Professional Documents
Culture Documents
SC 597
27. Milkhiram India v. Chamanlal, AIR 1965 SC 1698 3
28. Mineral Enterprises v. Ministry of Railways, [2013] 118 SCL 55 8
(CCI)
29. MMRDA v. The Fare Fixation Committee, 2017 SCC OnLine Bom 9
9296
30. Neeraj Malhotra v. North Delhi Power Limited, Case No. 9, 10
06/2009
31. Om Datt Sharma v. CCI, 2015 CompLR 529 13
32. PK Krishnan v. Paul Madavana, 2016 CompLR 83 (CCI) 9, 10
33. Poolpandi v. Supdt., Central Excise, (1992) 3 SCC 259 6
34. Prayab Deb v. Rama Roy, AIR 1977 Cal 1 4
35. Rajasthan Cylinders v. Union of India, 2018 (13) SCALE 493 26, 32, 36
36. Reliance Big Entertainment Limited v. Karnataka Film Chamber 23
of Commerce, 2012 CompLR 269 (CCI)
37. Sandhya Drug Agency v. Assam Drug Dealers Association 34
38. Shamsher Kataria v. Honda Siel Cars, 2014 CompLR 1 (CCI) 18
39. Shivam Enterprises v. Kiratpur Sahib Truck Operators, 2015 16
CompLR 232 (CCI)
40. Shubham Srivastava v. Department of Industrial Policy & 22
Promotion, 2013 CompLR 868 (CCI)
41. Siemens India v. K. Balasubramaniam, (1983) 34 CTR (Bom) 4
32
42. Sitaram Sugar v. Union of India, (1990) 3 SCC 223 8
43. Solidaire India v. Fairgrowth Financial, (2001) 3 SCC 71 10
44. State of Maharashtra v. Digambar, (1995) 4 SCC 683 7
45. Technip S.A. v. SMS Holding, (2005) 5 SCC 465 29, 31
46. Telefonaktiebolaget LM Ericson v. CCI, (2016) 4 CompLJ 122 10
(Del)
47. Thyssen Stahluion Gmbh v. SAIL, (1999) 9 SCC 334 : AIR 1999 22
SC 3923
48. Union of India v. CCI, AIR 2002 Del 66 11, 23
49. Varca Druggists & Chemist v. Chemists and Druggists 19
Association, 2012 CompLR 838 (CCI)
D. ONLINE SOURCES
1. Organisation for Economic Co-operation and Development, Policy 32
Round Tables : Oligopoly, 1999 available at
https : //www.oecd.org/daf/competition/1920526.pdf
E. STATUTES AND REGULATIONS
1. CCI Determination of Cost Regulations, 2009, 18
2. Code of Civil Procedure, 1908, No. 5, Acts of Parliament, 1908 3
(India)
3. Consumer Protection Act, 1986, No. 68, Acts of Parliament, 1986 4
(India).
4. The Competition Act, 2002, No. 12, Acts of Parliament, 2002 1, 2, 6, 9, 13,
(India) 15, 17, 21, 32
STATEMENT OF JURISDICTION
The Respondent reserves the right to contest the jurisdiction in the present case.
Further, the Respondent also reserves the right to seek dismissal of the Application
filed by G-One Pharmaceuticals.
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STATEMENT OF FACTS
I. THE KINGDOM OF REPUBLIA AND ITS COMPETITION LAW
The Kingdom of Republia (“Republia”) is a vast nation with a large population. In
2002, the Republian Parliament enacted the Competition Act, 2002 (“Act”). The Act
established the Competition Commission of Republia (“CCR”) to promote competition
and prohibit anti competitive practices by orders imposing suitable penalties. The CCR
directs its investigative arm, the Director General (“DG”) to open investigations
against perceived anti-competitive conduct upon finding that a prima facie case is
made out. The orders of the CCR are appealable before the Kings Competition
Appellate Tribunal (“KCAT”).
II. THE ANTEGRIAN AGGRESSION AND THE SUBSEQUENT ENACTMENT OF THE ESSENTIAL
COMMODITIES ACT , 1965.
In 1962, Republia was attacked by its neighbour, Antegria and the attack was
regarded as the Antegrian Aggression. During the aggression, many large Republian
traders hoarded essential commodities such as medicines and sold them at shockingly
high prices. To counter the hoarding, Republia enacted the Republian Essential
Commodities Act, 1965 (“RECA”). The RECA allowed the government to regulate the
production, supply and distribution of commodities considered ‘essential’. Further, the
government could also impose price ceilings or other forms of market control.
III. THE DOPE ORDER
In 1972, the Republian Government realised that drug prices in Republia were
significantly higher than those in neighbouring countries. In an effort to combat
continued hoarding, the government notified the Drugs Over Pricing Evaluation Order,
1972 (“DOPE Order”) under the RECA. The DOPE Order provided for cost based
ceiling prices on 447 drugs listed in its schedule. Further, the DOPE department was
created to enforce the DOPE order. The manufacturers who sold the drugs at prices
above the ceiling were subject to strict penalties under the RECA, including
cancellation of licenses, fines and imprisonment.
IV. MARKET BASED PRICE CONTROLS FOR ESSENTIAL DRUGS
In 2008, Margaret Nykwil, the Republian Minister for Chemicals and Fertilisers
announced that the government was considering a major overhaul to the DOPE Order.
She said that cost-based price controls provided insufficient incentives for the
manufacturers to chase efficiencies. Further, she stated that her party wanted to
provide cheaper healthcare by imposing market based price controls. The scope of
price control was limited to ‘essential’ drugs and finally on 01st April, 2010, the
government notified substantial amendments to the DOPE Order to impose market
based price controls.
V. THE REPUBLIAN WINTER OF 2013
In the winter of 2013, there was a sudden dip in temperature in Republia and large
parts witnessed snowfall for the first time in recorded history. The unprecedented
weather led to a flu epidemic of epic proportions. Children were the worst hit by this
scourge. Dry Cough was the main symptom of the flu and doctors prescribed
dextromethorphan based cough syrup to alleviate the irritation. This crisis finally
abated in March 2014 alongside the onset of spring and the airlift of hundreds of tons
of humanitarian aid, including WHO supplied essential medicine kits.
