COMPETITION LAW

Blue = extra from senior’s notes

Table of Contents
Module I - Introduction 2
Historic Development of Competition Law 3
Common Law & Competition Law 5
Socialism and Competition Law 8
Classical and Neoclassical Competition 9
Goal of Competition law 10
Different Schools of Competition Analysis 13
Development of Competition in the US. 15
Promotion of competition law in European Union 17
Module II – Emergence of Competition Law in India 19
History and evolution 19
Monopolistic and Restrictive Trade Practice Act, 1969 20
Focus of MRTP 20
Failure of the MRTP Act: 22
Shortcoming of MRTP Act: 22
Competition Act, 2002 23
Brahm Dutt v. UOI: 23
MRTP Act and Competition Act difference: 25
Module III – Competition Act, 2002 27
Section 3 of the Competition Act – Anti-competitive Agreements 27
Sherman Anti-Trust Act, 1890 38
Prohibited Agreements, Decisions & Commercial Practices under EC Law 48
Section 3(3) of the Competition Act, 2002 54
Cartel 55
 Bid Rigging 59
Cartel Leniency 62
Joint Venture 64
Vertical Agreement 65
Module IV – Abuse of Dominance 73
Dominant Position: Competition Act, 2002 73
Unites States of America – Law under the Sherman Act 73

MODULE I - INTRODUCTION

Competition Law is aimed at preventing competition. It is designed to prevent market distortions. It

ensures that the enterprise do not enter into anti-competitive and ruinous competition practices.
Ruinous competition involves driving out competitors or preventing new players from entering the
market. Other objectives include making products available at an affordable price, ensuring quality of
products, whether a merger or particular action is anti-competitive etc.

Competition law broadly focuses on two things:

● Efficiency- helps companies become efficient in terms of the supply of products, setting of
prices etc.
● Promoting consumer welfare

Competition Law legislation was introduced in India in 2002, but entered into force fully only in
May 2009. Competition Amendment Act, 2007 brought many changes into the law. Competition
Law is still developing in India, particularly when compared to EU (Rome Treaty 1957) and USA,
there is a lot to learn and improve in the competition law in India.

The importance of competition in an increasingly innovative and globalised economy is clear.

Vigorous competition between firms is the lifeblood of strong and effective markets. Competition
helps consumers get a good deal. It encourages firms to innovate by reducing slack, putting
downward pressure on costs and providing incentives for the effective organisation of production.
As such, competition is a central driver for productivity growth in the economy.

Competition law provides the framework for competitive activity. Competition law protects the
process of competition. Competition law is aimed at promoting or maintaining market competition
by regulating anti-competitive conduct.
Historic Development of Competition Law
50th century: History of Competition Law can be traced back to 50th century Roman period
enactment Lex Julia de Annona, which prohibited profiteering and joint action to influence corn
trade. The oldest criminal enactment against monopolies which has been preserved to the present
day, the lex Julia de Annona, relates to the corn trade and probably dates from the time of Julius
Caesar. This law, which is phrased in wide terms, imposed a heavy fine on any person who alone, or
in association with others, did any act which artificially increased the price of corn.

But the effect of the lex Julia was not encouraging. The Roman lawgiver was soon to find that
monopoly grows easily and dies hard. Liability to prosecution and a fine under the Imperial decree
did not prevent the practice from gradually extending to the whole of the trade in foodstuffs and,
indeed, to most other articles in daily use.

Records show that numerous Imperial decrees were promulgated from time to time to deal with the
situation. Criminal sanctions, which in the first instance had been directed against corn monopolies,
were later extended to monopolies of provisions generally, and then to monopolies of all kinds of
goods. Moreover, the penalties for the offence were increased. Thus, besides the fine provided for
by the lex Juli de annona, which remained in force, subsequent decrees introduced the penalties of
withdrawal of the right to trade and even deportation.

The most serious obstacle, however, to the working of the criminal laws against monopoly ultimately
came from the state. During the economic crisis which threatened the existence of the Western
Empire in the third century AD, the Emperors themselves sought to replenish their impoverished
treasuries by the sale of monopoly rights. The result was that many of the most important branches
of industry and trade throughout the Empire came to be organised on a state protected
monopolistic basis. The anti-monopoly laws were virtually paralysed; for it was obviously
paradoxical, at least, to have such laws when the state itself obtained a considerable part of its
revenue from the sale of monopoly rights. It is melancholy to reflect, in passing, that state policy of
practising one thing and preaching another about monopoly is not unknown in modern times.

In 301 AD: Under Diocletian, an ‘Edict on Maximum Prices’ established a death penalty for anyone
violating a tariff system, for example by buying up, concealing or contriving the scarcity of everyday
goods- By the beginning of the fourth century, the evils of monopoly had begun to weigh so
seriously on the public, that Diocletian, in 301 AD, attempted to protect consumers by issuing an
Edict on 'Price-Control', which laid down a system of maximum prices, and made violation of the
tariff' punishable by death. Buyers in the black market, no less than sellers, were subjected to the
same punishment. But the Edict, in entering the notoriously difficult field of price-control, proved
to be over-venturesome. Even the death penalty was ineffectual in the face of organised
black-marketing, and the Edict was repealed immediately after Diocletian's abdication in 305 AD.

