16 March, 2018
CCI orders investigation against Gujarat State Load Dispatch Centre for abuse of dominance 2
On January 31, 2018, CCI directed investigation against Gujarat Energy Transmission Corporation Limited (‘ GETCO’), State Load Dispatch Centre, GETCO Gujarat (‘ SLDC- GETCO’), and Paschim Gujarat Vij Company Limited (‘ PGVCL’) based on an information filed by HPCL-Mittal Pipelines Limited (‘ HPCL’) alleging abuse of dominance under Section 4 of the Competition Act.
HPCL, an industrial electricity consumer, had sought permission from SLDC-GETCO to procure electricity through ‘open access mechanism’ as provided for under the Electricity Act, 2003 (‘Electricity Act’). The open access mechanism allows large users of electricity to purchase cheaper power from a source other than the distribution licensee licensed to supply power to a particular area. Pursuant to the Electricity Act, SLDC-GETCO is the sole authority entrusted with the power to approve or disapprove open access requests. It was alleged by HPCL that SLDC-GETCO indiscriminately rejected its requests for open access transmission on 12 different occasions, even though HPCL had satisfied all the pre-requisites, on various grounds that were unfair, un-reasoned and reflected non application of mind. Further, HPCL alleged that the requests were rejected by SLDC-GETCO in order to ensure that HPCL only sourced its demand of electricity through PGVCL , a subsidiary of SLDC GETCO , engaged in the downstream market for distribution and retail sale of electricity. HPCL alleged that SLDC-GETCO imposed unfair and discriminatory conditions by denying open access permission and thereby restricting the production of electricity, denying market access to the power generators, and manipulating the downstream distribution market in favor of its subsidiary (i.e. PGVCL ).
CCI delineated the relevant market as the ‘market for services relating to use of transmission facility for availing open access electricity in the State of Gujarat ’. It observed that SLDC-GETCO held 100% market share in this market, being the nodal agency having the sole prerogative to allow open access permission. Therefore, SLDC-GETCO was held to be in a dominant position in the relevant market.
CCI found irregularities and lack of a justifiable cause in SLDC-GETCO ’s conduct. CCI was of the prima facie view that SLDC-GETCO had leveraged its dominant position in the relevant market for use of transmission facility to adversely affect the competition in the downstream market, where it was present through its group entity PGVCL . CCI found that such unreasonable and exclusionary conduct warranted investigation under Section 4 of the Competition Act.
CCI dismisses allegations of abuse of dominance filed by plot owner against real estate developer in Bengaluru 3
On January 4, 2018, CCI dismissed an information filed against DS-M ax Properties Private Limited (‘DS-Max ’) by Mr. Induhar M. Patil. The informant alleged the contravention of Section 4 of the Competition Act by DS-M ax.
Mr. Patil had purchased a plot of land under the ‘Charming Heights’ project of DS-M ax in Bengaluru for a total consideration of . 14,92,500, of which . 10,00,000 had to be paid in cash as DS-M ax had refused to take this amount by way of a cheque. CCI noted that Mr. Patil was aggrieved with the fraudulent sale of land as a residential plot by DS-M ax, which was originally allotted by the Karnataka Government to Scheduled Castes/Scheduled Tribes free of cost. DSM ax allegedly misled the buyers into purchasing the residential plots by promising to provide various amenities on this land and, subsequently, did not provide the concerned services which rendered the plot unlivable for Mr. Patil.
CCI opined that though the agreement and the sale deed were entered into in 2006-2007 (before the relevant provisions of the Competition Act came into effect), the effects of the agreement and the sale deed were continuing, and the same could therefore be examined under the Competition Act. CCI opined that the case related to money laundering, corruption, and unfair practices, and did not raise any competition concerns. Moreover, no case under Competition Act could be made out since DS-M ax was not in a position of dominance in the relevant market of ‘provision of services for development and sale of residential plots in Bengaluru ’. Within this relevant market, there were several other real estate developers, selling residential plots, along with many plot owners selling their property through dealers or on online platforms, such as magicbricks.com and 99acres.com . In the presence of a number of players in the relevant market, DS-M ax was held not to be dominant.