VI. THE KETCHUM COMMISSION REPORT
Due to the flu epidemic and the ensuing public disaster, a total of 7,000 Republians
died. Thereafter, the government constituted an inquiry commission headed by Banner
Ketchum, a member of the Republian Parliament. The report of the Ketchum
Commission [“KCo Report”] was tabled in the Republian Parliament and it contained
two major findings, first that all brands of cough syrup were priced identically at the
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price permitted by the DOPE Order and second that Cough Syrup manufacturers did
not increase production despite the onset of the epidemic.
VII. REFERENCE TO CCR AND THE SUBSEQUENT INVESTIGATION
On 03rd December, 2014, the Government referred the present matter to the CCR
under Section 19(1)(b) of the Competition Act, 2002. Later, without holding a
preliminary conference, the CCR found that a prima facie case existed and directed the
DG to conduct an investigation. On 15th July 2015, the DG raided the offices of all
manufacturers with a market share of 1% or more. A wide variety of documents were
seized, despite the protests of the manufacturers that principles of natural justice were
violated as their lawyers were not present. Thereafter, the DG submitted its report to
the CCR.
VIII. CCR'S FINDINGS AND THE PRESENT APPEALS
The CCR imposed a penalty on the manufacturers amounting to 2% of their average
turnover of their cough syrup businesses in the period investigated, in addition to a
nominal penalty of 100,000 Republian Dollars against the DOPE Department.
Aggrieved, the Manufacturers preferred appeals against the order of the CCR before
the KCAT. Further, G-One Pharmaceuticals separately filed an application and
requested the KCAT to dismiss and set aside the findings of the CCR, and as a gesture
of goodwill, stated that they would lower their prices to 30% if the application was
allowed. The KCAT listed the matter for arguments on 15th March, 2019.
ISSUES FOR CONSIDERATION
I. WHETHER G-ONE'S APPLICATION BE UPHELD BY THE KCAT?
II. WHETHER G-ONE HAS VIOLATED SECTION 4 OF THE ACT?
III. W HETHER THE DG AND THE CCR CAN PROCEED AGAINST THE DOPE DEPARTMENT?
IV. WHETHER THE MANUFACTURERS AND THE DOPE DEPARTMENT HAVE VIOLATED SECTION 3
(3) OF THE ACT?
SUMMARY OF ARGUMENTS
I. G-ONE'S APPLICATION SHOULD BE DISMISSED BY THE KCAT.
The CCR submits that G-One's application itself is not maintainable and therefore
should be dismissed in limine. There is no provision in the Competition Act, 2002
which allows for such an application. Further, there is also no provision or law which
permits the KCAT to decide applications or appeals summarily. The power to decide
appeals or applications summarily are only vested in Civil Courts pursuant to Order 37
of the Code of Civil Procedure, 1908 and forums where power to decide summarily has
been expressly conferred.
However, the power to decide summarily has not been conferred upon this KCAT.
Further, merely due to the fact that G-One is proposing to undertake an Initial Public
Offering does not mean that this Application should be decided summarily. Further, G-
One's application of voluntarily lowering prices by 30% has no bearing in the present
case. If such an ‘offer’ is allowed by the KCAT, the future consequences of the same
would be disastrous to the rule of law and the aim of promoting market competition in
Republia. If so, then anyone could make such an ‘offer’ and get away scot-free from
past anti-competitive practices.
Lastly, the Appellants may challenge the jurisdiction of the CCR in the present case.
The CCR responds by contending that it had jurisdiction since the Competition Act,
2002 is a special act governing Competition in Republia and even if it conflicts with
any other law, it will prevail due to the non-obstante clause in Section 60 of the Act.
Accordingly, the CCR submits that G-One Pharmaceuticals application should be
dismissed.
II. G-ONE PHARMACEUTICALS VIOLATED SECTION 4 OF THE ACT .
The relevant market in the present case in the market for ‘sale of safe and
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12. Order XXXVII applies to suits based on bills of exchange, promissory notes,
hundies and suits in which the plaintiff seeks to recover a debt or liquidated amount
payable by the defendant with or without interest arising on a written contract on an
enactment, where the sum sought to be recovered is a fixed sum of money or debt
other than penalty or on a guarantee, where the claim against the principal is in
respect of a debt or liquidated amount.14
13. Presently, none of the aforesaid instruments are in question, but the summary
hearing has been requested by G-One to set aside the findings of the CCR without
admitting any violation.15 Accordingly, it is submitted that summary procedure cannot
be sought if none of the instruments expressly contained in Order XXXVII are
attracted.
iii. The 2002 Act expressly does not provide for summary hearing.
14. It is submitted that the Courts or Tribunals can apply summary procedure if the
governing statute expressly provides for it or where the Courts have interpreted any
provision of any act to provide for a summary hearing. For instance, Section 27(3) of
the Consumer Protection Act, 1986 provides that all offences under that Act may be
tried summarily by the District Forum or the State Commission or the National
Commission, as the case may be.16 Secondly, Section 155 of the Companies Act, 1956
was construed to provide for a summary procedure.17
15. However, none of the provisions of the Competition Act, 2002 provide for a
summary hearing and secondly, neither judgment has also provided for the same.
Hence, the argument of G-One requesting for a summary hearing should be rejected.
iv. Summary hearing is not intended for complicated questions of fact or law.
16. It is well settled that summary hearing is not intended for complicated
questions of fact or law.18 Accordingly, if the questions raised in the application pertain
to complicated questions of fact or law19 or acute disputes of facts20 , the KCAT cannot
provide a summary hearing. Presently, both complicated questions of fact or law have
arisen which negate the very possibility of a summary hearing.
