CHAPTER 3

WORKING OF CCI IN CURBING ANTI-COMPETITIVE AGREEMENTS

Contents
3.1 Curbing Anti-Competitive Agreements
3.1.1 Anti Competitive Agreements – A General Understanding
3.1.2 Rules Applied in the Interpretation of Anti-Competitive
Agreements
3.1.3 Horizontal Agreements
3.1.4 Vertical Agreements
3.1.5 CCI Orders Against Anti- Competitive Agreements
3.1.6 Powers of Competition Commission as Regards Agreement
3.2 Cases Filed In CCI– A Descriptive Analysis
3.2.1 Details of the Complainants
3.2.2 Details of Opposition Party
3.3 Description of the Selected Cases of Anti-Competitive Agreement
3.4 References
 This chapter focuses on analyzing the effectiveness of CCI in achieving the
objective of curbing anti-competitive agreements in Indian business. This chapter is
divided into 3 sub sections. Section 3.1 discusses the practices adopted by CCI for the
purpose of curbing anti-competitive agreements. Section 3.2 deals with the descriptive
analysis of the cases relating to anti-competitive agreements; finally section 3.3 describes
few selected cases related to anti-competitive agreements falling under the purview of
Competition Act, 2002.

3.1 Curbing Anti-Competitive Agreements

3.1.1 Anti-Competitive Agreements- A General Understanding
Section 3 of the Competition Act, 2002 states that-
“(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 AAEC within India.”
“(2) Any agreement entered into in contravention of the provisions contained in
subsection (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 identical or similar trade of goods or provision of
services, which–taken by, any association of enterprises or association of persons,
including cartels, engaged in provision of services;”
“(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, “Section 3(2) of the Act, declares that
“Agreements under section 3(1) to be void. Section 3(3) relates with certain
specific anti-competitive practices, agreements and decisions of those who supply
identical or similar goods or services, for instance, an agreement between
producer and or producer or supplier and supplier, and is also inclusive of action
by cartels. Section 3(4) states the limitations that are imposed through agreements
among enterprises in different levels of production or supply chain etc.”

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3.1.2 Rules Applied in the Interpretation of Anti-Competitive Agreements
The following three rules which are applicable are mentioned as under:

3.1.2.1 Rule of Reason

The rule of reason outlook takes into account the logic of certain specified action
taken and the economic benefits and the price of it before landing on a conclusion. Facts
of a particular case and its impact on the condition of the market, and existing
competition that indicates the actual or probable acts lessening competition are the factors
that determine the impact on competition.

3.1.2.2 The Per Se Rule

In Fefforson Parish Hospital Distt. No. 2 v. Hyde, it was held by the court that the
justification for per se rule, is to avert a cumbersome inquiry into the market‟s actual
conditions in circumstances where the likelihood of anti-competitive practice is so big as
to render unjustified the price of it to determine whether the case at par involves anti-
competitive conduct. Opposite to the previous mentioned rule, it is applied by the Courts
in agreements that relate to price-fixing, bid-rigging, allocation of territories, group
boycotts, consulted resale price maintenance and refusal to deal.

3.1.2.3 The Rule of Presumption

The principle has been provided in the Evidence Act, 1872 under section 4 (2)
and states that “whenever it is directed by this Act that the Court shall presume a fact, it
shall regard such fact as proved, unless and until it is disproved”. Thus, it shall presume
and leaves no authority with the Court to make the presumption and it is a legislative
command to Courts to raise a presumption and regard such fact as proved unless and until
it is disproved. The Court is also bound to take the fact as proved until and unless the
evidence is given to disprove it.

3.1.3 Horizontal Agreements

There are the agreements prohibited under section 3(3) of the Act as they are
applicable to identical or similar trade of goods or provision of services. An analysis of
section 3(3) discloses that it prohibits three things namely practice, agreement and
decision that include cartels that are identical or similar trade of goods or provision of
services. The Act under this sub-section assumes following activities as to have AAEC.
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 1. “Agreement between :-
 Enterprises
 Associations of enterprises
 Persons
 Associations of persons
 Person and enterprise
2. Practice carried by:-
 Association of enterprises
 Association of persons
3. Decision taken by:-
 Association of enterprises
 Association of persons”
4. “Cartels
Who are engaged in identical or similar trade of goods or provision of services
including cartels only if any of their activity:-
 Determines either directly or indirectly purchase or sale prices
 Limits or controls production, supply, markets, technical development, investment
or provision of services.
 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;
 Directly or indirectly results in bid rigging or collusive bidding”

3.1.3.1 Types of Horizontal Agreements

The horizontal agreements are of the following four types:

3.1.3.1.1. Agreements That Directly or Indirectly Determine Purchase or Sale

Prices
These are agreements that are done to fix, directly or indirectly purchase or sale
prices. It is applicable to a vast range of actuaries taken by competitors that have a direct
effect on price and is inclusive of agreements on price, agreements on credit terms,
agreements to adhere to published prices etc.

