India: Year In Review 2019

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The past year has been a hectic one for the Competition
Commission of India (CCI), with the competition
law space having seen considerable development with the release of
the report of the Competition Law Review Committee, notification of
several regulatory amendments and a renewed focus on digital
economy. Some significant leniency applications were reviewed by
the CCI uncovering cartelization and bid rigging, and the rarely
invoked ‘essential facilities’ doctrine was in focus on
more than one occasion.

I. Institutional changes

2019 saw a whole new cast take charge at the offices of the CCI.
Following the appointment of the Chairperson in November 2018, two
more members – Dr. Sangeeta Verma (formerly of the Indian
Economic Service) and Mr. Bhagwant Singh Bishnoi (formerly of the
Indian Foreign Service) were appointed. Finally in accordance with
the directions of the Delhi High Court in Mahindra & Mahindra Ltd. & Ors. v. CCI,
the Central Government approved the appointment of the Court’s
former member, Justice Sangita Dhingra Sehgal, in November 2019.
Justice Sehgal is scheduled to hold office till 2023.

II. Legislative changes

The CCI carried out amendments to its merger regulations and
general regulations. In the merger control space, in its endeavor
to further ease of doing business in India, the CCI amended the CCI (Procedure in regard to the transaction of
business relating to combinations) Regulations, 2011 in August
to introduce a Green Channel mechanism under which combinations are
deemed to be approved at the time of filing the form. This has been
covered in greater detail in our Flash Alert which can be accessed on our
LinkedIn page. Through a subsequent amendment to the Combination Regulations, the
CCI hiked the filing fee payable along with the notice of the
proposed combination to INR 20,00,000 for a Form I filing (from INR
15,00,000 earlier), and to INR 65,00,000 for Form II (from INR
50,00,000 earlier) filings.

In November, the CCI notified the seventh amendment to the CCI
(General) Regulations, 2009, by way of which:

an informant/complainant is now required to disclose details of
any litigation or disputes pending between the parties in respect
of the subject matter in question;

the CCI has granted itself the overriding power to disclose the
identity of an informant seeking confidentiality, after affording
them an opportunity of hearing;

a 30-day time limit has been prescribed within which the
DG’s order rejecting a request for confidentiality can be
appealed before the CCI; and

the fee payable along with an information has been hiked.

2019 also witnessed the highly anticipated Report of the Competition Law Review Committee,
constituted by the Central Government in October 2018 to review the
existing laws governing the competition regime in India and make
suitable recommendations. The Report suggested recommendations with
relation to the regulatory architecture and functioning of the CCI,
guidelines for penalties, introduction of settlements and
commitments procedures, easier approval processes for combinations,
and dealing with technology driven new age markets, amongst
others.

More recently (on 8th January 2020), the CCI has also published
a report pursuant to its recently concluded
Market Study on E-Commerce in India, a breakdown of the CCI’s
findings can be found in our Flash Alert available on our LinkedIn
page.

III. Procedural developments

Penalties

In April 2019, the Delhi High Court upheld the constitutionality of various
provisions of the Competition Act save one, but directed that the
Central Government appoint a judicial member to the CCI, which
should ensure that such member is part of all final hearings, and
further that the composition of the bench should be kept constant
once the final arguments commence.

The Supreme Court confirmed a judgment of the Delhi High Court pertaining to
the scope of Section 42(3) of the Competition Act, 2002. The issue
before the Court was whether the penal clause under Section 42(3)
of the Act was limited to the substantive orders passed by the CCI
under the listed sections, or was wider and included non-compliance
with an order imposing penalties for refusing to respond to an
information request during the course of an investigation. The
Court upheld the view taken by the Delhi High Court stating that
due to the presence of a disjunctive “or” in the text of
Section 42(3), the provision was found to be wide enough to cover
orders of the CCI listed in 42(2), as well as other directions in
the wider provision of Section 42(1).