17. The KCAT needs to decide on the complicated question of law as to the inter-
relation between the RECA, 1965, the DOPE Order, 2010 and the 2002 Act. This inter-
relation forms the very basis of the present dispute. Secondly, the KCAT also needs to
consider the evidence recorded by the DG while deciding the appeal and such
examination is complicated in nature. Therefore, since the present proceeding pertains
to complicated questions of fact or law, the KCAT cannot decide the summary hearing.
C. The CCR and the DG have not contravened the principles of natural justice.
18. The investigation by the DG forms part of the regulatory jurisdiction of the
CCR.21 During the search and seizure by DG, the DG seized a wide variety of physical
and electronic documents under Section 41(3) of the 2002 Act, however, the
manufacturers protested that the principles of natural justice were violated as their
lawyers were not present.22
19. The CCR will establish that the principles of natural justice were not
contravened based on the following grounds.
i. Since the 2002 Act is silent, legal representation is not an inevitable part of natural
justice.
20. Where the relevant statute is silent on the question of legal representation, the
view propounded is that legal representation is not an inevitable part of natural
justice, and cannot be claimed as a matter of right.23 The relevant provision presently
is Section 41(3) and it provides that Sections 240 and 240A of the Companies Act,
1956 shall apply to an investigation made by the Director General.24
21. The right to legal representation is not mandatory during investigation stage by
DG, as it is only a fact finding exercise and no rights and liabilities of a party are
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affected at that stage.25 However, none of these provisions provide for any express
right of legal representation during search and seizure. Accordingly, legal
representation is not an inevitable part of natural justice.
ii. Comprehensive hearings were provided before the CCR.
22. Assuming but not conceding that a right to legal representation existed, a post
decisional hearing has been provided before the CCR. Post decisional hearing can be
given in exceptional cases.26 Comprehensive hearings have taken place before the CCR
and only post such comprehensive hearings, the CCR passed the order under Section
27.27 Accordingly, the CCR submits that it has complied with the principles of natural
justice.
iii. Alternatively, there has been delay and acquiescence on part of the manufacturers
which disentitles them for any relief.
23. Presently, the DG investigation took place in July, 2015 and the order was
passed by the CCR on 10th January, 2019.28 There has been an undue delay of 4 years
to claim any contravention of the principles of natural justice. If there was any
infraction, the manufacturers could have preferred a Writ Petition and nothing barred
them from doing so. However, when the manufacturers are guilty of undue delay or
laches, the manufacturers are disentitled to get relief, and particularly so when no
attempt was made to explain blameworthy conduct of undue delay or laches.29 In view
of the foregoing, the CCR submits that it has at all times complied with the principles
of natural justice and there has been no contravention as alleged.
iv. Lastly, DG's Report was only partially based on the Information.
24. The CCR submits that the DG's report was only partially based on the
information recovered through the raids.30 Therefore, even in the absence of the
information recovered through the raids, the DG could prove contraventions by the
manufacturers including G-One Pharmaceuticals.
v. The DG or the CCR can prescribe an appropriate procedure when legal
representation during Investigation is requested.
25. The CCR contends that the DG or the CCR, as the case may be, during the
course of the proceeding can prescribe an appropriate procedure to be followed during
investigation when a request for legal representation is made.31 Further, it was
observed that till the CCR framed such procedure and framed regulations, the DG can
make appropriate procedural orders. Hence, the CCR submits that it has discretion to
prescribe the appropriate procedure and that it has rightfully exercised such discretion
presently.
D. The CCR can examine price fixation and production under the 2002 Act.
26. The manufacturers may contend that price fixation of an essential commodity is
not subject to examination by the CCR. However, the CCR contends that it has the
requisite jurisdiction under the 2002 Act to examine anti-competitive practices even
with respect to essential commodities.
i. The CCR is not a court but an economic body which can look into economical aspects
of the decisions taken.
27. The Manufacturers may submit that price fixation of an essential commodity is a
policy decision not subject to judicial review by Courts.32 However, the CCR submits
that the CCR is not a court but an economic body which can look into economic
aspects of the decisions taken.33
28. However, the CCR has no jurisdiction to examine validity of the action taken in
accordance with the Statute. A Court can interfere in a policy decision if it is against
public interest and also interfere in fixation of rates if the fixation rates are
discriminatory or violates Part III of the Constitution.34
29. Irrespective of such power, the CCR does not have any restriction in examining
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a policy decision or a fixation of rates if it is unfair and discriminatory. Since the CCR
has been mandated by Parliament under Section 18 of the 2002 Act to prevent any
conduct and practices which are anti-competitive. 35
ii. Alternatively, any legislative exercise of price fixation is not immune from judicial
review.
30. Even if fixation of price is legislative in nature, the CCR will not deny itself
jurisdiction to enquire into whether relevant considerations have gone in, and
irrelevant considerations are kept out at the time of determination of price. In matters
of price fixation, the interests of those who are most vitally affected i.e. the consumer
public cannot be ignored.36 Hence, the CCR as well as the KCAT are capable of
reviewing price fixation of an essential commodity.
E. The Competition Act, 2002 shall prevail over the DOPE Order, 2010.
31. Firstly, it is submitted that the Competition Act, 2002 and the DOPE Order,
2010 operate in different fields.37 While the DOPE Order, 2010 applies to essential
pharmaceutical drugs and regulates fixation of their prices, the CCR's mandate is to
eliminate practices having adverse effect on competition, promote and sustain
competition, protect the interests of consumers and ensure freedom of trade carried on
by other participants, in markets in Republia.38
32. However, even if there is an inconsistency between the DOPE Order, 2010 and
the 2002 Act, the 2002 Act will prevail due to the existence of the non-obstante clause
under Section 60.39
i. The Competition Act, 2002 overrides all other laws.