In 483 AD: The public was now again very largely at the mercy of the monopolist, and so it went on
until, in the year 483 AD, the Emperor leno issued his famous Edict against monopolies. The
Roman Constitution of Zeno, was promulgated which protected consumers against artificial
increases in the prices of all food stuffs, and hence the artificial creation of scarcity. The Edict of
leno is assuredly the high-water mark of anti-monopolistic legislation. It condemned the exercise of
monopoly power without any reservation whatsoever, and imposed the penalties of heavy fines,
forfeiture of property and condemnation to exile. No attempt was made to distinguish between the
lawful and the unlawful exercise of monopoly power. Not only did the Edict rescind monopoly
rights where they had already been granted by previous Emperors, but it also outlawed the grant of
Imperial privileges in the future.
Zeno’s Edict is particularly significant, moreover, because it is probably the first piece of legislation
in history which contains a provision bearing closely upon the modern practice of resale price
maintenance. Thus, one of the practices which the Edict specifically prohibits and penalises is ‘an
agreement among persons that merchandise may not be sold at a price less than they have agreed
upon themselves.

529 to 534 AD: After the promulgation of Zeno's Edict, there was no fresh Roman legislation on
the subject of monopolies, and when finally, during the years 529 to 534 AD, Justinian codified the
Roman law, he did not more than incorporate Zeno's Edict and also the earlier lex Julia de annona
as the main props of his legislation on the subject.

Justinian codified the Roman law; the days of the Empire were drawing to a close and Europe soon
slipped into the Dark Ages. Legislation in England to control monopolies and restrictive practices
were in force well before the Norman Conquest. "Foresteel" was one of the forfeitures that King
Edward the Confessor could carry out through England.

1266 AD: Under Henry III, an Act was passed in 1266 to fix bread and ale prices in correspondence
with corn prices laid downy the assizes. Penalties for breach included amercements, pillory and
tumbrel.

1300s onwards:

- Under King Edward III, the Statute of Labourers of 1349 fixed wages of artificers and
workmen and decreed that foodstuffs should be sold at reasonable prices. On top of existing
penalties, the statute stated that overcharging merchants must pay the injured party double
the sum they received.
- The Municipal Statutes of Florence in 1322 and 1325 followed Zeno's legislation against
state monopolies; and under Emperor Charles V in the Holy Roman Empire a law was
 passed "to prevent losses resulting from monopolies and improper contracts which many
merchants and artisans made in the Netherlands.
- In 1553 King Henry VIII reintroduced tariffs for foodstuffs, designed to stabilise prices in
the face of fluctuations in supply from overseas.
- In 1561, a system of Industrial Monopoly Licences, similar to modern patents had been
introduced into England.
- But by the reign of Queen Elizabeth I, the system was repeatedly much abused and used
merely to preserve privileges, encouraging nothing new in the way of innovation or
manufacture.

Darcey v. Allin (1602) - The plaintiff, an officer of the Queen’s household, had been granted the
sole right of making playing cards and claimed damages for the defendant's infringement of this
right. The defendant Thomas Allin started making playing cards.

Held: The court found the grant void and that three characteristics of monopoly were

(1) price increases – exclusive right would result in increase of price of products – discretion to set
price

(2) quality decrease

(3) the tendency to reduce artificers to idleness and beggary.

From King Charles I, through the civil war and to King Charles II, monopolies continued, and were
considered especially useful for raising revenue.

EIC v. Sandys (1684) - Thomas Sandys was an English merchant. Sandys traded in India, returning
with a shipload of cloth which arrived in the English Channel in January 1682. When the ship sailed
up the River Thames, officials of the East India Company, which held a monopoly on trading in the
East Indies, seized the ship and attempted to levy a fine

Held: it was decided that exclusive rights to trade only outside the realm were legitimate on the
grounds that only large and powerful concerns could trade in the conditions prevailing overseas. The
East India Company was entitled to levy the fine, citing the Statute of Monopolies of 1624. held that
Sandys and the other interloping merchants had never been possession of the East India trade, and
they had suffered no loss of freedom or restraint of liberty. He upheld the East India Company
charter, and the royal prerogative over foreign trade.

In 1710 to deal with high coal prices caused by a Newcastle Coal Monopoly, the New Law was
passed.
Common Law & Competition Law
● Common Law is one of the main bases of emergence and crystallization of competition law.
● Common law basically deals with unfair competition which is primarily comprised of torts
that cause an economic injury to a business, through a deceptive or wrongful business
practice.
● Earlier, courts used common law to protect competition in the market.
● While adjudicating upon the validity of any anti-competitive agreement, the court had to
satisfy itself that the person who had promised not to compete would not become a charge
on the community.
● The law of contracts and combinations in restraint of trade was one of the few areas of the
common law where the courts expressly accommodated the nineteenth century state’s
economy.
● The English common law sought to protect the liberty of people to practice their craft or
trade.
● Competition Law rests on the basic set premises of doctrine of restraint of trade.
● Restraint of trade is a common law doctrine relating to the enforceability of contractual
restrictions on freedom to conduct business.
● Generally, contracts in restraint of trade are void, as they are contrary to public policy and
public interest.
● Specifically, it relates to a situation in which a party agrees with any other party to restrict his
liberty in the future to carry on trade with other persons not parties to the contract in such
manner as he chooses.
● Initially, every contract restraining trade was struck down.
● In the early 17th century, the concept of reasonableness started coming into picture while
enforcing the doctrine.
● It became a primary consideration in the later 19th and 20th centuries.

