each case must be examined to see whether they fall within or without the terms of this general
rule.260
Each day’s delay after expiry of limitation is to be explained.261
GROUNDS OF APPEAL
In the absence of any provision in this regard, the appeal lies to the Supreme Court on any question of law or fact, arising
out of the decision or order of the Appellate Tribunal.
COMPETITION ACT, 2002, VIS-À-VIS MRTP ACT, 1969
Under the MRTP Act, 1969, the appeal to Supreme Court against any order or decision of the MRTP Commission would
lie on the grounds specified in section 100 of CPC, according to which the appeal could lie only if any substantial question
of law was involved. Under the Competition Act, 2002 appeal could lie to the Supreme Court against any order or decision
of Appellant Tribunal on question of fact also which was not permissible under the MRTP Act, 1969.
MAINTAINABILITY OF A WRIT PETITION UNDER ARTICLE 226 OF THE
CONSTITUTION OF INDIA
In the case of Bela Rani Bhattcharyya v UOI,262 the question for consideration was of the
maintainability of a writ petition under Article 226 of the Constitution of India against the order of the COMPAT and
which order admittedly was appealable to the Supreme Court under section 53T. The Court referred to the Supreme Court
order in the case of CIT Tax v Chhabil Dass Agarwal,263 to emphasize:
... while it can be said that this Court has recognized some exceptions to the rule of alternative remedy, i.e., where the statutory
authority has not acted in accordance with the provisions of the enactment in question, or in defiance of the fundamental principles
of judicial procedure, or has resorted to invoke the provisions which are repealed, or when an order has been passed in total
violation of the principles of natural justice, the proposition laid down in Thansingh Nathmal case, Titagarh Paper Mills case and
other similar judgments that the High Court will not entertain a petition under Article 226 of the Constitution if an effective
alternative remedy is available to the aggrieved person or the statute under which the action complained of has been taken itself
contains a mechanism for redressal of grievance still holds the field. Therefore, when a statutory forum is created by law for
redressal of grievances, a writ petition should not be entertained ignoring the statutory dispensation.
Page 4 of 5
[s 53T] Appeal to Supreme Court
The Court referred to multiple cases264 and held that the availability of alternative remedy of appeal under section 53T to
be not an absolute bar to maintainability of writ petition in three contingencies namely where the writ petition has been
filed for the enforcement of any Fundamental Rights, or where there has been a violation of the principles of natural
justice, or where the order or proceedings are wholly without jurisdiction, or the vires of an Act is challenged, and a writ
petition to be maintainable on these limited grounds.
1 Chapter VIIIA containing sections 53A to 53U inserted by Act 39 of 2007, section 43,
section 53A inserted with effect from 12 October 2007, section 53B inserted with effect from 20 May 2009, sections 53C to 53M
inserted with effect from 20 December 2007 and sections 53N to 53U inserted with effect from 20 May 2009.
2 Airports Economic Regulatory Authority Appellate Tribunal and Cyber Appellate Tribunal
would be replaced by the Telecom Disputes Settlement and Appellate Tribunal. Copyright Board would be dissolved and its
functions would be taken over by the Intellectual Property Appellate Board. The National Highways Tribunal would be replaced
and its functions would be taken over by the Airport Appellate Tribunal. The functions of Employees Provident Fund Appellate
Tribunal would be taken over by the Industrial Tribunal.
3 COMPAT has ceased to exist from 26 May 2017. [SO 1696(E), Notification, Ministry of
Finance, dated 26 May 2017].
257 Corpus Juris Secundum, vol 4, p 356.
258 Adi Pherozeshaw Gandhi v Seervai (HM),
AIR 1971 SC 365 .
259 Dinabhandhu Sahu v Jadumoni, Mangaraj,
AIR 1954 AC 411 , approved by dicta in Krishna v Chathappan, (1889) 17 Mad 269 (FB).
260 Brij Inder Singh v Kanshi Ram,
ILR (1915) 45 Cal 94 .
261 Balaram v Sarthi, AIR 1988 Ori 10
.
262 Bela Rani Bhattcharyya v UOI, 2014 Comp LR 262 (Del) : 212
(2014) DLT 1 .
263 CIT Tax v Chhabil Dass Agarwal,
(2014) 1 SCC 603 : 2013 357 ITR 357
: 2013 (10) Scale 326 .
264 GK Granites v Tata Hitachi Construction Machinery Co Ltd, 205
(2013) DLT 355 ; Shree Cement Ltd v CCI; Whirlpool Corp v Registrar of
Page 5 of 5
[s 53T] Appeal to Supreme Court
Trade Marks, Mumbai, AIR 1999 SC 22 (1) : 1998 AIR SCW 3345 :
(1998) 8 SCC 1 : (1998) 8
SCC 1 1: 1998 (5) Scale 655 :
JT 1998 (7) SC 243 .
End of Document
[s 53U] Power to punish for contempt
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > [CHAPTER
VIIIA] COMPETITION APPELLATE TRIBUNAL
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
1[CHAPTER VIIIA] COMPETITION APPELLATE TRIBUNAL
The Union Government brought in multiple changes through the Finance Act, 2017. It scrapped eight AppellateTribunals,2 and
the Competition Appellate Tribunal (COMPAT) was one among them.3 Sections 171 and 172 of the Finance Act, 2017
amended the Competition Act, 2002 and the Companies Act, 2013, respectively. Section 171 amended sections 53A and 2(ba)
of the Competition Act, 2002 to the effect that the COMPAT has ceased to exist as the Appellate Tribunal, effective from 26
May 2017. The National Company Law Appellate Tribunal (NCLAT) will now be the Appellate Tribunal against the orders of
the Competition Commission of India (CCI). There will be a transition phase during which all pending matters before the
COMPAT stand transferred to the NCLAT. During this period, all such matters will be heard afresh by the NCLAT. The
procedural aspects of this transition have not been provided for yet.
Relevant provisions of the Finance Act, 2017 has been reproduced below:
(b) in Chapter VIIIA, for the heading, the following heading shall be substituted, namely:—
“APPELLATE TRIBUNAL”;
171(c) for section 53A, the following section shall be substituted, namely:—
[s 53A] The National Company Law Appellate Tribunal constituted under section 410 of the Companies Act, 2013 shall, on and
from the commencement of Part XIV of Chapter VI of the Finance Act, 2017, be the Appellate Tribunal for the purposes of this
Act and the said Appellate Tribunal shall—
(a) hear and dispose of appeals against any direction issued or decision made or order passed by the Commission under
sub-sections (2) and (6) of section 26, section 27, section 28, section 31, section 32, section 33, section 38, section 39,
section 43, section 43A, section 44, section 45 or section 46 of this Act; and
(b) adjudicate on claim for compensation that may arise from the findings of the Commission or the orders of the
Appellate Tribunal in an appeal against any finding of the Commission or under section 42A or under sub-section (2)
of section 53Q of this Act, and pass orders for the recovery of compensation under section 53N of this Act.”;
(c) sections 53C, 53D, 53E, 53F, 53G, 53H, 53-I, 53J, 53K, 53L, 53M and 53R shall be omitted;
(d) in section 63, in sub-section (2), clauses (mb), (mc) and (md) shall be omitted.
Page 2 of 3
[s 53U] Power to punish for contempt
172. In the Companies Act, 2013,—
(a) in section 410, for the words “for hearing appeals against the orders of the Tribunal”, the following shall be
substituted, namely:—
“for hearing appeals against,—
(a) the order of the Tribunal under this Act; and
(b) any direction, decision or order referred to in section 53N of the Competition Act, 2002 in accordance with the
provisions of that Act.”;
(b) after section 417, the following section shall be inserted, namely:—
“417A. Notwithstanding anything contained in this Act, the qualifications, appointment, term of office, salaries
and allowances, resignation, removal and other terms and conditions of service of the Chairperson and other
Members of the Appellate Tribunal appointed after the commencement of Part XIV of Chapter VI of the Finance
Act, 2017, shall be governed by the provisions of section 184 of that Act:
Provided that the Chairperson and Member appointed before the commencement of Part XIV of Chapter VI of
the Finance Act, 2017, shall continue to be governed by the provisions of this Act and the rules made thereunder
as if the provisions of section 184 of the Finance Act, 2017 had not come into force.”
Although, the COMPAT and ceased to exist as laid out under the Finance Act, 2017, the NCLAT has been given the same
appellate powers as it vested in COMPAT. The following discussion therefore would be relevant in understanding the nature
and scope of jurisdiction of the appellate authority.
Position prior to Finance Act, 2017
[s 53U] Power to punish for contempt
The Appellate Tribunal shall have, and exercise, the same jurisdiction, powers and authority in respect of contempt of
itself as a High Court has and may exercise and, for this purpose, the provisions of the Contempt of Courts Act, 1971 (70 of
1971), shall have effect subject to modifications that,—
(a) the reference therein to a High Court shall be construed as including a reference to the Appellate Tribunal;
(b) the references to the Advocate-General in section 15 of the said Act shall be construed as a reference to such Law
Officer as the Central Government may, by notification, specify in this behalf.
SCOPE OF THE SECTION
This section was inserted by the Competition (Amendment) Act, 2007 empowering the Appellate Tribunal to punish for
contempt of its own under the Contempt of Court Act, 1971. It will act as a deterrent against the erring parties and ensure
compliance of orders passed by the Tribunal.
COMPETITION ACT, 2002 VIS-À-VIS MRTP ACT, 1969
Page 3 of 3
[s 53U] Power to punish for contempt
The MRTP Commission enjoyed the same power of contempt of its own under section 13B as has been conferred on the
Appellate Tribunal under the Competition Act, 2002. Under the MRTP Act, 1969, the Central Government had notified the
First Additional Solicitor General of India for the purposes of clause (b) vide SO 574(E) dated 28 June 1994.
1 Chapter VIIIA containing sections 53A to 53U inserted by Act 39 of 2007, section 43,
section 53A inserted with effect from 12 October 2007, section 53B inserted with effect from 20 May 2009, sections 53C to 53M
inserted with effect from 20 December 2007 and sections 53N to 53U inserted with effect from 20 May 2009.
2 Airports Economic Regulatory Authority Appellate Tribunal and Cyber Appellate Tribunal
would be replaced by the Telecom Disputes Settlement and Appellate Tribunal. Copyright Board would be dissolved and its
functions would be taken over by the Intellectual Property Appellate Board. The National Highways Tribunal would be replaced
and its functions would be taken over by the Airport Appellate Tribunal. The functions of Employees Provident Fund Appellate
Tribunal would be taken over by the Industrial Tribunal.
3 COMPAT has ceased to exist from 26 May 2017. [SO 1696(E), Notification, Ministry of
Finance, dated 26 May 2017].
End of Document
[s 54] Power to exempt
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > CHAPTER
IX MISCELLANEOUS
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
CHAPTER IX MISCELLANEOUS
[s 54] Power to exempt
The Central Government may, by notification, exempt from the application of this Act, or any provision thereof, and for
such period as it may specify in such notification—
(a) any class of enterprise if such exemption is necessary in the interest of security of the state or public interest;
(b) any practice or agreement arising out of and in accordance with any obligation assumed by India under any
treaty, agreement or convention with any other country or countries;
(c) any enterprise which performs a sovereign function on behalf of the Central Government or a State Government;
Provided that in case an enterprise is engaged in any activity including the activity relatable to the sovereign functions of
the Government, the Central Government may grant exemption only in respect of activity relatable to the sovereign
functions.
LEGISLATIVE BACKGROUND
The Competition Act, 2002
Notes on clauses of the Bill and Memorandum regarding delegated legislation stated, thus:
Notes on clauses.—This clause empowers the Central Government, by notification, to exempt any class of enterprises from all or
any of the provisions of the proposed legislation for such period as may be specified in that notification if such exemption is
necessary in the interest of security of the State or public interest or any practice or agreement arising out of and in accordance
with any obligation assumed by India under any treaty or international agreement or convention. This exemption may also be given
to any enterprise which performs a sovereign function on behalf of the Central Government or a State Government. [Clause 52 of
the Competition Bill, 2001].
Memorandum Regarding Delegated Legislation.—Clause 52 of the Bill confers power upon the Central Government to exempt, by
notification, from the application of the proposed legislation or any provision thereof and for such period as it may specify in such
notification, any class of enterprises if such exemption is necessary in the interest of security of the State or public interest or any
practice or agreement arising out of and in accordance with any obligation assumed by India under any treaty or international
Page 2 of 6
[s 54] Power to exempt
agreement or convention or any enterprise which performs a sovereign function on behalf of the Central Government or a State
Government. [Competition Bill, 2001].
This section was enforced vide Notification No. S.O. 1241(E), dated 15 May 2009, with effect from 20 May 2009.
SCOPE OF THE SECTION
This section seeks to exclude from the purview of the Competition Act, 2002 such enterprises whose exemption is
necessary in the interest of security of the state or public interest or which perform sovereign functions or any treaty or
convention between India and other countries, as specified in the notification.
In the Indian Railways Case,1 the Commission took note of section 54 of the Act, which provides that the Central
Government may, by notification, exempt from the application of the Act, or any provision thereof, and for such period as
it may specify in such notification, inter alia, “any enterprise which performs a sovereign function on behalf of the Central
Government or a State Government” [see section 54(c)]. It was noted that there has been no notification issued by the
Central Government in relation to the services rendered by the Indian Railways. Even in relation to an enterprise which is
engaged in activity, including an activity relatable to the sovereign function of the Government, the Central Government
may grant exemption only in respect of activity relatable to sovereign functions. The Commission, therefore, noted that an
enterprise may perform some sovereign functions, while other functions performed by it, and the activities undertaken by
it, may not refer to sovereign functions. The exemption under section 54 could be granted in relation to the activities
relatable to sovereign functions of the Government, and not in relation to all the activities of such an enterprise.
Pertinently, there is no notification issued under section 54 either under clause (c), or under the proviso. As per the
Commission, it clearly showed that the Central Government did not consider any of the activities of the petitioner as
relatable to sovereign functions.
PROVISIONS OF THE MONOPOLIES AND RESTRICTIVE TRADE PRACTICES (MRTP)
ACT, 1969 VIS-À-VIS THE COMPETITION ACT, 2002
Section 3 of the Monopolies and Restrictive Trade Practices Act, 1969 exempted certain undertakings unless the Central
Government, by notification, otherwise directs that the Act shall not apply to them. Section 3 and the notification, dated 27
September 1991 issued thereunder are reproduced below:
Section 3. Act not to apply in certain cases.—Unless the Central Government, by notification, otherwise directs, this Act shall not
apply to—
(a) any undertaking owned or controlled by a Government company,
(b) any undertaking owned or controlled by the Government,
(c) any undertaking owned or controlled by a corporation (not being a company) established by or under any Central,
Provincial or State Act,
(d) any trade union or other association of workmen or employees formed for their own reasonable protection as such
workmen or employees,
Page 3 of 6
[s 54] Power to exempt
(e) any undertaking engaged in an industry, the management of which has been taken over by any person or body of persons
in pursuance of any authorisation made by the Central Government under any law for the time being in force,
(f) any undertaking owned by a co-operative society formed and registered under any Central, Provincial or State Act
relating to co-operative societies and
(g) any financial institution.
Explanation.—In determining, for the purposes of clause (c), whether or not any undertaking is owned or controlled by a
corporation, the shares held by financial institutions shall not be taken into account.
Notification GSR No. 605(E), dated 27 September 1991.2— In exercise of the powers conferred by section 3 of the Monopolies
and Restrictive Trade Practices Act, 1969 (54 of 1969), the Central Government hereby directs that the said Act shall apply to the
undertakings specified in clauses (a), (b), (c), (e) and (f) and financial institutions under clause (g) thereof, except the undertakings
owned or controlled by a Government company, or the Government, as the case may be, engaged in the production of arms and
ammunition and allied items of defence equipment, defence aircraft and warships, atomic energy, minerals specified in the
Schedule to the Atomic Energy (Control of Production and Use) Order, 1953 and industrial units under the Currency and Coinage
Division, Ministry of Finance, Department of Economic Affairs.
The provisions of section 54 of the Competition Act, 2002, though differently worded, have the same effect as under the
MRTP Act, 1969. After repeal of MRTP Act, 1969, the Central Government will have to issue fresh exemption notification
under section 54, if so deemed fit.
EXEMPTION NOTIFICATIONS ISSUED UNDER THE COMPETITION ACT, 2002
Notification S.O. 93(E), dated 8 January 2013.3—In exercise of the powers conferred by clause (a) of section 54 of the
Competition Act, 2002 (12 of 2003), the Central Government, exempted a banking company in respect of which Central
Government has issued a notification under section 45 of the Banking Regulation Act, 1949 (10 of 1949), from the
application of the provision of sections 5 and 6 of the Competition Act, in public interest for a period of five years from the
date of publication of this notification in the Official Gazette.
Notification S.O. 354 (E), dated 5 February 2015.4—In exercise of the powers conferred by clause (a) of section 54 of the
Competition Act, 2002 (12 of 2003), the Central Government, in public interest, exempted the Vessels Sharing Agreements
of Liner Shipping Industry from the provisions of section 3 of the said Act, for a period of one year from the date of
publication of this notification in the Official Gazette, in respect of carriers of all nationalities operating ships of any
nationality from any Indian port provided such agreements do not include concerted practices involving fixing of prices,
limitation of capacity or sales and the allocation of markets or customers. During the said period of one year, the Director
General, Shipping, Ministry of Shipping, Government of India shall monitor such agreements and for which, the persons
responsible for operations of such ships in India shall file copies of existing Vessels Sharing Agreements or Vessels
Sharing Agreements to be entered into with applicability during the said period along with other relevant documents within
thirty days of the publication of this notification in the Official Gazette or within ten days of signing of such agreements,
whichever is later, with the Director General, Shipping.