The topic of penalties was broached by the Delhi High Court
again in United India Insurance v. CCI wherein the
petitioner was directed to deposit interest on account of delay in
payment of penalty imposed vide order of the CCI dated 10.07.2015 for violation
of the provisions of Section 3 of the Act. The single-judge bench
observed that pendency of an appeal before the appellate court, or
even the grant of an interim stay on the operation of the CCI’s
order, did not negate the liability of the petitioner to pay
interest during the period of pendency if the appeal should
ultimately be unsuccessful.

Investigations

In a disturbing judgment, the Delhi High Court held that the
scope of the investigation conducted by the DG on directions
received under Section 26(1) is not limited to the prima
facie opinion of the CCI. The case was initiated on the basis
of an information filed by a non-profit organisation seeking an
enquiry against, inter alia, the Association of Man-made Fibre
Industry in India and its members, including Grasim Industries, for
imposing anti-competitive restrictions on the Indian textile
industry in the nature of price fixation, customer allocation, etc.
in violation of Section 3(3) of the Act.

The CCI directed the DG to investigate with respect to a
violation of Section 3(3) of the Act. As it turned out, Grasim was
(and is) a dominant supplier of Viscose Staple Fibre, a type of
man-made fibre, and fairly essential to textiles in India. The
DG’s Report revealed that while no contravention had been
established in relation to a cartel agreement, Grasim had abused
its dominant position, in violation of Section 4 of the Act.

When challenged, the single judge held that the DG’s actions were contrary to
the scheme of the Act, and that at best the CCI could treat this
part of the Report as an information under Section 19 of the Act,
and initiate a fresh enquiry if deemed necessary. This judgment was
appealed by the CCI before a Division Bench of the Delhi High
Court. Grasim contended that the jurisdiction of the DG to conduct
investigation was strictly circumscribed by the scope and ambit of
the prima facie opinion under Section 26(1) of the Act.
The CCI, on the other hand, submitted that the order under Section
26(1) was merely meant to trigger an investigation and that the DG
could not be restricted from examining information that emerges in
the course of conducting a comprehensive investigation.

The Bench concurred with the CCI and held that while the initial
complaint may pertain to a limited aspect, the DG can investigate
into other violations that emerged during the investigation of such
complaint, and can even be extended to parties who have not been
named in the original complaint.

The judgment raises serious concerns, particularly due to its
broad wording. A company facing an antitrust investigation for a
particular matter may potentially find every aspect of its business
under the scanner, and can ultimately be penalized for a completely
different and unrelated issue or issues than what originally
triggered the investigation. One can only hope that the judgment is
challenged and the Supreme Court narrows, or at the very least
clarifies its scope.

Jurisdictional issues yet again

In another addition to the ongoing tussle for jurisdiction
between the CCI and sectoral regulators, the Bombay High Court in
Star India v. CCI relied on the Supreme Court
order in CCI v. Bharti Airtel and ruled that disputes
in personam arising from rights and obligations governed
by Telecommunications Interconnection Regulations, 2004, are
jurisdictional facts that must be settled by the specialized
regulator before the CCI can take cognizance of a “refusal to
deal” claim under Section 3(4) of the Act.

Significantly, it was also noted that while dealing with a
violation of Section 3(4), the CCI was under an obligation to
arrive at a prima facie finding in terms of ascertaining
whether there was an appreciable adverse effect on competition as
per the factors laid down in Section 19(3) of the Act was caused.
As the same had not been referred to by the CCI in its order under Section 26(1), the impugned order
was set aside.

The effect of a settlement between the parties

The Bombay High Court vide judgment dated 06.08.2019, directed the CCI to
toe the line drawn by parties by way of opting for a settlement.
Further, the CCI was asked to close the proceedings pending before
them and all previous orders in connection with the case were
deemed inoperative. The parties in the matter were all competing
container terminals, and the complaint filed by Bharat Mumbai
Container Terminal alleged that Nhava Sheva International Container
Terminal and Gateway Terminals India were creating entry barriers
by colluding on certain terminal charges that were levied at the
Jawaharlal Nehru Port.