CCI dismisses allegations of abuse of dominance against SKF India Limited 4
On January 24, 2018, CCI dismissed an information filed by Asmi Metal Private Limited (‘Asmi ’) against SKF India Limited (‘SKF ’), alleging abuse of dominance under Section 4 of the Competition Act. Asmi was inter alia engaged in the business of supplying customized bearings to SKF as per its specific requirements, which SKF further sold in the market for automobiles and electrical products. It was alleged that SKF forced Asmi to make irrelevant expenditures on expansion of manufacturing facilities based upon assurances of refunds and subsequently defaulted on these payments. Further, it was alleged that SKF induced Asmi into undertaking various commitments at its behest and thereafter indiscriminately, denied any liability towards the losses incurred by the Asmi. The entire chain of events occurred over a period of time spanning from 2004 until 2017.
CCI noted that most of the instances of the alleged abuse of dominance took place before the Competition Act came into effect in the year 2009 and therefore, only assessed the conducts that either continued or took place post 20 May 2009.
CCI referred to its earlier decisions to define the market as the ‘market for industrial bearings in India’ without further distinguishing between various classes of such bearings. In its examination of the key players in the relevant market, CCI noted that while there were three top companies in the relevant market, including SKF , none of the players enjoyed a position of strength for a long duration. Further,
CCI also noted that imports accounted for around 44.8% of the market for mechanical bearings and posed competitive constraint on domestic manufacturers’ ability to raise prices. Accordingly, CCI held that SKF was not in a dominant position and therefore, its conduct could not be examined under Section 4 of the Competition Act.
CCI dismisses allegations of bid-rigging in UP electricity tender 5
On January 24, 2018, CCI dismissed an information filed by Mr. Arun Mishra, against 17 individuals and companies (‘OPs ’), for participation in an alleged bid rigging in contravention of Section 3(3)(d) of the Competition Act. The alleged bid rigging related to a tender floated by UP Power Corporation Limited (‘UP Power Corp ’) in 2013 for procurement of 6000 MW of electricity.
OP s No. 1 to 4 were the erstwhile government officials of various government departments or companies in the State of Uttar Pradesh, whereas OP s No. 5 – 17 were the companies that participated in the tender and engaged in the business of power generation.
It was contended that OP s No. 1 to 4 colluded with OP s No. 5-17 in accepting a new higher tariff of . 5.90 per unit, against the previously decided tariff of . 5.09 per unit. It was further alleged that such increase in the tariff was achieved on account of collusion between the bidders.
As also in the case involving GETCO discussed above, the OP s raised the objection that CCI had no jurisdiction in the instant matter as the issues fell within the purview of Electricity Act, where the Uttar Pradesh Electricity Regulatory Commission was the concerned authority. CCI took the view that it had the jurisdiction to proceed with issues that pertained to anti-competitive conduct and proceeded on this basis.
As regards the collusion alleged between OP s No. 1-4 and OP s No. 5-17, CCI held that OP s No. 1-4 were only government officials and were not engaged in the same business as that of OP s No. 5-17. As such, Section 3(3)(d) of the Competition Act covers an anti-competitive agreement between parties that are engaged in the same trade or area of practice. Further, as regards the alleged collusion between OP s No. 5 – 17, CCI held that the only evidence provided by the informant related to a meeting in Hotel Leela, Gurgaon, but the said meeting was only attended by officials of one enterprise i.e. OP No. 6 and therefore, could not be viewed as an evidence of meeting with competitors for fixing bid prices. Therefore, CCI held that no substantiating evidence was brought on record to prove even a prima facie indication of an agreement and passed a closure order under Section 26(2) of the Competition Act.