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 These agreements between competitors adversely effects competition as they
prevent prices from being fixed by the competitive forces in the market. Consumers are
therefore, compelled to pay higher prices for good than they would pay in the competitive
market. The object and consequence of every these agreements, if effective, is to
eliminate one form of competition. The authority to fix the prices, whether reasonably
exercised or not, involves the power to regulate the market and to fix arbitrary and
unreasonably high prices. The reasonable price fixed today, may become the
unreasonable price of tomorrow through business and economic additions. Once, if
established, it may be maintained unaltered because of the non-presence of competition
secured by the agreement for a price reasonable when fixed. Agreements that create such
potential powers may well be held within themselves unreasonable or unlawful restraints,
without the necessity of detailed inquiry whether a particular price is reasonable or
unreasonable as fixed without placing on government, in enforcing the law, the burden of
ascertaining from day to day whether it has become unreasonable through the mere
violation of economic circumstances.

3.1.3.1.2 Limits or Controls Production, Supply, Markets, Technical Development,

Investment or Provision of Services
Agreements that limit or control production, supply, markets, technical
development investment or provision of services are also considered to be
anticompetitive. For instance where there is a clause that the distributor must undertake
the selling of 100 cylinders a month.
Production limiting agreements may lead to price rise of the concerned product.
Similarly, technical development limiting agreements may lower the costs of a product
and affect consumers‟ interest. They are anticompetitive for two reasons; firstly artificial
scarcity is created by limiting production and secondly the competition is restricted
between the parties so that the better firm cannot go ahead and dislodge the less efficient
from the market.

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3.1.3.1.3 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 the Number of Customers in the Market or any Other Similar
Way
Market sharing agreements are covered under this category. These agreements
may be either to share markets geographically or in respect of consumers or particular
categories of consumers or types of goods or services in any other way. An instance of
geographical market sharing would be an agreement between manufacturer „X‟ and a
manufacturer „Y‟ (both manufacturers of product „A‟) that „X‟ will sell product „A‟ in a
certain geographic area, while „Y‟ will sell product „A‟ in another area and X will not
sell „A‟ in the area allotted to „Y‟ and vice versa.
They are considered to be anti-competitive as they limit the choice available to
consumers in a competitive market. They also reduce competition between the parties to
agreement.

3.1.3.1.4. Directly or Indirectly Results in Bid-Rigging or Collusive Bidding

Section 3(3) defines Bid -Rigging provided in the means “Any agreement
between the 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 for bidding”. The OECD Glossary pinpoints that about two common types of bid-
rigging. Firstly in which firms agree to giver common bids and the other where bids are
given in such a way that each firm gains an agreed number or value of contacts. An
example of bid rigging agreement is a combination of dealers who agree inter alia, not to
bid in conjunction with one another. Another instance may be where a group of firms
agree to file bids in such a way that one of them wins the bid. It is clear that a bid rigging
agreement hinders the process of competitive bidding as the winner of the bid to be
submitted is already decided amongst the parties..

3.1.4 Vertical Agreements

These are the agreements between persons at different stages of the production
such as an agreement between a producer and a distributor. Section 3(4) of the Act deals
with vertical agreements. It provides that―”Any agreement amongst enterprises or

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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”.

3.1.4.1 Types of Vertical Agreement Prohibited Under Section 3(4)

It includes the following five types

3.1.4.1.1 Tie-in Arrangements

“These arrangements have been discussed in explanation (a) of Section 3 (4) as
inclusive of any agreement that requires a buyer of goods (called tying product), as a
condition of such purchase, to buy some other goods (called tied product). This practice
is often resorted to by the enterprises to use the popularity and goodwill of a product
(tying product) to promote the sale of a less popular product.”

3.1.4.1.2 Exclusive Supply Agreement

“It includes any agreement that restricts in any manner, the purchase from
acquiring or otherwise dealing in any good other than those of the seller or any other
person.”

3.1.4.1.3 Exclusive Distribution Agreement

“It 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.”

3.1.4.1.4 Refusal to Deal

“It relates to 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.”

3.1.4.1.5 Resale Price Maintenance

This issue includes “An 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. Resale price
maintenance can reduce intra-brand competition and increase transparency of prices,

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which may facilitate collusion. Resale price maintenance is in some countries treated
under the per se rule e.g. in the US, because it could be the sign of a cartel.”

3.1.5 CCI orders against Anti-Competitive Agreement

If any party is found guilty of violating the provisions of section 3 then the CCI
may resort to one of the following.
 Penalty equal to 3 times the amount of profit made out of such agreement or 10 %
of average turnover of the cartel for preceding 3 years whichever is higher.
 Modification directed to the agreement.

3.1.6 Powers of Competition Commission as Regards Agreement

After the inquiry into the agreement, Competition Commission can:
 Direct parties to discontinue the agreement
 Prohibits parties from re-entering such agreement
 Direct modification of the agreement
 Penalty up to 10% of average turnover of the enterprises

3.2 Cases Filed in CCI – A Descriptive Analysis

It is divided into the following two sections

3.2.1 Details of the Complainants

In the research study the data of the cases filed by the complainant is collected
and the descriptive analysis is carried and reported in the subsequent sections. The
frequency distribution of the cases is shown in table 3.1
The frequency distribution of the cases filed by the complainant indicates that
most of the cases filed in the Competition Commission of India under section 3 of
Competitors Act 2002 are either by the private individuals or are suo-moto. 19.30% of
the cases are filed by private individuals. These private individuals came to know about
the anti-competitive practices of the opposition party and filed the cases against them in
the CCI. 17.54% of the cases are filed as suo-moto i.e. the commission acted on its own
cognizance and came forward to enquire into anti-competitive practices. The Competition
Commission of India is empowered to act suo-moto in the interest of the general public.