Notification S.O. 673(E), dated 4 March 2016.5—In exercise of the powers conferred by clause (a) of section 54 of the
Competition Act, 2002 (12 of 2003), the Central Government, in public interest, hereby exempts the “Group” exercising
less than fifty per cent. of voting rights in other enterprise from the provisions of section 5 of the said Act for a period of
five years with effect from the date of publication of this notification in the official gazette.
Notification S.O. 674(E), dated 4 March 2016.6—In exercise of the powers conferred by clause (a) of section 54 of the
Page 4 of 6
[s 54] Power to exempt
Competition Act, 2002 (12 of 2003), the Central Government, in public interest, hereby exempts an enterprise, whose
control, shares, voting rights or assets are being acquired has either assets of the value of not more than rupees three
hundred and fifty crores in India or turnover of not more than rupees one thousand crores in India from the provisions of
section 5 of the said Act for a period of five years from the date of publication of the notification in the official gazette.
Notification S.O. 675(E), dated 4 March 2016.7—In exercise of the powers conferred by sub-section (3) of section 20 of
the Competition Act, 2002 (12 of 2003), the Central Government in consultation with the Competition Commission of
India, enhanced, on the basis of the wholesale price index, the value of assets and the value of turnover, by hundred per
cent for the purposes of section 5 of the said Act, from the date of publication of this notification in the Official Gazette.
Notification S.O. 988(E), dated 27 March 20178—In exercise of the powers conferred by clause (a) of section 54 of the
Competition Act, 2002 (12 of 2003), the Central Government, in public interest, hereby exempts the enterprises being
parties to ––
(a) any acquisition referred to in clause (a) of section 5 of the Competition Act;
(b) acquiring of control by a person over an enterprise when such person has already direct or indirect control over
another enterprise engaged in production, distribution or trading of a similar or identical or substitutable goods or
provision of a similar or identical or substitutable service, referred to in clause (b) of section 5 of the Competition
Act; and
(c) any merger or amalgamation, referred to in clause (c) of section 5 of the Competition Act, 2002
where the value of assets being acquired, taken control of, merged or amalgamated is not more than rupees three hundred
and fifty crores in India or turnover of not more than rupees one thousand crores in India, from the provisions of section 5
of the said Act for a period of five years from the date of publication of this notification in the official gazette.
2. Where a portion of an enterprise or division or business is being acquired, taken control of, merged or amalgamated with
another enterprise, the value of assets of the said portion or division or business and or attributable to it, shall be the
relevant assets and turnover to be taken into account for the purpose of calculating the thresholds under section 5 of the
Act. The value of the said portion or division or business shall be determined by taking the book value of the assets as
shown, in the audited books of accounts of the enterprise or as per statutory auditor’s report where the financial statement
have not yet become due to be filed, in the financial year immediately preceding the financial year in which the date of the
proposed combination falls, as reduced by any depreciation, and the value of assets shall include the brand value, value of
goodwill, or value of copyright, patent, permitted use, collective mark, registered proprietor, registered trade mark,
registered user, homonymous geographical indication, geographical indications, design or layout design or similar other
commercial rights, if any, referred to in sub-section (5) of section 3. The turnover of the said portion or division or
business shall be as certified by the statutory auditor on the basis of the last available audited accounts of the company.
Notification S.O. 2039(E), dated 29 June 2017—In exercise of the powers conferred by clause (a) of section 54 of the
Competition Act, 2002 (12 of 2003), the Central Government, in public interest, hereby exempts every person or enterprise
who is a party to a combination as referred to in section 5 of the said Act from giving notice within thirty days mentioned
in sub-section (2) of section 6 of the said Act, subject to the provisions of sub-section (2A) of section 6 and section 43A of
the said Act, for a period of five years from the date of publication of this notification in the Official Gazette.
Notification S.O. 2561(E), dated 10 August 20179—In exercise of the powers conferred by clause (a) of section 54 of the
Competition Act, 2002 (12 of 2003), the Central Government, in public interest, hereby exempts the Regional Rural Banks
in respect of which the Central Government has issued a notification under sub-section (1) of section 23A of the Regional
Rural Banks Act, 1976 (21 of 1976), from the application of provisions of sections 5 and 6 of the Competition Act, 2002
for a period of five years from the date of publication of this notification in the Official Gazette.
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[s 54] Power to exempt
Notification S.O. 2828(E), dated 30 August 2017—In exercise of the powers conferred by clause (a) of Section 54 of the
Competition Act, 2002 (12 of 2003), the Central Government in the public interest hereby exempts, all cases of
reconstitution, transfer of the whole or any part thereof and amalgamation of nationalized banks, under the Banking
Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970) and the Banking Companies (Acquisition and
Transfer of Undertakings) Act, 1980 (40 of 1980), from the application of provisions of Sections 5 and 6 of the
Competition Act, 2002 for a period of ten years from the date of publication of this notification in the Official Gazette.
Notification S.O. 3714(E), dated 22 November 2017—In exercise of the powers conferred by clause (a) of Section 54 of
the Competition Act, 2002 (12 of 2003) (herein after referred to as the Act), the Central Government in the public interest
hereby exempts all cases of combinations under section 5 of the Act involving the Central Public Sector Enterprises
(CPSEs) operating in the Oil and Gas Sectors under the Petroleum Act, 1934 (30 of 1934) and the rules made thereunder or
under the Oilfields (Regulation and Development) Act, 1948 (53 of 1948) and the rules made thereunder, along with their
wholly or partly owned subsidiaries operating in the Oil and Gas Sectors, from the application of the provisions of sections
5 and 6 of the Act, for a period of five years from the date of publication of this notification in the Official Gazette.
1 UOI v CCI, AIR 2012 Del 66
: [2012] 107 CLA 362 (Delhi) : 2012
Comp LR 187 (Delhi) : (2012) 3 Comp LJ 303 (Del) : 187
(2012) DLT 697 : 2012 (128) DRJ 301
.
2 Published in the Gazette of India Extraordinary, Part II section 3,
sub-section (i), dated 27 September 1991.
3 Published in the Gazette of India Extraordinary, Part II section 3, sub-
section (ii), dated 8 January 2013.
4 Published in the Gazette of India Extraordinary, Part II section 3, sub-
section (ii), dated 5 February 2015. Also see previous notification of Ministry of Corporate Affairs—Notification, dated 11
December 2013 [S.O. 354(E)].
5 Published in the Gazette of India Extraordinary, Part II section 3, sub-
section (ii), dated 4 March 2016.
6 Id.
7 Id.
8 Published in the Gazette of India Extraordinary, Part II section 3, sub-
section (ii), dated 27 March 2017.
9 Published in the Gazette of India Extraordinary, Part II section 3, sub-
section (ii), dated 10 August 2017.
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[s 54] Power to exempt
End of Document
[s 55] Power of Central Government to issue directions
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
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The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > CHAPTER
IX MISCELLANEOUS
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
CHAPTER IX MISCELLANEOUS
[s 55] Power of Central Government to issue directions
(1) Without prejudice to the foregoing provisions of this Act, the Commission shall, in exercise of its powers or the
performance of its functions under this Act, be bound by such directions on questions of policy, other than those
relating to technical and administrative matters, as the Central Government may give in writing to it from time to
time:
Provided that the Commission shall, as far as practicable, be given an opportunity to express its views before
any direction is given under this sub-section.
(2) The decision of the Central Government whether a question is one of policy or not shall be final.
LEGISLATIVE BACKGROUND
The Competition Act, 2002
Notes on clauses of the Bill stated, thus:
Notes on clauses.—This clause empowers the Central Government to issue directions on questions of policy to the Commission.
The Commission shall, in exercise of its powers or the performance of its functions under the proposed legislations, be bound on
such directions on questions of policy. The Commission shall be given an opportunity to express its views before any such
direction is given. [Clause 53 of the Competition Bill, 2001].
This section was enforced vide Notification No. S.O. 1241(E), dated 15 May 2009, with effect from 20 May 2009.
SCOPE OF THE SECTION
Page 2 of 2
[s 55] Power of Central Government to issue directions
Central Government is empowered to give directions on policy matters to the Commission to be abided by it. The Central
Government may, however, give an opportunity to the Commission to express its views on such policy matters before the
directions are given. In terms of sub-section (2), the Central Government is the final authority to decide whether a question
is one of the policies or not. Persistent default in complying with the directions given by the Central Government is a good
ground for supersession of the Commission.
Similar provisions were not contained in the MRTP Act, 1969.
End of Document
[s 56] Power of Central Government to supersede Commission
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SM DugarSudhanshu Kumar
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The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > CHAPTER
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The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
CHAPTER IX MISCELLANEOUS
[s 56] Power of Central Government to supersede Commission
(1) If at any time the Central Government is of the opinion—
(a) that on account of circumstances beyond the control of the Commission, it is unable to discharge the
functions or perform the duties imposed on it by or under the provisions of this Act; or
(b) that the Commission has persistently made default in complying with any direction given by the Central
Government under this Act or in the discharge of the functions or performance of the duties imposed on it by
or under the provisions of this Act and as a result of such default the financial position of the Commission or
the administration of the Commission has suffered; or
(c) that circumstances exist which render it necessary in the public interest so to do,
the Central Government may, by notification and for reasons to be specified therein, supersede the Commission
for such period, not exceeding six months, as may be specified in the notification:
Provided that before issuing any such notification, the Central Government shall give a reasonable opportunity to
the Commission to make representations against the proposed supersession and shall consider representations, if
any, of the Commission.
(2) Upon the publication of a notification under sub-section (1) superseding the Commission,—
(a) the Chairperson and other Members shall, as from the date of supersession, vacate their offices as such;
(b) all the powers, functions and duties which may, by or under the provisions of this Act, be exercised or
discharged by or on behalf of the Commission shall, until the Commission is reconstituted under sub-section
(3), be exercised and discharged by the Central Government or such authority as the Central Government
may specify in this behalf;
(c) all properties owned or controlled by the Commission shall, until the Commission is reconstituted under sub-
section (3), vest in the Central Government.
(3) On or before the expiration of the period of supersession specified in the notification issued under sub-section (1),
the Central Government shall reconstitute the Commission by a fresh appointment of its Chairperson and other
Members and in such case any person who had vacated his office under clause (a) of sub-section (2) shall not be
deemed to be disqualified for re-appointment.
(4) The Central Government shall cause a notification issued under sub-section (1) and a full report of any action
taken under this section and the circumstances leading to such action to be laid before each House of Parliament
at the earliest.
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[s 56] Power of Central Government to supersede Commission
LEGISLATIVE BACKGROUND
The Competition Act, 2002
Notes on clauses of the Bill stated, thus:
Notes on clauses.—This clause provides for supersession of the Commission in certain circumstances. The Central Government
may, by notification, supersede the Commission for a period not exceeding six months, by notification, if the Central Government
is of the opinion that on account of circumstances beyond the control of the Commission, it is unable to discharge its functions or
perform its duties under the provisions of the proposed legislation or that the Commission has persistently defaulted in complying
with any direction given by the Central Government under the proposed legislation or in the discharge of its functions or
performance of the duties imposed on it by or under the provisions of proposed legislation and as a result of such default the
financial position of the Commission or the administration of the Commission has suffered or that circumstances exist which
render it necessary in the public interest so to do. The Central Government before issuing a notification of supersession shall give
the Commission a reasonable opportunity to make representation against such supersession and shall also consider such
representations, if any, made by the Commission. Sub-clause (2) deals with the effect of supersession. Sub-clause (3) provides for
reconstitution of the Commission by a fresh appointment of Chairperson and other members. Sub-clause (4) provides for laying of
the notification and a full report of any action taken under this clause before each House of Parliament. [Clause 54 of the
Competition Bill, 2001].
This section was enforced vide Notification No. S.O. 1241(E), dated 15 May 2009, with effect from 20 May 2009.
SCOPE OF THE SECTION
This is an extraordinary power of the Central Government to supersede the Commission for a period, not exceeding six
months, on the grounds specified in clauses (a), (b) and (c) of sub-section (1). In terms of clause (b) in case the
Commission persistently defaults in complying with the directions given by the Central Government under section 55 and
as a result, the financial position of the Commission or its administration has suffered, the Central Government may
supersede the Commission. The circumstances under which the Central Government may form the opinion that the
Commission is unable to discharge its functions on account of circumstances beyond its control and it is necessary in
public interest to do, in terms of clauses (a) and (c), are vague. The effect of supersession of the Commission is that its
Chairperson and Members shall vacate their offices and the Central Government shall assume all the powers of the
Commission. Thereafter, the Central Government shall reconstitute the Commission on the expiry of the period of
supersession in terms of Chapter III of the Competition Act, 2002.
Similar provisions were not contained in the Monopolies and Restrictive Trade Practices Act, 1969.
End of Document
[s 57] Restriction on disclosure of information
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The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > CHAPTER
IX MISCELLANEOUS
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
CHAPTER IX MISCELLANEOUS
[s 57] Restriction on disclosure of information
No information relating to any enterprise, being an information which has been obtained by or on behalf of 10[the
Commission or the Appellate Tribunal] for the purposes of this Act, shall, without the previous permission in writing of
the enterprise, be disclosed otherwise than in compliance with or for the purposes of this Act or any other law for the time
being in force.
LEGISLATIVE BACKGROUND
The Competition Act, 2002
Notes on clauses of the Bill stated, thus:
Notes on clauses.—This clause deals with restriction on disclosure of information by the Commission. [Clause 55 of the
Competition Bill, 2001].
The Competition (Amendment) Act, 2007
Notes on clauses.—This clause seeks to amend section 57 of the Competition Act, 2002 relating to restriction on disclosure of
information.
It is proposed to bring the Appellate Tribunal within the scope of section 57 of the Competition Act, 2002 consequent to the
proposal to insert a new Chapter VIIIA vide clause 43 of the Bill. The proposed amendment is consequential in nature. [Clause 44
of the Competition (Amendment) Bill, 2007].
Page 2 of 5
[s 57] Restriction on disclosure of information
SCOPE OF THE SECTION
This section seeks to ensure that the information obtained by the Commission and Appellate authority in respect of any
enterprise is not unauthorisedly disclosed to others. The purpose is to preserve commercial secrecy as such information if it
comes to the knowledge of business rivals, may injure the interest of the enterprise concerned. The protection, however,
shall not be available when the enterprise has given permission in this behalf. By virtue of section 41(3) of the Competition
Act, 2002 the provisions of sections 240 and 240A of the Companies Act, 1956 (now, section 217 and section 220 of the
Companies Act, 2013) would also apply to an investigation made by the Director General (DG), or any person
investigating under his authority, as they apply to an Inspector appointed under the Companies Act, 1956. Section 217 of
the Companies Act, 2013 enjoins all officers and other employees and agents of a company being investigated (a) to
preserve and produce to an inspector, all books and papers of, or relating to, the company or as the case may be relating to
the other body corporate, which are in their custody or power; and (b) otherwise give to the inspector all assistance in
connection with the investigation which they are reasonably able to give. By virtue of sub-section (3) of section 217 of the
Companies Act, 2013, the Inspector also has the power to retain any book and paper produced for a period of six months.
Section 220 empowers an Inspector to apply for an order of seizure of books and papers relating to a company or
managing director or manager of such company which he has reasonable grounds to believe would be destroyed, mutated,
altered falsified or secreted. Inspector has the power to retain the books and papers seized until the conclusion of the
investigation. Section 2(12) of the Companies Act, 2013 provides an expansive definition for the expression “book and
paper” or “book or paper”. In terms of the said definition, “book or paper” includes “acts, deeds, voucher, writings and
documents”. Thus, the DG or any person acting under his authority would have an unmitigated access to any document
available with the enterprise being investigated. Obviously, such documents may also include confidential and sensitive
information and even though the DG may keep the same as confidential, it can hardly be disputed that an enterprise
furnishing sensitive information to DG would run the risk of the information being leaked or disclosed. It also cannot be
overlooked that the fact that an enterprise is being investigated in respect of allegations of its anti-competitive conduct may
also result in loss of reputation and goodwill.
In the Ericsson case,11 apprehension as to a breach of confidentiality in relation to the confidential information provided
to the Commission was raised. The Delhi High Court reminded that the Commission, the DG and employees of
Commission were obliged to maintain confidentiality and secrecy of the confidential information provided by Ericsson and
must take adequate measures to maintain the same and in a given case of negligence, the Commission/DG may not be
immune from a claim of loss or damages if they fail to maintain confidentiality/secrecy of the sensitive information
provided to them.
PROVISIONS OF THE MONOPOLIES AND RESTRICTIVE TRADE PRACTICES ACT, 1969
VIS-À-VIS THE COMPETITION ACT, 2002
Sub-section (1) of section 60 of Monopolies and Restrictive Trade Practices Act, 1969, since repealed, corresponds with
section 57 of the Competition Act, 2002. However, under sub-sections (2) and (3) of section 60 of MRTP Act, 1969, there
were three limitations when the protection from disclosure was not available, namely (i) when disclosure is made in
connection with legal proceedings under the MRTP Act, 1969; (ii) when disclosure is made for any criminal proceedings
under the MRTP Act, 1969; and (iii) when the disclosure is made for purposes of any report relating to any proceedings, as
aforestated. These limitations do not form part of section 57 of the Competition Act, 2002.
CONFIDENTIALITY PROVISION UNDER THE 2009 REGULATIONS
The provision on confidentiality is also included in the Competition Commission of India (General) Regulations, 2009.
