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The Quarterly Newsletter of Competition Commission of India (CCI)

Fair competiton for greater good

VOLUME 7 : OCTOBER - DECEMBER 2013

In Focus : BRICS Way to Competition Cooperation

IN THIS ISSUE...
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FROM THE DESK OF THE CHAIRPERSON IN FOCUS BRICKS WAY TO COMPETITION COOPERATION SECTION 3 & 4 ORDERS INVESTIGATIONS INITIATED
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INAUGURAL ADDRESS OF HONBLE PRIME MINISTER


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SECTION 5 & 6 ORDERS


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ADVOCACY INITIATIVES
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ENGAGING WITH THE WORLD

EVENTS
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DEVELOPMENTS IN OTHER JURISDICTIONS


EDITOR: DR. SEEMA GAUR

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KNOW YOUR COMPETITION ACT

SUB EDITOR: DR. SANJAY PANDEY

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FROM THE DESK OF THE CHAIRPERSON

More than a hundred nations have enacted Competition Laws. Increasingly, however, the practices and transactions that fall within the purview of the laws are in international commerce. Laws are national, but markets do not stop at national borders. Money flows seamlessly and multinationals operate all over the world. Hence, the need for broadly harmonized principles in the application of divergent Competition Laws under different flags. A basic building block, in pursuance of this objective is co-operation between and amongst competition authorities. This also serves to build capacity in newer jurisdictions. The Competition Act, 2002 specifically provides for this; Section 18 provides that. the Commission may, for the purpose of discharging its duties or functions under this Act, enter into any memorandum or arrangement, with the prior approval of the Central Government, with any agency of any foreign country. The Competition Commission of India (CCI) has, right from its inception, taken this provision seriously. We have signed Memorandam of Understanding (MOU) with the Russian Federation, United States Federal Trade Commission and Department of Justice, the Australian Competition and Consumer Commission and, more recently, with the European Commission. To carry this forward, we are considering MOUs with BRICS countries as a grouping, with China, Japan and some other countries. The agreements will enable the professional staff of the CCI to interact with their counterparts and work jointly to mutual advantage on matters, more specifically on global cartel investigations and on Mergers and Acquisitions with the potential of adverse effects on competition in India. It will also provide the necessary umbrella for cross-border learning through the instrument of secondments and short-training programmes. All the BRICS economies have embraced modern competition law. Like so many other countries, they are now more open and more connected to the world than in the past. They are facing several common challenges in implementation of the law. When challenges are by and large similar, it makes sense to cooperate and learn from each other rather than reinventing the wheel again. BRICS Competition platform is a fit platform to do this and resolve to cooperate among BRICS competition authorities is very clear.

Ashok Chawla 3
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IN FOCUS
BRICS Way to Competition Cooperation

Business and money know no geographical boundaries. The increasing integration of the world economy in the form of multi-jurisdictional mergers and cross-border anti-competitive conduct makes international cooperation vitally important for all modern competition authorities.
Dr. Manmohan Singh, Hon'ble Prime Minister of India

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3rd BRICS International Competition Conference


The third BRICS International Competition Conference was organised by the Competition Commission of India in New Delhi during November 21-22, 2013. The theme of the conference was Competition Enforcement in BRICS Countries: Issues and Challenges. Approximately three hundred delegates from India and other

jurisdictions, including delegates from the BRICS competition authorities participated in the conference. The conference was inaugurated by Hon'ble Prime Minister of India Dr. Manmohan Singh, on November 21, 2013.Hon'ble Minister of Corporate Affairs Mr. Sachin Pilot delivered the key note address. The two day Conference consisted of 6 substantive

sessions, besides the inaugural, plenary and closing sessions. During the conference, discussions focused on issues and challenges in setting up an effective agency, enforcement vis--vis state owned enterprises, public procurement and creation of competition culture. A separate session was provided for experience sharing by mature jurisdictions. The last session deliberated on transforming cooperation from ideas into action. The
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...the competition authorities of the BRICS embark on an exercise of jointly addressing the common challenges they face in enforcing competition regimes. This could be done on the basis of home-grown solutions proposed by BRICS competition authorities as well as the experience of more mature jurisdictions shared during the conference.
Shri Sachin Pilot, Hon'ble Minister of State (IC) for Corporate Affairs.

Chairperson, Competition Appellate Tribunal Mr. Justice (Retd) V. S. Sirpurkar, delivered the keynote address during the closing session of the Conference on November 22, 2013.

Experience Sharing as a Tool of Competition Cooperation


CCI Chairperson Mr. Ashok Chawla traced the evolution of BRICS from being a virtual organisation to a global reality and emphasized the vital role played by the BRICS economies in changing the landscape of economic reforms at domestic, regional and global level. Hon'ble Prime Minister Dr. Manmohan Singh observed, BRICS competition authorities face unique challenges in the enforcement of competition law such as under development, institutional design problems and government regulations. International cooperation would play a role in facing these real world challenges, which are significant for successful implementation of a competition regime. He also stated that increasing integration of the world economy in the form of multi-jurisdictional mergers and cross-border anti-competitive conduct makes international cooperation vitally important for all modern competition authorities. He appreciated that the present conference has brought together leading practitioners and thinkers from 6

the field of competition to provide cross-learning and appreciation of global best practices. It is singularly well suited to share experiences regarding common challenges and articulate a new consensus on key issues. BRICS Competition Authorities are also ideally positioned to bridge the gap between mature competition authorities and nascent ones. It is worth noting that the BRICS International Competition Conference since its inception in 2009 has focused on experience sharing on competition enforcement (amongst the BRICS countries as well as with other competition jurisdictions) as a tool of competition cooperation. This was aptly stated by Union Minister of State (Independent Charge), Ministry of Corporate Affairs Mr. Sachin Pilot during his keynote address, Since the first conference in 2009, the BRICS countries have come a long way. The theme of each successive BRICS International Competition Conference has focused on deeper cooperation and understanding of the respective competition authorities. BRICS competition conferences provide the building blocks for a formal collaborative process.