CCI dismisses information by Industries and Commerce Association against coal companies 6
On February 6, 2018, CCI dismissed an information filed by the Industries and Commerce Association (‘ICA ’), comprising of 72 small scale industries that are involved in the manufacture and sale of hard coke, against Coal India Limited (‘CIL ’), its subsidiary Bharat Coking Coal Limited (‘BCCL ’), and the Ministry of Coal (‘MoC ’) alleging contravention of Section 4 of the Competition Act.
By way of background, National Coal Distribution Policy, 2008 (‘NCDP ’) was introduced by the MoC basis which the ICA was required to procure coal through following mechanism: 75% of its total requirement through Fuel Supply Agreements (‘FSAs ’) at notified prices to be fixed / declared by CIL , and the remaining 25% through e-auction / imports. More recently, the MoC issued guidelines in 2016 (‘2016 Guidelines ’) addressed to CIL , directing that none of the existing FSA s would be renewed and the members of ICA would be required to procure coal through e-auction process post expiry of the existing FSA .
The ICA challenged various terms of the existing FSA s that were due to expire in 2018 (‘Existing FSAs ’), relating to calculation of the price of coking coal, deemed delivery quantity, renewal terms, and security deposits, as being unfair. The ICA challenged the e-auction process (through which it procured 25% of its requirement) as being (i) unfair in imposing 10%-20% higher prices on coal and (ii) discriminatory between those purchasers who procure coal by way of FSA s and those who don’t. The ICA also alleged that the proposed 2016 Guidelines which required ICA to procure its entire requirement through e-auction is unfair and would lead to excessive pricing of coal, given that CIL is a monopolist. The ICA further challenged the certain terms of the model FSA proposed to be entered into as part of the e-auction as per the 2016 Guidelines.
In order to bring the above challenge to 2016 Guidelines within the purview of the Competition Act, ICA alleged that MoC is an ‘enterprise’ within the meaning of Competition Act and the purpose of 2016 Guidelines was to generate supra-normal profits by generating profits through companies under its control. Further, ICA alleged that BCCL , CIL and MoC formed a part of same group under the provisions of the Competition Act.
As regards the allegation pertaining to unfair condition under the Existing FSA s, CCI was of the view that the ICA , which had entered into two consecutive FSA s since the introduction of the NCDP in 2013, had filed the information at a belated stage i.e. at the time only when the second FSA was expiring. CCI noted that the actual trigger for the information was the update in the policy as per the 2016 Guidelines.
Further, CCI rejected ICA ’s contention that the MoC is an ‘enterprise’ under the provisions of the Competition Act, reasoning that the policy making function of MoC did not fall within the category of economic activity in order to satisfy the definition of the term ‘enterprise’. In view of the above, ICA ’s contention that CIL , BCCL , and the MoC constituted a ‘group’ was categorically dismissed. CCI held that the challenge to the 2016 Guidelines was speculative and premature since the e- auction had not yet taken place, the model FSA was not yet implemented and, therefore, the allegations did not merit an investigation.
NCLAT dismisses allegations of abuse of dominance against Lucknow Developers for lack of substantial evidence 7
On January 22, 2018, the NCLAT dismissed an appeal filed by Ms. Usha Roy against an order of CCI dismissing the information filed against ANS Developers Private Limited (‘ANS ’) and Shalimar Corporation Limited (‘Shalimar ’). Ms. Roy had raised similar allegations against ANS and Shalimar in a previous case that was closed by CCI as no prima facie case was made out. Ms. Roy argued that CCI ’s decision to dismiss the present information was incorrect since the present decision was based entirely on the reasoning of the previous case, and new evidence brought on record in the present case was not considered.
Ms. Roy alleged that the agreement entered into with ANS for the purchase of residential property had certain anti-competitive clauses, which placed excessive liabilities on Ms. Roy for delays in payment, whereas the ANS had no liability to pay interest for any delay on its part. It was also alleged that the agreement by ANS and Shalimar to use their position as the developer of the integrated township to enter into the market of providing medical facilities was anti-competitive. However, CCI opined that there were several significant and major real estate developers in the relevant market, and ANS and Shalimar could not be held to be in a dominant position.