The same has been reproduced below:
Regulation 35. Confidentiality.—
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[s 57] Restriction on disclosure of information
1. The Commission shall maintain confidentiality of the identity of an informant on a request made to it in writing.
2. Any party may submit a request in writing to the Commission or the Director General, as the case may be, that a
document or documents, or a part or parts thereof, be treated confidential.
3. A request under sub-regulation (2) may be made only if making the document or documents or a part or parts
thereof public will result in disclosure of trade secrets or destruction or appreciable diminution of the commercial
value of any information or can be reasonably expected to cause serious injury.
4. A request under sub-regulation (2) shall be accompanied with a statement setting out cogent reasons for such
treatment and to the extent possible the date on which such confidential treatment shall expire.
5. Where such document or documents, or a part or parts thereof, form part of the party’s written submissions, the
party shall file a complete version with the words “restriction of publication claimed” in red ink on top of the first
page and the word “confidential” clearly and legibly marked in red ink near the top on each page together with a
public version, which shall not contain such document or documents or part or parts thereof.
6. The public version of such written submissions shall be an exact copy of the confidential version with the
omissions of the confidential information being indicated in a conspicuous manner, as stipulated in sub-
regulation (5).
7. [***]12
8. On receipt of a request under sub-regulation (2), the Commission or the Director General, as the case may be, if
satisfied, shall direct that the document or documents or a part or parts thereof shall be kept confidential for the
time period to be specified. Provided that the Commission or the Director General, as the case may be, if
satisfied, may give such confidential treatment to any other information or document or part thereof also in
respect of which no request has been made by the party, which has furnished such information or the document.
9. The Commission or the Director General, as the case may be, may also consider the following while arriving at a
decision regarding confidentiality:—
(a) the extent to which the information is known to outside public;
(b) the extent to which the information is known to the employees, suppliers, distributors and others involved in
the party’s business;
(c) the measures taken by the party to guard the secrecy of the information;
(d) the ease or difficulty with which the information could be acquired or duplicated by others.
10. In case the Director General has rejected the request of the party made under sub-regulation (2), the party may
approach the Commission for a decision regarding confidential treatment.
11. Where the Director General or the Commission has rejected the request for confidential treatment of a document
or documents or a part or parts thereof and has informed the party of its intention, such document or documents
or part or parts thereof shall, subject to sub-regulation (13), not be treated as confidential.
12. [***]13
Page 4 of 5
[s 57] Restriction on disclosure of information
13. The document or documents or a part or parts thereof that have been granted confidential treatment under this
regulation shall be segregated from the public record and secured in a sealed envelope or any other appropriate
container, bearing the title, the docket number of the proceeding, the notation “confidential record under
regulation 35” and the date on which confidential treatment expires.
14. If the Commission includes in any order or decision or opinion, information that has been granted confidential
treatment under this regulation, the Commission shall file two versions of the order or decision or opinion. The
public version shall omit the confidential information that appears in the complete version, be marked “subject to
confidentiality requirements under regulation 35” on the first page, shall be served upon the parties, and shall be
included in the public record of the proceeding. The complete version shall be placed in the confidential record of
the proceeding as provided in sub-regulation (13).
15. Any person or party, including any officer or employee appointed by the Commission under sub-section (1) of
section 17 of the Act and any expert or professional engaged by the Commission under sub-section (3) of section
17 of the Act or any expert called upon to assist the Commission under sub-section (3) of section 36 of the Act
privy to the contents of the document or documents or a part or parts thereof that have been granted confidential
treatment under this regulation shall maintain confidentiality of the same and shall not use or disclose or deal
with such confidential information for any other purpose other than the purposes of the Act or any other law for
the time being in force:
Provided that breach of confidentiality by any officer or employee of the Commission appointed under sub-section (1) of
section 17 of the Act shall constitute a ground for initiation of disciplinary proceedings under the relevant rules or
regulations, as the case may be:
Provided further that breach of confidentiality by any expert or professional engaged by the Commission under sub-section
(3) of section 17 of the Act or any expert called upon to assist the Commission under sub-section (3) of section 36 of the
Act shall be sufficient ground for termination of the engagement or contract, as the case may be.
Regulation 37. Inspection and certified copies of documents.—
1. Subject to the provisions of Section 57 and regulation 35, a party to any proceeding of an ordinary meeting of the
Commission may on an application in writing in that behalf, addressed to the Secretary, be allowed to inspect or
obtain copies of the documents or records submitted during proceedings on payment of fee as specified in
regulation 50.
Provided further that no request for inspection or certified copies of internal documents shall be allowed.
2. The Commission may, on an application of a person, who is not a party to the proceedings, on sufficient cause
demonstrated, allow such person inspection of documents or records mentioned in sub-regulation (1) on payment
of fee as specified in regulation 50.
3. An inspection shall be allowed only in the presence of an officer so authorized by the Secretary:
Provided that the inspection of documents or copying thereof as per sub-regulation (1) or sub-regulation (2)
shall be allowed under the supervision of and subject to the time limits to be specified by the Secretary or an
officer authorized by him in this behalf.
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[s 57] Restriction on disclosure of information
4. An officer of the Central or State Government or the Director General or a statutory authority shall be allowed
inspection and obtain copies of documents or records mentioned in sub-regulation (1) on making written request
to the Secretary for the purpose.
Though Regulation 37 enables a party to the proceedings to inspect the documents or records submitted during
proceedings or to obtain copies of the same by making an application accompanied with the specified fees, the same is
subject to the restriction on disclosure of information as provided under section 57 of the Competition Act, 2002.
Therefore, the entitlement of a party to the proceedings to inspect the documents or to obtain copies of the same is not
absolute and it is always open to the Commission to reject permission for inspection or furnishing copies if it is of the view
that the documents/information requires confidential treatment.14
10 Subs. by Act 39 of 2007, section 44 for the words “the Commission” (w.e.f. 12 October
2007).
11 Telefonaktiebolaget LM Ericsson (PURL) v CCI, W.P.(C) 464/2014,
CM Nos. 911/2014 and 915/2014, W.P.(C) 1006/2014, CM Nos. 2037/2014 and 2040/2014.
12 Omitted by CCI (General) Amendment
Regulations, 2011, dated 31 March 2011 (w.e.f. 4 April 2011).
13 Omitted by CCI (General) Amendment
Regulations, 2011, dated 31 March 2011, (w.e.f. 4 April 2011).
14 Somi Conveyor Beltings Ltd v UOI, W.P.(C) 1416/2016 & CM
NO.6194/2016 (STAY) W.P.(C) 1969/2016, decided on 11 April 2017 (Del).
End of Document
[s 58] Chairperson, Members, Director General, Secretary Officers and other
employees, etc., to be public servants
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > CHAPTER
IX MISCELLANEOUS
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
CHAPTER IX MISCELLANEOUS
15[s 58] Chairperson, Members, Director General, Secretary Officers and other
employees, etc., to be public servants
The Chairperson and other Members and the Director General, Additional, Joint, Deputy or Assistant Directors General
and Secretary and officers and other employees of the Commission and the Chairperson, Members, officers and other
employees of the Appellate Tribunal shall be deemed, while acting or purporting to act in pursuance of any of the
provisions of this Act, to be public servants within the meaning of section 21 of the Indian Penal Code (45 of 1860)].
LEGISLATIVE BACKGROUND
The Competition Act, 2002
Notes on clauses of the Bill stated, thus:
Notes on clauses.—This clause provides that the Chairperson and other Members and the Director General, Additional, Joint,
Deputy or Assistant Directors General Registrar and other officers and employees of the Commission shall be deemed to be public
servants within the meaning of section 21 of the Indian Penal Code. [Clause 56 of the Competition Bill, 2001].
The Competition (Amendment) Act, 2007
Page 2 of 2
[s 58] Chairperson, Members, Director General, Secretary Officers and other employees, etc., to be public servants
Notes on clauses.—This clause seeks to amend section 58 of the Competition Act, 2002 relating to Members, Director General,
Registrar, officers and other employees, etc., of the Competition Commission of India.
Under the existing provisions contained in the said section, the Chairperson and other Members and the Director General,
Additional, Joint, Deputy or Assistant Directors General and Registrar and officers and other employees of the Commission shall
be deemed, while acting or purporting to act in pursuance of any of the provisions of the Competition Act, 2002, to be public
servants within the meaning of section 21 of the Indian Penal Code.
Clause 12 of the Bill proposes to confer power upon the Commission to appoint a Secretary instead of Registrar. Clause 43 of the
Bill proposes to insert new Chapter VIII-A in the Competition Act, 2002 to establish the Competition Appellate Tribunal. Hence, it
is proposed to bring the Secretary, officers or other employees of the Commission and the Chairperson, Members, officers and
other employees of the Appellate Tribunal within the scope of section 58 of the Competition Act, 2002. The proposed amendment
is consequential in nature. [Clause 45 of the Competition (Amendment) Bill, 2007].
SCOPE OF THE SECTION
This section extends the definition of “public servant” given in section 21 of the Indian Penal Code, 1860 by recognising
the Chairperson and other members of the Commission and Appellate Tribunal, the Director General and the members of
the staff of the Commission and the Director General and Secretary as such, while administering the provisions of the
Competition Act, 2002.
Similar provisions were contained in section 63 of MRTP Act, 1969, since repealed.
15 Subs. by Act 39 of 2007, section 45 (w.e.f. 12 October 2007). Prior to its substitution, it
stood as under:
Section 58. Members, Director General, Registrar, officers and employees, etc., of Commission
to be public servants
The Chairperson and other Members and the Director General, Additional, Joint, Deputy or Assistant Directors General and
Registrar and other officers and employees of the Commission shall be deemed, while acting or purporting to act in pursuance
of any of the provisions of this Act, to be public servants within the meaning of section 21 of the Indian Penal Code (45 of
1860).
End of Document
[s 59] Protection of action taken in good faith
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > CHAPTER
IX MISCELLANEOUS
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
CHAPTER IX MISCELLANEOUS
[s 59] Protection of action taken in good faith
No suit, prosecution or other legal proceedings shall lie against the Central Government or Commission or any officer of
the Central Government or the Chairperson or any Member or the Director-General, Additional, Joint, Deputy or Assistant
Directors-General or 16[the Secretary or officers or other employees of the Commission or the Chairperson, Members,
officers and other employees of the Appellate Tribunal] for anything which is in good faith done or intended to be done
under this Act or the rules or regulations made thereunder.
LEGISLATIVE BACKGROUND
The Competition Act, 2002
Notes on clauses of the Bill stated, thus:
Notes on clauses.—This clause provides for protection of action taken in good faith by the Central Government or Commission or
any officer of the Central Government or Chairperson or any Member or Director General, Additional, Joint, Deputy or Assistant
Directors General or Registrar or officers or other employees of the Commission for anything which is in good faith done or
intended to be done under the proposed legislation or any rules and regulations made thereunder. [Clause 57 of the Competition
Bill, 2001].
The Competition (Amendment) Act, 2007
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[s 59] Protection of action taken in good faith
Notes on clauses.—This clause seeks to amend section 59 of the Competition Act, 2002 relating to protection of action taken in
good faith.
Under the existing provisions contained in the said section, no suit, prosecution or other legal proceedings can lie against the
Central Government or Commission or any officer of the Central Government or the Chairperson or any Member or the Director
General, Additional, Joint, Deputy or Assistant Directors General or Registrar or officers or other employees of the Commission
for anything which is in good faith done or intended to be done under this Act or the rules or regulations made thereunder.
Clause 12 of the Bill proposes to confer power upon the Commission to appoint a Secretary instead of Registrar. Clause 34 of the
Bill proposes to insert new Chapter VIII-A in the Competition Act, 2002 proposing to establish the Competition Appellate
Tribunal. It is proposed to bring the Secretary, officers and other employees of the Commission and the Chairperson, Members,
officers and other employees of the Appellate Tribunal within the scope of the aforesaid section. The proposed amendment is
consequential in nature. [Clause 46 of the Competition (Amendment) Bill, 2007].
SCOPE OF THE SECTION
This section corresponds to section 635A of the Companies Act, 1956 and section 64 of the MRTP Act, 1969, since
repealed, and seeks to provide protection to the Commission, every member of the Commission, Director-General, Central
Government and their officers against any legal proceedings. The protection is available only in respect of the acts done in
good faith. If the acts are illegal or the officers have acted mala fide, appropriate proceedings are not prohibited.
16 Subs. by Act 39 of 2007, section 46, for “the Registrar or officers or other employees of
the Commission” (w.e.f. 12 October 2007).
End of Document
[s 60] Act to have overriding effect
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > CHAPTER
IX MISCELLANEOUS
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
CHAPTER IX MISCELLANEOUS
[s 60] Act to have overriding effect
The provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for
the time being in force.
LEGISLATIVE BACKGROUND
The Competition Act, 2002
Notes on clauses of the Bill stated, thus:
Notes on clauses.—This clause provides that the provisions of the proposed legislation shall have overriding effect on any other
law for the time being in force. [Clause 58 of the Competition Bill, 2001].
SCOPE OF THE SECTION
The mandate of Commission is to eliminate practices having adverse effect on competition, promote and sustain
competition, protect the interests of consumers and ensure freedom of trade carried on by other participants, in markets in
India. Sectoral regulators have necessary technical expertise to determine access, maintain standard, ensure safety and
determine tariff. They set rules of game, i.e., entry conditions, technical details, tariff, safety standards and have direct
control on prices, quantity and quality. Thus sectoral regulators focus on the dynamics of specific sectors, whereas the
Competition Commission has a holistic approach and focuses on functioning of the markets through increasing efficiency
through competition. In fact their roles are complementary to each other and share the objective of obtaining maximum
benefit for the consumers.17
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[s 60] Act to have overriding effect
Section 60 is a non-obstante clause to clarify that the provisions of the Competition Act, 2002 shall have overriding effect
over the provisions contained in other enactments. In case the provisions are inconsistent to each other, the provisions of
the Competition Act, 2002 shall prevail. However, in case the provisions are consistent with each other, the provisions of
the Competition Act, 2002 and the other enactment(s) shall prevail in their area of operation.
Under section 26 of the General Clauses Act, 1897, where an act or omission constitutes an offence under two or more
enactments, then the offender shall be liable to be prosecuted and punished under either or any of those enactments, but
shall not be liable to be punished twice for the same offence.
CASES UNDER THE COMPETITION ACT, 2002
In the case of PK Krishnan v Paul Madavana,18 it was contended that the Commission did not have the jurisdiction to
take cognisance of the matter as the statutory authority, i.e., State Drugs Control Department was the competent statutory
authority which could take cognisance of the matter. It was further contended that the Informant should have approached
licensing authority under clause 28 of Drugs (Prices Control) Order, 2013 for refusal by Alkem Laboratories to appoint the
Informant as stockist. Therefore, it was argued that the Commission was barred from taking jurisdiction in light of
available remedy under special law, i.e., Drugs (Prices Control) Order, 2013. The Commission rejected the argument and
noted that section 60 of the Competition Act, 2002 gave the provisions of the Competition Act, 2002 overriding effect by
declaring that the provisions of the Competition Act, 2002 shall have effect notwithstanding anything inconsistent
therewith contained in any other law for the time being in force. Furthermore, the provisions contained in section 62 of the
Competition Act, 2002 highlight that the proceedings under the Competition Act, 2002 are not in derogation of but in
addition to the provisions of any other law for the time being in force. The Commission further emphasised that
Competition law is a special law with an overarching mandate across the sectors (which may also be governed by their
respective sector regulators). The legislative intent is writ large and self-evident from the scheme of the Competition Act,
2002 and it makes the Commission a special body to oversee the markets from a competitive framework. The Commission
observed:
To accede the contention of the counsel appearing for the opposite party is to render the existence of the Commission redundant,
otiose and nugatory. Such an approach apart from being inconsistent with the legislative scheme would stultify the legislative
intent in curbing the abusive conduct by dominant enterprises.19
17 Neeraj Malhotra, Advocate v North Delhi Power Ltd, BSES Rajdhani
Power Ltd and BSES Yamuna Power Ltd, Case No. 06/2009, decided on 11 may 2011.
18 PK Krishnan v Paul Madavana, 2016 Comp LR 83 (CCI).
19 Para 5.4, Id. The Tribunal on 10 May 2016 (Appeal No. 9 of 2016)
set aside the Commission’s decision in PK Krishnan v Paul Madavana on grounds of violation of the principles of natural justice.
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[s 60] Act to have overriding effect
End of Document
[s 61] Exclusion of jurisdiction of civil courts
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > CHAPTER
IX MISCELLANEOUS
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
CHAPTER IX MISCELLANEOUS
[s 61] Exclusion of jurisdiction of civil courts
No civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which the 20[Commission
or the Appellate Tribunal] is empowered by or under this Act to determine and no injunction shall be granted by any court
or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act.
LEGISLATIVE BACKGROUND
The Competition Act, 2002
Notes on clauses of the Bill stated, thus:
Notes on clauses.—This clause provides for exclusion of jurisdiction of civil courts in respect of any matter which the Commission
is empowered by or under the proposed legislation to determine. [Clause 59 of the Competition Bill, 2001].
The Competition (Amendment) Act, 2007
Notes on clauses.—This clause seeks to amend section 61 of the Competition Act, 2002 relating to exclusion of jurisdiction of civil
courts.
Under the existing provisions contained in the said section, no civil court shall have jurisdiction to entertain any suit or proceeding
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[s 61] Exclusion of jurisdiction of civil courts
in respect of any matter which the Commission is empowered by or under this Act to determine and no injunction shall be granted
by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this
Act.
Clause 43 of the Bill proposes to insert new Chapter VIIIA in the Competition Act, 2002 proposing to establish the Competition
Appellate Tribunal. It is proposed to exclude the jurisdiction of civil courts in respect of any matter in which the Commission or
Appellate Tribunal is empowered to determine. The proposed amendment is consequential in nature. [Clause 47 of the Competition
(Amendment) Bill, 2007].