New Vistas of Cooperation


BRICS Competition Authorities identified several areas of co-

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operation amongst them. The role of competition cooperation was considered relevant for a competition authority in its initial setup, capacity building, institutional development,

operational effectiveness, and tackling of various challenges faced. Experience sharing on advocacy for developing culture of competition was also identified as an area of

cooperation. State owned enterprises are very important part of BRICS economies and BRICS competition authorities face largely similar challenges in enforcing competition law

Competition Law, Innovation and Economic Development: Experience Sharing by Mature Jurisdictions
A unique feature of the New Delhi conference was a special session on experience sharing by mature jurisdictions (Australia, Canada EU, France and the USA) on role of competition law in encouraging innovation and economic development. Mr. Joaqun Almunia, Vice President (EC) & European Commissioner for Competition delivered the keynote speech. It was recognized that competition policy is the best policy to foster innovation, economic development and good governance.

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cooperation, especially when BRICS countries themselves are competitors in global trade.

The Delhi Accord


The BRICS Competition Authorities recognised the global nature of competition law and its impact on the development of the economy and signed the Delhi Accord during the 3rd BRICS International Competition Conference. The signing of the Delhi Accord is a reiteration of the commitment of the BRICS countries to enhance cooperation among them to meet the challenges of competition enforcement. They also recognised the benefits of technical cooperation in respect of the sound and effective enforcement of competition laws and expressed their commitment to exchange views and experiences on different aspects of competition policy. The Accord also expressed the commitment of Competition Authorities of Brazil, Russia, India, and China to support the hosting of the Fourth BRICS International Competition Conference in 2015 by the Competition Commission of South Africa.

Fusion of Indian and Western music - a performance by Tripti - The mystical sounds of the Golden Bird at the welcome reception on November 20, 2013.

against them. Mutual experience sharing on competition enforcement against them to ensure level playing field, while keeping in view socio-economic obligations imposed on them is a rich area for BRICS competition cooperation. Another area is public procurement, which constitutes a very significant proportion of BRICS economies. Experience

sharing on how to detect bid rigging in public procurement markets and rid them of it and ensure value for public money may be highly useful for BRICS competition authorities. The mode or instrumentality of cooperation may include formation of working teams, training, staff exchange and MOU. BRICS competition authorities also recognised challenges they may face in

The Way Ahead


The need of international cooperation in competition enforcement has grown by leaps and bounds due to the increasingly global nature of anti-competitive activities and

Classical Dances of India by Reela Hota Troupe at the dinner reception on November 21, 2013.

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Brazil

Russia

China

South Africa

Bilateral Meetings with BRICS delegations

the role played by the BRICS International Competition Conference in this respect is very vital. The New Delhi BRICS competition conference heralds a new phase of competition cooperation wherein competition authorities of emerging economies and mature jurisdictions shared enforcement experience and identified solutions to make businesses and government institutions competition compliant. The experience sharing by various competition jurisdictions regarding

challenges faced in enforcing their respective competition law provides a roadmap for the future cooperation. This includes inter alia exchange of experience in competition advocacy, sharing of confidential information for enforcement, and capacity building. BRICS competition authorities need to initiate joint action in order to transform ideas generated in BRICS competition conferences into action.

Chairperson, Competition Appellate Tribunal Mr. Justice (Retd) V. S. Sirpurkar, delivering the keynote address in the closing session.

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3rd BRICS International Competition Conference

Inaugural Address By Hon'ble Prime Minister Dr. Manmohan Singh

Minister for Corporate Affairs, Shri Sachin Pilot ji, Vice-President, European Commission, Mr. Almunia, Chairman, Competition Commission of India, Shri Ashok Chawla, Members of the Commission, Distinguished Delegates, Ladies and Gentlemen! It gives me great pleasure to be in your midst on the occasion of the 3rd BRICS International Competition Conference. I extend my warm greetings to all our guests.

The BRICS partnership started as a loose juxtaposition of geographically dispersed countries based on features such as growth rates, sizeable educated workforces, large domestic markets and natural resource endowments. The BRICS countries have a combined population of 3 billion with a total estimated GDP of nearly $14 trillion and around $4 trillion of foreign exchange reserves. China is on the path to becoming the undisputed global leader in export of manufactured goods; India is poised to become

the most significant exporter of services. Russia and Brazil dominate as exporters of raw materials. South Africa is ideally situated to reap dividends from the untapped growth potential of the African continent. While the BRICS countries can entertain many possibilities for newer forms of economic and political co-ordination, we also face common challenges. Monitoring and managing speculative capital flows is a challenging task in times of global