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The frequency distribution also indicates that the cases are filed from various sectors of
the economy. In the last 5 years of the working of the Competition Commission of India,
a total of 57 cases have been filed under section 3 of the Competition Act 2002.The graph
of the frequency distribution of the cases filed under section 3 of the Competition Act,
2002 is shown in figure 3.1.

Table 3.1
Frequency Distribution of Complainant
Complainant Frequency Percent
Spirits 1 1.75%
Pharmaceutical 4 7.02%
Private Individual 11 19.30%
Suo Moto 10 17.54%
Telephone users 1 1.75%
Undisclosed 1 1.75%
Railway 3 5.26%
FICCI 1 1.75%
Aviation 1 1.75%
Travel & Tourism 1 1.75%
HV Detector Instrument 1 1.75%
Health 1 1.75%
Private Party 3 5.26%
Welfare Association 1 1.75%
Transportation 1 1.75%
Film 4 7.02%
Coal 1 1.75%
NGO 2 3.51%
Media 1 1.75%
Colonization 1 1.75%
Builders association 1 1.75%
Automobile 1 1.75%
Exports 1 1.75%
Bio Sciences 1 1.75%
Organizers 1 1.75%
Stationary 1 1.75%
Tyre 1 1.75%
Total 57 100.00%

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 Figure 3.1
Frequency Distribution of Complainant

In the research study the effort is done to find out the outcome of the filed cases
as well. A cross tabulation is done between the complainant and the outcome of the cases.
The results of the cross tab are shown in table 3.2 and figure 3.2.

Table 3.2
Cross Tabulation of Complainant vs Outcome of the Cases
Industry Outcome Total
Dismissed Withdrawn Violation Dismissed by Penalty
by CCI of Section CCI after U/S 27
without 3 Referral to
referral to DG
the DG
Spirits 1 0 0 0 0 1
Pharmaceutical 2 0 2 0 0 4
Private Individual 5 0 3 3 0 11
Suo Moto 4 1 4 1 0 10
Telephone users 1 0 0 0 0 1
Undisclosed 1 0 0 0 0 1
Railway 0 2 1 0 0 3
FICCI 0 0 1 0 0 1
Aviation 0 0 1 0 0 1
Travel & Tourism 0 0 0 1 0 1
HV Detector Instrument 1 0 0 0 0 1
Health 1 0 0 0 0 1
Private Party 3 0 0 0 0 3
Welfare Association 1 0 0 0 0 1
Transportation 0 0 0 1 0 1

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Film 0 0 4 0 0 4
Coal 0 0 1 0 0 1
NGO 1 0 1 0 0 2
Media 0 0 1 0 0 1
Colonization 0 0 1 0 0 1
Builders association 0 0 1 0 0 1
Automobile 1 0 0 0 0 1
Exports 1 0 0 0 0 1
Bio Sciences 0 0 0 0 1 1
Organizers 1 0 0 0 0 1
Stationary 1 0 0 0 0 1
Tyre 0 0 0 1 0 1
Total 25 3 21 7 1 57

Figure 3.2
Cross Tab Representation of Complainant Vs Outcome of the Cases

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 Table 3.2 and figure 3.2 clearly show that out of the 11 cases filed by the private
individuals, 5 cases are dismissed by CCI without referral to DG, 3 cases were found to
have violated the provision of Section 3 of the Competition Act 2002 and 3 cases were
dismissed by CCI after referral to the DG. Similarly, out of the 10 cases taken up as suo-
moto. 4 cases were dismissed by CCI without referral to DG. One case each was
withdrawn and dismissed by CCI after referral to DG and in 4 cases violation of Section
3 of the Competition Act, 2002 was found. The cross tab between total cases of anti-
competitive agreements and their outcome is shown in table and figure 3.3.

Table 3.3
Cross Tabulation of Total Cases of Anti-Competitive Agreements and Their Outcomes
Outcome Total
Dismissed by With- Violation of Dismissed by Penalty
CCI without drawn Section 3 CCI after U/S 27
referral to Referral to
the DG DG
Anti 25 3 21 7 1 57
Category
Competitive
Total 25 3 21 7 1 57

Figure 3.3
Cross Tabulation of Total Cases of Anti-Competitive Agreements and Their Outcomes

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 The results indicate that out of the 57 cases filed with CCI under section 3 of the
Competition Act, 2002, 25 cases are dismissed by the CCI without referral to the Director
General (DG), 3 cases are withdrawn, 20 cases are found to have violated the provisions
of section 3 of the Competition Act 2002, 7 cases are dismissed by the CCI after referral
to DG and in 1 case, CCI has imposed a penalty under Section 27 of the Competition Act,
2002.

3.2.2 Details of the Opposition Party

In the previous section it was found that 57 cases were filed in the Competition
Commission of India by different parties relating to anti-competitive practices. In the
study, the effort is also done to analyze the industries against which the cases were filed.
The frequency distribution of the industries against which the cases were filed by the
complainant is reported in table 3.4.
Table 3.4
Frequency Distribution of Opposition Party
Opposition Party Frequency Percentage
Glass 2 3.51%
Pharmaceutical 3 5.26%
TV Channel Op 1 1.75%
Aviation 5 8.77%
Telecom 1 1.75%
Construction 2 3.51%
PVC 2 3.51%
Film 7 12.28%
Computer Software 1 1.75%
Travel & Tourism 2 3.51%
Print Media 1 1.75%
Electrical 1 1.75%
Hospitality 1 1.75%
Government of AP 1 1.75%
Sugar Mills 1 1.75%
Real Estate 5 8.77%
Non Banking Finance 1 1.75%
Petroleum 1 1.75%
Agriculture 1 1.75%
Explosive 1 1.75%
Medical Products 1 1.75%
Banking 1 1.75%