The NCLAT took the view that the instant case was not maintainable merely on the ground that certain new information was provided as no new facts or substantial evidence for the same set of allegations had been brought to the notice of CCI that could differentiate the instant case from the previous one.
NCLAT dismisses appeal of real estate buyers alleging abuse of dominance by Earth Infrastructure Private Limited 8
On January 23, 2018, the NCLAT dismissed an appeal filed by Ms. Nikunj Sisondia and Ms. Rashmi Raj against an order of CCI dismissing an information alleging abuse of dominant position by Earth Infrastructure Private Limited (‘Earth Infrastructure ’). Ms. Sisondia and Ms. Raj had booked retail shops in a commercial project of Earth Infrastructure, wherein Earth Infrastructure had agreed to pay an interest of 12% every month till the possession of the retail shops was given. Ms. Sisondia and Ms. Raj alleged that Earth Infrastructure had defaulted on the aforementioned promise and had not made any interest payment since October, 2015. CCI , while delineating the relevant product market, referred to its previous orders, wherein a distinction had been drawn between residential and commercial real estate as the intention and considerations are different when buying a commercial property when compared with buying a residential property. The relevant geographic market was held to be ‘Noida and Greater Noida ’. The relevant market was thus delineated as the market for ‘provisions of services of development and sale of commercial space in Noida and Greater Noida ’. CCI had noted that no data has been provided to support the assertion that Earth Infrastructure was in a dominant position and found that no prima facie case was made out in this case.
The NCLAT agreed with the opinion of CCI and held that no evidence was brought on record to assert that Earth Infrastructure was indeed in a position of dominance in the relevant market.
NCLAT dismisses appeal against M/s Concept Horizons Infra Private Limited alleging abuse of dominance 9
On January 23, 2018, the NCLAT dismissed an appeal filed by Wing Commander Jai Kishan and Ms. Nikunj Sisondia (‘Buyers’), against an order of CCI dismissing an information alleging abuse of dominant position by M/s Concept Horizons Infra Private Limited (‘Concept Horizons’).
As in the case against Earth Infrastructure discussed above, it was alleged that Concept Horizons was liable to pay an interest of 12% per month to the Buyers but had stopped making these payments since July, 2016. CCI found that in the market for ‘residential properties’ in the relevant geographic market of ‘Noida and Greater Noida’, Concept Horizons was not in a position of dominance and that the Buyers had failed to bring on record any evidence to support the same. CCI noted that there were several established large real estate developers in this market and Concept Horizons did not possess market power to act independently of the competitive forces or have the ability to affect its competitors or consumers in the relevant market in its favour.
The NCLAT agreed with the reasoning of CCI and dismissed the instant appeal.
NCLAT sets aside CCI penalty against D.V. Rajasekhar for non-compliance with DG’s investigation 10 On January 29, 2018, the NCLAT allowed an appeal filed by D.V. Rajasekhar against an order of CCI imposing a penalty of . 5,00,000 imposed on him for non-cooperation with the investigation of the Director General (‘ DG’). It was alleged that Mr. Rajasekhar had shown aggressive behavior, delayed his scheduled appearance before the DG, failed to provide documents to the DG as promised, and denied access to his emails. CCI accepted the DG’s request to initiate proceedings against Mr. Rajasekhar under Section 43 of the Competition Act and found that Mr.
Rajasekhar was attempting to further deny access to the emails. In appeal to the NCLAT, Mr. Rajasekhar was given the opportunity to file an undertaking to provide access to the DG to the disputed documents. The undertaking was filed by Mr. Rajasekhar, and the NCLAT held that subject to compliance to the undertaking, the penalty would be quashed. Taking cognizance that the investigation report had already been filed by the DG, the NCLAT allowed for a supplementary report to be filed by the DG if the new information provided further details.