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uncertainty. Maintaining a sustainable fiscal policy, while incurring significant public expenditures to raise the standards of living of a large population, is also a task that we continually grapple with. Developing infrastructure at a pace that supports the growth of industry and the increasing aspirations of the people is another challenge before us. Last, but by no means least, there is the need for building credible institutions for sustained and equitable growth. Ladies and Gentlemen, The BRICS countries have chosen differing growth paths suited to their macroeconomic conditions and varied institutional strengths. Yet, I have no doubt that their emergence as economic powerhouses, is now an inescapable secular trend which will have a powerful impact on the world. Along with our goal of strong and sustained economic growth, we have made a

commitment to support the longterm growth of the global economy. This is expected through increased economic, finance and trade cooperation as mentioned in the Sanya Declaration of 2011. In keeping with this, there has been continuous development of BRICS as an institution, which has created structures for cooperation at different levels, in various areas. Two of the most significant agreements in the pipeline are those that will result in the setting up of a BRICS Development Bank and a Contingency Reserve Arrangement. Ladies and Gentlemen, Growth, development and poverty reduction are the most important challenges that our governments face. To meet these challenges, governments look for a sound architecture of policy in which the beneficial effects of markets can be maximised by action to prevent market failure. The development of a sound Competition policy is an

essential element of such architecture. Anti-competitive behaviour deprives markets of their ability to deliver efficient results and hurts the poor most of all. But fair and effective competition in markets is easier said than done. It has to be created and enforced through public policy. Otherwise, private barriers may simply substitute governmental barriers to trade and prevent improvements in social welfare. In 1991, India embarked on a path of economic reforms, the essential elements of which were liberalization, privatization and globalization. The erstwhile Monopolies and Restrictive Trade Practices Act of 1969, enacted at a time when India had a command and control economic policy paradigm, was inadequate to regulate the market and ensure promotion of competition therein. A modern Competition Act in tune with the new economic philosophy was required. This led Parliament

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to enact the Competition Act, 2002.Unlike the MRTP Act, the new Competition law does not restrict the size of firms or the concentration of ownership. Ladies and Gentlemen, Emerging economies face unique challenges in the enforcement of competition law. In addition to the problems of under development, institutional design problems and government regulation characterize our economies. These are realworld challenges that have to be recognised for the successful implementation of an antitrust regime. A competition law enforcement regime cannot operate in isolation but instead is shaped and transformed by the existing socioeconomic ideology and by other available policy tools. The economic objectives promoted by competition law on the one hand and prevailing socio-economic ideologies on the other are often in conflict with each other in economies in transition. This could limit the role and potential of competition law enforcement regimes. Increased awareness of competition rules resulting in the establishment of a competition culture in our economies can, therefore, go a long way in the effective implementation of competition law. I am glad that creation of a competition culture is being discussed at this conference. There is an increasing need to recognise the complementarities between competition law enforcement and liberalization of markets for procurement. Public procurement, more specifically, is a substantial slice of State spending

in emerging economies. Elimination of unnecessary restrictions and better tender design and specification can enhance possibilities for effective competition, thereby making bid rigging more difficult. As a result, competitive procurement markets can help save valuable fiscal resources and release funds for development. State owned or public sector enterprises are another challenge. By virtue of their ownership, they have been shielded from competition and have long enjoyed captive markets. A crucial issue is the exposure of these firms to competition. The government may own a public sector firm and exercise the normal rights of ownership. This does not mean it should shelter it from competition as well. Unfortunately, government ownership inevitably brings with it a bureaucratic style of decisionmaking and the end result is that the enterprise cannot compete in a market populated by equals. The solution lies in giving public sector firms greater functional autonomy and freeing them from bureaucratic control, and not in tolerating a slip in their competitiveness and then shielding them from competition. Several possible distortions can arise because of the advantages some public sector businesses have due to their government ownership. Competitive neutrality requires that the government not use its legislative and fiscal powers to give undue advantage to its own businesses over the private sector. Going forward, our governments will have to increasingly adopt competition neutral policies.

Ladies and Gentlemen, Cooperation in competition policy and enforcement is of vital importance in the above context and I am glad that this conference has selected these themes for discussions and interaction. Business and money know no geographical boundaries. The increasing integration of the world economy in the form of multijurisdictional mergers and crossborder anti-competitive conduct makes international cooperation vitally important for all modern competition authorities. This takes on greater significance in view of the increasing trade flows among BRICS nations. The International Competition Conference is an important platform that brings together leading practitioners and thinkers from the field of competition to provide cross-learning and appreciation of global best practices. It is singularly well suited to share experiences regarding common challenges and articulate a new consensus on key issues. BRICS Competition Authorities are also ideally positioned to bridge the gap between mature competition authorities and nascent ones. I am confident that the next two days will see robust discussions covering all the challenges faced by the BRICS countries in the enforcement of their respective competition regimes. I wish you the very best in this endeavour.

Thank you.

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SECTION 3 & 4 ORDERS

Coal India
penalised for abuse of dominance
CCI imposed penalty of`Rs 1773.05 Crore on Coal India Ltd (CIL) for abuse of dominance under section 4 of the Competition Act, 2002 (the Act). CCI passed penalising order under section 27 of the Act pursuant to investigation by the Director General (DG) in case Nos. 03, 11 & 59 of 2012 upon information filed by M/s Maharashtra State Power Generation Company Ltd. and M/s Gujarat State Electricity Corporation Ltd. CCI imposed penalty on CIL at the rate of 3 per cent of the average turnover of the year 2009-10, 2010-11 and 201112 by taking into consideration its consolidated accounts. CCI found that CIL operates independently of market forces through its subsidiaries and enjoys undisputed dominance in the relevant market of production and supply of non-coking coal in India. It was also found that the opposite parties are imposing unfair/discriminatory conditions and indulging in unfair/ discriminatory conduct in the matter of supply of non-coking coal to power producers. Further, CCI agreed with the findings by the DG and held that various clauses of the fuel supply agreements signed with the informants were in contravention of the provisions of section 4(2)(a)(i) of the Act. These clauses related to the sampling and testing procedure, charging the