This verdict of the Bombay High Court marks the first time that
proceedings before the CCI have been closed on account of a
settlement between the parties. However, the CCI has filed a review
petition as it believes that it exercises its jurisdiction in
rem with the obligation to curb anti-competitive practices in
the market, and hence a settlement between the parties should not
affect its ability to proceed with its investigation.

IV. Anti-competitive agreements

Vertical Restraints

In Suo Moto Case No. 01 of 2019, the CCI
passed an order under Section 26(1) directing the DG to cause an
investigation into India’s largest passenger car manufacturer,
Maruti Suzuki India Limited for imposition of restrictive clauses
in its agreement with its dealers, thereby limiting the discounts
that the dealers could offer to their customers and levied heavy
penalties on dealers who were found in violation of the policy.
Maruti was also alleged to have appointed ‘Mystery Shopping
Agencies’ to monitor the discounts being offered by its
dealers. Based on the evidence available, the CCI observed that
prima facie, Maruti implemented a resale price maintenance
arrangement with its dealers which appeared to contravene Section
3(4)(e) of the Act. This follows a similar order passed by the CCI in 2017 penalizing
Hyundai Motor India for engaging in conduct amounting to resale
price maintenance by controlling the discount levels. This was
however set aside by the NCLAT in September 2018. The CCI’s appeal is
pending before the Supreme Court.

Another interesting case pertaining to resale price maintenance,
this time filed against KAFF Appliances by Jasper Infotech,
operator of online marketplace Snapdeal, was dismissed by the CCI
in its order under Section 26(6) of the Act. It was
alleged that KAFF, unhappy with the discounted prices at which
their products were being listed on the Snapdeal’s online
marketplace, issued a caution notice on their website stating that
Snapdeal was not an authorized seller of their products and thus,
warranties on products bought via the website shall not be honored
which amounted to a price restriction in contravention of Section
3(4)(e) of the Act. The CCI held that the issuance of the notice
stemmed from a genuine concern of counterfeit goods being sold in
KAFF’s name, further nothing precluded the manufacturers from
exercising their right to choose the most efficient distribution
channel unless the choice lead to anti-competitive effects, which
could not be established in this case.

In Vijay Gopal v. Inox Leisure Ltd & Ors., the
impugned anti-competitive conduct manifested in the form of an
exclusive supply and distribution agreement between Inox and its
beverage partner Coca-Cola for the sale of water and beverages
within multiplexes of Inox. The CCI noted that purchase of
beverages was not a prerequisite for watching movies at Inox,
Coca-Cola’s market share was not significant enough to restrict
competition and that Pepsi Co had also entered into similar
agreements with large number of multiplexes thereby ensuring
intense competition between suppliers of non-alcoholic beverages,
and finally that there were no exit barriers as the agreement could
be terminated by either of the parties by giving a 60-day notice.
Consequently, the CCI held that no violation of the provisions of
the Act was made out against the parties as they did not have the
potential to cause any appreciable adverse effect on
competition.

Cartels

The first cartel case decided by the CCI in 2019
arose from a leniency application filed by Panasonic Corporation,
Japan through its Indian subsidiary Panasonic Energy India Co. Ltd.
which revealed a bi-lateral ancillary cartel between them and
Godrej & Boyce in the institutional sales of dry cell
batteries, in addition to a primary cartel with Eveready Industries
and Indo National whereby the three of them coordinated the market
prices of zinc-carbon dry cell batteries, this information was used
by Panasonic India to negotiate prices with Godrej & Boyce.
Panasonic received full immunity while Godrej & Boyce was
charged a penalty at the rate of @ 4% of its turnover for each year
of the continuance of the cartel.

Shortly after, the CCI passed an order in relation to the cartelization between
two major Japanese manufacturers of Electric Power Steering Systems
– NSK Limited and JTEKT Corporation and their Indian
subsidiaries – with respect to three Original Equipment
Manufacturers (car manufacturers). While concluding that Section
3(3)(a) and (d) had been violated, the CCI granted full immunity to
NSK, its subsidiaries and officials, while a 50% reduction (the
maximum permissible to the second applicant) was granted to JTEKT.
Deviating from its previous practice, the public version of the
order redacts the specific details of the cartel conduct, the
evidences, and individuals involved, the names of customers,
etc.