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 APT 1 1.75%
Chemical 1 1.75%
Ministry of Health and family 1 1.75%
Health Industry 1 1.75%
Maharashtra Ind Dev Corp 1 1.75%
Chemist & Druggist 1 1.75%
Cement Industry 3 5.26%
Automobile 1 1.75%
Publishing Industry 1 1.75%
Trade Promotion ORG 1 1.75%
Paper 1 1.75%
Tyre 1 1.75%
Concrete 1 1.75%
Total 57 100.00%

The frequency distribution of the cases filed by the complainant against different
parties belonging to different industries indicates that highest number of cases are filed in
the film industry, followed by real estate (8.77%) and aviation (8.77%). 3 cases are found
against pharmaceutical as well as cement industry, 2 cases against construction, travel
and tourism and PVC glass industries. All other cases are related to different industries.
The graphical representation of the frequency distribution is shown in figure 3.4.

Figure 3.4
Frequency Distribution of Opposition Party

In the research study the cross tabulation is done between the opposition party
against whom the cases were filed by the complainant and outcome for the cases. The
results of the cross tab is shown in table 3.5.

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 Table 3.5
Cross Tabulation of Opposition Party vs Outcome of Cases

Opposition Party Outcome Total

Dismissed With- Violation Dismissed Penalty
by CCI without drawn of Section by CCI after U/S 27
referral to the DG 3 Referral to DG
1 1 0 0 0 2
Glass 2 0 1 0 0 3
Pharmaceutical 1 0 0 0 0 1
TV Channel Op
4 0 0 1 0 5
Aviation
1 0 0 0 0 1
Telecom
2 0 0 0 0 2
Construction
PVC 0 2 0 0 0 2
Film 0 0 7 0 0 7
Computer Software 0 0 0 1 0 1
Travel & Tourism 0 0 1 1 0 2
Print Media 1 0 0 0 0 1
Electrical 1 0 0 0 0 1
Hospitality 1 0 0 0 0 1
Government of AP 1 0 0 0 0 1
Sugar Mills 1 0 0 0 0 1
Real Estate 3 0 1 1 0 5
Non Banking Finance 0 0 0 1 0 1
Petroleum 0 0 1 0 0 1
Agriculture 0 0 0 1 0 1
Explosive 0 0 1 0 0 1
Medical Products 0 0 1 0 0 1
Banking 1 0 0 0 0 1
APT 0 0 1 0 0 1
Chemical 0 0 1 0 0 1
Ministry of Health and family 0 0 1 0 0 1
Health Industry 0 0 1 0 0 1
Maharashtra Ind Dev Corp 1 0 0 0 0 1
Chemist & Druggist 0 0 1 0 0 1
Cement Industry
0 0 2 0 1 3
Automobile
1 0 0 0 0 1
Publishing Industry
1 0 0 0 0 1
Trade Promotion ORG
1 0 0 0 0 1
Paper
Tyre 1 0 0 0 0 1
Concrete 0 0 0 1 0 1
0 0 1 0 0 1
Total 25 3 21 7 1 57

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 The results indicate that in case of film industry, all the seven cases are found to
have violated the provisions of Section 3 of the Competition Act, 2002. In the aviation
industry out of the 5 cases, 4 are dismissed by CCI without referral to the DG and 1 was
dismissed by CCI after referral to the DG. In pharmaceutical industry, out of the 3 cases
filed against them, 2 cases were dismissed by CCI without referral to the DG and in 1
case, violation of Section 3 of the Competition Act, 2002 was found. Similarly, for the 3
cases that were filed against the cement industry, in 2 cases violation of the provisions of
Section 3 of Competition Act, 2002 was found and in one case, penalty under section 27
was levied. All other cases were related to different industries. The graphical
representations of the cross tab is shown below in figure 3.5

Figure 3.5
Cross Tabulation of Opposition Party vs Outcome of Cases

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3.3. Description of the Selected Cases of Anti-Competitive Agreement
1. Director General (Supplies & Disposals), Department of Commerce,
Ministry of Commerce & Industry, Government of India, New Delhi v. M/s
Puja Enterprises and Others*

Parties to the Case

1. Informant- Director General Supplies & Disposals), Department of Commerce,
Ministry of Commerce & Industry, Government of India, New Delhi
1. Opposite Party (OP)-M/s Puja Enterprises and Others
2. Investigator- Director General (DG), Competition Commission of India (CCI)

Facts of the Case

The informant in this case was the DG of supplies as Disposal, Ministry of
Commerce and Industry, Government of India. In this case relates to tender to supply
shoes to the military. Various shoe- making bodies submitted their respective bids
amounting to RS 10.45 crores. But it was doubted by the DG (S&D) and he
communicated about it to CCI on two grounds. One the offers of different bidders were
similar and secondly, there was a very narrow range in the quoted prices and except one
bidder, others had restricted the quantity in the rate contract period.

Issues Involved

Issue 1: Whether the conditions prevailing specifically with respect to the industry, the
product in context of, and its market etc .were conducive for collusive action of
the parties?