transportation/other expenses from the buyers on supply of ungraded coal, deemed delivery quantity (DDQ), force majeure capping on compensation for supply of stones for new power producers, review and termination provisions of the agreement and discrimination between existing and new power producers with respect to review of grade for new power producers to be. The opposite parties have also been directed to 'cease and desist' from indulging in any activity found to be in contravention of the provisions of the Act. CCI also directed modification in fuel supply agreements in the light of the observations and findings recorded in order. For effecting these modifications in the agreements, CCI directed CIL to consult all the stakeholders and ensure parity between old and new power producers as well as between private and PSU power producers, as far as practicable. CIL has also been directed to incorporate suitable modifications in the fuel supply agreements to provide for a fair and joint sampling and testing procedure. CCI suggested that CIL may consider and examine the feasibility of sampling at the unloading-end in consultation with power producers besides adopting international best practices and further advised CIL to consider hastening the process of installing Augur Sampling Machines and washeries to help improve the coal supplied.

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SECTION 3 & 4 ORDERS


Modifications in FDI norms by the Government do not constitute abuse of dominance

While considering an allegation of abuse of dominance by modification of policy against the Government, CCI found Government Department as an enterprise under the Act. However, CCI did not find the modified policy abusive under the provisions of the Act. In Case No. 39/2013, the informant challenged the conduct of Department of Industrial Policy & Promotion (DIPP), Ministry of Commerce & Industry in revising Press Note No.6 (2012 Series) modifying foreign direct investment policy in the civil aviation sector in a manner allegedly inconsistent with the scheme, intent and object of the Act. DIPP's Press Note No. 6 (2012 Series) permits foreign airlines to invest in the capital of Indian companies engaged in scheduled and non-scheduled air transport services up to a limit of 49 per cent of their paid-up capital except Air

India. As per Informant, airlines were allowed to participate in the equity of companies operating cargo airlines, helicopter and sea plane services, but not in the equity of scheduled and non-scheduled air transport services. Under the then prevalent policy of the Government of India, 49 per cent FDI (100 per cent for NRIs) through automatic route was permitted in Scheduled Air Transport Service/Domestic Scheduled Passenger Airlines. No foreign airline was allowed to participate directly or indirectly in the equity of an Air Transport Undertaking engaged in Scheduled and NonScheduled Air Transport Services except Cargo airlines and was uniformly applicable to all the airlines (including Air India).It was alleged that DIPP , by virtue of its role in formulation, promotion, approval and facilitation of FDI in India, enjoyed a monopoly under 'Formulation, promotion, approval

and facilitation of Foreign Direct Investment policy in civil air transport services in India'. Proposed exclusion of Air India from the changes in FDI architecture for Civil Aviation sector would result in reverse discrimination against Air India at the cost of taxpayers. CCI noted that the policy pronouncement on FDI through Press Notes/Press Releases by DIPP prima facie amounts to control of provision of services in the relevant market. A department of the Government can be classified as an enterprise, if the functions discharged by it amounts to 'control of articles or goods, or the provisions of services'.Accordingly, CCI opined that prima facie, DIPP appears to be an enterprise as defined under section 2(h) of the Act. However, CCI held that as per the Government of India (Allocation of Business) Rules, 1961 framed by the President of India in

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exercise of powers conferred under Article 77(3) of the Constitution, DIPP is constitutionally empowered to frame such executive policy on FDI. The referred Press Note gave an additional option to all private airlines to finance their capital needs through foreign direct investments from foreign airlines.

This does not affect their interest inter-se and may promote competition in the relevant market by facilitating cash crunch airlines to avail FDI for their operations, growth and expansion. Not allowing FDI from foreign airlines in Air India does not appear to be hampering competition in the

relevant market any way. As such, this action does not prima facie seem to create any appreciable adverse effect on competition in markets in India. The matter was accordingly closed under section 26(2) of the Act.

Quotes in narrow band are not bid rigging


alleged cartelisation by the Opposite Party Nos. 2 to 4 (liaison work contractors in coal industry) in collusion with the Opposite Party No. 1 (a company created by the Government of Maharashtra for the purpose of generation of power for supply in the State of Maharashtra) in the matter of provision of liaison work for its thermal power stations. Basic thrust of the grievance of the Informant centred around the fact that MAHAGENCO floats tenders for coal liasoning and subsequently cancels them for various assigned reasons and thereupon as a stop gap arrangements, work orders are issued to the Opposite Party contractors. Further, the Informant alleged that the opposite party contractors have distributed the markets inter se and make exorbitant quotations for their bids, and whenever new entrants seek to enter the market, unnecessary disputes about qualification of such competitors are raised by the entrenched contractors, all in collusion with the procurer. CCI observed that quotes in narrow band cannot be termed as identical or similar to constitute anticompetitive agreement, absent any other evidence or circumstance. Further, CCI held that the Opposite Party No. 1 is a government company and examination of any allegation of corruption or favouritism per se on its part or on the part of its officers is beyond the purview of the jurisdiction of the CCI. Further, the Commission held that allegations of the informant relating to contravention of the provisions of section 4 of the Act by Opposite Party No. 1 along with the three named contractors are misconceived as they do not fall within the definition of 'group'. Even at a dis-aggregated level, assuming Opposite Party No. 1 to be dominant in the market of procurement of liaison work relating to coal in the State of Maharashtra, the allegations made by the Informant against it of favouritism and corruption cannot be said to fall within the purview of section 4 of the Act. Accordingly, CCI closed matter and passed order under section 26(2) of the Act.