SCOPE OF THE SECTION
The jurisdiction of civil courts has been barred in respect of matters which are adjudicated by the Competition Commission
and Appellate Tribunal under the Competition Act, 2002. Similarly, no court shall grant any injunction in such matters. The
object of the section is to avoid multiple and parallel proceedings.
Similar provisions are contained in section 10GB of the Companies Act, 1956, inserted by the Companies (Second
Amendment) Act, 2002. However, no such provision existed under the MRTP Act, 1969.
JURISDICTION UNDER ARTICLE 226
The Delhi High Court in the case of Shree Cements,21 reiterated the principle laid down by the Supreme Court in
Whirlpool Corp v Registrar of Trade Marks, Mumbai,22 to observe that alternative remedy will not operate as a bar in at
least three contingencies, namely, where the writ petition has been filed for the enforcement of any of the fundamental
rights or where there has been a violation of the principle of natural justice or where the order or proceedings are wholly
without jurisdiction or the vires of an Act is challenged. Consequently, a writ petition challenging an order of COMPAT is
maintainable on limited grounds. Similarly, in the Ericsson case,23 the Delhi High Court held that where the direction
passed under section 26(1) is found to be mala fide or capricious, interference by the Court under Article 226 of the
Constitution of India would be warranted. Therefore, although the High Court does not sit as an Appellate Court to correct
every error but in cases where an authority has acted outside the scope of its jurisdiction, the High Court would interfere
under exercise of its jurisdiction under Article 226 of the Constitution of India.
The Madras High Court in the case of The Tamil Nadu Film Exhibitors Association,24 held that although section 61 of the
Competition Act, 2002 excludes the jurisdiction of Civil Courts, in respect of any matter which the Commission or the
Appellate Tribunal is empowered by the Act to determine but the said bar of jurisdiction may not apply to the jurisdiction
of this Court under Article 226 of the Constitution, as it has been held to be part of the basic structure. Therefore, despite
the fact that the orders of the Competition Commission are subject to the Appellate jurisdiction of the Competition
Appellate Tribunal and despite the fact that the orders of the Appellate Tribunal are subject to a statutory appeal under
section 53T of the Act, the jurisdiction of the High Court under Article 226 will not stand ousted.25
The Delhi High Court in Google Inc v CCI26 drew a parallel and noted that once petitions under Article 226 for quashing
of investigation under the Code of Criminal Procedure, 1973 (Cr PC) have been held to be maintainable, on the same
parity a petition under Article 226 would also be maintainable against an order/direction of the Commission of
investigation under section 26(1) of the Competition Act, 2002 particularly when the powers of the DG, Commission of
investigation are far wider than the powers of Police of investigation under the Cr PC. However, a petition under Article
226 of the Constitution of India against an order under section 26(1) of the Act would lie on the same parameters as
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[s 61] Exclusion of jurisdiction of civil courts
prescribed by the Supreme Court in Bhajan Lal,27 i.e., where treating the allegations in the
reference/information/complaint to be correct, still no case of contravention of section 3(1) or section 4(1) of the Act
would be made out or where the said allegations are absurd and inherently improbable or where there is an express legal
bar to the institution and continuance of the investigation or where the information/reference/complaint is manifestly
attended with mala fide and has been made/filed with ulterior motive or the like.
20 Subs. by Act 39 of 2007, section 47, for the word “Commission” (w.e.f. 12 October 2007).
21 Shree Cement Ltd v CCI, [2014] 122
CLA 22 (Delhi) : 210 (2014) DLT 605 :
[2014] 126S CL 275 (Delhi).
22 Whirlpool Corp v Registrar of Trade Marks, Mumbai,
AIR 1999 SC 22 (1) : 1998 AIR SCW 3345 :
(1998) 8 SCC 1 : 1998 (5) Scale 655
: JT 1998 (7) SC 243 .
23 Telefonaktiebolaget LM Ericsson (PUBL) v CCI, W.P.(C) 464/2014,
CM Nos. 911/2014 and 915/2014, W.P.(C) 1006/2014, CM Nos. 2037/2014 and 2040/2014.
24 The Tamil Nadu Film Exhibitors Association v CCI,
AIR 2015 Mad 106 : [2015] 127 CLA 393
(Mad.) : 2015 Comp LR 420 (Madras) : 2015 (3) CTC 515
: 2015 (2) LW 686 : (2015) 4 Mad LJ 1 : [2015] 132 SCL 274
(Madras).
25 The Bombay High Court in the case of Kingfisher Airlines Ltd v CCI
also held that a writ petition under Article 226 of the Constitution of India is maintainable against an order/direction for
investigation under the Competition Act, 2002 albeit for compelling reason or when the reference/information/complaint does not
disclose any contravention of section 3(1) or section 4(1) of the Competition Act, 2002.
26 Google Inc v CCI, [2015] 127
CLA 367 (Delhi) : 2015 Comp LR 391 (Delhi) : 2015 (150) DRJ 192
.
27 State of Haryana v Bhajan Lal,
1992 Supp (1) SCC 335 .
End of Document
[s 62] Application of other laws not barred
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > CHAPTER
IX MISCELLANEOUS
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
CHAPTER IX MISCELLANEOUS
[s 62] Application of other laws not barred
The provisions of this Act shall be in addition to, and not in derogation of, the provisions of any other law for the time
being in force.
LEGISLATIVE BACKGROUND
The Competition Act, 2002
Notes on clauses of the Bill stated thus:
Notes on clauses.—This clause seeks to provide that the provisions of the proposed legislation shall be in addition to, and not in
derogation of, the provisions of any other law for the time being in force. [Clause 60 of the Competition Bill, 2001].
SCOPE OF THE SECTION
The purpose of this section is to make it clear that the provisions of the Competition Act, 2002 have to be applied
harmoniously with the provisions of other enactments. In other words, if anything is expressly provided in the Competition
Act, 2002 it would override other laws. But, the provisions of other statutes will continue to apply with full force, where
the said provisions are not in conflict with the Competition Act, 2002.
This provision is in addition to section 60 under which the Competition Act, 2002 shall have overriding effect on any other
law.
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[s 62] Application of other laws not barred
PROVISIONS AND CASE LAW UNDER MONOPOLIES AND RESTRICTIVE TRADE
PRACTICES ACT, 1969
Similar provisions were contained in sub-section (1) of section 4 of Monopolies and Restrictive Trade Practices Act, 1969.
In the matter of All India Film Producers’ Council, Bombay,28 during the course of enquiry by the MRTP Commission,
the respondent pleaded that the Commission has no jurisdiction to pass any order overriding the provisions of section 25 of
the Companies Act, 1956. The Commission held that it has clear jurisdiction to pass any order under the Act. In doing so it
would not override the provisions of section 25 of the Companies Act, 1956. The Memorandum and Articles of Association
of the respondent and all acts, deeds and things done in pursuance of, or arising out, of the said Memorandum and Articles
of Association are not outside the purview or scope of the said Act. Whatever the Commission has to say is not in
derogation of section 25 of the Companies Act, 1956 but is in addition to the provisions of the Act. It is very clearly stated
in section 4(1) of the Act that the provisions of the Monopolies and Restrictive Trade Practices Act, 1969 are in addition
to, and not in derogation of, any other law for the time being in force. In case the Commission issues any directive to
modify any Articles of Association of the respondent, the Council has to follow the procedure laid down in the Companies
Act, 1956 but that did not mean that the Commission cannot issue any directive. Moreover, Memorandum and/or Articles
of Association of the respondent Council were not agreements authorised by law. Section 25 does not expressly authorise
the creation of companies limited by guarantee. It only sets out the circumstances under which the company can have
power to dispense with the words “limited” or “private limited” at the end of its title. The company can do so if it satisfies
certain conditions but that does not mean that it is expressly authorised by law.
A Civil Court as well as the MRTP Commission is both available for redress. A party can choose either of the two fora.29
The remedies available under the MRTP Act, 1969 are additional to the usual remedies available under the Indian Contract
Act, 1872 to the parties.30
In Balaji Traders v MMTC Ltd,31 it was decided by the Commission that in view of the mandatory provision of section 8
of the Arbitration and Conciliation Act, 1996 the matter may be referred to the arbitration.
In AAG Minerals Pvt Ltd v International Combustion (India) Ltd,32 a compensation application was filed under section
12B read with section 36B(a) read with section 36A. There was an arbitration agreement between the parties. The
Commission held that the allegation made fall under the provisions of section 12B and it is significant to note the provision
of section 4 which provides inter alia that the provisions of the Act shall be in addition to, and not in derogation of, any
other law. It appears, therefore, that without prejudice to any remedy, which will be available in the Arbitration and
Conciliation Act, 1996, the applicant is justified in approaching the Commission for claiming relief under the MRTP Act,
1969.
CASES UNDER THE COMPETITION ACT, 2002
In the case of Sunil Bansal v Jaiprakash Associates Ltd,33 it was argued that the instant matter would come under the
Consumer Protection Act, 1986 and the Informants should have approached the appropriate forum. It was further argued
that the instant matter did not raise any competition concern and was purely contractual in nature and as such the
Informants ought to have approached the appropriate relevant authorities/forum. The Commission, however, noted that
availability of remedies before consumer fora did not oust the jurisdiction of the Commission and it was the duty of the
Commission to eliminate practices having adverse effect on competition, promote and sustain competition, protect the
interests of consumers and ensure freedom of trade carried on by other participants, in markets. Moreover, it was held that
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[s 62] Application of other laws not barred
by virtue of the provisions contained in section 62 of the Competition Act, 2002 the provisions of the Competition Act,
2002 are in addition to, and not in derogation of, the provisions of any other law for the time being in force.
The Commission vide order dated 3 May 2011 in the Arshiya Rail Infrastructure Limited (ARIL)34 case disposed of the
preliminary objections raised by the Ministry of Railways (MoR) both as regards jurisdiction of the Commission to inquire
into the matter and also on the application of section 8 of the Arbitration and Conciliation Act, 1996, praying to the
Commission to refer the dispute between the parties for arbitration. In the Order, the Commission opined that the
allegations brought out in the information, related to abuse of dominant position by the railways which were allegedly in
contravention of the provisions of the Act. In the Order it was also argued that the arbitration agreement only covered the
contractual obligations incurred and assumed by the parties and hence will not address the allegations brought before the
Commission. Given that the scope of the present proceedings were different from the contractual obligations of the parties
assumed under the arbitration agreement, section 8 of the Arbitration and Conciliation Act, 1996 was not applicable to the
proceedings before the Commission. In reaching the above conclusion, the Commission also relied on sections 60 and 62
of the Competition Act, 2002, the former dealing with the exclusion of the jurisdiction of the civil courts and latter
providing that the provisions of the Act are in addition to and not in derogation of the provisions of any other law for the
time being in force.
The Commission’s 2011 order35 in the above case was challenged before the Delhi High Court.36 The question before
the High Court was whether the existence of an arbitration agreement between the parties is a bar to the maintainability of
the information and the proceedings arising therefrom before the Commission. The Delhi High Court emphasised that the
Commission has been set up with special focus “to prevent practices having adverse effect on competition, to promote and
sustain competition in markets, to protect the interests of consumers and to ensure freedom of trade carried on by other
participants in markets, in India, and for matters connected therewith or incidental thereto”. Further, it was noted that the
Commission is not merely concerned with the aspect of breach of contract or with regard to implementation of the
contract, its mandate is to ensure compliance of, inter alia, sections 3 and 4 of the Competition Act, 2002. The provisions
of the Act are in addition to, and not in derogation of, the provisions of any other law for the time being in force (section
62). This provision is pari materia with section 3 of the Consumer Protection Act, 1986 (COPRA) which also states that
the provisions of the Consumer Protection Act, 1986 shall be in addition to, and not in derogation of any other provisions
of law for the time being in force. Delhi High Court also noted that a similar objection was raised to maintainability of the
consumer claim under the Consumer Protection Act, 1986 on the ground that an arbitration agreement existed between the
parties, and that the disputes arising out of a contract were referable to arbitration. The Supreme Court, deciding a case
under COPRA rejected such argument in the face of section 3 of the Consumer Protection Act, 1986 in Fair Air Engineers
Pvt Ltd v NK Modi,37 by observing as follows:
It is seen that section 3 envisages that the provisions of the Act are in addition to and are not in derogation of any other law in
force. It is true, as rightly contended by Shri Suri, that the words “in derogation of the provisions of any other law for the time
being in force” would be given proper meaning and effect and if the compliant is not stayed and the parties are not relegated to the
arbitration, the Act purports to operate in derogation of the provisions of the Arbitration Act. Prima facie, the contention appears to
be plausible but on construction and conspectus of the provisions of the Act, we think that the contention is not well founded.
Parliament is aware of the provisions of the Arbitration Act and the Contract Act, 1872 and the consequential remedy available
under section 9 of the Code of Civil Procedure i.e., to avail of right of civil action in a competent court of civil jurisdiction.
Nonetheless, the Act provides the additional remedy.
The Delhi High Court further noted that the Fair Air Engineers case was referred to and relied upon by the Supreme Court
in its later decision in Secretary, Thirumurugan Co-op Agricultural Credit Society v M Lalitha (Dead) through LRs38
where it was held that the scope of the proceedings, and the focus of its investigation and consideration is very different
from the scope of an enquiry before an Arbitral Tribunal. An Arbitral Tribunal may not go into aspects of abuse of
dominant position by one of the contracting parties. Its focus is to examine the disputes in the light of the contractual
clauses. A contract may not be invalid or hit by section 23 of the Indian Contract Act, 1872 but the conduct of one of the
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[s 62] Application of other laws not barred
parties may still fall foul of the provisions of the Act. Therefore, an informant may not get the desired relief before an
Arbitral Tribunal, whose mandate is circumscribed by the contractual terms even if he were to raise issues of breach of
sections 3 and 4 of the Act before the Arbitral Tribunal. Moreover, the Arbitral Tribunal would neither have the mandate,
nor the expertise, nor the wherewithal to conduct an investigation to come up with a report, which may be necessary to
decide issues of abuse of dominant position by one of the parties to the contract. The Delhi High Court, therefore, rejected
the argument that the proceedings before the Commission was not maintainable as the said observations of the Supreme
Court apply with equal force in relation to the provisions of the Competition Act, 2002.39
The Tribunal in the case of Chemists & Druggists Association v CCI,40 held that even though section 62 of the
Competition Act, 2002 declares that the provisions of this Act shall be in addition to, and not in derogation of, the
provisions of any other law for the time being in force, meaning thereby that a party availing remedy under any other law
can also initiate proceedings under the Act, it does not empower a party to simultaneously avail two remedies which may
result in passing of inconsistent or contradictory orders by two adjudicatory forums. The Tribunal noted that in the present
case, while the Commission had ruled that the practices adopted by the Association were violative of section 3(3) (b) read
with section 3(1) of the Act and imposed penalty on all the appellants, the suits filed by the respondent for grant of a
declaration that Resolutions passed by the Association are nullity and for award of damage in lieu of the loss suffered by it
were dismissed by the competent Court, i.e., Additional Civil Judge (Senior Division), Ferozepur. It was not in dispute that
Respondent No. 2 had filed two suits and a criminal complaint before filing information, dated 20 September 2012 under
section 19(1)(a) of the Act and as matter of coincidence, the information culminated into passing of order, dated 5
February 2014 by the Commission vide which the Association was held guilty of acting in violation of section 3(3)(b) read
with section 3(1) of the Act and penalty was imposed on the Association and its office-bearers under section 27 of the Act,
but two suits filed for substantially similar reliefs were dismissed on 12 May 2015. The Tribunal held that once the DG had
been apprised of the facts relating to pending civil and criminal cases, he should have brought this fact to the notice of the
Commission and sought its guidance and the latter should have as a measure of propriety stayed further proceedings. In
any case, the Commission should not have finally pronounced upon the guilt of the Association and the other appellants
and should have waited for the final verdict of the civil and criminal cases.
Jurisdiction of the Commission: Competition Act, 2002 versus Trade Union Act, 1926
In the Kerala Films case41, it was contended by the opposite parties that since they were registered Trade Unions, the
disciplinary actions taken by them against their members, in accordance with their bye-laws, do not raise any competition
concern and accordingly, cannot be looked into by the Commission. Further, it was contended that the Commission had no
jurisdiction to adjudicate on trade union disputes which do not find mention in the Competition Act, 2002 but which has
been specifically included under the Industrial Dispute Act, 1947. The Commission, however, rejected the argument and
observed:42
7.9 Trade Associations provide an important platform for betterment of a particular trade, for establishing code of conduct, for
laying down standards for fair trade, for facilitating legitimate co-operative behaviour in case of negotiations with government
bodies etc. However, when the activities of the trade association transgress the thin line between legitimate trade activities and
anti-competitive practices, the competition regulator is well within its jurisdiction to interfere and take cognizance of such anti-
competitive actions/practices. It is true that right to form an association is recognised under Article 19 of the Constitution of India.
However, such right is neither unfettered nor absolute in nature. Fundamental rights enshrined under Article 19 of the
Constitution of India are accompanied by reasonable restrictions, which are recognised by the Hon’ble Supreme Court in catena
of judgments.