33. Section 60 of the 2002 Act provides that the provisions of the Act shall have
effect notwithstanding anything inconsistent therewith contained in any other law for
the time being in force.40 Section 60 has been enacted to restate and emphasize that
agreements, practices and conduct which may otherwise be legitimate under the
general laws would nonetheless be subject to the rigors of the Competition Act,
2002.41
34. Even if any conflict is found between the Competition Act, 2002 and the DOPE
Order, 2002, the Competition Act, 2002 will prevail due to the existence of the non-
obstante clause.42 While construing a non-obstante clause, it is necessary to determine
the purpose for which the same was enacted.43 Presently, the purpose of such clause
was to confer jurisdiction of the CCR in case of any inconsistency since the CCR
focuses on functioning of the markets by increasing efficiency through Competition.44
35. Hence, the CCR would have jurisdiction presently to examine any anti-
competitive conduct.
ii. The 2002 Act is the later special law and will prevail over the RECA, 1965 which is
the earlier special law.
36. If both legislations are special legislations, then as per the well known doctrine
of leges posteriors priores conteraias abrogant i.e. the later law abrogates the earlier
contrary law, the provisions of the 2002 Act will prevail.45 Accordingly, even if both the
RECA, 1965 and the 2002 Act are held to be special statutes, the 2002 Act will prevail
and the CCR will have jurisdiction to examine anti-competitive practices.
iii. Agreements otherwise lawful can fall foul of the 2002 Act.
37. Agreements otherwise lawful can fall foul of the 2002 Act. For instance, a
contract may not be invalid or hit by Section 23 of the Contract Act, but the conduct of
one of the parties may fall foul of Section 3 and 4 of the 2002 Act.46 Presently, while
the conduct of G-One Pharmaceuticals may not have been violative of the DOPE Order,
2010, it has certainly fallen foul of the Competition Act, 2002 and has given rise to a
cause of action for the CCR to examine.
38. Despite the presence of a governing law i.e. the DOPE Order, 2010, the CCR can
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examine the matter to check if there is any anti-competitive conduct or practice under
the Act.47
iv. Presently, the Republian Government has itself referred the matter to the CCR.
39. G-One Pharmaceuticals may contend that since the Republian Government has
jurisdiction under the DOPE Order, 2010, it should have jurisdiction. However, it
should be noted that presently, the Republian Government has itself referred the
matter to the CCR under Section 19(1)(b) of the 2002 Act.48 Therefore, the
Government itself has waived off its jurisdiction and has referred the matter for
examination of the CCR. In such a situation, G-One would be precluded from taking
the plea that the Republian Government is the appropriate forum presently.
40. For the aforesaid reasons, the CCR submits that it had jurisdiction and it
rightfully penalised the manufacturers and the DOPE Department under the 2002 Act.
F. Future Good Conduct cannot exonerate one of past liability.
41. If G-One's application is allowed, they have offered to lower their prices by
30%, as a gesture of care and goodwill and without admitting any violation.49
However, the CCR submits that the present offer is irrelevant to the present
adjudication before this KCAT. Any past liability for past violations of the Competition
Act cannot be waived off by promising future good conduct.
42. Presently, G-One abused its dominance during the relevant period by unfair
pricing and by limiting production.50 That was one of the principal reasons for the
public health disaster and for the consequent death of 7,000 Republians.51 Considering
such violations by G-One and considering that mostly children under the age of 10
have died, the KCAT must impose the strictest penalty possible for the contravention
of provisions of the Act. Further, any future good conduct i.e. by lowering prices
cannot exonerate G-One of its liability and therefore G-One's offer is of no
consequence to the present proceedings.
II. G-ONE VIOLATED SECTION 4 OF THE 2002 ACT .
43. The CCR will establish that G-One violated Sections 4(2)(a)(ii) and Section 4(2)
(b)(i) of the Act. Therefore, the further penalty of 3% of relevant turnover by the CCR
should be upheld by the CCR. There are 3 stages in determining whether an enterprise
has abused its dominant position.52 The first stage is defining the relevant market to
the relevant product market or relevant geographical market or with reference to both
markets.53 Without definition of the market, there is no way to measure the
defendant's liability to lessen or destroy competition.54
A. The Relevant Market is the market for sale of safe and efficacious
dextromethorphan based cough syrup in Republia.
44. Section 2(t) of the 2002 Act defines a ‘relevant product market’ as market
comprising of all the products which are interchangeable or substitutable by the
consumer with reference to (i) characteristics of the product, (ii) price (iii) intended
use.55 For determining the relevant product market, the demand side substitutability
is the decisive factor56 because whether a consumer would consider any other product
as a substitute or inter-changeable with the products manufactured by the opposite
parties will determine what all goods can be included in the relevant product market
definition.57
45. Presently, the DG defined the relevant market as the ‘market for the sale of safe
and efficacious dextromethorphan based cough syrup in Republia.’58 Presently, this
aforesaid market is the relevant market. While people attempted to manufacture
dextromethorphan at makeshift labs in their kitchen59 , it is irrelevant for the present
delineation of the market. The CCR states that such manufacture in the kitchen is
irrelevant as it was not substitutable by the consumer with regard to characteristics of
the product as well as intended use of the product.
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46. The intended use of the cough syrup was to cure infected children and hence, it
only required safe cough syrup manufactured by licensed manufacturers under the
Drugs and Cosmetics Act, 1940. Further, the sale of imported cough syrup would be
included within the relevant market. Further, the teaspoons of brandy fed to children
are not relevant as it is not based on the demand side substitutability60 and it was not
substitutable to safe and efficacious cough syrup. Had normal cough syrup been
available at the Pharmacies, people would not have preferred these alternatives and
only since the supplies grew scarcer.61
47. Secondly, the CCR submits that when the dominance of an enterprise remains
unchanged in a market with an alternative market definition, technicality of the
product market need not be dwelled further.62 Accordingly, the CCR submits that the
dominance of G-One will remain unchanged even with any alternative definition of the
relevant market. Therefore, the relevant market is only the market for the ‘sale of safe
and efficacious dextromethorphan based cough syrup in Republia.’63
B. G-One is placed in a Dominant position in the relevant market.
48. The second stage of determining abuse of dominance is whether the concerned
undertaking is in a dominant position or has a substantial degree of market power in
that relevant market.64 The explanation to Section 4 defines ‘dominant position’ as the
position of strength enjoyed by an enterprise which enables it to operate
independently of competitive forces prevailing in the relevant market; or affect its
competitors or consumers or the relevant market in its favour.65
49. Accordingly, the CCR states that the threshold to determine dominant position
is the power to behave independently of its competitors.66 Further, the dominant
position has to be tested based on the factors contained in Section 19(4) of the 2002
Act.67 The CCR states that G-One is in a dominant position for the following reasons.
i. G-One's Market share of 42% by itself indicates dominance in the relevant market.