In Nagrik Chetna Manch v. SAAR IT Resources Private
Limited, the Information was filed by a charitable trust
alleging that the bidders participating in a tender floated by Pune
Municipal Corporation were in fact proxy bidders and SAAR’s win
was predetermined. The CCI observed that the evidence submitted
revealed a discernable pattern pointing towards the existence of an
agreement or meeting of minds amongst the bidders to collude in the
tender process. Consequently, the CCI imposed penalty at the
maximum rate of 10 % of the average turnover and also penalized the
individuals in charge.

However, the CCI dismissed allegations pertaining to a violation
of Section 3 of the Act, in terms of imposition of an arbitrary and
uniform ‘Virtual Print Fee’ on Indian film producers, made
against PVR and three other major multiplexes along with the
association, as also put forth a standard non-negotiable revenue
sharing agreement which producers were forced to adhere to. In its
observations, the CCI noted that mere parallel conduct was
insufficient to establish collusion, in the absence of other
evidence. Vis-à-vis the standard revenue sharing agreement,
the CCI observed that the same could not be held to be
anti-competitive as it was a result of an agreement among between
producers’ and exhibitors’ industry bodies after due
deliberations during the pendency of a proceeding before the CCI in 2009.

V. Abuse of Dominance

2019 turned out to be a bad year for the new age digital economy
companies namely Google, Uber, and MakeMyTrip.

In today’s day and age where technology driven markets are
increasingly gaining importance and contributing heavily to
India’s economy, the Apex Court has clamped down on predatory
pricing practices by popular cab aggregator Uber vide its
judgment dated 03.09.2019. The complaint
against Uber was first instituted before the CCI by homegrown radio
taxi operator Meru Travel Solutions in 2015 on the ground that Uber
pays its driver partners / car owners on its network in Delhi
unreasonably high incentives in addition to the trip fare received
from the passengers, which results in a per trip net loss of INR
204 to Uber – amounting to predatory pricing by a dominant
enterprise. The CCI dismissed the complaint which was overturned
by the COMPAT which held that there Meru had placed sufficient
material before the CCI to justify an investigation.

The Supreme Court noted that on the basis of the incentive
structure itself which appeared to result in a significant net loss
per trip, it appeared that Uber’s actions would certainly
affect its competitors in the relevant market and that an
investigation was merited in this regard. Now that the CCI has
gained more clarity pursuant to the conclusion of its market study
on the e-commerce sector, it remains to be seen whether Meru’s
complaint is viewed in a different light.

Google again found itself under the CCI’s
scanner in relation to its Mobile Application Distribution
Agreement which restricted OEMs who wished to develop and sell
devices operating on alternate versions of the Android operating
system (Android forks) from pre-installing their proprietary
‘must-have’ apps such as the Google Play Store. Echoing the
anti-competitive practices found abusive in the record breaking case in Europe, the CCI
delineated the relevant market as the “market for
licensable smart mobile device operating systems in
India”. The associate relevant markets defined were the
market for application stores for Android, and the market for
online general web search services. The CCI prima facie
found Google to be dominant in all the three relevant markets.

Marking a significant departure from past practice related to
developing markets and new technologies, vide an order passed on 28.10.2019, the CCI directed
the DG to conduct an investigation against India’s own unicorn
MakeMyTrip-GoIbibo (MMT-Go) and OYO for alleged
violation of Sections 3 and 4 of the Act on the basis of an
information filed by the Federation of Hotel & Restaurant
Associations of India. Departing from its order approving MMT’s acquisition of rival
Ibibo in 2017 where the market was delineated as the
“sale of travel and travel related services”,
this time around the CCI took a more open-ended approach owing to
the rapidly evolving nature of the sector and, in an attempt to
distinguish the Online Travel Agency segment from offline
distribution channels, defined the relevant market as
“market for intermediation services for online hotel
booking”.