John Dyer (1414): Appears to be the first recorded case of restraint of trade. John, the Dyer, had
sought to enforce a writ against a colleague who had covenanted not to practise the craft of dyeing
in the same town as John Dyer for half a year. The judge held that the provision was against the
common law ‘and by God, if the plaintiff were here, he should go to prison’.

Horner v. Graves (1831) one party was a junior in the other party’s dental practice. On leaving they
entered into an agreement that the junior would not practice within 200 miles from the office of the
senior.
Held: whatever restraint is larger than the necessary protection of the party, can be of no benefit to
either; it can be oppressive, and if oppressive, it is in the eyes of law unreasonable. Whatever is
injurious to the interest of the public is void on the grounds of public policy.

Rogers v. Parry (1613) - Carpenter had a business and sold his business. Buyer paid money. Seller
will not compete with buyer for 21 years was one of the stipulations. Seller resumed business from
home.

Held:

It was held that a joiner who promised not to trade from his house for 21 years could have this bond
enforced against him since the time and place was certain. It was also held that a man cannot bind
himself to not use his trade generally.

The Court came up with the Rule of Reasonableness. Flexible approach. Since time and place was
certain the case, the stipulation was found valid and contract was also held to be valid. Restriction
was not kept on business from home.

Mitchel v. Reynolds (1711)- Reynolds had a bakery business. Reynold and Mitchel had a rent
contract through which Mitchel acquired this business. Reynolds agreed that he would not resume
his baking business within that parish (like a county). Reynold even gave him a bond as security in
the event he breached his promise. However, Reynolds resumed his baking within that parish,
resulting in Mitchel losing business because people went back to Reynolds. He sued and enforced
the bond.

Held: The court held that the restraint in this case was not unreasonable and not illegal and the aim
was to protect the renter’s interest. The Queen’s Bench for the first time devoid between reasonable
and unreasonable restraint of trade.

Nordenfelt v. Maxim Nordenfelt Guns and Ammunition Co. Ltd. (1894) - Important case since
the House of Lords for the first time established the blue pencil doctrine to facilitate better
application of the unreasonable test.

Throston Nordenfelt is a Swedish gun maker who sold his business to an American gunmaker called
Hiram Maxim Stevens for 200,000 pounds. Nordenfelt was well reputed globally. The agreement
included a clause which stated that Nordenfelt would not make guns anywhere in the world. He
would not compete with Maxim in any way for the next 25 years.

Blue Pencil Doctrine- [Blue Pencil- Used by copy editors to make corrections in a document.] The
House of Lords established 'blue pencil test' as a method for deciding whether contractual
obligations can be partially enforced when the obligation as drafted in the contract has an element of
illegality. HOL wanted to severe the unreasonable contract clause and let the rest of the contract
remain valid. The 25-year clause was reasonable and valid. The BP doctrine was used to make
corrections.

The court held that:

● The provision prohibiting Nordenfelt from making guns or ammunition was reasonable.
● The providing banning competition ‘in any way’ was unenforceable as an unreasonable
restraint of trade.

The question on severability was whether the reasonable restriction could be enforced when it was
in the same contract as an unreasonable and unenforceable restriction. The court used the test of
striking out (with a blue pencil) words containing unreasonable provisions would leave behind a
contractual obligation that still made sense. If it did, then the amended contract would be enforced
by the court.

Amended clause- Nordenfelt would make guns and ammunition in any part of the world for the
next 25 years. Through this Doctrine, the Court asked the party to amend the restrictive part of the
clause.

The Court felt that restraint must be in legitimate interest of the parties and reasonable in scope
from the point of view of parties involved, and p.o.v. of public interest

Case 8: Eldridge et al v. Johnston

Held: “A contract imposing a restraint on competition must be reasonable with regard to area and
time if it is to be given effect to. A promise is to be considered reasonable if is not wider than is
necessary for the protection of the parties. And not injurious to public. If the restraint imposed is
greater than is necessary for the protection of promise, it is in valid”.

Case 9: Board of Trade of Chicago v. United States (1917)

Based restraint of trade on rule of reason test.