Issue 2: Whether the identical or near identical prices quoted by the different parties
against the Tender Enquiry of DGS & D were a consequence of collusion
amongst them and whether there are any direct or indirect evidences and
proofs in support of an agreement, formal or informal between them for bid
rigging going against the provisions of section 3(1) read with section3 (3) of
the Competition Act as alleged?

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Issue 3: Whether, the restriction of total quantity to be supplied during the Rate Contact
period and the restriction of maximum quantity to be supplied per Direct
Demanding Officer was a result of collusion amongst the parties and whether
there are any direct or indirect evidences of collusive agreement amongst the
manufacturers in violation of the provisions of section 3(1) read with section 3(3)
of the Competition Act as alleged?

Issue 4: Whether there is any violation of the Act under section 3(4) as alleged by the
informant.

Decision of CCI
The CCI after a thorough investigation held that there was a violation of the
provisions of section 3(1), 3(3)(a) and 3(3)(d) of the Act as the bid suppliers had
determined the prices in the rate contract period by quoting identical or near identical
rates and were thereby found to be involved in bid rigging and also collusive bidding.
The alleged parties were also found to have violated the provision of section 3(1),
3(3)(c) and 3(3)(d) as they had not only limited or controlled the supply of the shoes but
through an arrangement amongst themselves , shared the product market as well. CCI,
therefore held that the parties were involved in collusive bidding and bid-rigging and also
limited the product supply and the market. They indirectly determined the rates of the
shoe by submitting identical or near identical prices and imposed restriction on prices. All
the eleven shoe- producers were penalized with a fine of 6.18 crores and were ordered to
„cease and desist‟ from anti-competitive conducts in future as well. The companies
penalized include AR Polymers, Puja Enterprises, MB Rubber, Tirupati Footwear, HB
Rubber, Rajkumar Dyeing and Printing Works, Preet Footwears, SS Rubbers, RS
industries, Shiva Rubber Industries and Derpa Industrial Polymers.

Analysis of the Order

Theoretically, cartels can be of four different categories. i.e. market sharing,
output restricting, price fixing and bid rigging. If the members of the bidding group
intentionally manipulate and keep the bid to a pre- decided level then it is termed as
bid rigging. This practice is anti-competitive as it defeats the very purpose of inviting
of tenders. The orders passed by CCI in this particulars case will be a bridle for those

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associations who are involved in government tenders. They either quote a price that
is too high to be accepted or include such clauses which the buyer will not find
adequate. In this case, the opposition party restricted their limited their tender
quantity to 7 lakh pairs per annum (whereas their installed capacity was 15.72 lakhs
per annum) for which they had no adequate rationalizatioin. CCI also quoted that bid
rigging in government tenders adversely effects public spending and is detrimental to
consumer interest.

2. M/s FCM Travels Solution (India) Limited Respondent: Travel Agents

Federation of India & others

Parties to the Case

Informant- M/s FCM Travels Solution (India) Limited Respondent: Travel
Agents Federation of India & others

Facts of the Case

In November 2008, the international Airlines including Singapore Airlines &
Silk Airlines announced 100% cuts in commission of the travel agents. Some of the
travel associations, who were unhappy with the reduction of commission, formed a
cartel and as a result thereof, TAFI (Travel Agents Federation of India), TAAI (Travel
Agents Association of India) and lAAl (IATA Agents Association of India) started
intimidating the member travel agents and advised all their members to boycott selling
of tickets of these airlines and divert bookings to other airlines. The association also
persuaded their members to join them and boycott the sale of Singapore and Silk
Airlines. The Informant didn‟t join the movement and as a result, the associations after
giving a warning expelled the informant. The informant filed the instant complaint
before DG (I&R), MRTP Commission alleging cartelization and adoption of restrictive
trade practices. On the basis of the information received, the DG initiated the
investigation. The association maintained that protest was a peaceful way of collective
bargaining and should not be construed as a way to curb competition in market.
Consequently upon the repeal of MRTP Act, this case was transferred to
Competition Commission of India under the Competition Commission Act, 2002.

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Issues Involved

Issue 1: Whether the Conduct of the association is anti-competitive under the provisions
of the Competition Act 2002?

Issue 2: Whether the acting upon on the boycott call given by TAAI, TAFI & IAAI
resulted in formation of vertical agreements between the associations & their
members?

Issue 3: Whether owing to the resumed selling of the Singapore Airline tickets makes
the instant proceedings in fructuous?

Decision of the CCI

The CCI upon inquiry found that the present case is similar to one of the cases
that CCI has already decided in the past. The associations namely, TAFI & TAAI
didn‟t cooperate during the investigation and as a result, CCI decided the case on the
basis of the replies filed by the respondent in one of the case bearing no. 03/2009
coupled with the statements given by the office bearers of associations. On the basis of
the information received and relied upon, CCI decided the following issues:
The Commission referring to case no. 03/2009 and the reply filed by TAFI, the
admissions made by the TAFI in Delhi High Court in case No. 454 of 2009, press
statements issued by office bearers of the respective associations in newspapers,
hoarding placed clearly indicate that conduct of the airline in boycotting the sale of
Singapore airlines is anti-competitive under the provisions of the Competition Act,
2002. As a result of which Singapore Airlines sales went down by 29%. The
Commission did not agree to the view given by Director General that call to boycott
call made by TAAI & other associations amounted to vertical agreements. The
Commission stated that for the applicability of section 3(4) of the Act, it is necessary
that the enterprise must be at different levels of production chain in different markets,
which is not in the present case, since the travel association and travel agents both the
not engaged in providing travel agency services, it‟s only the agent.
The Commission observed that although the travel agents have lifted the
boycott on Singapore Airlines & resumed the sale of tickets of Singapore Airlines since

66
January 2010, but this will not bind the Commission from exercising its jurisdiction &
power from taking within its purview the past anti-competitive activities.
However, Commission stated that as penalty has already been imposed on the
associations in similar case (03/2009, mentioned above), hence there will be no double
jeopardy for one act. Thus the Commission opined that there is no penalty on
associations but directed them to refrain from such anti-competitive activities in future.