50. Section 19(4) of the 2002 Act provides that the market share of an enterprise
shall be considered while deciding upon the question of dominance.68 Market share
indicates the position of strength of the enterprise.69 Further, market share acts as
potent screening criteria to ascertain comparative strength of the market players.70 In
the landmark United Brands case, the ECJ held that 40-45% market share was
sufficient to establish dominance.71
51. Presently, G-One Pharmaceuticals holds a 42% share in the relevant market.72
The CCR submits that this 42% market share by itself suggests a position of strength
in the relevant market73 and therefore, G-One had a special responsibility not to allow
its conduct to impair genuine undistorted competition in the common market.74
ii. G-One was in a position to affect its competitors and consumers in its favour.
52. It is not disputed that G-One is the market leader with 42% market share.75
Presently, G-One sold the cough syrup at the ceiling price and that affected the
competitors and they were forced to sell the cough syrup at the ceiling to develop and
maintain the image that their products were just effective and of as much quality as
those sold by G-One Pharma.76 Therefore, G-One was in a position to affect its
competitors and consumers in its favour and was in a dominant position.77
iii. G-One was capable of operating independently of prevailing market forces.
53. In January 2008, Margaret Nykwil announced that the government would
impose market based price controls.78 Thereafter, in April 2008, all other
manufacturers increased their prices while G-One did not increase its prices as much
since it was the dominant player and it operated independently of the prevailing
market forces. Therefore, it is submitted that G-One could behave independently of its
competitors and its customers.79
54. Lastly, G-One's dominance should also be considered in light of the fact it is the
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oldest player in the market.80 In view of the aforesaid reasons, the CCR submits that G
-One is a dominant player in the relevant market.
iv. There existed considerable entry barriers to the market.
55. Section 19(4) provides that the CCR shall examine if there exist entry barriers
to determine dominant position.81 Presently, there exist considerable regulatory entry
barriers to the relevant market in the form of approvals from the licensing authorities
under the Republian Drugs and Cosmetics Act, 1940. Therefore, the CCR submits that
G-One is in a dominant position.
C. G-One abused its dominance.
56. The third stage is the determination of whether the dominant enterprise abused
its dominance.82 The CCR submits that G-One abused its dominance based on the
following grounds.
i. G-One indulged into excessive pricing and thereby contravened Section 4(2)(a)(ii).
57. Imposition of unfair price is an abusive act under Section 4(2)(a)(ii) of the
2002 Act.83 Unfair pricing includes ‘excessive’ pricing84 and presently, it is CCR's case
that G-One indulged into excessive pricing. There is a two-fold test to determine
‘excessive’ pricing. First, the difference between the costs incurred by the dominant
entity and the prices actually charged must be in excess; second, the price under
consideration also must be unfair either in itself or when compared to prices of
competing products.85
58. Further, if the dominant enterprise has made use of the opportunities arising
out of its dominant position in such a way as to reap trading benefits which it would
not have reaped if there been sufficiently efficiently effective competition, the price
would be unfair.86
59. Presently, the average variable cost of cough syrup was RPD 65 in April 2013
whereas G-One's selling price was RPD 132.87 The cost is generally to be taken as the
average variable cost and it is a proxy for the marginal cost.88 Further, since G-One
was a dominant player, fixed costs are almost zero beyond a certain point of time and
the average variable costs are a proxy for marginal costs. Keeping RPD 65 as the base
price, there is an increase of 103.07% from the average variable cost and the selling
price. It is submitted that such pricing clearly amounts to excessive pricing as per the
United Brands test.89
60. First, the price is in excess of the costs and second, it is unfair in itself.
Therefore, G-One has contravened Section 4(2)(a)(ii) of the 2002 Act.
ii. G-One limited production and therefore contravened Section (4)(2)(b)(i).
61. Section 4(2)(b)(i) of the 2002 Act provides that limiting or restricting
production of goods or services shall be treated as abuse of dominance.90 If a
dominant player restricts and limits the production, it shall be a violation of Section 4
(2)(b)(i).91 Presently, between October 2013 and January 2014, the demand spiked by
nearly 300%. While the installed capacity increased by 150%, the production capacity
of the manufacturers only increased by 120%.92
62. Presently, G-One did not produce at the level of 150% despite its installed
capacity. Therefore, the CCR submits that G-One had a special responsibility to
increase production as the dominant undertaking to meet the sudden spurt in
demand.93 However, it deliberately limited production, and G-One also earned very
high profits from the sale of the cough syrup in the black market.94
63. Further, G-One could have produced additional units of cough syrup and it
would have promoted market competition in Republia and that would have also
signalled other competitors to increase production to match the market leader. But it
chose not to do so. Despite the fact that the spike in demand was temporary, it could
have produced additional units and even if the demand was met, it could have
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enterprise or the person should carry on any business. “Any activity” is qualified by
relating to the carrying out of business.
72. Therefore, a policy guideline, a regulation, a legal activity or any act which
effects the carrying on of business is covered. It is evident from the fact that a
government department is an enterprise according to the definition but a government
department does not carry on any business. Therefore, it is not necessary that a
person should be carrying out any business to qualify as an enterprise under the
Competition Act.103
iii. The DOPE Department is not performing sovereign functions.