The Supreme Court of the United States applied the "rule of reason" to the internal trading rules of
a commodity market. Section 1 of the Sherman Act flatly states: "Every contract, combination in the
form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several
States, or with foreign nations, is declared to be illegal."[1] However, in evaluating the U.S.
government's allegations that the Chicago Board of Trade's rules on grain prices violated the Act,
the Supreme Court rejected a strict interpretation of its language: "The true test of legality is
whether the restraint imposed is such as merely regulates and perhaps thereby promotes competition
or whether it is such as may suppress or even destroy competition.
Socialism and Competition Law
Compatibility of socialism in any form of competition. In case of socialisms, the means of
production and distribution of economic resources is vested in the state. This is similar in a Marxists
economy, however they differ in that socialism recognises private profit and private property to
some extent

19th Century-

Joseph Proudhan- He was not against competition but rejected capitalism. Socialism was a free
association of small property owners and independent producers owning their means of production.
The necessary evil of capitalism is that it gives monopoly on the means of production to bankers
and industrialists and so small industrials were ousted from the market, In such competition, a
genuine competition with presupposed equality and freedom is important. Proudhan did not
eliminate the existence of competition, he believed that it was inherent in nature. He also propagated
that socialism would break the capitalism monopoly on means of production. Competition is
ruinous in a capitalist economy. Socialism would return to an individual tools of his labour and
thereby restore fair competition.

Karl Marx- Competition is the emulation of profit. In history, the industry was not competitive for
a large period of time. He said that competition contains the seed for future centralisations or rather
it contains the seed for future capital accumulation that is achieved through mergers and
acquisitions.

Lenin- adopted a more pragmatic approach and advocated that socialism is not against competition.
It is in fact the first system to create an opportunity for competition with the masses to include
majority of workers into a task within which they shall be prove their best abilities.

Classical and Neoclassical Competition

Differs in taxonomy and functioning. For classical economists, competition meant both rivalry and
freedom from constraints. Competition is a form of liberty. Just as one could give up some liberty by
entering into a contract, so also one could bargain away the right to compete.

Classical political economists were concerned expressly with public policy, much more than their
neo-classical followers. They did rest their arguments in the spirit of common law principles.

Adam Smith- He viewed competition as a struggle of all to maximise wealth. Those who seek
health by following their individual self-interest inadvertently stimulate the economy and assist the
society as a whole. He was focused on individual self-interest that drives people to work to better the
economy. He is led to propagate this theory by invisible hands. This term is not defined by him, but
later economists attempt to understand it. It means unseen market forces that set the economy. He
believed that there must be unstrained freedom with the self-interested individual while deciding
what job to take up, what prices to charge, whom to deal with and other such market decisions.
Individuals are concerned with augmenting its wealth due to vehicle they inadvertently stimulate the
economy. AS’s view was critiqued by-

Kenneth Arrow and Gerald Debreu- Criticised AS’s view. They propagated that it is not possible
to achieve such a market condition because the initial distribution of wealth and resources is not
appropriate. To achieve a desirable market conditions, equitable distribution of wealth and income
needs to be appropriate.

For neo-classicists, perfect competition is a state of affairs in which price is driven to marginal cost and
firms are forced to minimise their costs through innovation and growth to the optimal size.

Marginal cost is the cost of each additional unit of output. Eg- if there are a batch of 10 units- cost
for which is 100, and for 11 units cost is 105, then here MC- is 5.

Imperfect Market:

- Monopolistic competition, in contrast to perfect comp is a type of imperfect comp- large number of
buyers and larger number of sellers.

- Monopoly is another example- high prices, high buyers, low sellers, dealing with homogeneous
products.

Homogenous products- products with similar like and similar characteristics. Eg- butter and
margarine.

- Duopoly- 2 player

- Oligopoly- small number of players account for a large number of market share.

Cement Cartelisation case- cement market in India is an oligopoly market- 10 players account
for 75% of market shares.

Tire Cartelisation case- CCI on the bases on data collected by DG, found that the tire market is
also oligopolistic in nature since- few companies account for 95% of

Market is normally imperfect.

Perfect Competition-

1. Large number of buyers

2. Homogenous product

3. Seller is price taker

 4. No entry of exit barrier

5. Perfect factor mobility- players can move from one industry to another

6. Perfect information with regards to price and quality of production

Goal of Competition law

Arguments of scholars

a. Joy Durban- viewed that efficiency is not the basis for competition- rather distrust of power is the
real basis (Market supply, demand and liquidity side).

b. Prof. Mcchesney- corroborated views of Durban that distrust of power is the reason for
competition- no efficient market requires competition- Americans embraced the free-market
economy and did not believe in govt. directed resources.

c. Prof. Elenoar M Fox- Not only distrust of power but concerns for consumers are matters of
competition. Competition is the preferred governor of the market as opposed to efficiency. Product
efficiency and allocative efficiency re by products of the

market.

Goals of competition law

a. Classical goals

1. Enhancement of efficiency in the market

2. Promoting consumer welfare

3. Avoidance of conglomeration of economic power

4. Protection of smaller firms from anti-competitive agreements.

b. Specific goals- creation of the single market which helps lower prices and better consumer welfare
and liberty to seller

The EU is the best example as it has 27 member states but as far as economic activities are
concerned, the whole EU operates as a single economic entity. It is called a single market or internal
market because it operates even though it has physical borders.

Efficiency and Goals of Competition Law

● J. Dirlam: he opined that efficiency cannot be the basis for competition? He views that it is
the distrust of power that is the basis of power. The private actors would not trust state
 interference in the economic activities such as regulating the prices and charges of the
product etc. When such is left on the state then it would be difficult to operate.

