MAHARASHTRA NATIONAL LAW UNIVERSITY, NAGPUR

B.A.LL.B.(Hons.) Year-V Semester-IX: Academic Year : 2021-2022

Second Open Book Assessment, November-2021
9.3 COMPETITION LAW (Optional Paper)
Total Marks: Forty (40)
Instructions:
1. Read the questions carefully and answer.
2. No clarification shall be sought on the question paper.
3. Use the Answer File Template sent by Examination Section and fill the necessary
information.
4. Answer File Nomenclature: UID and Course Name (For Example-UID: UG2017-01
& Course: 9.3 Competition Law, Answer File Nomenclature: 2017 -01 Competition
Law).
5. Use of open resource(s) to answer the question(s) is permitted.
6. Answer file in MS Word shall be submitted on or before 11:59 pm, on Sunday,
November 28, 2021 on a link provided by the respective subject teacher.
7. Students are advised not to consult any faculty member/outsider or any other person
regarding the questions and must strictly adhere to professional values.
8. The contents of question paper are strictly for private circulation only.

Note: Total No. of questions are FIVE (5). Attempt any FOUR (4) questions.
1. Rose Furniture Manufacturers Association (hereafter OP 1), is an unincorporated “trade
association” and twenty (20) other corporate companies (hereafter OP 2) are members of the
association who are engaged in the business of selling and shipping different types of furniture
in interstate commerce. Out of the 20 corporate companies, approximately one-half own
rubber wood, MDF, and sawmills which are used as raw material and machinery to facilitate
the manufacturing of finished furniture which is directly sold and shipped in interstate
commerce. The other companies purchase raw material used for furniture in the open market
and manufacture it into finished furniture which is then sold and shipped. Estimates submitted
to the government indicate that the OP 2 produced 70 percent of the total production of these
types of furniture in the year 2020, but the percentage gradually diminished during the five
years preceding, the average for the five years being 74.2 percent. In March, 2020, the OP 2
participated in various trade association (OP 1) meetings.
The OP 2 have engaged in many activities to which no notice was taken by the government
and which were admitted to be beneficial to the industry and to consumers, such as cooperative
advertising and the standardization and improvement of its product. The activities include:
(1) The computation and distribution among the members of the association of the average
cost of production of furniture products manufactured by them of all dimensions and grades.
(2) The compilation and distribution among members of a booklet showing freight rates of
shipment of furniture from Delhi to Hyderabad.
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(3) The gathering of statistics which at frequent intervals are supplied by each member of the
association to the secretary of the association given complete information as to the quantity
and kind of furniture sold and prices received by the reporting members,and the amount of
stock on hand, which information is summarized by the secretary and transmitted to members,
without, however, revealing the identity of the members in connection with any specific
information thus transmitted.
(4) Meetings are conducted where the representatives of members congregate and discuss the
industry and exchange views as to its problems.
(5) During the financial year 2019–2020, the capacity utilization of half of OP 2 who had the
raw materials and saw mills had come down to 65% from 78% in the previous years, in spite
of a very high demand in furniture.
(6) The cost of raw material especially rubber wood and MDF used for manufacture showed
variance in terms of companies procuring from free market and those who owned such raw
material.
It was alleged by Home Furnishing Pvt. Ltd (informant) who was not a member of the
association (OP 1) that there was an agreement among the members of the association to create
an artificial scarcity in the market by reducing the capacity utilization which led to increase in
prices. The trends, pattern and price correlation of all the 20 companies is very similar despite
variation in cost of production and all the companies being located in different States with
varying tax rates. These ‘plus factors’ raise a reasonable inference that all the c ompanies
indulged in cartel like behaviour and adversely affected the competition.
Contentions of Opposite Parties:
1. They contended that both by the articles of association and in actual practice, members
have been left free to sell their product at any price they choose, and to conduct their
business as they please. It was alleged that the activities of the defendants h ereinbefore
referred to resulted in the maintenance of practical uniformity of net delivered prices as
between the several corporate defendants but the evidence failed to establish such
uniformity, although it was conceded by defendants that the dissemination of information
as to cost of the product and as to production and prices would tend to bring about
uniformity in prices through the operation of economic law.
2. The defendants also offered a great volume of evidence tending to show that the trend of
prices of the product of the defendants corresponded to the law of supply and demand, and
that it evidenced no abnormality when compared with the price of commodities generally.
There is undisputed evidence that the prices of members were fair and reasonable and that
they were usually lower than the prices of non-members, and there is no claim that
defendants were guilty of unfair or arbitrary trade practices.
3. Production capacity was lowered due to scarcity of raw material machines used became
slow due to continuous use.
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 Decide whether there was any unlawful agreement amongst the defendants and if yes whether
price parallelism can be sufficient reason to hold them guilty? Analyse with reference to
relevant case laws and legal provisions. 10 marks

