January 2022 Updates

ABBREVIATIONS USED-
CA- Competition Act, 2002

CCI- Competition Commission of India

TWFS- Together We Fight Society

DG- Director General

DNPA- Digital News Publishers Association

AMP- Accelerated Mobile Pages

TReDS- Trade Receivable Discounting System

CoR- Certificate of Registration

RBI- Reserve Bank of India

NBFC- Non-Banking Financial Company

MSME- Micro, Small and Medium Enterprises

HTM- Held to Maturity

AFS- Available for Sale

FVTPL- Fair Value through Profit & Loss Account

1. CCI orders a probe against Apple over competition in the App Market [Together We
Fight Society v. Apple Inc. And Another]

While having a monopoly or a dominant position might not be considered in the competition
market as bad per se, but its abuse is prohibited under the CA. Under the provisions of
Section 4 of the CA, the CCI restricts an enterprise from abusing its dominating position in
the relevant market.

In the present case, Apple Inc., world’s largest technology company was ordered by the CCI
to undergo a detailed investigation in response to complaints filed by a Rajasthan based non-
governmental organization Together We Fight Society (TWFS). The pivotal contention posed
by the non-profit group was that Apple forced the developers to use it proprietary in-app
purchases. It was alleged that an imposition of a 30% in-app fee by Apple for the
dissemination of paid digital content and other restrictions negatively impacts the competition
as well as hampers the other app developers from reaching the mobile phone users.

The fair-trade regulator in its prima facie view, opined that, the multi-national company had
breached its dominant position and had violated various sub-sections of Section 4 of CA. The
commission also ordered the DG to undertake an investigation in the aforementioned matter
and submit an unbiased investigation report within 60 days.

Order available here

2. CCI orders an investigation against Google over abuse of dominant position [Digital
News Publishers Association v. Alphabet Inc. And Ors.]

Over the past few years, the revenue generation through digital advertising has increased
manifold. The Covid-19 pandemic has also contributed exponentially to the reliance of users
on digital media. Technology companies like Google have a massive outreach when it comes
to rendering specialized internet services including online advertising to the users across the
globe.

In the present case, the CCI ordered an investigation into the tech giant Alphabet Inc’s
Google based on the allegations posed by the informants Digital News Publishers Association
(DNPA). The primary contention of the Association was that, even though the content is
published by the news media companies but, online search engines like Google end up with a
significant portion of the revenue, while the publisher receives only 51% of the advertisement
revenue by the advertisers. Another allegation raised by DNPA was that Google was abusing
the dominant position that it holds in the relevant market. It forced the publishers to
incorporate Accelerated Mobile Pages (AMP) which contributes in reducing the traffic.

The fair-trade regulator noted that Google being at a monopolistic position, imposed arbitrary
and unfair conditions on the publishers which left them with no option but to accept its
conditions. The commission in the prima facie view held Google liable under various sub-
sections of section 4 and directed a further investigation into the matter by the DG.

Order available here

3. RBI releases the new guidelines on Registration of Factors (Reserve Bank)
Regulations, 2022

The Reserve Bank of India recently released the Registration of Factors (Reserve Bank)
Regulations, 2022 and provided with a procedure for issuing a Certificate of Registration
(CoR) to the companies who wish to undertake factoring business. The regulations prescribe
the framework to the factors for the manner of filing the transactions with the Central
Ministry by a Trade Receivable Discounting System (TReDS). TReDS, on behalf of the
Factor, is required to register the particulars of the assignment or satisfaction in prescribed
forms with Central Registry within 10 days of the date of such assignment or satisfaction.

After obtaining the CoR from RBI, an NBFC-Factor or an NBFC-Investment and Credit
Company (NBFC-ICC) can undertake factoring services, according to the Registration
Regulations. Factoring services in India were introduced in 1987. Factoring is a transaction in
which a company sells its receivables to another entity, say an NBFC, in order to meet
immediate cash flow needs that may be delayed by payment delays.

These guidelines would further contribute in bolstering the TReDS platforms which will
further help in facilitating the functioning of the MSMEs. The Regulation is a step toward
easing the timely reporting of transactions.

Order available here

4. RBI releases discussion paper on Prudential Norms for Classification, Valuation and
Operations of Investment Portfolio of Commercial Banks

In order to narrow down the gap between the Indian norms and the global standards and
practices pertaining to the financial market, RBI released a discussion paper on Prudential
Norms for Classification, Valuation and Operations of Investment Portfolio of Commercial
Banks. The paper aims to bring suggestions for the classification of valuation of banks’
investment portfolio.

The paper proposed that investment portfolio of banks should be categorized under three
categories namely, Held to Maturity (HTM), Available for Sale (AFS) and Fair Value
through Profit & Loss Account (FVTPL).
Only securities with fixed or determinable payments and fixed maturity with the intention of
holding till maturity, shall be classified as HTM. Corporate bonds are now permitted to be
held under HTM, which was previously restricted. The proposal discourages the sale of
investments in HTM and allows banks to consider securities being placed under HTM.
Further, when a bank's intention with respect to assets eligible for HTM is flexible, i.e., when
it intends to hold to maturity as well as sell (for example, for asset liability management
(ALM) purposes), such securities are classed under AFS. And lastly, FVTPL is a surplus
category. All investments that do not meet the criteria of HTM or AFS shall be categorised as
FVTPL.

Through this proposal, India’s central bank aims to facilitate symmetric treatment of gains
and losses in cash and derivatives portfolios, and is expected to encourage banks to employ
derivative products more actively to control underlying risks in their investment portfolios.

From April 1, 2023, the new bank portfolio classification standards will take effect. The
stakeholders are invited to give their comments on the paper till February 15th.

Order Available here