An information alleging contravention of the provisions of sections 3 and 4 of the Act was filed by Mr. Surendra Prasad (Case No.61 of 2013) against M/s Maharashtra State Power Generation Co. Ltd. (Opposite Party No. 1), M/s Nair Coal Services Ltd. (Opposite Party No. 2), M/s Karam Chand Thapar & Bros. (Opposite Party No.3) and M/s Naresh Kumar & Co (Opposite Party No.4) ct. The Informant

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SECTION 5 & 6 ORDERS


Jet-Airways and Etihad Airways Combination is approved

Jet Airways (India) Limited ('Jet') is an airline primarily engaged in the business of providing low cost and full service scheduled air passenger transport services within and to/from India. Etihad Airways PJSC ('Etihad') is the national airline of UAE, based in the emirate of Abu Dhabi. Etihad is primarily engaged in the business of international air passenger transportation services. Jet and Etihad filed a joint notice with CCI for the acquisition of 24 percent equity stake and certain other rights in Jet by Etihad pursuant to an Investment Agreement ('IA'), a Shareholders' Agreement ('SHA') and a

Commercial Cooperation Agreement ('CCA'). The Parties entered into a composite combination comprising inter alia the IA, SHA and the CCA with the common/ultimate objective of enhancing their airline business through joint initiatives. The effect of the said agreements including the governance structure envisaged in the CCA establishes Etihad's joint control over Jet, more particularly over the assets and operations of Jet. The Commission found that the relevant market for the purpose of assessment of the combination is the market for international air

passengers: (a) on the origin & destination (O&D) pairs originating between 9 cities in India (Kochi (COK), Bombay (BOM), Hyderabad (HYD), Thiruvananthapuram (TRV), Bangalore (BLR), Kozhikhode (CCJ), Ahmedabad (AMD), Delhi (DEL) and Chennai (MAA)) and United Arab Emirates (UAE); and (b) on the O&D pairs originating from or ending in India to/from international destinations on the overlapping routes of the parties to the combination. For the purpose of defining the relevant market, the Commission held O&D approach to market

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definition as an appropriate starting point for the competition analysis in air transport cases. However, in arriving at the relevant market definition, the Commission made a distinction between different groups of passengers and observed that Indian passengers on the 9 direct overlapping O&D pairs are generally more price sensitive and less time sensitive. Moreover, passengers living in the catchment areas of two or more airports may consider these airports as substitutable to each other. Considering these, the Commission noted that in the case of passengers travelling to Abu Dhabi, there are 3 international airports in UAE that passengers might consider as substitutable with each other i.e. Abu Dhabi (AUH), Dubai (DXB) and Sharjah (SHJ). The Commission also undertook a competition assessment of the O&D city pairs between India and Abu Dhabi and concluded that there is sufficient restraint on market power in all the O&D routes between different call points in India and Abu Dhabi. It was also observed that the Parties and Air India are likely to increase their services in a phased manner on Mumbai-Abu Dhabi and Delhi-Abu Dhabi routes, which would mitigate the potential apprehension regarding reduced competition, if any. As regards the other overlapping O&D pairs between different call points in India and other foreign destinations, the Commission observed that there are 38 routes to/from India to other destinations, where both Etihad and Jet fly and there is at least one competitor on the route. Of these, only for 7 routes, Jet and Etihad have a combined market share of greater than 50 percent. Of these 7 routes, on 3 routes either Jet or Etihad has

a market share of less than 5 per cent. For instance, on the Bombay (BOM)-Brussels (BRU) route, Jet has a market share of 72.90% and Etihad has a market share of 3.30%. On the AMD-BRU route, Jet has a market share of 83.10%, while Etihad has a market share of 2.61%. Thus, post transaction change in market share is marginal for the combined entity and the deal does not alter the competition dynamics.

The Commission, vide majority order dated November 12, 2013, approved the combination under sub-section (1) of section 31 of the Act. However, CCI observed that the approval is granted pursuant to the underlying competition assessment based upon the information provided by the Parties, in the notice given under Section 6(2) of the Act(as modified and supplemented from time to time). The approval should not be construed as immunity in any manner from subsequent proceedings before the Commission for violations of other provisions of the Act.
The six of the seven above mentioned routes, where Jet and Etihad have an indirect overlap and the market share is greater than 50 percent consist of Brussels (BRU) and six Indian cities (BRU-AMD, BLR-BRU, BOM-BRU, BRU-COK, BRU-HYD and BRU-TRV) as O&D pairs. The Commission considered airport substitutability in the same catchment area of these O&D pairs and the possibility of their being in the same relevant market. When these airports are considered as substitutable, the combined market

share of Jet and Etihad decreases significantly (it comes down to around 30%). For the one remaining route, Chennai-Toronto (i.e MAA-YYZ), where market share is greater than 50%, Jet and Etihad are not the closest competitor and there is at least one credible competitor in the market from which the customers can choose from an alternative (Emirates, Lufthansa, and British Airways). To summarise, on all routes, passengers have a major carrier to choose from other than Jet and Etihad, which can constraint the pricing behaviour of Jet and Etihad. This will ensure that the passengers can select amongst more than one airline even after the combination. The Commission further observed that Airline alliances create substantial opportunities for generating economic benefits, many of which are dependent at least in part on the closer integration achievable. The Commission, vide majority order dated November 12, 2013, approved the combination under sub-section (1) of section 31 of the Act. However, CCI observed that the approval is granted pursuant to the underlying competition assessment based upon the information provided by the Parties, in the notice given under Section 6(2) of the Act(as modified and supplemented from time to time). The approval should not be construed as immunity in any manner from subsequent proceedings before the Commission for violations of other provisions of the Act. It is incumbent upon the Parties to ensure that the ex-ante approval does not lead to ex-post violation of the provisions of the Act. The Commission also held that the approval shall have no bearing on proceedings under section 43A of the Act.