7.10 Similarly, the associations governed under different laws are amenable to the jurisdiction of
the Commission, if they are found to be indulging in any of the activity prohibited under the Act. The OPs have relied upon Section
62 of the Act to contend that the jurisdictions of the Commission is not available when there is a ‘trade dispute’ between the
association and one of its members, in view of remedy provided under the Trade Unions Act. The Commission notes that Section
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[s 62] Application of other laws not barred
62 of the Act clearly provides that ‘the provision of the Act shall be in addition to and not in derogation of the provisions of any
other law for the time being in force’. Hence, the issues covered under the ambit of the Act have to be enforced in true spirit and
there is no prohibition under any other law to avoid the enforcement of the Act merely because such law is applied albeit in
different context and purpose. In the instant case, the operation of two statutes is not confronting with each other. On the contrary,
they are complementing each other, one (Trade Unions Act, 1926) is created with the objective of protecting legitimate trade union
activities and the other (Competition Act, 2002) is created to protect fair competition in the markets.
The Patents Act, 1970 versus The Competition Act, 2002
The question before the Delhi High Court in the Ericsson case43 was whether the provision of remedies under the Patents
Act, 1970 excludes the applicability of Competition Act, 2002 to certain abuse of patent rights. The court went into great
depths to analyse the background and intent behind both the Acts. The intent behind the Patents Act, 1970 as per the Court,
was to make it unlawful for the use of a patent without permission from the owner, in order to further innovation by
protecting the property rights of inventors when they share their inventions with the public. The Competition Act, 2002 on
the other hand, aims to protect fair trade and prohibit trade practices having an adverse effect on competition in the Indian
market. The Court observed:
Section 62 of the competition Act makes it evident that the intention of the Parliament in enacting
the Act was not to curtail or whittle down the full scope of any other law, and therefore it is expressly stated that the Competition
Act would be in addition to, and in derogation of any other Act.
Section 60 of the Competition Act, which provides for the provisions of the said Act to have effect
notwithstanding anything inconsistent therewith contained in any other law for the time being in force, must be read harmoniously
with Section 62 of the Competition Act and in the context of the subject matter of the Act.
Section 60 expressly provides for the provisions of the Competition Act shall have effect
notwithstanding anything inconsistent in any other law. However, the said provision must be read in the context of the Competition
Act as a whole and the mischief sought to be addressed by it. Thus, Section 60 is enacted only to restate and emphasize that
notwithstanding agreements, arrangements, practices and conduct which may otherwise be legitimate under the general laws
would nonetheless be subject to the rigours of the Competition Act. Section 60 cannot be read to curtail the provisions of the other
statutes.
Noting the position of law that in case of irreconcilable conflict between general law and special law, the special law
prevails; the court stated that if there are any irreconcilable differences between the Patents Act, 1070 and the Competition
Act, 2002 in so far as anti-abuse provisions are concerned, then the Patents Act, 1970 being a special statue shall prevail
notwithstanding section 60 of the Competition Act, 2002.
Whether there is any irreconcilable conflict between the Patents Act, 1970 and the Competition
Act, 2002 or whether both could be construed harmoniously in the context of the Patents Act, 1970?
The provisions of the Patents Act, 1970 which could be construed as dealing with a subject matter which is common with
the Competition Act, 2002 are essentially provisions of Chapter XVI and section 140. Section 84 provides for the grant of
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[s 62] Application of other laws not barred
compulsory licenses in certain cases where reasonable requirement of public with respect to the patented inventions have
not been satisfied or where the patented invention is not available to the public at a reasonably affordable price or where
the patented invention is not worked in India. Some of the instances provided under section 84(7) could be construed, in
certain circumstances as an abuse of dominance—remedy in these cases is grant of compulsory license.
The remedies provided under section 27 of the Competition Act, 2002 for abuse of dominant position are materially
different from the remedy as available under section 84 of the Patents Act, 1970. It is also apparent that the remedies under
the two enactments are not mutually exclusive; grant of one is not destructive of the other. Thus, it may be open for a
prospective licensee to approach the Controller of Patents for grant of compulsory licence in certain cases. The same is not
inconsistent with the CCI passing an order under section 27 of the Competition Act, 2002. Section 84 of the Patents Act,
1970 provides specific remedy to the person seeking relief, whereas the orders passed by CCI are in rem. Thus, the
operative width of the two enactments is different. The High Court in the Ericsson case observed:
The provisions of Sections 21 and 21A of the Competition Act, read in the aforesaid context, indicate that the intention of the
Parliament was not to abrogate any other law but to ensure that even in cases where CCI or other statutory authorities contemplate
passing orders, which may be inconsistent with other statutes, the opinion of the concerned authority is taken into account while
passing the such orders. The plain intention being that none of the statutory provisions are abrogated but only bi-passed in certain
cases. These provisions—Sections 21 and 21A of the Competition Act—clearly indicates that the intention of the Parliament was
that the Competition Act co-exist with other regulatory statutes and be harmoniously worked in tandem with those statues and as
far as possible, statutory orders be passed which are consistent with the concerned statutory enactments including the Competition
Act.44
The Competition Act, 2002 versus The Electricity Act, 1910:
It was alleged that Dakshin Haryana Bijli Vitran Nigam (DHBVN),45 being the sole supplier of electricity in a certain
area, was abusing its dominant position by imposing an unfair and discriminatory price upon consumers by charging Fuel
and Power Purchase Cost Surcharge Adjustment (FSA) and cross-subsidising the FSA cost by charging higher FSA from
consumers having higher consumption, admittedly with the approval of Haryana Electricity Regulatory Commission
(HERC). The Commission, while agreeing with the Appellant about dominance of DHBVN in the relevant market (market
for distribution of electricity in the licensed area of DHBVN in the State of Haryana), did not agree that differential pricing
in this case constituted abuse of dominance in terms of section 4 of the Competition Act, 2002. The Commission was of the
view that, classification of consumers and corresponding FSA charged followed a rationale whereby domestic consumers
was charged less than the non-domestic consumers and different FSA was levied for different categories of consumers
depending upon the socio-economic conditions of the respective class of consumers. The conclusion of the Commission
was that the classification appeared to have economic justification based on market segmentation and did not amount to
discriminatory conduct. The Commission further held that the case essentially related to the functions discharged by the
Electricity Distribution Company and the State Electricity Regulatory Commission in respect of fixation of FSA and no
competition issue was discernible from the facts presented in the information. The Commission was of the view that, FSA
was computed and levied as per the Regulations framed by HERC and any issue regarding violation of the Regulations
was, therefore, to be dealt with by HERC and anyone aggrieved by the decision of HERC could go in appeal to the
Appellate Authority under the Electricity Act, 1910. The Commission accordingly closed the matter in terms of section
26(2) of the Act.
The COMPAT also noted that section 62 of the Electricity Act, 1910 allows segmentation of consumers for determining
tariff, which includes FSA, according to the consumer’s load factor, power factor, voltage, total consumption of electricity
during any specified period or the time at which the supply is required or the geographical position of any area, the nature
of supply and the purpose for which the supply is required. Thus, the differential levy of tariff has a statutory sanction. It
was further noted that fixation of tariff is legislative in character and protective discrimination through differential tariff is
Page 7 of 8
[s 62] Application of other laws not barred
permissible. COMPAT also held that the Electricity Act, 1910 has its own system of addressing the issues of abuse of
dominance and other grievances of its consumers. In terms of section 60 of the Electricity Act, 1910 HERC is authorised to
issue such directions as it considers appropriate to a licensee, if it abuses its dominant position or enters into a combination
which is likely to cause or causes an adverse effect on competition in the electricity industry and contravention of
directions of HERC is liable for punishment under section 146 of the Electricity Act, 1910. Therefore, HERC can address
the issue of abuse of dominance. It was also held that in case of a conflict between provisions of the Electricity Act, 1910
and the Competition Act, 2002 the former will override. The Electricity Act, 1910 is admittedly a latter special statute and
in the event of irreconcilable inconsistency between the Electricity Act, 1910 and the Competition Act, 2002 the former
would override even though the Competition Act, 2002 contains the non obstante clause in section 60. In its order,
COMPAT observed that, there is an implied immunity from Competition law in matters of electricity tariff approved by
the Appropriate Commission in terms of the Electricity Act, 1910 and, therefore, the Appellant cannot seek any relief
under the Competition Act, 2002. It was also held that the Commission lacks jurisdiction in this case; hence, the issue,
whether the Appellant was able to establish a prima facie case of contravention under section 4, is only academic in nature.
Assuming that the Commission had jurisdiction, COMPAT agreed its finding that the Appellant had failed to establish a
prima facie case of contravention of section 4 and dismissed the appeal.
28 All India Film Producers’ Council, Bombay, RTP Enquiry No. 1/78,
dated 2 May 1983 : (1983) Comp LJ 197 .
29 Ballarpur Industries Ltd v Sinarmas, (1996) 87 COMP CASES 159
(MRTPC) at p 160.
30 Man Roland Druckinachinen AG v Multicolour Offset Ltd,
(2004) 60 CLA 5 SC : (2004) 53 SCL 146
(SC).
31 Balaji Traders v MMTC Ltd,
(1999) 34 CLA 261 .
32 AAG Minerals Pvt Ltd v International Combustion (India) Ltd,
(2005) 69 CLA 30 (MRTP).
33 Sunil Bansal v Jaiprakash Associates Ltd, 2015 Comp LR 1009 (CCI).
34 Arshiya Rail Infrastructure Ltd (ARIL) v Ministry of Railways (MoR)
through the Chairman, Railway Board (KB) and Container Corporation of India Ltd (CONCOR),
[2013] 112 CLA 297 (CCI) : 2012 Comp LR 937 (CCI) :
[2012] 116 SCL 417 (CCI).
35 Id.
36 UOI v CCI, AIR 2012 Del 66
: [2012] 107 CLA 362 (Delhi) : 2012
Comp LR 187 (Delhi) : (2012) 3 Comp LJ 303 (Del) : 187
Page 8 of 8
[s 62] Application of other laws not barred
(2012) DLT 697 : 2012 (128) DRJ 301
.
37 Fair Air Engineers Pvt Ltd v NK Modi,
(1996) 6 SCC 385 .
38 Secretary, Thirumurugan Co-op Agricultural Credit Society v M
Lalitha (Dead) through LRs, (2004) 1 SCC 305 : 2004 All LJ 172 : [2004]
2 Mad LJ 94.
39 Also see Micromax Informatics Ltd v Telefonaktiebolaget LM
Ericsson (PUBL), FAO (OS) 143/2013, decided on 12 March 2013.
40 Chemists & Druggists Association v CCI, Appeal Nos. 21/2014 to
28/2014, decided on 30 October 2015.
41 Re T G Vinayakumar (aka Vinayan) Bharathim And Association of
Malayalam Movie Artists (AMMA), Film Employees Federation of Kerala (FEFKA), Case No. 98 of 2014, decided on 24 March
2017.
42 Also see Advertising Agencies Guild v Indian Broadcasting
Foundation (IBF), Case No. 35 of 2013.
43 Telefonaktiebolaget Lm
Ericsson v CCI, 2016 Comp LR 497 (Delhi).
44 Telefonaktiebolaget LM Ericsson (PUBL) v CCI, 2016 Comp LR
497 (Delhi).
45 Anand Parkash Agarwal v Dakshin Haryana Bijli Vitran Nigam,
Appeal No. 33/2016 [COMPAT], decided on 16 February 2017.
End of Document
[s 63] Power to make rules
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > CHAPTER
IX MISCELLANEOUS
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
CHAPTER IX MISCELLANEOUS
[s 63] Power to make rules
(1) The Central Government may, by notification, make rules to carry out the provisions of this Act.
(2) In particular, and without prejudice to the generality of the foregoing power, such rules may provide for all or any
of the following matters, namely:—
46[(a) the term of the Selection Committee and the manner of selection of panel of names under sub-
section (2) of section 9];
(b) the form and manner in which and the authority before whom the oath of office and of secrecy shall be made
and subscribed under sub-section (3) of section 10;
(c) 47[* * *]
(d) the salary and the other terms and conditions of service including travelling expenses, house rent allowance
and conveyance facilities, sumptuary allowance and medical facilities to be provided to the Chairperson and
other Members under sub-section (1) of section 14;
48[(da) the number of Additional, Joint, Deputy or Assistant Directors General or such officers or other
employees in the office of Director General and the manner in which such Additional, Joint, Deputy or
Assistant Directors General or such officers or other employees may be appointed under sub-section (1A) of
section 16];
(e) the salary, allowances and other terms and conditions of service of the Director General, Additional, Joint,
Deputy or Assistant Directors General or 49[such officers or other employees] under sub-section (3) of
section 16;
(f) the qualifications for appointment of the Director General, Additional, Joint, Deputy or Assistant Directors
General or 50[such officers or other employees] under sub-section (4) of section 16;
(g) the salaries and allowances and other terms and conditions of service of the 51[Secretary] and officers and
other employees payable, and the number of such officers and employees under sub-section (2) of section 17;
(h) 52[* * *]
(i) [* * *]
(j) [* * *]
(k) the form in which the annual statement of accounts shall be prepared under sub-section (1) of section 52;
(l) the time within which and the form and manner in which the Commission may furnish returns, statements
and such particulars as the Central Government may require under sub-section (1) of section 53;
Page 2 of 6
[s 63] Power to make rules
(m) the form in which and the time within which the annual report shall be prepared under sub-section (2) of
section 53;
53[(ma) the form in which an appeal may be filed before the Appellate Tribunal under sub-section (2) of
section 53B and the fees payable in respect of such appeal;
(mb)the term of the Selection Committee and the manner of selection of panel of names under sub-section (2) of
section 53E;
(mc) the salaries and allowances and other terms and conditions of the Chairperson and other Members of the
Appellate Tribunal under sub-section (1) of section 53G;
(md)the salaries and allowances and other conditions of service of the officers and other employees of the
Appellate Tribunal under sub-section (3) of section 53M;
(me) the fee which shall be accompanied with every application made under sub-section (2) of section 53N;
(mf) the other matters under clause (i) of sub-section (2) of section 53-O in respect of which the Appellate
Tribunal shall have powers under the Code of Civil Procedure, 1908 (5 of 1908), while trying a suit;
54[(n) the manner in which the monies transferred to the Competition Commission of India or the
Appellate Tribunal shall be dealt with by the Commission or the Appellate Tribunal, as the case may be,
under the fourth proviso to sub-section (2) of section 66.
(o) any other matter which is to be, or may be, prescribed, or in respect of which provision is to be, or may be,
made by rules.
(3) Every notification issued under sub-section (3) of section 20 and section 54 and every rule made under this Act
by the Central Government shall be laid, as soon as may be after it is made, before each House of Parliament,
while it is in session, for a total period of thirty days which may be comprised in one session, or in two or more
successive sessions, and if, before the expiry of the session immediately following the session or the successive
sessions aforesaid, both Houses agree in making any modification in the notification or rule, or both Houses
agree that the notification should not be issued or rule should not be made, the notification or rule shall thereafter
have effect only in such modified form or be of no effect, as the case may be; so, however, that any such
modification or annulment shall be without prejudice to the validity of anything previously done under that
notification or rule, as the case may be.
LEGISLATIVE BACKGROUND
The Competition Act, 2002
Notes on clauses of the Bill stated, thus:
Notes on clauses.—This clause confers upon the Central Government the power to make rules to carry out the provisions of the
proposed legislation. Sub-clause (2) of this clause enumerates the various matters in respect of which such rules may be made.
Sub-clause (3) provides that every notification issued under sub-clause (3) of clause 20 and clause 52 and every rule made by the
Central Government under the proposed legislation shall be laid before both Houses of Parliament. [Clause 61 of the Competition
Bill, 2001].
Memorandum regarding delegated legislation.—Clause 61 of the Bill confers power upon the Central Government to make rules
for carrying out the provisions of the Bill. The matters in respect of which rules may be made relate, inter alia, to provide for the
form and manner in which, and the authority before whom, the oath of office and of secrecy shall be made and subscribed under
sub-section (3) of section 10; the other conditions of service relating to travelling expenses, house rent allowance and conveyance
facilities, sumptuary allowance and medical facilities to be provided to the Chairperson and other Members under sub-section (3)
of section 14; the salary, allowances and other terms and conditions of service of the Director General, Additional, Joint, Deputy or
Assistant Directors General under sub-section (3) of section 16; the qualifications for appointment of the Director General or
Additional, Joint, Deputy or Assistant Directors-General under sub-section (4) of section 16; the salaries, allowances and other
Page 3 of 6
[s 63] Power to make rules
terms and conditions of service of the Registrar and officers and other employees payable under sub-section (2) of section 17; the
rules for the purpose of securing any case or matter which requires to be decided by a Bench composed of more than two Members
under sub-section (4) of section 23; any other matters in respect of which the Commission shall have power under clause (g) of
sub-section (2) of section 36; the promotion of competition advocacy, creating awareness and imparting training about competition
issues under sub-section (3) of section 47; the form in which the annual statement of accounts shall be prepared under sub-section
(1) of section 50; the time within which, and the form and manner in which the Commission may furnish returns, statements and
such particulars as the Central Government may require under sub-section (1) of section 51; the form in which, and the time within
which, the annual report shall be prepared under sub-section (2) of section 51; the manner in which the monies transferred to the
Central Government shall be dealt with by that Government under fourth proviso to sub-section (2) of section 64; any other matter
which is to be, or may be, prescribed or in respect of which provision is to be, or may be, made by rules. [Competition Bill, 2001]
The Competition (Amendment) Act, 2007
Notes on clauses.—This clause seeks to amend section 63 of the Competition Act, 2002 relating to power to make rules.
It is proposed to amend said section so as to confer powers upon the Central Government to make rules in respect of certain
matters specified in that section and to make certain other amendments which are consequential in nature. [Clause 48 of the
Competition (Amendment) Bill, 2007].
SCOPE OF THE SECTION
This section corresponds to section 642 of the Companies Act, 1956 and section 67 of the Monopolies and Restrictive
Trade Practices Act, 1969, and empowers the Central Government to make rules to provide for matters specified in sub-
section (2). Under sub-section (3), the notifications issued under section 20(3) and section 54 and the rules made by the
Government are to be laid before each House of Parliament.