● McChesney: He concurred with Dirlam and said that in any society, we would not need a
competitive market if it were efficient. American system is the decentralized system.
Interference by the state should only be there if the market fails or distorts. Otherwise, there
should not be any interference.

● Elanor M. Fox: She said it is not merely distrust of power that is a basis of competition but
a concern of consumers and the commitment for opportunity of entrepreneurs are the basis
of competition. It is not efficiency that is the basis. Competition is the preferred governor of
the market and not state interference. When competition operates in the market, certainly
the product efficiency is the by-products.

Efficiency:

Efficiency is all about maximum utilization and best possible management of scarce resources in a
society. There are other types of efficiency:

1. Allocative efficiency:

● It refers to allocation of the resources. Resources can eb products or inputs. Ex: how raw
material suppliers should supply their products to the manufacturers. Now, it is the
responsibility to ensure that the resources are allocated efficiently to the customers.

● Basically, it is optimal allocation of resources. Optimal is maximum allocation of the

resources that also meets the demand of the consumers.

2. Productive efficiency:

● Optimal production of the products/services. You have to be careful and should optimally
allocate resources into the stream of production but without wastage.

● Productive efficiency refers to how minimal resources can be used to produce maximum
output.

● Allocative and productive efficiency together is known as static efficiency where price =
marginal cost.

3. Dynamic efficiency:

● It refers to the technology market where any product cannot be developed due to static
efficiency models.
 ● In the modern and fast-moving society, we need dynamic efficiency. There is an interface
that is required between dynamic and static efficiency.

● The cost that a company incurs in R&D has to be transposed to the selling price of the
product.

b. Neo-classical goals

Neo-classical economic theory: Neoclassical economics is a broad theory that focuses on supply and
demand as the driving forces behind the production, pricing, and consumption of goods and
services.

Static models of oligopoly:

Oligopoly is on the right side and perfect competition is on the left side. In case of perfect market
competition, the competitors react with the market as a whole. Competitors are price takers and not
price makers. Whereas in the oligopolistic competition, the competitors interact with each other.
This does not mean that there is always a collusion. In monopoly, the competitors do not interact
with each other at all.

1. Cournot model:

● Cournot was a French mathematician, he developed a model in 1838. It is a duopoly model.

When he developed the model based on mathematics, they did not completely base it on the
market.

● He presented a duopoly model but with quantity. Ex: there are two firms, A and B in the
market. They both compete by setting output, i.e., compete by quantity and not by price.
Both players move simultaneously at once. Both are not able to understand what the others
would do but they assume it. The consequence of this is that when output is the criteria then
there is a chance that price would come down and quantity would increase. When duopoly
competition increases, then quantity increases and prices will fall. Thus, the number of
products will increase but there will still not be a perfect competitive state.

● Cournot's model is idealistic because it is an assumption that goods are perfectly

substitutable, the marginal cost of products are constant and equal for both the parties, and
the firms are not subject to production capacity.

2. Bertrand model:

● Joseph Bertrand had developed this model almost 45 years after Cournot in 1883. The
unique feature of this model is that the element is price and not quantity. Duopoly market is
 one where the two players move simultaneously however the other player may undercut the
price.

● Hence, they compete with price but they move simultaneously. They compete by
undercutting prices. Both players can continue to compete when one player undercuts and
the price reaches the marginal cost.

● In this model, they compete by setting prices and not output.

● Criticisms

- It is too idealistic- gives certain unrealistic assumptions which are mostly not true

- Assumption of MC being equal for both players is preposterous- one player may have a
larger plant.

3. Stackelberg Model

● Developed in 1931 based on Cornout model

● This model is also called leadership model

● Players here rely on each other’s reaction and not action- seller follows price set by other
person- if other party chooses to be a follower- leads to ‘Cornouts equilibrium’

● If both want to be leader- leads to stackelberg warfare.

● Stackelberg equilibrium- leader and follower.

● Difference between Bertrand and Stackelberg- Bertrand is based on prices, Stackelberg is

based on output.

Different Schools of Competition Analysis

a) Harvard School of Thought (S-C-P Paradigm)

Developed by ES Mason- developed the initial brick of the pragmatic/ empirical model in 1930s. He
had a disciple- JS Bain who in 1950s rigorously developed the model- took 20 prominent industries
in the US and came up with the Structure-Conduct-Performance paradigm (Each element directs the
other)

In a highly concentrated market- parties perform anti-competitively and this would result in
controlled output and monopoly pricing.

Market structure to be understood based on market concentration (top 3 players or top five players
concentrate the market)
According to Bain- in economies of scale the market structure determined everything about the
players (ex- entry barriers)- therefore known as ‘structuralism’.

b) Chicago School of Thought

Developed as a reaction to the S-C-P Paradigm. Efficiency is the main goal as per this theory.
Developed primarily by Robert Bark. They disagreed with structuralists- according to them
economies of scale were very less and entry barriers were not high.

