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INDIA: COMPETITION LAW

YEAR IN REVIEW -
HIGHLIGHTS OF 2019
L&L Partners

AVNISH PRAKASH
INDIA: COMPETITION LAW YEAR IN REVIEW - HIGHLIGHTS OF 2019

TABLE OF CONTENTS
I. Institutional changes........................................................................................................2
II. Legislative changes........................................................................................................2
III. Procedural developments..............................................................................................3
Penalties..............................................................................................................................3
Investigations......................................................................................................................3
Jurisdictional issues yet again.............................................................................................4
The effect of a settlement between the parties....................................................................5
IV. Anti-competitive agreements........................................................................................5
Vertical Restraints...............................................................................................................5
Cartels.................................................................................................................................6
V. Abuse of Dominance......................................................................................................7
VI. Merger Control...........................................................................................................10
Digital economy (again)...................................................................................................11
Airports (again).................................................................................................................11
Healthcare & pharmaceuticals..........................................................................................12
The first blocked transaction...almost...............................................................................12
Conclusion........................................................................................................................13

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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.

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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

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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.
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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

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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.

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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.

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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.
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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
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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.

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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)

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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.

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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:

a. It was a consolidation of the first and second players in terms of sales and distribution reach;
b. 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;
c. the next competitor would be three times smaller than the Combined Entity;
d. 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;
e. 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

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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.

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