The purpose of the Rules is to provide for procedural matters, which are subsidiary to the provisions of the Act. They may
in some cases explain the provision of the Act, and it might, in certain cases, be legitimate to read the rules along with the
provision of the Act, in order to find out the true intention of the Legislature in enacting the latter. But, no rules can ever be
construed to override the specific provisions of the Act itself.55
Rules are meant only for the purposes of carrying out the provisions of the Act; and they cannot take away what is
conferred by the Act or whittle down its scope or effect.56 The Rules are required to conform to the intendment of the
provisions of the Act and if the Rules are inconsistent therewith, they could be held ultra vires.57
RULES FRAMED BY THE CENTRAL GOVERNMENT
Under section 63, the Central Government has framed the following rules for purposes of the Act:
(i) Competition Commission of India (Oath of office and of secrecy for Chairperson and other Members) Rules,
2003 (see Appendix 8).
Page 4 of 6
[s 63] Power to make rules
(ii) Competition Commission of India (Salary, Allowances and other terms and conditions of service of Chairperson
and other Members) Rules, 2003 (see Appendix 9).
(iii) Competition Commission of India (Term of the Selection Committee and the manner of selection of Panel of
Names) Rules, 2008 (see Appendix 2).
(iv) Competition Commission of India (Return on measures for the promotion of Competition Advocacy, Awareness
and training on Competition Issues) Rules, 2008 (see Appendix 10).
(v) Competition Appellate Tribunal (Term of the Selection Committee and the manner of Selection of Panel of
names) Rules, 2008 (see Appendix 7).
(vi) Competition Commission of India (Form and time of preparation of Annual Report) Rules, 2008 (see Appendix
11).
(vii) Competition Appellate Tribunal (Salaries and allowances and other terms and conditions of service of the
Chairperson and other Members) Rules, 2009 (see Appendix 12).
(viii)Competition Commission of India (Number of Additional, Joint, Deputy or Assistant Director General, other
officers and employees, their manner of appointment, Qualification, salary, allowances and other terms and
conditions of service) Rules, 2009 (see Appendix 14).
(ix) Competition Commission of India (Form of Annual Statement of Accounts) Rules, 2009 (see Appendix 18).
PROVISIONS OF MONOPOLIES AND RESTRICTIVE TRADE PRACTICES ACT, 1969 VIS-À-
VIS THE COMPETITION ACT, 2002
Similar provisions were contained in section 67 of the Monopolies and Restrictive Trade Practices Act, 1969. Under this
rule-making power, the Central Government had framed the following rules, which also stand repealed:
(a) MRTP Rules, 1970.
(b) MRTP (Information) Rules, 1971.
(c) MRTP (Classification of Goods) Rules, 1971.
(d) MRTPC (Conditions of Service of Chairman and Members) Rules, 1970.
(e) MRTPC (Recruitment of Members of Staff) Rules, 1974.
(f) MRTP (Recognition of Consumers Association) Rules, 1987.
(g) MRTP (Destruction of Records) Rules, 1984.
46 Subs. by Act 39 of 2007, section 48(i) (w.e.f. 12 October 2007). Prior to its substitution,
it stood as under: (a) the manner in which the Chairperson and other Members shall be selected under section 9;
Page 5 of 6
[s 63] Power to make rules
47 Clause (c) omitted by Act 39 of 2007, section 48(ii) (w.e.f. 12 October 2007). Prior to
its omission, it stood as under:
(c) the financial and administrative powers which may be vested in the Member Administration under section 13;
48 Ins. by Act 39 of 2007, section 48(iii) (w.e.f. 12 October 2007).
49 Subs. by Act 39 of 2007, section 48(iv), for the words “such other advisers, consultants
or officers” (w.e.f. 12 October 2007).
50 Subs. by Act 39 of 2007, section 48(iv), for the words “such other advisers, consultants
or officers” (w.e.f. 12 October 2007).
51 Subs. by Act 39 of 2007, section 48(v), for the word “Registrar” (w.e.f. 12 October
2007).
52 Clauses (h), (i) and (j) omitted by Act 39 of 2007, section 48(vi) (w.e.f. 12 October
2007). Prior to omission, these stood as under:
(h) the rules for the purpose of securing any case or matter which requires to be decided by a Bench composed of more than
two Members under sub-section (4) of section 23;
(i) any other matter in respect of which the Commission shall have power under clause (g) of sub-section (2) of section 36;
(j) the promotion of competition advocacy, creating awareness and imparting training about competition issues under sub-
section (3) of section 49;
53 Ins. by Act 39 of 2007, section 48(vii) (w.e.f. 12 October 2007).
54 Subs. by Act 39 of 2007, section 48(viii), for clause (n) (w.e.f. 12 October 2007). Prior
to its substitution, it stood as under:
(n) the manner in which the monies transferred to the Central Government shall be dealt with by that Government under the
fourth proviso to sub-section (2) of section 66;
Page 6 of 6
[s 63] Power to make rules
55 Ganpat v Lingapa, AIR 1962
Bom 104 , 105.
56 CIT v Taj Mahal Hotel, (1971) 82
ITR 44 (SC).
57 Re Century Enka Ltd, (1977) 107
ITR 909 (Cal).
End of Document
[s 64] Power to make regulations
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > CHAPTER
IX MISCELLANEOUS
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
CHAPTER IX MISCELLANEOUS
[s 64] Power to make regulations
(1) The Commission may, by notification, make regulations consistent with this Act and the rules made thereunder to
carry out the purposes of this Act.
(2) In particular, and without prejudice to the generality of the foregoing provisions, such regulations may provide
for all or any of the following matters, namely:—
(a) the cost of production to be determined under clause (b) of the Explanation to section 4;
(b) the form of notice as may be specified and the fee, which may be determined under sub-section (2) of section
6;
(c) the form in which details of the acquisition shall be filed under sub-section (5) of section 6;
58[(d) the procedures to be followed for engaging the experts and professionals under sub-section (3) of
section 17;
(e) the fee which may be determined under clause (a) of sub-section (1) of section 19;
(f) the rules of procedure in regard to the transaction of business at the meetings of the Commission under sub-
section (1) of section 22;
(g) the manner in which penalty shall be recovered under sub-section (1) of section 39;
(h) any other matter in respect of which provision is to be, or may be, made by regulations.]
(3) Every regulation made under this Act shall be laid, as soon as may be after it is made, before each House of
Parliament, while it is in session, for a total period of thirty days which may be comprised in one session or in
two or more successive sessions, and if, before the expiry of the session immediately following the session or the
successive sessions aforesaid, both Houses agree in making any modification in the regulation, or both Houses
agree that the regulation should not be made, the regulation shall thereafter have effect only in such modified
form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be
without prejudice to the validity of anything previously done under that regulation.
LEGISLATIVE BACKGROUND
The Competition Act, 2002
Page 2 of 3
[s 64] Power to make regulations
The Notes on clauses of the Bill stated, thus:
Notes on clauses.—This clause confers power upon the Commission to make regulations consistent with the proposed legislation
and the rules made thereunder, to carry out the purposes of the proposed legislations. Sub-clause (2) enumerates the various
matters in respect of which such regulations may be made by the Commission. Sub-clause (3) provides for laying of regulations
before both Houses of Parliament. [Clause 62 of the Competition Bill, 2001].
Memorandum regarding delegated legislation.—Clause 62 of the Bill confers power upon the Competition Commission of India to
make regulations consistent with the Act and the rules made thereunder to carry out the purposes of the Act. The matters in respect
of which, regulations may be made, relate, inter alia, to provide for the cost of production to be determined under clause (b) of the
Explanation to section 4; the form of notice as may be specified and the fee which may be determined under sub-section (2) of
section 6; the form in which details of the acquisition shall be filed under sub-section (5) of section 6; any other matter in respect of
which provision is to be, or may be, made by regulations.
The notifications issued under sub-section (3) of section 20 and section 52, the rules made by the Central Government and the
regulations made by the Competition Commission of India shall be laid, as soon as may be, after they are made, before each House
of Parliament.
The matters in respect of which notifications may be issued and the rules and regulations may be made are generally matters of
procedure and administrative detail and it is not practicable to provide for them in the Bill itself. The delegation of legislative
power is, therefore, of a normal character. [Competition Bill, 2001]
The Competition (Amendment) Act, 2007
Notes on clauses.—This clause seeks to amend section 64 of the Competition Act, 2002 relating to power to make regulations by
the Competition Commission of India.
It is proposed to amend said section 64 so as to confer powers upon the Competition Commission of India to make regulations in
respect of certain matters specified in the said section. [Clause 49 of the Competition (Amendment) Act, 2007].
SCOPE OF THE SECTION
This section empowers the Commission to make regulations for the efficient conduct of its business under the Competition
Act, 2002. The regulations may relate to matters regarding determination of cost of production under clause (b) of
Explanation to section 4; form of notice and fee payable under section 6(2); form with details of acquisition to be filed
under section 6(5); fee payable under section 19(1)(a) and other matters.
This section corresponds to the regulation making power of the MRTP Commission under section 66 of MRTP Act, 1969
(since repealed).
Page 3 of 3
[s 64] Power to make regulations
REGULATIONS FRAMED BY THE COMMISSION
Under section 64, the Competition Commission of India has framed the following regulations:
(i) Competition Commission of India (Procedure for Engagement of Experts and Professionals) Regulations, 2009
(see Appendix 3).
(ii) Competition Commission of India (General) Regulations, 2009 (see Appendix 1).
(iii) Competition Commission of India (Meeting for Transaction of Business) Regulation, 2009 (see Appendix 4).
(iv) Competition Commission of India (Lesser Penalty) Regulations, 2009 (see Appendix 5).
(v) Competition Commission of India (Determination of Cost of Production) Regulations, 2009 (see Appendix 6).
(vi) Competition Commission of India (Manner of Recovery of Monetary Penalty) Regulations, 2011 (see Appendix
20).
(vii) Competition Commission of India (Procedure in regard to the transaction of business relating to combinations)
Regulations, 2011 (see Appendix 19).
58 Subs. by Act 39 of 2007, section 49 (w.e.f. 12 October 2007). Prior to submission,
clauses (d) and (e) stood as under:
(d) the fee which may be determined under clause (a) of sub-section (1) of section 19;
(e) any other matter in respect of which provision is to be, or may be, made by regulations.
End of Document
[s 65] Power to remove difficulties
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > CHAPTER
IX MISCELLANEOUS
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
CHAPTER IX MISCELLANEOUS
[s 65] Power to remove difficulties
(1) If any difficulty arises in giving effect to the provisions of this Act, the Central Government may, by order
published in the Official Gazette, make such provisions, not inconsistent with the provisions of this Act as may
appear to it to be necessary for removing the difficulty:
Provided that no such order shall be made under this section after the expiry of a period of two years from
the commencement of this Act.
(2) Every order made under this section shall be laid, as soon as may be after it is made, before each House of
Parliament.
LEGISLATIVE BACKGROUND
The Competition Act, 2002
Notes on clauses of the Bill stated, thus:
Notes on clauses.—This clause seeks to empower the Central Government to make provision, by order, published in the Official
Gazette, to remove difficulties which may arise in giving effect to the provisions of the Bill. However, such order can be issued
only within a period of two years from the date of commencement of the proposed legislation. The orders made under this clause
shall be required to be laid before both Houses of Parliament. [Clause 63 of the Competition Bill, 2001].
SCOPE OF THE SECTION
This is the power of the Central Government to remove difficulties in giving effect to the provisions of the Competition
Act, 2002 within a period of two years from the date of commencement of the Competition Act, 2002. Every order made by
the Central Government under this section shall be laid before each House of Parliament.
Page 2 of 2
[s 65] Power to remove difficulties
No such provision was contained in the Monopolies and Restrictive Trade Practices Act, 1969.
End of Document
[s 66] Repeal and saving
S M Dugar: Guide to Competition Law, 7th ed
SM DugarSudhanshu Kumar
S M Dugar: Guide to Competition Law, 7th ed > S M Dugar: Guide to Competition Law, 7th ed > Volume 1 >
The Competition Act, 2002 > PART I COMMENTARY ON THE COMPETITION ACT, 2002 > CHAPTER
IX MISCELLANEOUS
The Competition Act, 2002
PART I COMMENTARY ON THE COMPETITION ACT, 2002
CHAPTER IX MISCELLANEOUS
[s 66] Repeal and saving
59[(1) The Monopolies and Restrictive Trade Practices Act, 1969 (54 of 1969), is hereby repealed and the
Monopolies and Restrictive Trade Practices Commission established under sub-section (1) of section 5 of the said
Act (hereinafter referred to as the repealed Act) shall stand dissolved:
60[* * *]
(1A) The repeal of the Monopolies and Restrictive Trade Practices Act, 1969 (54 of 1969) shall, however, not
affect,—
(a) the previous operation of the Act so repealed or anything duly done or suffered thereunder; or
(b) any right, privilege obligation or liability acquired, accrued or incurred under the Act so repealed; or
(c) any penalty, confiscation or punishment incurred in respect of any contravention under the Act so repealed;
or
(d) any proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty, confiscation or
punishment as aforesaid, and any such proceeding or remedy may be instituted, continued or enforced, and
any such penalty, confiscation or punishment may be imposed or made as if that Act had not been repealed.]
(2) On the dissolution of the Monopolies and Restrictive Trade Practices Commission, the person appointed as the
Chairman of the Monopolies and Restrictive Trade Practices Commission and every other person appointed as
Member and Director General of Investigation and Registration, Additional, Joint, Deputy, or Assistant Director
General of Investigation and Registration and any officer and other employee of that Commission and holding
office as such immediately before such dissolution shall vacate their respective offices and such Chairman and
other Members shall be entitled to claim compensation not exceeding three months’ pay and allowances for the
premature termination of term of their office or of any contract of service:
Provided that the Director General of Investigation and Registration, Additional, Joint, Deputy or Assistant
Directors General of Investigation and Registration or any officer or other employee who has been,
immediately before the dissolution of the Monopolies and Restrictive Trade Practices Commission appointed
on deputation basis to the Monopolies and Restrictive Trade Practices Commission, shall, on such
dissolution, stand reverted to his parent cadre, Ministry or Department, as the case may be:
61[Provided further that the Director-General of Investigation and Registration, Additional, Joint, Deputy or
Assistant Directors General of Investigation and Registration or any officer or other employee who has been,
immediately before the dissolution of the Monopolies and Restrictive Trade Practices Commission employed
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[s 66] Repeal and saving
on regular basis by the Monopolies and Restrictive Trade Practices Commission, shall become, on and from
such dissolution, the officer and employee, respectively, of the Competition Commission of India or the
Appellate Tribunal, in such manner as may be specified by the Central Government, with the same rights and
privileges as to pension, gratuity and other like matters as would have been admissible to him if the rights in
relation to such Monopolies and Restrictive Trade Practices Commission had not been transferred to, and
vested in, the Competition Commission of India or the Appellate Tribunal, as the case may be, and shall
continue to do so unless and until his employment in the Competition Commission of India or the Appellate
Tribunal, as the case may be, is duly terminated or until his remuneration, terms and conditions of
employment are duly altered by the Competition Commission of India or the Appellate Tribunal, as the case
may be];
Provided also that notwithstanding anything contained in the Industrial Disputes Act, 1947, (14 of 1947) or
in any other law for the time being in force, the transfer of the services of any Director General of
Investigation and Registration, Additional, Joint, Deputy or Assistant Directors General of Investigation and
Registration or any officer or other employee, employed in the Monopolies and Restrictive Trade Practices
Commission, to 62[the Competition Commission of India or the Appellate Tribunal, as the case may be,]
shall not entitle such Directors General of Investigation and Registration, Additional, Joint, Deputy or
Assistant Director General of Investigation and Registration or any officer or other employee any
compensation under this Act or any other law for the time being in force and no such claim shall be
entertained by any court, tribunal or other authority:
Provided also that where the Monopolies and Restrictive Trade Practices Commission has established a
provident fund, superannuation, welfare or other fund for the benefit of the Director General of Investigation
and Registration, Additional, Joint, Deputy or Assistant Directors General of Investigation and Registration
or the officers and other employees employed in the Monopolies and Restrictive Trade Practices
Commission, the monies relatable to the officers and other employees whose services have been transferred
by or under this Act to 63[the Competition Commission of India or the Appellate Tribunal, as the case may
be, shall, out of the monies standing], on the dissolution of the Monopolies and Restrictive Trade Practices
Commission to the credit of such provident fund, superannuation, welfare or other fund, stand transferred to,
and vest in, 64[the Competition Commission of India or the Appellate Tribunal, as the case may be, and such
monies which stand so transferred shall be dealt with by the said Commission or the Tribunal, as the case
may be, in such manner as may be prescribed].
65[(3) All cases pertaining to monopolistic trade practices or restrictive trade practices pending (including such
cases, in which any unfair trade practice has also been alleged), before the Monopolies and Restrictive Trade
Practices Commission shall 66[on the Commencement of the Competition (Amendment) Act, 2009], stand
transferred to the Appellate Tribunal and shall be adjudicated by the Appellate Tribunal in accordance with the
provisions of the repealed Act as if that Act had not been repealed];
67[Fxplanation.—For the removal of doubts, it is hereby declared that all cases referred to in this sub-
section, sub-section (4) and sub-section (5) shall be deemed to include all applications made for the losses or
damages under section 12B of the Monopolies and Restrictive Trade Practice Act, 1969 (54 of 1969) as it
stood before its repeal];
(4) Subject to the provisions of sub-section (3), all cases pertaining to unfair trade practices other than those referred
to in clause (x) of sub-section (1) of section 36A of the Monopolies and Restrictive Trade Practices Act, 1969 (54
of 1969) and pending before the Monopolies and Restrictive Trade Practices Commission 68[immediately before
the commencement of the Competition (Amendment) Act, 2009, shall, on such commencement], stand
transferred to the National Commission constituted under the Consumer Protection Act, 1986 (68 of 1986) and
the National Commission shall dispose of such cases as if they were cases filed under that Act.