4. Government of India floated a tender for procuring Covid -19 vaccines for the age group
above18. During the period between 2018-2019, M/s Covid Win Pharmaceutical Ltd was the
lone bidder for the tenders and it single-handedly supplied the entire tendered quantity. But with
the entry of M/s Covaxin Pharmaceutical Ltd , M/s Covishield Pvt. Ltd and two other companies
which manufactured vaccines in the market in 2020, the bidding process became more
competitive. However, as soon as M/s Covid Win Ltd became ineligible in 2020 due to
enhanced eligibility requirements and WHO Guidelines, the four firms instead of competing
with each other were alleged to enter into collusive bidding. It was alleged that the opposite
parties were in touch with each other which were proved through minutes of the meetings and
through visitor’s register of the Medical Association of India indicating the simultaneous visits
made by the representatives of opposite parties. The three vaccine companies submitted
extremely high priced bids as ‘cover bids’ so that the procurement process does not get stalled
due to the lack of enough competition whereas it was shown that there was an agreement that
Covaxin will submit the lowest bid and once it wins, the sub -contract for other raw materials
needed for manufacture of such vaccines will be distributed amongst the other losing bidders if
they help Covaxin win the bid. Also, peculiar market conditions, including the presence of only
4 suppliers of the Covid-19 vaccines together with the tendering process made the market
conducive to collusion especially since (i) the product is homogeneous; (ii) there is a high
demand in the market; and (iii) suppliers are repetitive bidders. It was also shown that in
previous years repetitive bids was submitted where similar pattern was observed by these 4
companies with the lowest bid being submitted by but with respect to supply of malaria vaccines
from the year 2002-2008.
Contentions of Opposite Parties:
(1) It noted that the existence of a scenario conducive to cartelisation was not enough and cogent
evidence must be adduced or collected to prove anticompetitive arrangement or agreement.
Further, mere suspicion, howsoever, strong it might be could not be made basis for recording a
finding of collusive bidding or bid rigging.
(2) In its reply to the Director General, the three companies explained its conduct stating that it
submitted high priced bids because in the previous years, it had remained unsuccessful and had
to destroy large quantities of the vaccine thereby incurring huge losses.

Analyse the above given facts and decide whether there existed an anti-competitive agreement
in the form of collusive bidding amongst the four companies and identify other market
conditions conducive for collusive bidding. 10 marks
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3. A notice was given by Tulip International, Inc (Tulip International or Acquirer) and Tulip
Europe PLC ( Europe),involving the acquisition of the entire share capital of Tulip Europe by
Tulip International, as a consequence of which Tulip International has indirectly acquired
35.91% equity share capital of Wheels India Ltd (Wheels India) from Tulip Europe. It was
alleged that the parties had reached an agreement on the terms of the recommended share offer
for the acquisition of entire share capital of Tulip Europe on 10 August 2020 and therefore, in
terms of section 6(2) of the Competition Act, 2002, the Acquirer ought to have given the notice
to the Commission within 30 days of reaching the said agreement. However, the Acquirer gave
the notice to the Commission only on 4 February 2020 with a delay of around 147 days and that
too after the combination had already taken effect.
The opposite parties contended that the reasons for the delay were: one the incorrect advice
from their initial Indian counsel; and two, the fact that both Tulip International and Tulip Europe
were based outside India and their combination resulted from the acquisition of one foreign
enterprise by another foreign enterprise. Therefore, a lenient view should be taken by the
Commission and condone the delay.
Analyse the above facts and decide whether delay can be condoned and discuss the thresholds
required for a merger to be notified to the commission? Discuss the various tests that a
commission has to go through before a merger can be approved or denied and what are the
penalties that can be inflicted on the parties by the commission.
10 Marks

4. Velocity Travels Pvt. Ltd. (“Velocity Co”) was set up in Delhi, in April 2010. Initially it
started operations in Mumbai and Delhi with 600 cabs in each city. In November 2011, Velocity
Co introduced its services in Bangalore and Kolkata with 300 cabs each. All these cabs were
owned by Velocity Co and expenses regarding fuel, salary of drivers, insurance, permit, fleet
maintenance etc. were borne by the company. The cars were fitted with a Global Positioning
System (GPS) and meter, and the drivers were provided with Velocity phones with the mobile
application program (a software for mobile app-based cab business), locked from downloading
any other competing networks’ application. Velocity Co quickly gained popularity as a
premium cab service among urban Indians. By July 2016, Velocity Co was getting around 700
point-to-point trips per cab per month on average and had a market share of around 35% of the
mobile app-based cab market in the urban cities where it operated.