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SECTION 5 & 6 ORDERS


CCI approves the Acquisition of D&S Business of

by

Microsoft Corporation and Microsoft International (a wholly owned subsidiary of Microsoft) filed a notice under Combinations Regulations in October, 2013 for the proposed acquisition of Devices and Services (D&S) Business of Nokia Corporation and its related arrangements. The D&S business of Nokia includes the mobile phones and smart devices business units, as well as industry design team, operations including production facilities, sales and marketing activities, support functions, and design patents of the devices produced by the D&S business. Microsoft is a multinational software corporation headquartered in USA, and is primarily engaged in the design, development and supply of computer software, hardware devices and related services. Microsoft International is an investment holding company headquartered in Netherlands. Nokia is a multinational communications and information technology corporation, headquartered in Finland. As part of the transaction, Nokia will grant Microsoft a ten year nonexclusive license to its patents with an option to extend the same to perpetuity. Microsoft will grant

Nokia reciprocal rights to use Microsoft patents in the services offered by HERE North America LLC, a subsidiary of Nokia. Additionally, Microsoft will also become a strategic licensee of Nokia's HERE platform, as Nokia will grant Microsoft a four-year non-exclusive license to the HERE geo-spatial data and services. Microsoft would have a ten year license arrangement with Nokia to use the Nokia brand on current and subsequently developed products based on the Series 30 and Series 40 Operating System and Nokia will continue to own and maintain the Nokia brand. In India, Microsoft operates through its subsidiaries and divisions, which represent its products cycle, systems and applications and various state-ofthe-art technologies. In India, Nokia is engaged in the D&S business and Nokia Solutions Networks business through its various subsidiaries and divisions. It also conducts research and development and has mobile device manufacturing facilities in India. The Commission observed that, in India, the proposed combination relates to the business of mobile

handsets (including the smartphones and tablets) and operating systems used in these devices. Nokia is active in the D&S business of mobile handsets, while Microsoft is not active in that business. Presently, Microsoft and Nokia are also not active in the business of manufacturing and sale of tablets in India. It was further noted that Nokia is not active in the business of operating software used in the mobile/smartphones and tablets. The Commission noticed the existence of a vertical relationship between Microsoft and Nokia as Microsoft's Windows Phone OS is used in the Nokia Lumia range of smartphones. However, the Commission took into consideration the minimal share of Microsoft against the presence of major players like Google and Appleas well as other players like RIM, Linux, Firefoxetc. in the business of the operating software used in the mobile/smartphones and tablets in India. Further, the Commission also took note of the minimal share of Nokia in the business of mobile/smartphones and the presence of numerous other global and local players like Samsung, Apple, Blackberry, Sony, HTC, LG, Lenovo, Micromax, Lava, Spice,

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Karbonn etc. in the business of mobile/smartphones in India. In view of the above considerations, the vertical relationship was found to be relatively insignificant. The Commission also observed that these markets are extremely dynamic and are constantly evolving and thereby the product life cycles in these markets are very short. The technology in these businesses is primarily driven by the eco-system and its ability to swiftly integrate the different smart products within a given ecosystem, which incentivises the application developers to constantly innovate for new and better quality products. Therefore, it is the ecosystem in this business, which drives the demand between the users, application developers, and designers/manufacturers. The transaction aims to enhance Microsoft's device business and

In addition to the innovation and strength of the devices at all price points, the present transaction would give Microsoft a proven capability and talent in the critical mass including the hardware design & engineering, supply chain, sales, and marketing. Hence, with the proposed transaction, Microsoft intends to develop a competitive eco-system other than that of Google and Apple which would, therefore, provide an option to the consumers for more choice, innovation and high end quality products.

strengthen opportunities for Microsoft and its developers across the Windows phone eco-system. In addition to the innovation and strength of the devices at all price points, the present transaction would give Microsoft a proven capability and talent in the critical mass including the hardware design & engineering, supply chain, sales, and marketing. Hence, with the proposed transaction, Microsoft intends to develop a competitive eco-system other than that of Google and Apple which would, therefore, provide an option to the consumers for more choice, innovation and high end quality products. The Commission approved the proposed combination under Section 31(1) of the Act, stating that it is not likely to create any adverse effect on competition in India.

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Volume 7 : October - December 2013 Fair Play

INVESTIGATIONS INITIATED
Alleged Abuse of Dominance by Telefonaktiebolaget LM Ericsson

sponge iron plants. Taking advantage of their dominant position, Opposite Parties were allegedly not adhering to the terms and conditions in the FSA/MOUs and conducting themselves in a manner detrimental to the interest of the informant. The terms and conditions of FSA also show it being heavily loaded in favour of Opposite Parties. Accordingly, CCI ordered the DG to investigate the conduct of the Opposite Parties for alleged contravention of the provisions of the Act. CCI has directed the Director General, CCI to investigate the information filed by the Sponge Iron Manufactures Association ('the Informant') against Coal India Limited(CIL) and its 6 subsidiaries for alleged abuse of dominance in the supply of coal to sponge iron manufacturers. Informant is an association of Sponge Iron Manufacturers formed to promote the interests of the Indian Sponge Iron Industry. The Opposite Parties are government controlled companies incorporated under the provisions of Companies Act, 1956 and are engaged in the business of development of coal mines and sale of coal in India. The main allegation against the Opposite Parties are that they enjoy a virtual monopoly over the production and supply of coal, producing over 80 percent of the coal in India. Being a monopoly, they force their consumers to enter into extremely one-sided, anticompetitive Fuel Supply Agreement (FSA) and the Memorandum of Understandings (MoUs) under which informants; their consumers have no bargaining power. Based on the above, the informant has alleged that the Opposite Parties have abused their dominant position in violation of the provision of section 4 of the Act. CCI observed that it appears from information that the informant's member companies were totally dependent on Opposite Parties for supply of coal for running their It is pertinent to note that several cases against CIL are already under investigation for alleged abuse of dominance. CIL was earlier held to be prima facie dominant in the relevant market in Case No. 3/2012, Case No.11/2012 and Case No. 59/2012 and the Commission being of the opinion that there existed a prima facie case of abuse of dominance under section 4 of the Act had directed the DG to investigate the matter in these cases. The investigation report of DG in the above said cases is under consideration of the Commission. Similarly, in Case nos. 5/2013, 7/2013 and 37/2013 also the Commission had earlier directed DG to investigate the anticompetitive conduct of CIL.