Analysis of Order
The case laid two cardinal principles in competition jurisdiction. Firstly, it
expanded the scope of CCI in adjudicating past anti-competitive matters and secondly,
it identified & addressed a thin line of difference between the anti-competitive
agreement and collective bargaining.

3. In Re: Bengal Chemist and Druggist Association

Parties to the Case
1. Bengal Chemist and Druggist Association
2. Ref. case no. 01 of 2013

Facts of the Case

An email was received by CCI alleging Bengal chemists and druggists
Association (BCDA) of anti-competitive conducts like price fixing, limiting supply and
setting selling price of drugs. Under section 19(1), a suo-moto enquiry was pursued by
CCI but later on under section 26, the matter was referred for investigation by the DG.
However the Director, Directorate of Drugs control, west- Bengal also filed a
complaint to CCI. This again was referred to the DG by CCI. These two matters were
clubbed as their substance was more or less same. The DG placed his report for
consideration before the commission and mentioned that report may be adopted for
both the matters

Issues Involved
Issue 1: Whether the impugned body being a “trade association” is covered by the law
and whether it has infringed the law?

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Issue 2: Whether the impugned body can plea for relief from imposition of penalty
under section 27 after having “cease and desist” its impugned practice?

Issue 3: Whether the provisions of section 48 can be invoked upon the office bearers of
the trade association?

Decision of the CCI

The CCI found the BCDA involved in anti-competitive practices and imposed a
penalty of RS 13.24 lakhs on BCDA. Whereas the senior officer of BCDA were held
personally liable and fined with RS 1820 crores for endorsing the conduct of BCDA.

Analysis of the Order

Through its decision in this particular case, the CCI is sending clear signals that
it has increased its level of strictness while dealing with Indian bodies to adhere to
competition compliance. It has also levied up the principle of lifting up of corporate
veil and disregarded the Separate legal entity of the company from to members such
powers to bind the officers of have been voted to CCI under section 480 the completion
act, 2002.
Therefore, it alerts the offices that are in charge of the acts of company that they
can be held personally liable as well. The objective is to comply with the rule and laws
because such officers take important decisions on the company‟s behalf.
They can be axed if willingly or unknowingly violate the provisions contained
in the act. CCI with not hear pleadings on „‟ignorance of the laws‟‟ as there is no
excuse under the law to break it out of ignorance. It is also note noteworthy to highlight
here that a number of cases have been reported a gained the anti commutative conducts
of chemist and druggists associations in which CCI has passed strict orders penalizing
them. This only benefits the consumed as they will now be made available medicines at
competitive rates. Also it is a matter of concern because to save from pain or even
death by such up by the CCI in future against such defaulting trade association and
thereby provided the legal right to the consumer to get the prescribed medicines at
competition prices. The act , however provide defense to the person held unable to
prove their innocence on the fact that the violation was done without his knowledge or
due diligence was exercised by him.

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4. CCI v SAIL
Parties to the Case
 Competition Commission of India
 Steel Authority of India Ltd

Facts of the Case

In this particular case Jindal steel was the informant and it informed CCI that
SAIL and Indian railways entered into exclusive supply agreement which was anti-
competitive and law abusive in nature. CCI furnished notice to SAIL to provide
relevant information. Within two weeks of accruing the notice SAIL though found the
time in appropriate and requested for an extension up to six weeks for the same but CCI
showed reluctance to grant any extension and was of a prima facie view upon the case
and therefore directed the DG under section 26(1) of the act to conduct on inquiry into
the matter. SAIL however claimed that CCI should not form such opinion without
hearing and challenged CCI‟s order before the tribunal. It was confronted by CCI that
no valid reason were recorded by CCI while forming prima-facie opinion and the time
granted to file information was not enough and inadequate. CCI was not impleaded as a
party by SAIL while filing the appeal. CCI therefore applied to the tribunal that it
should be considered as a proper and necessary party. The tribunal held that under
section 53A(1), the direction to inquire is also prosecutable and that DG should not
have been asked to enquire without hearing SAIL. It further disregarded CCI as a
proper or necessary party and found it guilty of not recording reasons while cropping
the time extension.

Issues Involved

Issue 1: Whether the direction passed by the Commission u/s. 26(1) of the Act while
forming prima facie opinion would be appealable u/s/ 53A (1) of the Act?

Issue 2: What is the scope of the power vested with Commission u/s. 26(1) of the Act
and whether parties including the informant and other affected parties are
entitled to notice at the stage of formation of prima facie opinion?

Issue 3: Whether the Commission would be necessary or at least a proper part in

proceedings before the Tribunal?

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Issue 4: At what stage and in what manner the Commission can exercise its powers u/s.
33 of the Act while passing interim orders?

Issue 5: Whether it is obligatory for the Commission to record reasons while forming
prima facie opinion?