While Velocity Co was building up its market share in India, competing with traditional taxi
services, Mr. James, a young technology entrepreneur, started exploring the possibility of
offering cheaper cab services, through a technology aggregator model. He incorporated Swifty
Pvt Ltd. (Swifty) in July 2016. Swifty followed a purely aggregator model. The company did

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not own cabs in its own name. Instead, it set up a platform for a network of cabs and customers,
which included provision of a call-centre, software applications for mobiles and internet GPS,
feedback system, quality maintenance check lists (both for cars and drivers), setting up of the
price charging formula and prices. In the aggregator model, the fleet operators, or individual
drivers with their own cabs, attached themselves to Swifty which entered into a revenue sharing
arrangement with the drivers. The drivers were also given incentives based on performance,
that is, minimum number of trips in a given period, loyalty, feedback from customers etc. The
prices of Swifty cabs were extremely competitive from the very beginning.

Within the first year of its launch, Swifty acquired a market share of 45% and operated a fleet
size of 600 in each of the top Indian cities - Mumbai, Delhi, Bangalore and Kolkata - with each
cab doing more than 800 point-to-point trips per cab per month on average. One advantage of
Swifty was that its services were much cheaper than Velocity Co and other mobile app -based
cab operators. However, mobile app-based cab operators felt that the competitive pricing was
due to below cost pricing, as Swifty was able to use surge pricing strategically during peak
hours to charge prices above competitive levels, and make up for losses sustained.
Consequently, when Velocity Co lost around 10% of the mobile app-based cab market share in
India from July 2016 to July 2018, it alleged that this was due to unfair pricing by Swifty, which
made Velocity Co cabs seem unreasonably expensive to its consumers. However, Mr. James
claimed that this was due to the superiority of the economics of the aggregator-based model. In
the meantime, another market player, Speedy Pvt. Ltd. (“Speedy”) also based on the aggregator
model, started following a pricing strategy similar to Swifty. Speedy however, being a new
entrant had very small market share. Swifty argued that since there was competition in the
market between Swifty and Speedy, it was not possible for Swifty to increase prices above
competitive levels. Velocity Co has now approached the Competition Commission of India
(CCI) claiming Swifty to be in violation of Section 4 of the Competition Act, 2002. The CCI
has directed you to conduct investigation into the matter.

Give a detailed opinion on this case after considering the following:

a) The relevant market;
b) Dominance (if any) in the relevant market; and
c) Price abuse alleged here and the Law on the same. 2.5+2.5+5=10 Marks

5. The Indian market for cars is fiercely competitive, with world-class car companies operating
in the market and selling various models of cars, at different prices. In January 2019, Mr. John,
a purchaser of a Brand X car, has complained to the CCI that despite the car market being
competitive, car manufacturers are restricting the supply of spare parts and diagnostics tools in
the market, thereby creating a situation where the manufacturers, through their authorized
dealers, became the sole suppliers of spare parts and after sales repair/maintenance services in
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India. This was allowing individual car companies to impose unfairly high prices on spare parts
and repair/maintenance services for their cars. Further, since spare parts, diagnostic tools and
technological information were not made available to independent workshops, the same was
resulting in denial of market access to thousands of independent rep airers.
However, the car companies are claiming that the restrictions imposed on dealers are necessary
for maintaining the efficiency of their distribution networks. Moreover, if spare parts were sold
directly in the aftermarket, car companies would not be able to protect their IP rights, or ensure
quality and safety of the spare parts. This could encourage the sale of spurious/substandard
spare parts. As regards repair/maintenance services, the car companies claimed that repairing
of vehicles by independent workshops was not feasible in India, as independent workshops did
not possess the required skill, or training, to carry out repairs of such sophisticated products.
Further, and most importantly, this business model has been followed by car companies for
many years, and the growth of the Indian car industry has been phenomenal in the last few
decades.

Suppose that, you are the officer entrusted with investigating this matter. Give critical opinion
on this matter focusing on:

a) The concept of aftermarket and the Law on the same;

b) The validity of exclusive distribution agreements and refusal to deal under Section 3(4); and
c) Any other issue you consider relevant.
4+4+2=10 Marks

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