Fair Play Volume 7 : October - December 2013

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ADVOCACY INITIATIVES

Advocacy with Central Government Ministries/ Departments


As part of initiatives for government advocacy, a meeting was held between Health Secretary & Senior Officers of the Ministry of Health & Family Welfare and team of Officers from CCI led by Mr. Anurag Goel, Member on November 6, 2013 at Nirman Bhawan. The Ministry was sensitised about the provisions of the Competition law and need to follow competition complaint polices.

Advocacy with States


As State governments implement not only their own polices but also central government policies, CCI attaches great importance to sensitising the States about importance of competition complaint polices. A workshop on 'Application of Competition Law' was organised in Mumbai on October 1, 2013. The participants of the workshop included Chief Secretary and senior officers of Government of Maharashtra. Mr. Anurag Goel, Member led the CCI team in the workshop. Two presentations were made in the workshop; 'Scheme of the Competition Act, 2002 including Powers, Functions & Duties of CCI' and 'Potential Anti-Competitive Conduct of Firms by way of Bidrigging/Cartelisation'.

Advocacy with Trade Associations


As part of CCI initiatives for creating awareness among Industry/Trade Associations, CCI gave a Industry/T presentation on 'Competition Law, Law, T Trade rade Association & Competition Compliance Programme' at CII's 4th Interactive Meeting with Industry Members organised in Bhavnagar on October 17, 2013.Similar presentations were made on 'Competition Compliance & Trade Association' & 'Sections 3 & 4 of the Competition Act' in an advocacy event organised by FICCI in Mumbai on December 6, 2013.

Advocacy with Government Training Academies


As part of CCI initiatives in government training academies, CCI made a presentation on 'Competition Law and Benefits to Government' at Dr RCVP Noronha Academy Academy, Bhopal on October 31, 2013 and discussed the need to introduce 'Competition Module' in their foundation courses. Similar efforts were made at National Academy of Direct Taxes on November 29, 2013.

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Volume 7 : October - December 2013 Fair Play

ENGAGING WITH THE WORLD


MOU with DG Competition Signed

EU delegation with Competition Commission of India


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On the side-lines of the 3rd BRICS International Competition Conference, on November 21, 2013, the Competition Commission of India and the Directorate General for Competition of the European Commission (DG COMP) signed a Memorandum of Understanding (MoU) on cooperation between the EU and Indian competition authorities The MoU was signed by Mr Joaqun Almunia, the Vice President and Competition Commissioner of the European Commission and Mr Ashok Chawla, Chairperson, Competition Commission of India. The signing of MOU reiterates the importance of cooperation for effective enforcement of competition law and policy. Under the MOU, both the competition authorities have agreed to exchange nonconfidential information on competition policy/legislation and enforcement, multilateral competition initiatives, competition advocacy and undertake technical cooperation in addition to cooperating in competition law enforcement. It is expected that MOU would strengthen the existing relations between the two authorities and would allow both the authorities to work closer for effective competition enforcement.

Meeting with US Antitrust Authorities


In 2012, CCI had signed MOU with US antitrust authorities - Federal Trade Commission and Antitrust Division of Department of Justice. CCI held bilateral meeting with them on November 23, 2013 in New Delhi to discuss operationalisation of MOU. 23
Volume 7 : October - December 2013 Fair Play

EVENTS
International Events
Mr. Anurag Goel, Member, CCI participated in the meeting of OECD Competition Committee and its working parties during October 28 31, 2013 in Paris, France. CCI also contributed papers for the roundtable discussions onEx-officio cartel investigations and the use of screens to detect cartels, and Competition issues in the Food Chain Industry. CCI officials participated in various workshops/ seminars/ meetings, some of which are: 2013 International Competition Network (ICN) workshop on Cartel during October 15-18, 2013, in 6 Cape Town, South Africa. Busan, South. OECD-Korea Policy Centre workshop on Complex Mergers during December 11-13, 2013 in 6 17th International Workshop on Competition Policy during December 9-10, 2013 in Seoul, Korea. 6 2013 ICN Advocacy Workshop: Advocacy: a driver for change during 12-13, December 2013 in 6 Rome, Italy.

Capacity Building Events

6 A short workshop on Cartel Investigation

was organised in collaboration with the US Department of Justice on November 20, 2013 for the officers of CCI. organized a workshop on HighTechnology and Competition Issues for its officers during December 17-19, 2013.