Issue 6: What directions, if any, need to be issued by the Court for ensuring proper
compliance of the procedural requirements while keeping in mind the scheme
and object of the Act?

Analysis of the Order

1) The court-made a catholic analysis of the provisions of the Act. It suggested
that under section 53A (1) of the act which decision, directions or orders may be
appealed before the tribunal. The court also mentioned that if the Act does not
state a right to appeal then it cannot assume that right, as to appeal is a
substantive right which gets its validity from the operation of the law
2) and 5) The court also found that it is inquisitional and regulatory power under
section 26 (1) to form a prima-facie opinion and by doing so the commission
does not look down upon anyone. It is only administrative function and not an
adjudicating one. It is thus just a preparatory measure and there is no
contemplation of right of notice of hearing under section 26(1). On the aspect of
furnishing the reasons while forming prima-facie view, the court set out that
CCI must clearly express that why did it form prima-facie opinion? Such
expressed information must also be backed by relevant proofs, records and
references of cases.
3) When, without one party, no order can be made effective, it is regarded as a
necessary party. When in the absence of whom, an effective order can be made
but for a complete and final decision, whose presence is necessary, such a party
is regarded as a proper party. Implementing this rule, the court regarded the
commission as a proper party if it initiates a suo-moto proceeding whereas in all
other cases it will be taken as a necessary party.
4) On powers of the Commission u/s. 33, the Court noted in following terms:
“During an inquiry and where the Commission is satisfied that the act is in

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 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 passing on an order must-
a) clearly record its satisfaction that an act contravening the provision has been
committed, is committed or is about to be committed.
b) it is required to issue a restrain order
c) it is obvious from the records submitted that there is irretrievable or
irreparable damage or an adverse effect on competition.
6) One of the important verdicts of the case is related to recognizing and affirming
the disposal of complaints that are filed before the commission by the court. It
found this case as appropriate one to set out guideline as a reference case for
future is the world of justice.

Decision of the Court

1. The court said that it is expected of the commission to record its opinions by
holding meeting with in a shorter time than as is stipulated under the Act (i.e.
within 60 days of filling of information.
2. While meetings the objectives of the Act, all the enquires and investigations
undertaken either by commission or by DG must be expeditiously completed.
3. The commission must pass a final order as quickly as possible as and never later
than 60 days if in the course of enquiry it passes some in therein order.
4. As per section 26(2) the DG should submit his reported as asked by the
Commission and never later than 45 days of passing such directions.
5. Under section 57, the commission and the DG are required to maintain
complete confidentially and if there is any breach, then the aggrieved party can
approach the commission.

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Analysis of the Order
The time of and the related issued in the judgment bear immerse importance. It
is clear that company law and CCI, both are currently in their infancy stage within the
complex structure of Indian Economy. Through the judgment of the Supreme Court,
the market forces will be set out more freedom and fairness in their operation to
effectively take competition law and CCI to newer heights.

5. M/s Peeveear Medical Agencies, Kerala v. All India Organization of

Chemists and Druggists and Ors.

Parties to the Case

 M/s Peeveear Medical Agencies, Kerala (Informant)
 All India Organization of Chemists and Druggists (AIOCD)
 Janssen Cilag Pharmaceuticals (Janssen)
 All Kerala Chemists & Druggists Association
 All Kerala Chemists & Druggists Association (Affiliated to AIOCD)
 Organization of Pharmaceutical Producers of India (OPPI)
 Indian Drug Manufacturers Association (IDMA)

Facts of the Case

The Informant was a partnership proprietor firm dealing in selling, stocking and
distribution of wholesale drugs, in Kerala. As per the information supplied with,
AIOCD, an all India body of drug stockists registered under the Societies Registration
Act, has full control over the stockists of medicines and drugs in India. The informant
alleged that AIOCD has been abusing its dominant position by being continuously
involved in anticompetitive agreements, controlling the trading policies and profit
margins of different manufacturing companies and stockists and regulating stockists or
distributor agreements of every manufacturing company. Further, threats of boycott
were issued and new business entrants were also hindered by strict enforcement of
technical compliances such as attaining a No Objection Certificate (NOC), Product
Information Service (PIS) approvals etc. As per the informant, these conducts resulted
in limiting and controlling the supply and markets and directly influenced the sale and
purchase price of the drugs and pharmaceutical products in India, thus violating
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provisions of the Competition Act. The Commission took into consideration the
information and supporting references and agreed to the existence of a prima facie case
to direct the Director General (DG) under Section 26 (1) of the Competition Act to
cause an investigation. In the meantime the CCI provided some interim relief to the
Informant by staying the AIOCD boycott order and restricting Janssen for terminating
dealership.

Issues Involved

Issue 1: Whether the actions of AIOCD and its affiliates – through enforcing grant of
NOC, fixation of trade margins, PIS charges or boycott of pharma products - are
in violation of Section 3 of the Act?

Issue 2: Whether liability u/s 3 also accrues to OPPI and IDMA along with AIOCD?

Issue 3: Whether the member of the Executive Committees of AIOCD, OPPI and
IDMA were also liable u/s 3 of the Act?