They placed reliance on efficiency of firms- stated that concentration of firms didn’t matter as much
as efficiency did. Further stated that individual consumers are rational human beings who made
rational choices- they did not buy any good at any price. They believed markets to be self-correcting
systems (through invisible hand) which did not require government interference. They also stated
that firms cannot adopt monopolistic pricing as consumers being rational would go for cheaper
alternatives. Believed that winners and losers in market are irrelevant as long as efficiency is
achieved. Did not discard structuralism altogether- believed it was important too but not the main
determinant.

c) Game theory

- Influenced by static models

- Game theory was developed by two economists in 1944 – John Von Nuemann –
Hungarian American and Oskar Morgenstern – German American. But in 1944, not
much attention was received. When Chicago was in limelight in 1970, this swiftly
developed.

- Game theory refers to market games and strategies. Game Theory involves a combo of
best strategies. Eg. – Firm A’s best strategy against Firm B’s and vice versa. Co-op game
theory ends with co-operation/interaction.

- Game theory can be can be divided into two

1. With cooperative gains (it’s a part of collusion)

2. With non-co-operative games - here is no co-operation between players (economists

are more interested in this)- can be divided in two more

- Static games

- Repeated games

● Static games
 a. Involves two firms both of whom move at once and do not interact with each other.
They employ the best strategy.

b. Similar to Prisoner’s Dilemma –Two villains were caught in stolen car after robbing
bank. Kept in 2 separate cells. Prosecutor needed proof to charge them. They couldn’t
interact with each other at all – 2 options were given – a) confess, b) deny. Both were
asked separately and didn’t know what the other would answer.
i. If A confesses, B denies – A will get 10 year jail term.
ii. If B confesses, A denies – B will get 10-year jail term.
iii. Both confess – 6 years.
iv. Both deny – acquitted from bank robbery, 1 year for car stealing.

Prosecutor got them to confess as (iii) was the optimal answer and the best strategy.

c. Price variable- firms don’t know the price set by the other firm- Firm A would think
price has increased from 100 to 105- while Firm B may (or may not) decrease his prices.

d. A therefore would reduce to 95 to tilt demand to his side, until when they both reduce to
the level that they have no incentive to derail from the strategy- this called Nash
equilibrium. It reflects Pareto efficiency but not pareto optimacy.

● Repeated gains

a. They are not short games. They are played again and again

b. There are two types

1. With finite horizon- The number of games played by players in the market is known-
studied through the backward induction theory. In Prisoner’s Dilemma – both players
know the best-case scenario – not to co-operate.
In repeated games, both players know the last game. When they feel that is rational not
to co-operate in the last game, it becomes irrational for them to compete in the
penultimate game. They compete but do not co-operate. Eg – 6 games. Players A & B
won’t co-operate in any of the 6 games but will compete.
2. With infinite horizon- The last period to play the game is unknown (therefore total
number of games are not known)
- period of games is unlimited
- with a combination of various equilibrium and strategies a collusion is possible
- players are discouraged from not cooperating- they are asked to cooperate to protect
their interests
- economists argued- it is easy to reach the terms and conditions of collusion- however
it is difficult to police/ monitor.
 c. Games are not played only once- repeated at every level according to the criteria

Development of Competition in the US.

● 75-80 years after independence in 1776, USA saw economic development taking place in
concentrated form. USA was protectionist till 1860.

● During 1861-1865, there was civil war between 7 southern states with northern states as 7
states wanted to free itself from the USA.

● In 1865, US economy started flourishing. Demand and supply started to increase, small firms
turned large and large firms went for cartelization. Especially in some sectors like oil and
communication.

● In 1870, for oil, a trust was formed by John D Rockerfeller. While forming the board, he
invited trustees from all corporations in the sector. All companies were asked to submit
share certificates to the board of trustees. Thus, the board got all details for all corporations
in the oil sector.

● By 1885, all sectors had formed the trust and it had become formidable. Railroads were
important for long and short haul traffic & commerce. But small firms were met with
injustice as fares for both hauls were same for small and big firms

● In 1887, the Interstate Commerce Act was passed by the US Government for the railroad
sector. Some states started regulating this as well.

● In 1889, there was a change in government. New President Benjamin Harris requested
lawmakers to make law to regulate the trusts.

● 1890- Ohio Senator John made a law and it was passed in 1890. Sherman Anti-Trust Act of
1890. John – “If a king is not endured as political power, a king can’t be endured for
production of essential commodities – transportation, sale of necessities of life – aim is to
protect competition and it is not against big corporations.”

● Anti-trust laws were made. Two important provisions: S. 1 – Anti-competitive agreements;

S. 2 – Monopolization – act of abuse.

● 1909- Taft become the US president- recognized problems in competition- corporations

started colluding through M and A.

● 1914 - Wilson became President. Companies had started merging instead of making trusts.
They also called overnight mergers.

● WW1 had begun. WW brought about the following changes-

 1. Clayton Act, 1914 – Rectified loophole of Sherman Act. S. 7 prohibited potential
anti-competitive mergers. If acquisition leads to fewer competitors in the market, this
is invalid. It also provided for prohibition of prior discriminatory practices.