MMT-Go’s alleged conduct under scrutiny includes Across
Platform Parity Agreements imposed unilaterally by MMT-Go on
hotels, containing the so-called ‘most favoured nation retail
clauses’ which obligated hotels to provide the most favorable
pricing and non-pricing terms on MMT-Go vis-à-vis that
offered to other distribution channels (online or offline). Other
areas of concern expressed by the CCI included discriminatory
application of service fees, and predatory pricing by MMT-Go, while
it refrained from ordering an investigation into the charging of
exorbitant commissions. MMT-Go and OYO were also charged with
entering into an anti-competitive agreement to provide preferential
treatment to OYO’s listings on the platform to the exclusion of
its competitors Treebo and Fab Hotels.

An investigation was also launched into Intel on the basis of a
complaint filed by Matrix Info Systems wherein allegations against
unfair and discriminatory provisions in the warranty policy for
boxed microprocessors in India were levelled against them. The CCI
in its order dated 09.08.2019 noted that the new
warranty policy was restrictive of the rights of consumers, and
held that the distinction made by Intel between warranties on
products purchased in India and from authorized distributors in
other countries is prima facie unfair and discriminatory,
especially when seen in light of the fact that such differential
treatment is not meted out by Intel in any other jurisdiction.
Consequently, the DG was directed to submit his findings so as to
ascertain whether there has been an abuse of dominance in violation
of Section 4 of the Act.

Following in the footsteps of its previous orders initiating
probes into governing bodies of cricket, hockey, athletics and chess, the CCI directed the DG to initiate an
investigation into the alleged abuse of dominance by the Volleyball
Federation of India vide order dated 07.08.2019. The impugned conduct
manifested in the form of the Federation’s agreement with
Baseline Ventures (India) granting them exclusive rights to
organize volleyball tournaments for 10 years and undertaking to
restrict volleyball players from participating in tournaments
organized by other entities, thereby amounting to potential
foreclosure of access to the relevant market for Baseline’s
competitors. Furthermore, the CCI opined that the agreement also
served as a restriction on the players’ right to freely provide
their services through participation in tournaments promoted by
other organisations.

In October 2019, the CCI directed an investigation into an airport operator,
GMR Hyderabad International Airport Limited
(GHIAL), for alleged abusive conduct in violation
of the provisions of Section 4 of the Act. on the basis of an
information filed by Air Works India, a third party provider of
Line Maintenance Services (LMS) services at the
Rajiv Gandhi International Airport, for refusing to renew its
license (which had expired by efflux of time) to utilize space at
the airport premises for providing LMS to airlines. The CCI held
that access to the space at the airport premises is an input which
is indispensable to the provision of LMS and would be considered an
“essential facility” for provision of services in the
downstream market. Further, the CCI observed that there were only
two significant LMS providers at the airport, of which one was
GHIAL’s group entity GMR Aero Technic, and prima facie
it appeared that GHIAL’s action of refusing to renew Air
Works’ license was aimed at monopolizing the LMS market at the
airport.

In a rather interesting case involving the interplay of
competition law and consumer protection, the CCI in National Consumers Co-operative Federation of India
Ltd. v. New Town Electric Supply Company dismissed a complaint
filed by a cooperative society against an electricity distributor
in West Bengal on the ground that the complaint which arose from a
‘deficiency of service’ by the discom was a consumer
dispute with a state body, thereby excluding the jurisdiction of
the CCI under the Act. It is pertinent to note that this dismissal
was made despite having found the discom to be dominant and proof
of its conduct tied to the delay in power supply facilities for
over ten years with numerous representations in this regard having
been ignored by them. This order has been challenged by the
consumer federation before the Appellate Tribunal and given the
obvious error in the CCI’s interpretation of the dispute, one
can only hope that the Tribunal swiftly remedies the same.