73. The CCR submits that the functions carried on by DOPE Department are not
sovereign functions and thus do not qualify for exemption under section 2(h) of the
Act. Sovereign Functions are only primary, inalienable and non-delegable functions of
the constitutional government.104
74. Welfare commercial and economic activities are not covered within the meaning
of ‘sovereign functions” and the state while discharging such functions will be
amenable to the jurisdiction of the competition regulator.105 Determining prices of
commodities is in the nature of commercial activity and therefore they cannot be
called sovereign function.106 Lastly, the CCR submits that the DOPE Department is
engaged in commercial activities i.e. by controlling articles and goods and by
determining the prices of dextromethorphan based cough syrup. Therefore, the DOPE
Department would squarely fall within the definition of an enterprise and the DG and
the CCR can proceed against the DOPE Department.
B. The scope of the DG's Investigation is not limited by the order of CCR.
75. The DG was well within its powers to proceed against the DOPE Department.
Under the 2002 Act, the DG is empowered to investigate into the complaint filed with
the CCR. While investigating the anti-competitive conduct by any party, if the DG
finds additional information he is well within his powers to include that information
within its report. The scope of investigation by DG will depend on the language of the
order passed by CCR.107
76. Presently, the CCR passed an order under section 26(1) of the act holding that
a prima facie case exists for fixing prices in relation to cough syrups. The language of
the order was in no way limited to investigation only against the manufactures but
also against any other party which was involved in fixing of prices. The report of
Ketchum Commission108 reported allegations against identical pricing of Cough Syrup
which would also include investigation against the DOPE Department who was
performing the price regulation of cough syrups.
77. Further, the very purpose of a DG investigation is to cover all necessary facts
and evidence in order to determine as to whether there exist any anti-competitive
practices adopted by the persons complained against. Therefore, the starting point of
the inquiry would be the allegations contained in the complaint” but during the course
of the investigation if other facts also get revealed and are brought to light, according
to the SC, the DG would be well within his powers to include those as well in his
report.109
78. The cognizance of the present case was taken by CCR on the basis of the
information received from the report of Ketchum Commission110 which further required
investigation. At that stage, the CCR did not have complete information about the anti
-competitive conduct and it was only during the inquiry that the whole picture became
clear.111 Thus, on the basis of Ketchum Commission Report the CCR and DG can
proceed against the DOPE Department. In view of the foregoing reasons, the CCR
submits that it can proceed against the DOPE Department and accordingly, the order
of the CCR should be upheld.
IV. THE MANUFACTURERS AND THE DOPE DEPARTMENT VIOLATED SECTION 3(3) OF THE
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ACT .
79. The CCR will establish that the Manufacturers and the DOPE Department have
contravened Section 3(3) of the 2002 Act by determining the price of the cough syrup.
The cough syrup manufacturers have colluded presently and this shall be conclusively
established by the CCR.
A. There existed an agreement between the Manufacturers.
80. Firstly, the CCR must demonstrate the existence of an agreement to invoke
Section 3(3) of the 2002 Act.112 Presently, there existed an agreement for the
following reasons.
i. The essentials to prove an agreement are satisfied.
81. The definition of an agreement is widely worded. It is not exhaustive, and
includes any arrangement or understanding or even action in concert. The standard of
proof required to establish such concert is one of probability and may be established
“if having regard to their relation etc., their conduct, and their common interest, that
it may be inferred that they must be acting together : evidence of actual concerted
acting is normally difficult to obtain, and is not insisted upon.” 113
82. To conclude the existence of an agreement, certain factors like the number of
firms in the industry, level of concentration in the industry, barriers restricting entry,
homogeneity of the product and inelasticity of demand needs to be taken into
account.114
83. Presently, it quite clear that there are a few major competitors who hold a
significant market share.115 Due to the strict government regulations, there are
significant entry barriers.116 Cough syrup is a necessity and has a highly inelastic
demand and is homogenous in nature.
84. In the present case, the manufacturers have taken undue advantage of the
market conditions to collectively benefit their cause. All these factors considered
together indicate that there was a collusive agreement among the manufacturers with
respect to price fixing.
ii. Circumstantial evidence can be used to determine an agreement.
85. Circumstantial evidence concerning the market and the conduct of market
participants may also establish an anti-competitive agreement and suggest concerted
action.117 It is trite law that circumstantial evidence is of no less value than direct
evidence for it is the general rule that the law makes no distinction between direct and
circumstantial evidence in order to prove the conspiracy, it is not necessary for the
government to present proof of verbal or written agreement.118
86. Presently, the manufacturers have priced the cough syrup identically at the
ceiling price and the price increases have also been in concert with each other and
identical.119 The CCR submits that such behaviour is sufficient economic or
circumstantial evidence to establish the existence of an agreement. It cannot be mere
co-incidence that all the manufacturers sold the cough syrup at exactly the same price
and also produced at the same level i.e. 120%.120 Accordingly, it is submitted that an
agreement existed.
iii. The Manufacturers did not respond to the market conditions.
87. Although parallel behaviour may not itself if identified with a concerted practice,
it may however amount to strong evidence of such a practice if it leads to conditions of
competition which do not respond to the normal conditions of the market, having
regard to the nature of the products, the size and number of the undertakings, and the
volume of the said market.121
88. Presently, under normal circumstances, the increased demand provided an
opportunity to the manufacturers to increase their production and maximise their
profits by increasing sales. Presently, notwithstanding the increase in demand to
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300%, the manufacturers increased their production to merely 120%, although they
had an installed capacity of 150%.122
89. G-One Pharmaceutical holds a market share of 42%.123 Accordingly, expected
producer behaviour would be to reduce the prices by increasing production, in order to
maximise profit by economies of scale. However, the appellant deviated from expected
behaviour under such market conditions and aligned its pricing with those of the other
market players, which establishes that an agreement existed between the
manufacturers to determine the price and the quantity to be supplied in the market.
iv. The CCR only needs to establish strong probability of contravention.