2. Federal Trade Commission Act, 1914

- Established FTC who had to survey the market to look for unfair and deceptive
practices being used by firms across the USA. Later, it was given power to sue under
the Sherman Act.

- For criminal actions, the Department of Justice was given power to sue [Only
government departments can invoke criminal action, FTC can’t bring criminal
actions]. Areas were bifurcated between Department and FTC.

- War broke out and firms demanded protection from W. Wilson. During the war
period, firms monopolized the market and abused consumers but it helped the
economy of the USA and so Wilson enacted a legislation.

3. Webb – Pomerene Act, 1918 – Exemption legislation that exempted certain

corporations from FTC, 1914 and Clayton, 1914 as they aided US economy during
war.

4. By 1935, US government again focused on competition issues. This resulted in

amendment of S. 2 of Clayton Act. The Robinson – Patman Amendment Act, 1936
added more price-discriminatory practices and punishment in S. 2.

5. Celler–Kefauver Act 1950 amended S.7 of the Clayton Act to provide for prohibition
on anti-competitive stock acquisitions. It prohibited any merger or acquisition if that
transaction would substantially lessen the competition

Problem: Companies started acquiring assets and so 1950 act was amended and it brought other
forms of corporate restructuring.

6. 1976 – Hart Hart-Scott-Rodino Antitrust Improvements Act of 1976: Mandatory

premerger filing requirements present. In India, we have CCI that approves such
schemes of re-arrangement.

[The Hart-Scott-Rodino Antitrust Improvements Act of 1976 requires large

companies to file a report before completing a merger, acquisition or tender offer.
Enacted by President Ford as a set of amendments to existing U.S. antitrust laws,
such as the Clayton Antitrust Act, the Hart-Scott-Rodino Act requires parties to
notify the Federal Trade Commission and Department of Justice of large mergers
and acquisitions before they occur with the filing of an HSR Form, also called a
 "Notification and Report Form for Certain Mergers and Acquisitions," and generally
known as a "premerger notification report." The report is meant to alert regulators
to the intent of companies to merge so they may perform a review of the action
based on antitrust laws.]

Promotion of competition law in European Union

● Joean Monet- French political economist and diplomat, Robert Schuman a French
statemen and Winston Churchill realised a 100-year-old dream of a united states of
Europe- they encouraged collaboration between various countries of Western Europe
(Belgium, Luxembourg, France etc)-

● Treaty of Paris- treaty established the European Steel and Coal Community- aimed at
reducing tariff. 6 countries involved – Belgium, Luxembourg, Italy, France, Netherlands and
Western Germany started steel supply and subsidies (reduced tariff values between these 6
countries). This went on for 6-7 years.

● 1951- the same states having this advantage expanded the set up for other products of trade-
came up with two agreements

● 1957- 6 countries entered into Rome Treaty which constituted two bodies:

i. European Economic Community

ii. European Atomic Energy Community

EEC was larger and encompassed all products of trade across 6 countries. The bodies started
functioning and states wanted to bring other countries under the same umbrella.

● 1965- countries entered into a Merger Treaty which established

a) Council of Ministers: highest treaty making body represented by ministers
b) European Parliament: was a weak body till 1979 as parliament members were nominated by
member states. In 1979, elections were conducted for Parliament
c) European Commission: Executive wing- implements all the laws of the council and the
parliament- they work according to the law- they have inquisitorial powers and preliminary
adjudicatory powers.
d) ECJ: Principle judicial organ of European Community

● 1987- Single European Treaty of 1987 was entered into to revitalized the functions of the
four organs. It introduced the Court of First Instance to address the problem of the ECJ being
overburdened. From 1989, questions of fact would be settled at the CFI and questions of
law could be appealed from CFI to ECJ.
● 1992- , in Netherlands, countries made Maastricht Treaty. In 2004, 10 more countries joined
to become was informally called the EU. In December 2007, Lisbon Treaty was entered into
and it re-christened names.
● The Lisbon Treaty significantly revised (and renamed) the Treaty on the Functioning of the
European Union (TFEU) and the Treaty on European Union (TEU), the other principal EU
Treaty. ECJ became the CJEU.
 MODULE II – EMERGENCE OF COMPETITION LAW IN INDIA

History and evolution

● From 1947- government under Nehru’s leadership embraced a mixed economy with socialism.
During this time, India’s economic policies undertake by the government under Nehru often
rejected a Command & Control approach.
● In 1948, the 1st Industrial Policy was formulated. Being a socialist country with a mixed
economy, GOI wanted to remove
a) having reliance on others and become a truly independent India
b) regional imbalance,
c) check concentration of power in big enterprises operating in private sector.

The 1948 policy divided economy into 2 parts – public and private.

● Parliament passed the Industries (Development & Regulation) Act, 1957 which is often
considered an obsolete legislation. The act introduced License Raj – objective of act was to
provide for compulsory licensing system- this was mandatory for the private industries only-
every new entrant was required to acquire license. Private entities were also required to
periodically renew these licenses,
● The 1951 Act and license raj continued till 1991 but the public sector was exempted from this
license raj. The private sector was burden with renewals. It also introduced corruption and
red-tapism. Small enterprises were burdened with such fees and renewals procedure.
● The 1951 Act introduced a policy and the indigenous goods and products were encouraged and
imports were restricted. Import substitution – local over imported market – can’t import
products that could be indigenously produced.