Finally, the Appellate Tribunal, vide its order dated 18.12.2019, upheld the CCI’s
order dated 11.07.2018 penalizing South Asia
LPG Company, a joint venture between Hindustan Petroleum and Total
Gas & Power India, for abuse of dominance in the relevant
market of LPG terminalling services at Visakhapatnam Port. While
assessing the informant’s allegations, the CCI held that the
relevant upstream market was the market for terminalling services
at Vishakhapatnam Port, in which SALPG enjoyed a monopoly status,
and its reasons for denial of access to the informant were
unjustified. The CCI directed SALPG to (a) desist from insisting on
mandatory use of its cavern and allow bypassing the cavern for both
pre-mixed and blended LPG; and (b) allow access to its competitors,
potential as well as existing, to the terminalling infrastructure
at Vishakhapatnam Port. In its order, the Tribunal reiterated the
CCI’s findings and stated that SALPG’s restrictions
amounted to a violation of Section 4 as they were solely
incorporated to protect its own commercial interests.

VI. Merger Control

76 Form Is and 13 Form IIs were filed with the CCI in 2019,
while 73 Form Is and 14 Form IIs received approval. Five
transactions – Green Rock-NIIF-Indo-Infra / GVKAHL, Qatar Holdings LLC / Adani Electricity Mumbai
Limited and Adani Electricity Mumbai Services Limited, Muthoot Finance / IDBI Asset Management Ltd. and
IDBI MF Trustee Company Ltd., Masdar / Hero Future Energies Global and Hero
Future Energies Private Limited and BAC Acquisitions / Essel Finance Asset Management
Company and Essel Mutual Fund were approved via the Green
Channel route, introduced in August 2019.

As opposed to 2018, most combinations were approved
unconditionally, while few required minor modifications, and only
one resulting in the appointment of a monitoring agency.

The first significant combination notified by the CCI was the acquisition of 65.96% of the equity share
capital in DEN Networks and 51.34% stake in Hathway Cable &
Datacom, two of the largest cable operators in India, by Reliance
Industries Limited through six of its subsidiaries. This was
however approved only after a voluntary modification to the effect
that the existing customers would not have to change any equipment
at their premises for services currently being availed by them, and
that if required, the parties to the combination would undertake
the cost incurred for any technical modifications to such
equipment. The remedy mirrors that required by the CCI in the Dish TV / Videocon D2h merger in 2017.

That wasn’t all for India’s largest company in 2019, as
it strengthened its presence in the textile manufacturing sector
through its acquisition of insolvent entity Alok
Industries Limited, jointly with a trust managed by the JM
Financial Asset Reconstruction Company Ltd.

In the banking sector the CCI approved the amalgamation of GRUH Finance Ltd.
into Bandhan Bank Ltd. and the subsequent acquisition of 14.96%
stake in the resulting entity by Housing Development Finance
Corporation Ltd. Although the CCI noted that in the micro loans
segment, the combined market share of the parties was in the range
of 25-30% but the same was not likely to raise any competition
concerns due to the presence of various competitors, including
public sector and private sector banks.

The CCI also cleared Power Finance Corporation’s acquisition of 52.63% equity stake along with
management control in REC Limited, necessitated by the
Government’s need to meet its divestment target for the fiscal
year.

Digital economy (again)

In the e-commerce space, the CCI approved the acquisition of Aditya Birla Retail Limited by
Samara Capital (51%) and Amazon (49%). While analyzing horizontal
overlaps CCI found that even though the post-combination market
share was 25-30% in the organized sector for online retail
business, the incremental market share was miniscule.

Yet another transaction involving Amazon NV Investment Holdings
was notified in 2019, wherein the Amazon subsidiary’s acquisition of 0.51% issued, subscribed and
paid-up equity share capital of Quess Corp Limited was cleared by
the CCI. In its order, the CCI observed that Amazon Seller
Services, an affiliate of the acquiring company, and QDigi Services
Limited, a subsidiary of the target company, have entered into an
agreement under which QDigi provides after sale services for
certain category of products sold on the Amazon India marketplace,
to the exclusion of a list of mutually agreed list of
persons. While approving the transaction, the CCI observed
that this restriction was not ancillary to the proposed combination
but did not require the parties to modify it.