90. Section 3(3) is a presumptive section. If the intent of the agreement is to
restrict competition in any manner, it will naturally attract provisions of Section 3 of
the Competition Act. The burden of proof in such cases cannot be equated with the
burden in the criminal cases where the prosecution has to prove the allegation beyond
the reasonable doubt. A strong probability would be enough to come to the conclusion
about the breach of the provisions of the Competition Act.124
91. Presently, all the major firms hold a different percentage of market share.
Therefore, it can be concluded that the average cost incurred by all the firms will vary
depending upon their production capacity. Yet, they colluded to quote identical prices
which eliminated market competition. The manufacturers, in furtherance of this
collusive behaviour raised their production capacity exactly by 120%125 .
B. There also existed an agreement between the Manufacturers and the DOPE
Department.
i. Direct evidence is not essential to establish an agreement.
92. The nature of acting in concert requires the definition to be drawn in
deliberately wide terms. This is necessary as arrangements are often informal, and the
understanding may arise from a hint.126 People who combine together to keep up
prices do not shout it from the housetops. They keep it quiet. They make their own
arrangements in the cellar where no one can see. They will not put anything into
writing nor even into words. A nod or wink will do.127 Hence, an agreement can be
proved even by implication.
93. The transactions may point out to a course of dealing of facts indicating that the
parties had an opportunity to meet, exchange views and conspire.128
94. Presently, the manufacturers, under many instances had an opportunity to
communicate with the DOPE Department during the annual fixation of the drug price.
These meetings may have served as a platform to determine the price ceiling at which
all the manufacturers sold the drugs. Presently, it is CCR's case that there was
agreement with respect to increase of prices and it is admitted fact that the DOPE
Department never rejected such applications in the past.129
ii. Unusual conduct of the parties indicates the existence of an agreement.
95. It is settled that there is no need for an explicit agreement and it can be
inferred from the intention or conduct of the parties in question.130 For Section 3(3) to
be attracted, it is not necessary that all their actions must be demonstrated by an
express or written agreement; it may be inferred from the circumstances surrounding
the transactions.131
96. The proven conduct of the manufacturers in pricing their product in a
coordinated fashion, which almost coincided with the price ceiling fixed by the DOPE
Department gives an indication that the all the parties acted in concert to fix the price
of the product which is in contravention of Section 3(3)(a) of the Act.
iii. There existed an agreement with respect to fixing of prices.
97. Business behaviour is admissible circumstantial evidence from which the fact
finder may infer agreement.132 In the present case, prior to the amendments in the
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DOPE Order, the prices of the manufacturers were significantly different from one
another. However, since April 2010, the prices of all the manufacturers were identical
and exactly the same. The price coordination resulted from the annual revision of the
DOPE ceiling revision cycle, which was regular, highly predictable and had a signalling
effect to all market players.133
iv. The DOPE Department has always accepted the price increase by manufacturers.
98. There is rarely direct evidence of action in concert and the panel must draw
upon its experience and common sense to determine whether those involved in any
dealings have some form of understanding and are acting in cooperation with each
other.134 Although the inflation rate showed an increase of 3%, the DOPE Department
allowed a revision in the ceiling price by 10%135 , which negated the purpose of
imposing a ceiling.
99. The DOPE was established as a measure to ensure that there is no hoarding of
the essential drugs. This is primarily to ensure that the essential drugs are available to
all at fair prices. The DOPE department has never rejected the application for price
increase by the manufacturers136 , and this practice continued even though there was a
need for the drugs prices to be regulated.
100. The price coordination by the manufacturers at the ceiling price establishes
that the parties acted in contravention of Section 3(3)(a) of the Act.
C. There existed a cartel between the Manufacturers.
101. One of the anti-competitive practices is cartelisation and its essential postulate
is agreement between enterprises which causes or is likely to cause an appreciable
adverse effect on competition within India.137 Section 2(c) of the 2002 Act defines
cartel and “cartel” includes an association of producers, sellers, distributors, traders or
service providers who, by agreement amongst themselves, limit, control or attempt to
control the production, distribution, sale or price of, or, trade in goods or provision of
services.”138
i. Strong circumstantial evidence indicates the existence of a cartel.
102. Cartelisation not being a criminal offence, the test of proof is balance of
probability and liaison of intention which can be established with the support of
indirect or circumstantial evidence.139 Horizontal agreements including cartels
described in Section 3(3) are presumed to have an appreciable adverse effect on
competition140 and therefore void.
103. Circumstantial evidence is admissible to prove the existence of a cartel.
Circumstantial evidence, in turn, consists of communication evidence and economic
evidence, which include firm conduct, market structure, and evidence of facilitating
practices.141
104. Presently, the market conditions like small number of suppliers, little or no
entry, stable demand conditions, identical products or services and few or no
substitutes, etc., indicate that that the market is conducive to cartelisation.142 The
market for the cough syrup shares similar characteristics and hence indicates the
presence of a cartel. Further, this submission is buttressed by the fact that all
manufacturers priced the syrup identically post the DOPE Order and even increased
the prices similarly to maximise their profits.
ii. The present market structure is oligopolistic in nature.
105. Given the statistics of the market shares of the 6 manufacturers, it can be
concluded that the market for dextromethorphan based cough syrup reflects
oligopolistic characteristics.143 Further, the first 6 manufacturers hold 90% of the
market share. It is a point of common observation that in an oligopolistic market, the
firms tend to form cartels in order to maximise profits. Oligopolistic inter-dependence
can also foster anti-competitive coordination144 as this has also occurred presently.
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iii. Direct involvement of the parties need not be shown to prove a cartel.
106. Physical participation of the conspirators or members of a cartel need not be
proved for establishing their common understanding, common design, common
motive, common intent or commonality of their approach.
107. Presently, the CCR places reliance on the economic and circumstantial
evidence such as collusion among the manufacturers to determine the price along with
the supply and production of the cough syrup to establish the existence of a cartel.
iv. The Manufacturers and DOPE Department contravened Section 3(3)(a).
108. The Ketchum Committee Report highlighted that brands of Cough Syrup were
priced identically and the manufacturers did not increase production despite the
epidemic.145 This is contrary to the expected market behaviour wherein the producers
increase their production to maximise profits when the demand increases. Therefore, it
is submitted that the cartel so formed and the DOPE Department have violated Section
3(3)(a) of the 2002 Act by eliminating price competition in the market.
v. Section 3(3)(b) of the 2002 Act was also contravened.