Provided that the National Commission may, if it considers appropriate, transfer any case transferred to it
under this sub-section, to the concerned State Commission established under section 9 of the Consumer
Protection Act, 1986 (68 of 1986) and that State Commission shall dispose of such case as if it was filed
under that Act:
69[Provided further that all the cases relating to the unfair trade practices pending, before the National
Commission under this sub-section, on or before the date of which the Competition (Amendment) Bill, 2009
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[s 66] Repeal and saving
receives the assent of the President, shall, on and from that date stand transferred to the Appellate Tribunal
and be adjudicated by the Appellate Tribunal in accordance with the provisions of the repealed Act as if that
Act had not been repealed].
70[(5) All cases pertaining to unfair trade practices referred to in clause (x) of sub-section (1) of section 36A of the
Monopolies and Restrictive Trade Practices Act, 1969 (54 of 1969) and pending before the Monopolies and
Restrictive Trade Practices Commission shall, 71[on the commencement of the Competition (Amendment) Act,
2009] stand transferred to the Appellate Tribunal and the Appellate Tribunal shall dispose of such cases as if they
were cases filed under that Act.]
(6) All investigations or proceedings, other than those relating to unfair trade practices, pending before the Director
General of Investigation and Registration on or before the commencement of this Act shall, on such
commencement, stand transferred to the Competition Commission of India, and the Competition Commission of
India may conduct or order for conduct of such investigation or proceedings in the manner as it deems fit.
(7) All investigations or proceedings, relating to unfair trade practices other than those referred to in clause (x) of
sub-section (1) of section 36A of the Monopolies and Restrictive Trade Practices Act, 1969 (54 of 1969) and
pending before the Director General of Investigation and Registration on or before the commencement of this Act
shall, on such commencement, stand transferred to the National Commission constituted under the Consumer
Protection Act, 1986 (68 of 1986) and the National Commission may conduct or order for conduct of such
investigation or proceedings in the manner as it deems fit.
72[Provided that all investigations or proceedings, relating to unfair trade practices pending before the
National Commission, on or before the date on which the Competition (Amendment) Bill, 2009 receives the
assent of the President shall, on and from that date, stand transferred to the Appellate Tribunal and the
Appellate Tribunal may conduct or order for conduct of such investigation or proceedings in the manner as it
deems fit].
(8) All investigations or proceedings relating to unfair trade practices referred to in clause (x) of sub-section (1) of
section 36A of the Monopolies and Restrictive Trade practices Act, 1969 (54 of 1969) and pending before the
Director General of Investigation and Registration on or before the commencement of this Act shall, on such
commencement, stand transferred to the Competition Commission of India and the Competition Commission of
India may conduct or order for conduct of such investigation in the manner as it deems fit.
(9) Save as otherwise provided under sub-section (3) to (8), all cases or proceedings pending before the Monopolies
and Restrictive Trade Practices Commission shall abate.
(10) The mention of the particular matters referred to in sub-sections (3) to (8) shall not be held to prejudice or affect
the general application of section 6 of the General Clauses Act, 1897 (10 of 1897) with regard to the effect of
repeal.
LEGISLATIVE BACKGROUND
The Competition Act, 2002
Notes on clauses of the Bill stated, thus:
Notes on clauses.—This clause provides for repeal and savings. This clause, inter alia, proposes to repeal the Monopolies and
Restrictive Trade Practices Act, 1969. Upon such repeal, the Monopolies and Restrictive Trade Practices Commission established
under sub-section (1) of section 5 of the said Act shall stand dissolved. Sub-clauses (2) to (10) deal with the matters arising out of
such repeal. [Clause 64 of the Competition Bill, 2001].
The Competition (Amendment) Act, 2007
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[s 66] Repeal and saving
Notes on clauses.—This clause seeks to amend section 66 of the Competition Act, 2002 relating to repeal and saving.
Under the existing provisions, the Monopolies and Restrictive Trade Practices Act, 1969 is proposed to be repealed and upon such
repeal, the Monopolies and Restrictive Trade Practices Commission established under sub-section (1) of section 5 of the repealed
Act shall stand dissolved. Sub-sections (2) to (10) of the aforesaid section deals with the matters arising out of such repeal.
It is proposed to amend said section 66 so as to provide that the Monopolies and Restrictive Trade Practices Commission may
continue to exercise jurisdiction and powers under the Monopolies and Restrictive Trade Practices Act, 1969 for a period of two
years from the date of bringing into force of section 66 of the Competition Act, 2002, only in respect of cases or proceedings filed
before such commencement. It further provides for the transfer of pending cases after the two years period to the Appellate
Tribunal or the National Commission under Consumer Protection Act, 1986 depending on the nature of cases. It also provides that
the staff of the Monopolies and Restrictive Trade Practices Commission who has been employed on regular basis by the
Monopolies and Restrictive Trade Practices Commission shall, on its dissolution, become employees of the Competition
Commission or the Appellate Tribunal in the manner as may be specified by the Central Government. [Clause 50 of the
Competition (Amendment) Bill, 2007].
SCOPE OF THE SECTION
The Competition Act, 2002 has come into force on repeal of the Monopolies and Restrictive Trade Practices Act, 1969 and
dissolution of the MRTP Commission. Originally, it was provided in this section that all pending cases relating to
monopolistic or restrictive trade practices before the MRTP Commission shall stand transferred to the CCI for adjudication
in accordance with the powers of the repealed MRTP Act, 1969 and pending cases relating to unfair trade practices before
MRTP Commission shall stand transferred to National Commission constituted under the Consumer Protection Act, 1986.
National Commission may, in turn, transfer the case to the concerned State Commission having regard to the pecuniary
limits. However, pending cases pertaining to unfair trade practices covered by section 36A(1)(x) of MRTP Act, 1969 shall
stand transferred to CCI for disposal. In so far as cases pending for Investigation before DG (Investigations and
Registrations) (I&R) relating to RTP and MTP are concerned, these shall stand transferred to the Competition Commission
and similarly all pending investigations relating to UTPs shall stand transferred to National Commission. However,
pending investigations relating to UTP under section 36A(1)(x) of MRTP Act, 1969 shall stand transferred to the
Competition Commission.
Substantial changes have been made in this section by the Amendment Acts of 2007 and 2009. As per the Competition
(Amendment) Act, 2007, it was provided that MRTP Commission shall continue to exercise its powers for two years to
deal with pending monopolistic and restrictive trade practices cases under the MRPT Act, 1969. It was also provided that
after two years, these cases shall be transferred to the Appellate Tribunal for disposal. It was also provided that staff of
MRTP Commission and DG (I&R) shall become the employees of the Competition Commission or the Appellate Tribunal,
as the case may be.
Section 66 of the Competition Act, 2002 was brought in force on the 1 September 2009. The post of Chairperson of the
MRTP Commission was vacant on the said date and there were only two Members in the said Commission out of five
Members. Both Members in the said Commission demitted their office on 14 September 2009 and on 1 October 2009
respectively on completion of their tenure. Efforts were made to fill up the posts but were of no avail. The MRTPC became
non-functional and a gap was created for the disposal of the cases pending with the Commission. On the other hand, the
Competition Appellate Tribunal established under the Competition Act, 2002 was not having adequate workload. As both
the Houses of Parliament were not in session and the President was satisfied that the circumstances existed which rendered
it necessary for her to take immediate action, the Competition (Amendment) Ordinance, 2009 was promulgated on 14
October 2009 so as to transfer immediately the cases pending with the MRTPC to the Competition Appellate Tribunal and
National Commission from the date of issue of the Ordinance.73
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[s 66] Repeal and saving
Since the National Commission expressed its inability to accept the transfer of cases and also the investigations or
proceedings as many of the cases were not covered by the definition of “consumer” under the Consumer Protection Act,
1986 and due to lack of investigating machinery with them, certain further amendments are proposed to section 66 of the
Competition Act, 2002 which, inter alia, contains that:—
(i) all the cases relating to unfair trade practices pending before the National Commission on or before the date on
which the Competition (Amendment) Bill, 2009 receives the assent of the President, shall, on and from that date,
stand transferred to the Appellate Tribunal and be adjudicated by the Appellate Tribunal in accordance with the
provisions of the repealed Act as if that Act had not been repealed;
(ii) all investigations or proceedings, relating to unfair trade practices pending before the National Commission, on or
before the date on which the Competition (Amendment) Bill 2009 receives the assent of the President shall, on
and from that date, stand transferred to the Appellate Tribunal and the Appellate Tribunal may conduct or order
for conduct of such investigation in the manner as it deems fit.
Memorandum explaining the modifications contained in the Bill to replace the Competition (Amendment)
Ordinance, 2009.
The Competition (Amendment) Bill, 2009 which sought to repeal and replace the Competition (Amendment) Ordinance,
2009 proposed to make the following modifications apart from modifications of consequential or drafting nature in the
provisions contained in the said Ordinance, namely:—
(i) It is proposed to insert an Explanation to sub-section (3) of section 66 of the Competition Act, 2002 so as to
clarify that the expression “all cases” referred to in sub-sections (3), (4) and (5) shall be deemed to include all
applications made for the losses or damages under section 12B of the Monopolies and Restrictive Trade Practices
Act, 1969 as it stood before its repeal;
(ii) It is proposed to insert a second proviso to sub-section (4) of section 66 of the Competition Act, 2002 to the effect
that all the cases relating to the unfair trade practices pending, before the National Commission under this sub-
section, on or before the date on which the Competition (Amendment) Bill, 2009 receives the assent of the
President, shall, on and from that date, stand transferred to the Appellate Tribunal and be adjudicated by the
Appellate tribunal in accordance with the provisions of the repealed Act as if that Act had not been repealed;
(iii) It is also proposed to insert a proviso in sub-section (7) of section 66 of the Competition Act. 2002 to the effect
that all investigations or proceedings, relating to unfair trade practices pending before the National Commission,
on or before the date on which the Competition (Amendment) Bill, 2009 perceives the assent of the President
shall, on and from that date, stand transferred to the Appellate Tribunal and the Appellate Tribunal may conduct
or order for conduct of such investigation or proceedings in the manner as it deems fit.
These two provisos shall come into force on and from the date on which the Competition (Amendment) Bill,
2009 receives the assent of the President.74
The provisions of the Competition Act, 2002 shall apply to fresh cases coming within the ambit of the Act and shall not
apply to pending cases.
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[s 66] Repeal and saving
CASES
In the case of PC Rishi v Ambit Corp,75 the Tribunal held that by participating in proceedings of complaint for almost six
years, between 2009 to 2015, the complainant would be deemed to have acquiesced in jurisdiction of Tribunal and he was
now not entitled to contend that the case should have been transferred to National Consumer Disputes Redressal
Commission. By virtue of sub-section (3) of section 66 of the Competition Act, 2013, all cases pertaining to monopolistic
trade practices or restrictive trade practices pending, including such cases, in which any unfair trade practice had been
alleged, stood transferred to Appellate Tribunal and same were required to be adjudicated in accordance with the
Monopolies and Restrictive Trade Practices Act, 1969. By virtue of explanation added by Competition (Amendment) Act
(39 of 2009), Parliament clarified that all cases referred to in sub-sections (3), (4) and (5) shall be deemed to include all
applications made for the losses or damages under section 12B of the Monopolies and Restrictive Trade Practices Act,
1969, as it is stood before the repeal. Sub-section (4), which begins with the words “Subject to the provisions of sub-
section (3),” provides that all cases pertaining to unfair trade practices other than those enumerated in section 36A(1) (x) of
the Monopolies and Restrictive Trade Practices Act, 1969 and pending before the Commission, immediately before 14
October 2009, shall stand transferred to the National Commission and the same shall be disposed of as if they were filed
under the Consumer Protection Act, 1986. Proviso to that section empowered the National Commission to transfer any
case to the State Commission established under section 9 of the Consumer Protection Act, 1986. In that event, the State
Commission was to dispose of the case as if it was filed under that Act. By the same amendment, second proviso came to
be inserted in sub-section (4), which postulates that all cases relating to unfair trade practices pending before the National
Commission under sub-section (4), on or before the date, on which the receipt of the assent of the President, shall on or
from that date stand transferred to the Appellate Tribunal and be adjudicated by the Appellate Tribunal in accordance with
the provisions of the repealed Act. Section 66(5) provided that all cases pertaining to unfair trade practices referred to in
section 36A(1)(x) of the Monopolies and Restrictive Trade Practices Act, 1969 shall stand transferred to the Appellate
Tribunal and be disposed of under the Monopolies and Restrictive Trade Practices Act, 1969. A cursory reading of these
provisions may give rise to some confusion about the Forum, which should decide the cases of unfair trade practices
except those enumerated in section 36A(1)(x), but by virtue of the second proviso to sub-section (4), it was made clear that
all cases relating to unfair trade practices pending before the Commission, shall, from the date of receipt of presidential
assent to Competition (Amendment) Bill, 2009, shall stand transferred to the Tribunal. Therefore, the Tribunal held that
there was no substance in the belated contention raised by the complainant that the complaint should have been transferred
to the National Consumer Disputes Redressal Commission.
In the case of Varca Druggist & Chemist v Chemists & Druggists Association, Goa,76 it was held that if on filing of the
complaint the Director General (Investigations and Registrations) (DGIR), MRTPC undertook the preliminary
investigation which was still pending when the MRTP Act, 1969 was repealed and investigation had not culminated into a
“case,” the matter was rightly transferred to the Competition Commission by the DGIR, MRTPC invoking the provisions
of section 66(6) of the Competition Act, 2002 as the allegations involved in the complaint were related to restrictive trade
practices of CDAG. It was held that section 66(6) of the Act clearly demonstrated that on receiving the matters where
investigation was pending, the Commission may order for conduct of the investigation in the manner as it deems fit. As the
complaint filed before the DGIR, MRTPC was still at the stage of preliminary investigation no right, liability, privilege or
obligation could be said to have been accrued to any party and, therefore, the provisions of section 66(1A) or 66(10) are
not applicable in the present situation. Furthermore, the Commission has not been conferred any power to adjudicate any
matter invoking the provisions of repealed MRTP Act, 1969. It was observed:
This premise becomes clear when the provisions of section 66(6) are contrasted with the provisions of section 66(3) of the Act.
Whereas the Competition Appellate Tribunal has been specifically conferred power to adjudicate cases pertaining to monopolistic
and restrictive trade practices pending before MRTP Commission in accordance with the provisions of repealed MRTP Act under
section 66(3) of the Act, no such power has been given to the Commission under section 66(6) of the Act. In the backdrop of the
provisions of the Act as analysed above, it was held that there is no illegality in entertaining and examining the present case under
the Competition Act, 2002 in which the investigation was pending before the DG IR, MRTPC before the MRTP Act was repealed.
Further, even in cases where the alleged anti-competitive conduct was started before coming into force of sections 3 and 4, the
Commission has the jurisdiction to look into such conduct if it continues even after the enforcement of relevant provisions of the
Act, which was found in the present case. Again, as regards supplementary investigation by the DG, the Act has not placed any
fetter on the power of the Commission to conduct further investigation or further inquiry. It was also pointed out that regulation
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[s 66] Repeal and saving
20(6) of the Competition Commission of India (General) Regulations, 2009 specifically empowers the Commission to direct the
DG to conduct further investigation even after the DG has submitted his report. It was held that no procedural irregularity was
committed by the DG while conducting supplementary investigation.77, 78
In the case of All India Tyre Dealers’ Federation Informant v Tyre Manufacturers,79 the Commission held that the period
of contravention of the provisions of the Competition Act, 2002 has to be reckoned only from the date of its enforcement
but that did not imply that either the DG or the Commission could not examine the conduct of parties post notification
where the information/complaint was filed before the MRTP Commission. The Commission, while passing order under
section 26(1) of the Competition Act, 2002 did not specify any period for the reason that at that stage it would not be
desirable to curtail the period of examination by the DG. Thus, the Commission held that the plea of the Opposite Parties
that the DG had no authority to examine their conduct for a period subsequent to the alleged period of contravention had
no force and was liable to be rejected. Further, the Commission noted that in the present matter the DGIR, MRTP
Commission undertook the investigation which was still pending when the MRTP Act, 1969 was repealed vide ordinance,
dated 14 October 2009. As the investigation had not culminated into a “case” the matter was rightly transferred to the
Commission by the DGIR, MRTPC invoking the provisions of section 66(6) of the Competition Act, 2002 as the
allegations involved were related to restrictive trade practices. Furthermore, the Commission has not been conferred with
any power to adjudicate any matter invoking the provisions of repealed MRTP Act, 1969. Therefore, the Commission did
not find any illegality in entertaining and examining the present case under the Competition Act, 2002 in which the
investigation was pending before the DGIR, MRTPC before the MRTP Act, 1969 was repealed. Thus, even in cases where
the alleged anti-competitive conduct was started before coming into force of sections 3 and 4, the Commission has the
jurisdiction to look into such conduct if it continues even after the enforcement of relevant provisions of the Act. The
Commission noted that in the present case, the investigations were initiated on the basis of complaint of All India Tyre
Dealers Federation (AITDF), dated 28 December 2007. As the investigations under the MRTP Act, 1969 could not be
completed, the matter was transferred to the Commission in terms of the provisions of section 66 of the Act. In the
meantime, the provisions relating to anti-competitive agreements and abuse of dominant position of the Competition Act,
2002 were notified, the conduct of the parties had been examined by the Commission post such notification of the
provisions. It may also be noted that though Automotive Tyre Manufacturers Association (ATMA) was not specifically
mentioned in the order passed by the Commission under section 26(1) of the Act, the DG while investigating the matter
took into consideration the role and conduct of ATMA. The DG and the Commission had given ample opportunity to the
ATMA to explain its conduct. Therefore, no prejudice was held to have been caused to ATMA on this count. It is also
pertinent to note that the DG examined the conduct of the parties in the present case spanning from year 2005 to 2010 for
delineating the market construct and conducting competitive analysis of tyre industry in a holistic perspective, though as
noted above for the purpose of determining the period of contravention the conduct of the parties can only be taken for a
period starting from 20 May 2009, i.e., the date on which the relevant provision of the Competition Act, 2002 were
notified. The Commission as such does not have power to adjudicate any matter invoking the provisions of the repealed
MRTP Act, 1969, therefore, in the present matter the relevant period for the purposes of determining the contravention of
the parties under inquiry was held to commence only from the date of enforcement of section 3 of the Act.