The CCI also unconditionally approved Visa’s acquisition of around 13.12% equity shares in
IndiaIdeas.com Ltd. (the holding company of popular payment
aggregator BillDesk), as well as the investment by SoftBank,
Carlyle, and Fosun in Delhivery, a third party logistics service
provider, in three separate orders dated 21.02.2019, 21.02.2019 and 22.03.2019.

While simultaneously ordering an investigation for potential
abuse of dominance against MakeMyTrip, on 20.08.2019, the CCI cleared the acquisition
of 42.52% of outstanding voting securities of MakeMyTrip by
Ctrip.com International. The CCI assessed several narrow markets,
distinguishing between (i) the type of travel services (air ticket,
accommodation, package holidays, etc.); (ii) online and offline
modes of distribution between travel related services; (iii)
intermediation services and direct suppliers; and (iv) domestic and
international travel related services. Horizontal overlaps were
identified for air ticket booking, accommodation booking, and
package holidays, with sub-segments of online and offline,
international and domestic travel. However, CTrip being a marginal
player and the increment being insignificant, the CCI did not raise
any concerns.

Airports (again)

The CCI also took its first deep dive into the airport
management and operations sector in the context of the INR 8000 crore transaction involving the GMR
group, which manages the Delhi and Hyderabad airports, two of
the four major airports in the country. The CCI held that each
airport constituted a relevant (upstream) market, there being no
competing airport in the vicinity. The relevant downstream market
was the “market for provision of air transport activities
and other specific services at each of the target
airports”.

The CCI noted that none of the acquirers – Tata, GIC, and
SSG (or their portfolio companies) – were in the business of
developing and operating airports in India, and thus to that extent
there were no horizontal overlaps with the target entity, GMR
Airports Limited. In terms of vertical overlaps, none of the
portfolio companies forming part of the GIC group or SSG group were
engaged in the same business as the Target. Tata however has a
majority stake in two airlines namely AirAsia India (51%) and
Vistara Airlines (51%), as well as other services provided on the
commercial (non-aeronautical) side of the airport.

The CCI’s concerns primarily focused on slot allocation,
noting that the vertical relationship between the airlines and the
airports could lead to a conflict of interest as there may be an
incentive on the part of the parties to foreclose access to
competing airlines. The CCI also wrote to the Ministry of Civil
Aviation and the Airports Authority of India asking for their
views. Despite the parties’ arguments that there was a robust
regulatory process in place which involved all the airlines
participating as well, it appears the CCI was unmoved, and
consequently, Tata tendered the following commitments, namely to
refrain from (i) appointing a director/Key Managerial Person in the
airport operating companies in India (the Target’s subsidiary
companies managing the airports); (ii) appointing a director on the
Board of the Target who is a director of any entity that is
operating a scheduled airline in or outside India; and (iii)
exercising voting rights in matters of slot allocation and from
directly/indirectly disclosing any commercially sensitive
information pertaining to slot allocation to the nominee director
appointed on behalf of the Tata Sons group.

Healthcare & pharmaceuticals

In the healthcare and pharmaceuticals sector, the CCI approved the proposed combination of Max
Healthcare, Radiant Life Care and KKR Group-backed Kayak
Investments Holding. This marks the second in-depth analysis in
this sector, following the IHH Healthcare Berhad / Fortis deal. While
assessing the relevant product market, the same was carried out in
terms of total number of hospitals, total number of relevant
operational beds and number of procedures (volumes) for secondary,
tertiary and quaternary procedures separately, in Delhi. Further,
since the market for quaternary procedures such as transplants of
heart, liver, lungs, etc. are at a very nascent stage in India,
they were not likely to give rise to competition concerns.

This was followed by the CCI giving the go ahead to the GlaxoSmithKline / Pfizer combination, wherein
a new joint venture was proposed to be formed by bringing together
certain consumer healthcare products of GSK and Pfizer. Following
established practice, the CCI looked into overlaps at the ATC3 and
ATC4 levels across four product segments and held that as the
combined market share of the parties and the new joint venture was
not over 30% in any product, the presence of competitors would
continue to provide competitive constraint to the parties
post-combination.