109. Further, the DG's report illustrates that all the manufacturers increased their
production capacity in the range of 120% whereas the installed capacity rose by
150%.146 Even after the sudden spurt in demand, instead of benefiting from the
principle of economies of scale, they chose not to increase production. This shows that
the all the manufacturers tactically colluded to determine the levels of production to
benefit their cause by determining the supply and limiting competition.
D. There was an appreciable adverse effect on Competition.
i. Existence of an agreement leads to a presumption of appreciable adverse effect.
110. Once existence of prohibited agreement, practice or decision enumerated
under section 3(3) is established there is no further need to show an effect on
competition because then a rebuttable presumption is raised that such conduct has an
appreciable adverse effect of competition and is therefore anticompetitive.147
ii. The presumption cannot be rebutted by the Manufacturers.
111. The objectives of the 2002 Act are to eliminate practices having adverse effect
on the competition, to promote and sustain competition in the market, to protect the
interest of the consumers and ensure freedom of trade carried on by the participants
in the market, in view of the economic developments in the country.148
112. Whenever a group of suppliers come together to fix price of the product or
service in concert, they voluntarily give up price competition and bring about mutually
administered prices, ignoring consumer interest.149 This shows that the concerted act
of the appellants of indulging into price fixation has caused an appreciable adverse
effect on competition. Presently, the Appellants cannot rebut the presumption of an
appreciable adverse effect since they colluded to fix the prices of the
dextromethorphan based cough syrup.
iii. The appellants have taken undue advantage of the inelastic demand of the cough
syrup.
113. Medicines are a product of necessity and therefore have an inelastic demand in
the market. A combination or conspiracy among a number of persons engaged in a
particular business, to stifle or prevent competition and thereby to enhance or
diminish prices to a point above or below where they would have been if left to the
influence of unrestricted competition is contrary to public policy.150 The Appellants
have taken advantage of this necessity by charging similar and higher prices which
goes against the spirit of public policy.
114. By placing the prices at similar levels, the manufacturers have reduced
competition, giving no freedom of choice to the customers. This has further
implications such has compromise with the quality of the product and low product
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efficiency, since the public will be compelled to buy whatever is being made available
due to necessity.
iv. The consumers were deprived of access to adequate units of cough syrup.
115. It is well-established that price fixing has an inherent tendency to reduce the
collective output of the participant in the price fixing conspiracy.151 The main threat of
horizontal agreements is that they can enable participants to reduce the output of
goods in some market, thus causing higher prices, inefficient substitution and the
resultant losses in consumer welfare.152
116. The primary objective of Competition Law is to promote economic efficiency
using competition as one of the means of assisting the creation of market responsive
to consumer preferences. By eliminating competition, the advantage of allocative
efficiency, which ensures the effective allocation of resources, productive efficiency,
which ensures that costs of production are kept at a minimum and dynamic efficiency,
which promotes innovative practices153 are being denied to the consumers.
117. The manufacturers did not increase production despite the spurt in demand
which was double the supply rate. As a result of this practice, people were compelled
to manufacture the drug in makeshift laboratories and search for alternatives due to
shortage in the market. This resulted in a public health disaster claiming 7000 lives.154
118. In view of the aforesaid submissions, the CCR submits that the present
Application and Appeal should be dismissed by the KCAT and the order of the CCR
dated 10th January, 2019 should be upheld in its entirety by this KCAT.
PRAYER
In light of the foregoing, the Respondent humbly prays to this KCAT to adjudge and
declare that:
A. G-One Pharmaceuticals application is not maintainable and should be dismissed.
B. The CCR had appropriate jurisdiction to examine anti-competitive practices.
C. The DG and CCR did not violate the principles of natural justice.
D. G-One Pharmaceuticals violated Section 4 of the 2002 Act.
E. The DG and CCR can proceed against the DOPE Department.
F. The Manufacturers and the DOPE Department violated Section 3 of the 2002 Act.
G. The order of the CCR dated 10th January, 2019 was correct and should be
upheld.
And/or pass any other order that this KCAT may deem fit in the interests of justice,
equity and good conscience.
1 Moot Proposition, ¶22.
2The Competition Act, 2002, §53-B, No. 12, Acts of Parliament, 2002 (India). [hereinafter “The Competition Act,
2002”].
3
CCI v. JCB India, (2014) 146 DRJ 531, ¶19 [hereinafter “JCB India”].
4 JCB India, supra note 3, ¶19.
5 The Competition Act, 2002, supra note 2, §53-N.
6
1 SM DUGAR , GUIDE TO COMPETITION LAW 944 (6th ed. 2016) [hereinafter “SM DUGAR ”].
7 Moot Proposition, ¶22.
8 Moot Proposition, ¶22.
9 SM DUGAR , supra note 6, p. 979.
10 Moot Proposition, ¶21.
11 Code of Civil Procedure, 1908, O.37, No. 5, Acts of Parliament, 1908 (India).
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19 Gaurishankar Neeklanth v. Sulochana Neeklanth, [2014] 185 CompCas 300 (CLB), ¶46.
20 Bharathi Knitting v. DHL Worldwide, (1996) 4 SCC 704 : AIR 1996 SC 2508, ¶6.
21 JCB India, supra note 3, ¶21.
113 CIT v. East Coast Commercial Co. Ltd., AIR 1967 SC 768, ¶19.
114 SM DUGAR , supra note 6, p. 223.
115 Moot Proposition, Annexure II.
116 Moot Proposition, Annexure II.
117 Builders Association of India v. Cement Manufacturers' Association, 2017 SCC OnLine CCI 21, ¶5.5.4
[hereinafter “Builders Association”].
118 Builders Association, supra note 117, ¶5.5.9.
119 Moot Proposition, ¶17; Moot Proposition, Annexure II.
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