In collaboration with the US FTC, CCI 6

Fair Play Volume 7 6 : October November - December - January 2013 2014

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DEVELOPMENTS IN OTHER JURISDICTIONS


EU Commission fines banks 1.7 billion Euros for participating in Cartels in markets for financial derivatives

The European Commission has fined 8 international financial institutions including UBS, RBS, Deutsche Bank, JP Morgan, Citigroup, RP Martin, Barclays, and Societe Generale a total amount of 1 712 468 000 for participating in illegal cartels in markets for financial derivatives covering the European Economic Area (EEA). Four of these institutions including Barclays, Deutsche Bank, RBS and Societe Generale participated in a cartel relating to interest rate derivatives denominated in the euro currency. Whereas six of the settling parties including UBS, RBS, Deutsche Bank, JPMorgan, Citigroup and RP Martin participated in one or more bilateral cartels relating to interest rate derivatives denominated in Japanese yen. The Commission found that cartel operating in the interest rate derivatives industry aimed at distorting the normal course of pricing components for these derivatives. In setting the level of fines, the Commission took into account the banks' value of sales for the products concerned within the EEA, the nature of the infringements, their geographic scope and respective durations.

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Volume 7 : October - December 2013 Fair Play

EU Commission fines Johnson & Johnson, Novartis 16 million Euros for Generic Drug deal

The European Commission has imposed fines of 10 798 000 on the US pharmaceutical company Johnson & Johnson (J&J) and its Dutch unit, Janssen-Cilag, and 5 493 000 on Novartis and its Dutch subsidiary, Sandoz for blocking the sale of a generic painkiller 'Fentanyl' in the Dutch market. Fentanyl is a pain-killer 100 times more potent than morphine. It is used notably for patients suffering from cancer. The Commission found that after Johnson & Johnson's patent on a patch containing the drug Fentanyl expired in 2005, it paid Novartis to delay launching a generic version in the Netherlands. The Commission observed that the two companies deprived patients in the

Netherlands including people suffering from cancer from access to a cheaper version of this medicine. According to the Commission, the agreed monthly payments exceeded the profits that Novartis Dutch subsidiary Sandoz expected to obtain from selling its generic product. The deal ended in

December 2006, when a third party was about to launch a generic fentanyl patch. In setting the level of the fines, the Commission took into account the duration of the infringement and its gravity.

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KNOW YOUR COMPETITION ACT


In the previous issue, various aspects of abuse of dominant position and its mandate under Section 4 of the Act were discussed. This issue focuses on provisions relating to Combinations under Section 5 and 6 of the Act and Regulations made thereunder. Combinations Combinations mean mergers, amalgamations of companies or acquisitions of control, shares, voting rights or assets of one company by another company or group. As such, combinations are usual business activities, which allow companies to consolidate their position in markets. Combinations Regulation Most combinations do not raise serious prospect of an increase in market power; some however may raise serious concerns, which can be detrimental to competition. The core purpose of regulating combinations is to prevent the prospective anti-competitive effects of such combinations through appropriate remedies, including prohibition if necessary. It is ex-ante in nature and aims to ensure that firms do not acquire such a degree of market power after the combination so as to harm the interests of consumers, the economy and society as a whole. The Competition Act 2002 provides for mandatory filing of proposed combinations based on thresholds, which were further raised by 50 per cent through notification by the Government of India. The relevant provisions of the act relating to combination have come into effect from 1st June, 2011 after an extensive consultation process with stakeholders. In order to minimize regulatory compliance cost on the industry, the regulations lay down the categories of transactions that ordinarily are not likely to have an appreciable adverse effect on competition and, therefore, ordinarily not required to make any filing. The regulations also provide certainty on the applicability of the law by stipulating that only combination proposals approved by their respective boards, or for which binding documents were executed, on or after June 1, 2011, are required to make a filing to the Commission. The Combination Regulations are reviewed and amended from time to time with a view to simplify the filing requirements and bring about greater certainty in the application of the Act and the Regulations. The Commission has the power to take suo-moto action by calling for notice from parties to the mergers, who do not comply with the mandatory filing requirements. Procedure for Investigation of Combinations The procedure for investigating a combination comprises of three steps: firstly a relevant market is identified according to the definition accorded under the Act, this entails identifying both 27 the relevant product market as well as the relevant geographic market. Secondly, the combination is scrutinized to determine whether the combination has an appreciable adverse effect on competition in the relevant market. The criteria for such an analysis are laid down under section 20 (4) of the Act. Lastly, on the basis of the above, the Commission decides whether the combination should be approved, rejected or approved with modifications to the combination. The modifications to the combinations are made on the basis of how the anticompetitive effects could be minimized or eliminated. Timelines The Competition Act, 2002 provides a time period of 210 days to CCI to take a decision on a combinations filing. Since time is a crucial element in combination cases, a provision to reduce the time period to one hundred and eighty days best endeavour basis has been included in the Combination Regulations. The Commission has to form a prima facie opinion within thirty days as to whether the combination is likely to cause an appreciable adverse effect on competition. In pursuance of this provision, most filings are likely to be approved in this shorter time frame. Only few filings with serious competition concerns are likely to go beyond this period to the second stage of investigation. These will be automatically cleared at the end of 210 days if no order is passed.

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Filing of Combination Notice


Review of Notice

Combination cleared within 30 days

Detailed inquiry is launched

Combination deemed to be cleared if no order passed within 210 days

Inquiry Report Considered by the Commission

Combination approved

Combination approved with Modifications

Combination not approved

Competition Commission of India The Hindustan Times House 18-20, Kasturba Gandhi Marg New Delhi- 110001
Please visit www.cci.gov.in for more information about the Commission. For any query/comment/suggestion, please write to capacitybuilding@cci.gov.in Disclaimer: The contents of this publication do not necessarily reflect the official position of the Competition Commission of India.Contents of this newsletter are only informative in nature and not meant to substitute for professional advice. Information and viewsin the newsletter are fact based and incorporate necessary editing.