The first blocked transaction…almost

The L&T / Schneider transaction turned out to
be the most challenging one approved during the year. On
16.07.2018, Schneider Electric and MacRitchie Investments, a
subsidiary of Singapore based Temasek, filed a notice in relation
to the acquisition of the electrical and automation business of
Larsen & Toubro (L&T) as a going concern.
In only its eight time in as many years, the CCI decided to send
the transaction to ‘phase II’, concluding that there would
be significant damage to competition in the Low Voltage
(LV) Switchgear sector. The CCI delineated the
market on two levels, the first being each of the 29 overlapping
products, and the other at the clustered level, given that in the
sector a customer ordinarily purchased the entire cluster of
products from one brand for building a switchboard.

In six products, Schneider and L&T combined accounted for
45% – 60% of the market. Unsurprisingly, the CCI concluded
that the proposed transaction would cause appreciable adverse
effect in the market as:

It was a consolidation of the first and second players in terms
of sales and distribution reach;

There was a strong preference for use of same brand of products
in building a switchboard and thus a player offering complete
portfolio of components has an inherent advantage. L&T and
Schneider had the widest range of offerings in the LV switchgear
market in India;

the next competitor would be three times smaller than the
Combined Entity;

the Combined Entity would lock a larger part of the
distribution network, panel builders and other downstream players
through their exclusive distribution arrangements, thereby making
entry of new players far more difficult;

establishing a brand and optimal distribution network in the LV
switchgear market is a time-consuming process in the industry.

In order to remedy the concerns, the CCI proposed the divestment
of L&T’s business in relation to six LV switchgear products
having high market shares, and two plants of L&T. However, as
both plants were multi-product integrated plants, with common sales
and marketing teams, and senior R&D resources, the CCI agreed
to rectify the anti-competitive effects of the transaction through
behavioral commitments. The parties agreed to strengthen existing
LV manufacturers by offering them products under a white-labelling
arrangement on a long-term basis, along with the eventual transfer
of technology on a nonexclusive basis. The parties also agreed to
remove all clauses that led to exclusivity of their distribution
network (discounts and rebates).

Unwilling to block its first transaction, the CCI eventually
accepted the complex set of remedies and approved the combination.
As usual, a monitoring agency was appointed to oversee the
implementation of the commitments. However, the CCI will also be
taking an active role and reviewing yearly reports to be filed by
the parties elaborating how the commitments were affecting the
competitive scenario in the market.

Conclusion

There is a lot to watch out for in 2020, in terms of whether the
recommendations of the Competition Law Review Committee will
culminate in legislative changes being introduced taking into
account the burgeoning need for settlements and commitments in the
Indian regime. Further, the Report also opens up possibilities of
the CCI establishing its presence at regional levels in India,
which may significantly bolster the efficiency of its investigative
arm, which currently operates out of its seat in Delhi. The CCI has
already made headway on the digital economy with investigations
being launched into Amazon and Flipkart less than a week after its
findings in the market study conducted on the Indian e-commerce
sector were made public. Shortly after Zomato announced its acquisition of Uber Eats, which
makes the app-based food delivery market a two-horse contest with
Swiggy, and while the transaction itself did not require CCI’s
approval, we could quickly see an investigation being opened on
this front as well.

Avantika is an Associate in the Competition Law Practice
Group at L&L Partners, New Delhi. She graduated from National
Law University, Jodhpur in 2019 with a B.Sc., LL.B. degree with a
specialization in Business Laws. At the firm, she has handled
matters pertaining to cartel investigations and leniency
proceedings and has represented both international and domestic
clients across various sectors, inter alia, alcobev, shipping and
airport operations & management. She can be reached at aarun@luthra.com.

Abdul is a Partner in the same Practice Group at L&L. He
can be reached at ahussain@luthra.com.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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