12 May 2021
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Competition Commission of India (‘CCI’) rarely grants interim injunctions. In over ten years of regulatory enforcement, it has done so only in a handful of cases. This is because competition law inquiries are different from civil disputes as their outcomes depend on complex considerations — such as the position of a firm in the market and the wider competitive effects of conduct. Such factors are difficult to decide until a detailed investigation is pursued.
This is why an interim injunction by CCI issued against MakeMyTrip India Pvt. Ltd. and Ibibo Group Private Limited (‘MMT-GO’) last month shows an important shift in CCI’s willingness to intervene with a remedy in the early stages of an inquiry (‘MMT Decision’)
1. Overview of the MMT Decision
The MMT Decision directs MMT-GO to relist Casa2 Stays Pvt. Ltd. (‘FabHotels’), and Rubtub Solutions Pvt. Ltd. (‘Treebo’) (‘Claimants’), both of which are engaged in franchising budget hotels in India on all MMT-Go portals. It accepts the claim that the Claimant’s business and competition suffered harm on account of an exclusive arrangement between MMT-GO and OYO, under which MMT-GO allegedly agreed not to list OYO’s closest competitors on its platform (‘Agreement’).
The MMT Decision reaches this conclusion by applying a set of conditions that the Supreme Court had laid down in CCI v. SAIL2 for issuing an interim injunction. A summary of CCI’s application of these conditions is summarised below:
Firstly, CCI must record its satisfaction, which should be of a much higher degree than the formation of a prima facie view, of a continuing or imminent contravention. The MMT Decision applied this test and rejected MMT-Go’s claim that such satisfaction should necessarily rest on new evidence, finding that existing evidence was sufficient to reach the requisite level of satisfaction.
Secondly, CCI must only intervene when it is necessary to issue an order of restraint. The MMT Decision determined that the balance of convenience lies in the Claimants’ favour, because MMT-GO would not face any severe inconvenience, but would rather earn a commission if it allows the Claimants to access their platform.
Thirdly, CCI must show that there is every likelihood that the party would suffer irreparable and irretrievable damage, or there is definite apprehension that the conduct would cause an adverse effect on competition in the market. CCI found the Agreement had the “dangerous probability” of irreversibly altering the competitive landscape, especially in the franchisee budget hotel downstream market.
The Legal Test for Denial of Market Access
An important factor in CCI’s upholding a contravention finding (of a nature stronger than a prima facie finding) was that access to MMT-GO (a dominant online intermediation partner) was necessary for downstream players like Treebo and FabHotels to effectively function in their market. It observed that a denial of such access ‘can be lethal to the functioning of businesses who rely on such intermediaries to reach the end-consumers’.
This principle is consistent with CCI’s general approach in claims of dominant firm conduct. But a finding of a denial of market access usually rests on a higher footing than what CCI applied in the MMT Decision. This is because competition rules, as a starting point, respect an entity’s freedom in choosing its trading partners and reserves a “proactive” intervention in the form of an obligation to supply for some specific scenarios.
In particular, CCI’s GMR decision3 reviewed the European Commission’s (‘EC’) guidance to recognise the following essentials for a successful claim of denial of market access: (i) the refused input is indispensable for an entity to compete in the downstream market; (ii) refusal will most likely eliminate competition in the downstream market; and (iii) refusal will most likely harm consumers.
While the MMT Decision considers MMT-GO to be an ‘important’ access route for independent hotels to reach the end-consumers, it does not examine whether it is ‘indispensable’ for such access, in the long run (‘Indispensability Requirement’). For example, it does not assess whether Treebo and FabHotels could plausibly survive long-term competition by selling their inventories through other channels and partners. The EC guidelines that the GMR decision relied on, considers an input to be indispensable, when there is no actual or potential alternative that the downstream player could rely on to counter the negative consequences of the refusal, at least in the long term.
One distinguishing factor between India and the EC is that the EC typically considers competition problems from a refusal to supply to arise when the dominant firm competes in the ‘downstream’ market with the buyer whom it refuses to supply. India, on the other hand, has ruled out this requirement by holding that denial of market access to a customer may be also unlawful under the rules.4 But it is unclear (and unlikely) that distinction alone would justify watering down the Indispensability Requirement.
Independent of the merits of CCI’s findings in the MMT Decision, one key question that the case raises is in what situations CCI could impose a duty to supply on dominant firms. CCI has come to the view that a finding of vertical restraint is not mutually exclusive to that of abuse of dominance: both these frameworks could independently apply to a single fact scenario. However, consistent identification of the charging sections and articulation of legal principles would not only help firms plan compliance better, but also strengthen the decisions in writ and appellate challenges.
For further information, please contact:
Zia Mody, Partner, AZB & Partners
zia.mody@azbpartners.com
1 The MMT Decision has been challenged before the Gujarat High Court and an order dated April 23, 2021 has stayed the interim order till the disposal of the proceedings before it.
2 CCI v. SAIL (2010) 10 SCC 744.
3 In Re: Air Works India (Engineering) Pvt. Ltd. v. GMR Hyderabad International Airport Ltd. and Anr., Case No. 30 of 2019
4 CCI v. M/s Fast Way Transmission Pvt. Ltd. and Ors., Civil Appeal 7215 of 2014 (Order dated January 24, 2018).