Decision of the CCI

The CCI identified AIOCD as the apex body exercising suo-moto regulatory
and executive actions to govern the sale of drugs, without any mandate either under law
or from its members. This permitted it to control and restrict the supply of
pharmaceutical products in the market and influence the prices of drugs and medicines,
which is anticompetitive in nature and required strict action. The CCI directed AIOCD
to cease and desist in following the anticompetitive practices found hereby, specifically
discontinuation of PIS and NOC within 60 days of the order. Further, AIOCD was to
issue a letter to OPPI and IDMA informing them about no requirement of NOC and
inform all Chemists, Druggists, members and associations that PIS charges could be
availed voluntarily and that they were now free to give discounts to the customers.
Besides passing these orders the CCI also imposed a penalty of 10% of the average
annual turnover of the financial years 2008-09, 09-10 and 10-11.

Separate Orders
The majority order did not deliver findings of cartelization and other issues.
There were two separate orders passed in addition. One separate order found AIOCD

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and its affiliate/s guilty of acting as a cartel basis its specific actions and directions to
members, for fixing margins in violation of Section 3(3) of the Competition Act. The
order also determined office bearers culpability, interpreting Section 48 of the Act to
argue that since the definition of a „Company‟ didn‟t include individuals working for
associations or firms constituting the culpable company, office bearers in this instance
could not be found liable. It also imposed 10% penalty on the average turnover of the
constituent members of associations (like AIOCD) that didn‟t have revenues nor
maintained any balance sheets. In the second order the members agreed with the
majority finding on the value of PIS, but did not find the conduct to be anticompetitive.
Fixing margins and PIS charges were found to have not resulted in price fixation and
therefore not violating the Act. But the order found OPPI and IDMA guilty of Section
3(1) as opposed to the majority order.

Analysis of the Order

Lately, the CCI has increased its concentration on anticompetitive issues in the
Pharmaceutical and Medicines Sector given its sensitivity in supplying life-saving
drugs and medicines. The patent regime and protection of product and process patents
in India allows for a combination of proprietary and generic drugs with prices regulated
for essential medicines. With this order the CCI sought to watch consumer interest
beyond the market place by ensuring supply conditions to ensure optimum competition
outcomes. The levying of the highest possible fine of 10%reflects the CCI‟s strong
message on stringent enforcement of the laws in cases of consumer interest in essential
sectors. The CCI noted that the consumers at large would have been benefited in
monetary terms and otherwise, in the absence of anticompetitive conduct of AIOCD.
Lately there have also been numerous instances whereby industry associations have
been found guilty in the encouragement of anticompetitive practices. This is seen as an
indirect subversion of direct culpability of the industry players at large since industry
associations ideally do not generate any revenue beyond membership. This structure
has been criticised for allowing its members to impose and enforce cartel behaviour on
the one hand while escaping actual liability in the event AAEC has been discovered.
Therefore, the majority decision in this case has left the issue of direct culpability of the
association‟s office bearers undecided for lack of information. It shall be worthwhile to

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follow the outcome of this decision to assess whether the protection offered under a
Society/Company/Trust or other artificial legal entity to the officer bearers withstands
competition law culpability as well as the broader outcome on the interaction between
industry bodies and its constituents.
Importantly, the range of reforms that have been suggested through the cease
and desist orders hereby shall have serious repercussions in the manner medicines are
distributed and sold in the marketplace if they prevail.

3.4 References
 http://www.cci.gov.in/
 http://cci.gov.in/images/media/presentations/PKSinghPresen041011.pdf
 http://cci.gov.in/images/media/presentations/AdvocSemKeralaHighCourtACA08
Aug2009.pdf
 http://cci.gov.in/images/media/presentations/SBSCollege-
Symposium26Feb09.pdf
 http://cci.gov.in/images/media/presentations/kk_anti_20090305113302.pdf
 http://cci.gov.in/images/media/presentations/SeminarKolkataAntiCompetitiveAgr
eements09Jan09.pdf
 http://cci.gov.in/images/media/presentations/anti_august_20090213110241.pdf
 http://cci.gov.in/images/media/presentations/anti_amitabh_20090213111858.pdf
 http://www.nishithdesai.com/fileadmin/user_upload/pdfs/Research%20Papers/Co
mpetition_Law_in_India.pdf
 http://circ.in/pdf/Case_Study_02.pdf
 cuts institute of regulation and competition
http://cci.gov.in/May2011/OrderOfCommission/27/412011.pdf june 2014
 cuts institute of regulation and competition
http://www.cci.gov.in/May2011/OrderOfCommission/fcmtravelmainorder17nov2
011.pdf september 2013
 http://cci.gov.in/images/media/presentations/anuradha_cci_1may08_2008052215
5727.pdf
 http://competitionlawyer.blogspot.in/2010/09/cci-v-sail-supreme-court-gets-it-
right.html
 http://www.cci.gov.in/May2011/Advocacy/PubAnnRep0910-060911.pdf
 http://www.cci.gov.in/May2011/Advocacy/EnglishAnnualReport201011.pdf

75
 http://www.cci.gov.in/May2011/Advocacy/CCIANNUALREPORT201112ENGL
ISH.pdf
 http://www.cci.gov.in/May2011/Advocacy/AR2012-13E.pdf
 http://www.cci.gov.in/May2011/Advocacy/ar2014.pdf
 Ref. Case No. 01 of 2012. Date of order: 06.08.2013, available at
http://www.cci.gov.in/May2011/OrderOfCommission/012012.pdf, as accessed on
August 21, 2013.
 Order passed by CCI on 05/02/2014 available at
http://www.cci.gov.in/May2011/OrderOfCommission/27/602012.pdf last
accessed on 15/04/2014

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