In the case of Uttar Pradesh Industrial Development Corp Ltd,80 Appellants filed compensation applications81 under
section 12B of the MRTP Act, 1969 before the MRTPC. By section 66(1) of the Competition Act, 2002, the MRTP Act,
1969 was repealed and the MRTP Commission was dissolved. Section 66(3) of the Competition Act, 2002 provided that all
cases pertaining to monopolistic trade practices or restrictive trade practices pending before the MRTP Commission shall,
on the commencement of the Competition (Amendment) Ordinance, 2009, stand transferred to the Competition Appellate
Tribunal constituted under the Competition Act, 2002 and shall be adjudicated by the Appellate Tribunal in accordance
with the provisions of the MRTP Act, 1969 as if the MRTP Act, 1969 had not been repealed. Consequently, the two
compensation applications filed by the Appellants stood transferred to the Competition Appellate Tribunal. Before the
Competition Appellate Tribunal, the Respondents in the two appeals raised preliminary objections to the maintainability of
the compensation applications filed by the Appellants. They contended that the Appellants had not initiated separate
proceedings either under section 10 or under section 36B of the MRTP Act, 1969 alleging unfair trade practices by the
Respondents and in the absence of any such separate proceedings initiated by the Respondents before the MRTP
Commission, the compensation applications of the Appellants under section 12B of the MRTP Act, 1969 were not
maintainable. The Tribunal noted that this preliminary question was also raised in C.A. No. 108 of 2005 filed by Info
Electronics System Ltd against Sutran Corporation and the Competition Appellate Tribunal by its order dated 29 March
2011 passed in C.A. No. 108 of 2005 (Info Electronics System Ltd v Sutran Corp) held, relying on a judgement of Supreme
Court in Saurabh Prakash v DLF Universal Ltd,82 that in the absence of separate proceedings alleging unfair,
monopolistic or restrictive trade practice, an application for compensation under section 12B of the MRTP Act, 1969 is not
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[s 66] Repeal and saving
maintainable and accordingly dismissed C.A. No. 108 of 2005. Following the aforesaid order dated 29 March 2011 in C.A.
No. 108 of 2005, the Competition Appellate Tribunal also dismissed C.A. No. 126 of 2008 on 26 April 2012 and C.A. No.
110 of 1997 on 20 May 2011. Aggrieved, the Appellants filed an appeal to the Supreme Court of India. The Supreme
Court differentiated the DLF case on issues and instead held the decision of Division Bench of the Delhi High Court in
Pennwalt (I) Ltd v Monopolies and Restrictive Trade Practices Commission83 and the decision of the learned Single Judge
of the Delhi High Court in RC Sood and Co Pvt Ltd v Monopolies and Restrictive Trade Practices Commission,84 as the
correct position. Accordingly, the order of the Tribunal was set aside and it was held that application for compensation
under section 12B of the MRTP Act, 1969 was maintainable without any proceeding being initiated under section 10 or
section 36B of the MRTP Act, 1969.85
In the case of Tam Tam Pedda Guruva Reddy v Ashok Leyland Ltd,86 it was argued that by virtue of section 66 of the
Competition Act, 2002 which was enforced with effect from 01 September 2009 and was amended on 14 October 2009
only those cases which were pending before the erstwhile MRTPC stood transferred to the Tribunal and as the complaint
filed by the complainant had already been dismissed, the Tribunal did not have jurisdiction to decide the application for
revival of the proceedings. The Tribunal, however, held that a bare reading of clauses (a) and (b) of sub-section (1A) and
sub-sections (3) and (4) of section 66 made it clear that any proceedings or remedy in respect of any such right, privilege,
obligation, liability, penalty, confiscation or punishment which has bearing on Monopolies and Restrictive Trade Practices
Act, 1969 could be continued or enforced before the Tribunal after 1 September 2009 and 14 October 2009. Therefore, the
application filed by the complainant for revival of the complaint was very much maintainable and the Tribunal did not
commit any illegality by entertaining the same, more so, because while dismissing the complaint on account of pendency
of the arbitral proceedings, the erstwhile MRTPC had reserved a right to the complainant to seek revival and the
complainant had exercised that right after four years and four months of dismissal of the complaint and for some reason
that application was not disposed of till the repeal of the Monopolies and Restrictive Trade Practices Act, 1969. The
Tribunal held that the inability of the MRTPC to dispose of the application for revival cannot operate to the detriment of
the complainant and it is not possible to find any fault with order dated 28 August 2012.
Further, it was held that once the jurisdiction of the Tribunal to entertain the revival application is upheld, its power to
issue Notice of enquiry cannot be questioned.
Other Examples of Transfer Cases
V Ramachandran Reddy v HDFC Ltd87—Consequent upon the repeal of Monopolies and Restrictive Trade Practices Act,
1969 the following five cases were received by the Commission from the erstwhile MRTPC on transfer under section
66(6) of the Competition Act, 2002 (the Act), i.e., 1. V Ramachandran Reddy against HDFC Ltd (Case No. 7/28); 2.
Swapna Muthukrishnan against HDFC Ltd (Case No. 25/28); 3. AK Baviskar against ICICI Bank Ltd (Case No. 8/28); 4.
Charanjit Singh against ICICI Bank Ltd (Case No. 9/28); and 5. Shiv Kumar Gupta against ICICI Bank Ltd (Case No.
10/28) alleging anti-competitive conduct of HDFC and ICICI Bank.
Re Glass Manufacturers of India88—Case related to suo-motu cognisance taken by the erstwhile MRTPC on the basis of
an article published in the magazine “The Outlook Business” dated 16–19 April 2008 alleging cartel-like practices of
leading Indian manufacturers of float glass. Consequent upon the repeal of the MRTP Act, 1969 the case was received on
transfer by the CCI under section 66(6) of the Competition Act, 2002.
Royal Energy Ltd v Indian Oil Corp Ltd, Bharat Petroleum Corp Ltd and Hindustan Petroleum Corp Ltd89—The office of
DG (I&R) vide its letter dated 9 July 2009 told informant that it might approach the Ministry of Petroleum and Natural Gas
(MoPNG) for its grievances. However, the informant vide letter dated 13 July 2009 requested the office of DG (I&R) for a
hearing on the issue. Meanwhile, due to the repeal of MRTP Act, 1969 the case was transferred to the Competition
Commission of India under section 66(6) of the Competition Act, 2002.
Cine Prakashakula Viniyoga Darula Sangham v Hindustan Coca Cola Beverages Pvt Ltd79—The complaint in the present
case was filed before the MRTPC on 1 October 2008 by the Consumer Guidance Society, Vijayawada against Hindustan
Coca Cola Beverages Pvt Ltd and INOX Leisure Pvt Ltd for their alleged restrictive and unfair trade practices. Consequent
Page 9 of 12
[s 66] Repeal and saving
upon the repeal of Monopolies and Restrictive Trade Practices Act, 1969 the case was received by the Commission from
the erstwhile MRTPC on transfer under section 66(6) of the Competition Act, 2002.90
59 Subs. by Act 39 of 2007, section 50, for sub-section (1) (w.e.f. 1 September 2009). Prior
to its substitution, sub-section (1) of section 66 stood as under:
(1) The Monopolies and Restrictive Trade Practices Act, 1969 (54 of 1969) is hereby repealed and the Monopolies and
Restrictive Trade Practices Commission established under sub-section (1) of section 5 of the said Act (hereinafter referred to
as the repealed Act) shall stand dissolved.
60 Omitted by Act 39 of 2009, section 2 (w.e.f. 14 October 2009). Prior to omission, the
Proviso and Explanation stood as under:
Provided that, notwithstanding anything contained in this sub-section, the Monopolies and Restrictive Trade Practices
Commission established under sub-section (1) of section 5 of the repealed Act, may continue to exercise jurisdiction and
power under the repealed Act for a period of two years from the date of the commencement of this Act in respect of all cases
or proceedings (including complaints received by it or references or applications made to it) filed before the commencement
of this Act as if the Monopolies and Restrictive Trade Practices Act, 1969 (54 of 1969), had not been repealed and all the
provisions of the said Act so repealed shall mutatis mutandis apply to such cases or proceedings or complaints or references or
applications and to all other matters.
Explanation.—For the removal of doubts, it is hereby declared that nothing in this proviso shall confer any jurisdiction or
power upon the Monopolies and Restrictive Trade Practices Commission to decide or adjudicate any case or proceeding
arising under the Monopolies and Restrictive Trade Practices Act, 1969 (54 of 1969), on or after the commencement of this
Act.
61 Subs. by Act 39 of 2007, section 50(b)(i) (w.e.f. 1 September 2009). Prior to its
substitution, the second proviso stood as under:
Provided further that the Director General of Investigation and Registration Additional, Joint, Deputy or Assistant Directors
General of Investigation and Registration or any officer or other employee who has been, immediately before the dissolution
of the Monopolies and Restrictive Trade Practices Commission, employed on regular basis by the Monopolies and Restrictive
Trade Practices Commission, shall become, on and from such dissolution, the officer and employee, respectively, of the
Central Government with the same rights and privileges as to pension, gratuity and other like matters as would have been
admissible to him if the rights in relation to such Monopolies and Restrictive Trade Practices Commission had not been
transferred to, and vested in, the Central Government and shall continue to do so unless and until his employment in the
Page 10 of 12
[s 66] Repeal and saving
Central Government is duly terminated or until his remuneration, terms and conditions of employment are duly altered by that
Government:
62 Subs. by Act 39 of 2007, section 50(b)(ii) for the words “the Central Government”
(w.e.f. 1 September 2009).
63 Subs. by Act 39 of 2007, section 50(b)(iii), for certain words (w.e.f. 1 September 2009).
64 Subs. by Act 39 of 2007, section 50(b)(iii), for words “the Central Government and such
monies which stand so transferred shall be dealt with by the said Government in such manner as may be prescribed.” (w.e.f. 1
September 2009).
65 Subs. by Act 39 of 2007, section 50(c) (w.e.f. 1 September 2009). Prior to its
substitution, it stood as under: (3) All cases pertaining to monopolistic trade practices or restrictive trade practices pending before
the Monopolies and Restrictive Trade Practices Commission on or before the commencement of this Act, including such cases, in
which any unfair trade practice has also been alleged, shall, on such commencement, stand transferred to the Competition
Commission of India and shall be adjudicated by that Commission in accordance with the provisions of the repealed Act as if that
Act had not been repealed.
66 Subs. by Act 39 of 2009, section 2(b)(i), for the words “after the expiry of two years
referred to in the proviso to sub-section (1)” (w.e.f. 14 October 2009).
67 Explanation inserted by Act 39 of 2009, section 2(b)(ii) (w.e.f. 14 October 2009).
68 Subs. by Act 39 of 2009, section 2(c)(i), for the words “on or before the expiry of two
years referred to in the proviso to sub-section (1)” (w.e.f. 14 October 2009).
69 Proviso inserted by Act 39 of 2009, section 2(c)(ii) (w.e.f. 14 October 2009).
70 Subs. by Act 39 of 2007, section 50(e) (w.e.f. 1 September 2009). Prior to its
substitution, it stood as under: (5) All cases pertaining to unfair trade practices referred to in clause (x) of sub-section (1) of section
36A of the Monopolies and Restrictive Trade Practices Act, 1969 (54 of 1969) and pending before the Monopolies and Restrictive
Trade Practices Commission on or before the commencement of this Act shall, on such commencement, stand transferred to the
Competition Commission of India, and the Competition Commission of India shall dispose of such cases as if they were cases filed
under that Act.
71 Subs. by Act 39 of 2009, section 2(d), for the words “after the expiry of two years
referred to in the proviso to sub-section (1)” (w.e.f. 14 October 2009).
72 Proviso inserted by Act 39 of 2009, section 2(e) (w.e.f. 14 October 2009).
73 Rangi International Pvt Ltd v Nova Scotia Bank, Unfair Trade
Practices Enquiry No. 192 of 2008, decided on 27 January 2016; Also see Ajit Bhardwaj v DLF Universal Ltd, Unfair Trade
Practices Enquiry No. 07/2004 and Compensation Application No. 24/2008, decided on 24 February 2016.
74 Id.
Page 11 of 12
[s 66] Repeal and saving
75 PC Rishi v Ambit Corp, 2016 Comp LR 27 (CompAT).
76 Varca Druggist & Chemist v Chemists & Druggists Association, Goa,
2012 Comp LR 838 (CCI).
77 Also see Re Alleged cartelisation by steel producers, 2014 Comp LR
145 (CCI); Re Alleged Cartelisation by Cement Manufacturers, [2013] 112 CLA 387
(CCI).
78 Also see Interglobe Aviation Ltd v The Secretary, CCI, 173
(2010) DLT 581 : 2010
(119) DRJ 467 : ILR (2010) Supp (2) Delhi 620
.
79 All India Tyre Dealers’ Federation Informant v Tyre Manufacturers,
2013 Comp LR 92 (CCI).
80 Girish Chandra Gupta v Uttar Pradesh Industrial Development Corp
Ltd and James Kutty PC v Tread Stone Ltd, AIR 2013 SC 352 : 2013 1
AD (SC) 574 : 2013(2) All LJ 227 : 2013 (3) CDR 632 (SC) :
[2013] 112 CLA 1 (SC) : (2013) 1
Comp LJ 257 (SC) : I (2013) CPJ 9
(SC) : JT 2012 (12) SC 423 :
2013 (1) LW 465 : 2013 (1) RCR (Civil) 928
: 2012 (12) Scale 65 :
[2013] 117 SCL 484 (SC) : 2012 (12) Scale 65
: JT 2012 (12) SC 423 .
81 C.A. No. 110 of 1997 and C.A. No. 126 of 2008.
82 Saurabh Prakash v DLF Universal Ltd,
(2007) 1 SCC 228 .
83 Pennwalt (I) Ltd v Monopolies and Restrictive Trade Practices
Commission, AIR 1999 Del 23 .
84 RC Sood and Co Pvt Ltd v Monopolies and Restrictive Trade
Practices Commission, (1996) 86 CC 626 Del.
85 The Supreme Court left it open to the Respondents to raise a plea
before the Competition Appellate Tribunal that the Appellants have not made out any case of monopolistic or restrictive trade
practice or unfair trade practice in terms of section 12B of the Monopolies and Restrictive Trade Practices Act, 1969 and if such
plea is raised it will be decided by the Competition Appellate Tribunal on its own merits following the decision of this Court in
Saurabh Prakash v DLF Universal Ltd (Supra).
86 Tam Tam Pedda Guruva Reddy v Ashok Leyland Ltd,
[2015] 130 SCL 726 (CAT).
Page 12 of 12
[s 66] Repeal and saving
87 V Ramachandran Reddy v HDFC Ltd, Case Nos. 7/28 and 8/28,
decided on 31 May 2011.
88 Re Glass Manufacturers of India, 2012 Comp LR 365 (CCI).
89 Royal Energy Ltd v Indian Oil Corp Ltd, Bharat Petroleum Corp Ltd
and Hindustan Petroleum Corp Ltd, 2012 Comp LR 563 (CCI).
79 All India Tyre Dealers’ Federation Informant v Tyre Manufacturers,
2013 Comp LR 92 (CCI).
90 Cine Prakashakula Viniyoga Darula Sangham v Hindustan Coca
Cola Beverages Pvt Ltd, Case No. UTPE 99/2009 and RTPE-16/2009, decided on 23 May 2011. Also see RN Grover v Rawal
Apartments Pvt Ltd, 2015 Comp LR 819 (CompAT); Macedon Indo Austrian Venture Pvt Ltd v New Standard Engg Co Ltd, CA
51/2000, decided on 6 February 2015; Inder Mehta v Pushpa Builders Ltd, IV (2015) CPJ 83
; Rajesh Kumar Gupta v DLF Universal Ltd, 2015 Comp LR 1000 (CompAT); Manjeet Kaur Monga
v KL Suneja, 2015 Comp LR 793 (CompAT); Dipti Bhalla Verma v DLF Universal Ltd, UTPE 234/1997, decided on 20 May 2015;
Destiny Fun Club v Iffco-Tokio General Insurance Co Ltd, 2015 Comp LR 1 (CompAT); Basi Lal Arora Trust v Skipper Tower Pvt
Ltd, IV (2015) CPJ 92 ; DG (I&R) v India Auto Industries Pvt
Ltd, RTPE 13/2006, decided on 2 February 2015; Vedant Bio-Sciences v Chemists & Druggists Association of Baroda,
[2012] 111 CLA 446 (CCI).
End of Document
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