Supreme Court passes its judgment in CCI v M/s Fast Way Transmission Private Limited & Ors 11
On January 24, 2018, the Hon’ble Supreme Court of India (‘Supreme Court’) quashed the decision of the Competition Appellate Tribunal (‘ COMPAT’) which overturned the order passed by CCI against Fast Way Transmission Private Limited (‘Fast Way’).
On August 1, 2010, the broadcasters of the news channel ‘Day & Night News’ (‘Broadcasters’) entered into a channel placement agreement with the Multi System Operators (‘ MSOs’), forming part of the Fast Way group, for a period of one year. A notice of termination was served on the Broadcasters, which was alleged to be an act of abuse of dominant position by the MSOs in denying market access to the Broadcasters.
In its order, CCI found that the MSOs were dominant in the relevant market, having 85% of the total subscriber share. CCI opined that the MSOs’ reason for termination, that the Broadcasters had low television rating points (‘ TRP’), and that the MSOs were facing spectrum constraint, were insufficient and mere afterthoughts put forth by the MSOs. Accordingly, a penalty of . 8,40,01,141 was imposed by CCI on the MSOs.
In appeal before the COMPAT, CCI’s order was reversed. The COMPAT held that a broadcaster cannot be said to be a competitor of MSOs, and denial of market access can be caused only by one competitor to another.
The Supreme Court observed that CCI has a positive duty to eliminate all practices that lead to an adverse effect on competition. Distinguishing from the opinion of the COMPAT, the Supreme Court held that for there to be an abuse of dominant position, once dominance is made out, it becomes irrelevant whether the parties are competitors or not. The Supreme Court observed that Section 4(2)(c) of the Competition Act would be applicable for the simple reason that the Broadcasters were denied market access due to an unlawful termination of the agreement between the Broadcasters and MSOs. The Supreme Court noted that the position of dominance of the MSOs was clearly made out, owing to subscriber share of 85% enjoyed by the MSOs in the relevant market of ‘Cable TV market in Punjab and Chandigarh’ and held that the MSOs acted in breach of Section 4(2)(c) by terminating the agreement, but found that the reasons for termination provided by the MSO s were justified, and therefore quashed the penalty imposed by CCI .
CCI approves acquisition of shares by Dai-ichi Life Holdings Inc. in Union Asset Management Company Private Limited 12
On December 19, 2017, CCI approved an acquisition of 39.62% of shares in Union Asset Management Company Private Limited (‘ UAMPCL’) by Dai-ichi Life Holdings Inc. (‘Dai-ichi’).
Dai-ichi is a financial services holding company incorporated in Japan, and carries out insurance and non-insurance businesses both in Japan as well as overseas. Dai-ichi has a presence in India by way of Star Union Dai-ichi Life Co. Limited, its joint venture with Bank of India and Union Bank of India. UAMPCL is a wholly-owned subsidiary of Union Bank of India.
CCI, without providing any description of the facts relating to non-compete, observed that the non-compete covenant, to the extent it relates to the scope of products or services of the proposed combination, is beyond what is necessary for the implementation of the proposed combination and therefore, is not ancillary to the proposed combination.
CCI noted that there were no horizontal or vertical overlaps between Dai-ichi and UAMPCL. CCI therefore opined that the proposed combination was not likely to have an appreciable adverse effect on competition in India and issued its approval.
2 Case No. 39 of 2017.
3 Case No. 64 of 2017.
4 Case No. 66 of 2017.
5 Case No. 43 of 2017.
6 Case No. 60 of 2017.
7 Competition Appeal 34 of 2017.
8 Competition Appeals 02 and 03 of 2018.
9 Competition Appeal 04 of 2018.
10 Competition Appeal 07 of 2017.
11 Civil Appeal 7215 of 2014 (Order dated January 24, 2018).
For further information, please contact:
Zia Mody, Partner, AZB & Partners
zia.mody@azbpartners.com