The 2nd policy – 1956 – was also introduced.

● Late 1950s- there was uproar from industrialists as the policies weren’t getting the desired
results.
● Mahalanobis Committee: Distribution of Income and Levels of Living Committee
headed by P. C. Mahalanobis was constituted to look at existing levels of income. They issued
their report in 1964 observing that the planned economy model had resulted in inequal
distribution of income and low levels of living. The top 10% owned 40% of income. The top 20
large firms owned 38% of private built-up capital.
● Establishment of Monopoly Inquiry Commission: Pursuant to the Mahalanobis committee
recommendation, in April 1964, GOI set up the Monopoly Inquiry Commission for:
i. Investigating concentration of economic power in private sector, its nature and extent
ii. Suggest remedial measures/legislative or otherwise
 iii. draft copy of the MRTP, segregation into product wise and country wise concentration.
● MIC Report, 1965: The report was submitted in October 1965 and it observed that 85% of
production and distribution of economic power in private sector was covered by top 3
enterprises [Relate to SCP Model]. Small enterprises started with the oligopoly model which was
anti-competitive.
● Hazari Committee 1966: In July, 1966, the Hazari Committee was made to observe the
examine the effect of the 1951 Act – licensing system. The committee observed that the working
of the licensing system has resulted in the disproportionate growth of some big houses.
● In July 1967, GOI set up Industrial Licensing Policy Inquiry Committee (ILPIC). The
findings substantiated Hazari Committee’s observations on the concentration of power and
disproportionate growth of big enterprises.

Monopolistic and Restrictive Trade Practice Act, 1969

MRTP was passed as per the recommendation of the MIC in 1969. It was based on 4 principles:
(1) Social Justice with economic growth;
(2) Welfare state;
(3) Regulating concentration of economic power to the common detriment; and
(4) Controlling monopolistic, unfair and restrictive trade practices.
MRTP was based on Article 38(2) and Article 39(b) and (c).
● Article 38(2) – The State shall strive to minimize inequalities in income and eliminate
inequality in opportunity.
● 39(b) and (c) – Ownership of natural resources should be distributed so as so serve common
good. The operation of the economic system shouldn’t result in concentration of wealth in
the means of production.
This law was enacted:
1) To ensure that the operation of the economic system does not result in the concentration of
economic power in hands of few,
2) To provide for the control of monopolies, and
3) To prohibit monopolistic and restrictive trade practices.

Focus of MRTP
1. Monopolistic Trade Practice (MTP) defined under Section 2(i)1

1
“Monopolistic trade practice” means a trade practice which has, or is likely to have, the effect of, —
(i) maintaining the prices of goods or charges for the services] at an unreasonable level by limiting, reducing or otherwise
controlling the production, supply or distribution of goods or the supply of any services or in any other manner;
(ii) unreasonably preventing or lessening competition in the production, supply or distribution of any goods or in the
supply of any service;
(iii) limiting technical development or capital investment to the common detriment or allowing the quality of any goods
produced, supplied or distributed, or any service rendered, in India to deteriorate;
S.2(i) – “monopolistic trade practice” means a trade practice which has, or is likely to have, the effect
of:
i. Maintaining prices of goods or charges for services at an unreasonable level by limiting, reducing
or otherwise controlling production, supply or distribution of G&S.
ii. Unreasonably preventing or lessening competition in production, supply or distribution of goods
or services. Whether or not by adoption of unfair method or fair or deceptive practice.
iii. Limiting technical development or capital investment to common detriment
iv. Deteriorating the quality of any goods produced, supplied or distributed; and
v. increasing unreasonably –
- The cost of production of any good; or
- Charges for the provision, or maintenance, of any services; or
- The prices for sale or resale of goods; or
- The profits derived from the production, supply or distribution of any goods or services.

2. Restrictive Trade Practice (RTP) is defined under Section 2(o).

A restrictive trade practice is a trade practice, which Prevents, distorts or restricts competition in any
manner; or obstructs the flow of capital or resources into the stream of production; or which tends
to bring about manipulation of prices or conditions of delivery or affected the flow of supplies in
the market of any goods or services, imposing on the consumers unjustified cost or restrictions.

3. Unfair Trade Practice (UTP)

No definition for Unfair Trade Practice was provided. UTP was brought in 1984 pursuant to
recommendations made by the Sachar Committee which was set up in 1977. Over and above MTP
and RTP, there existed deceptive trade practices which were categorized as UTP. Eg – bargaining,
misrepresentation. Recommendation was made to include UTP as an anti-competitive practice
pursuant which the S. 36(A) was added.
S. 36(A) – Any trade practice which for the purpose of promoting sales, use or supply of any goods
or provisions of any services is said to adopt UTP which includes:
i. Bargain – selling below market price
ii. Bait and switch selling – advertising something and selling another

(iv) increasing unreasonably, —

(a) the cost of production of any goods; or
(b) charges for the provision, or maintenance, of any services;
(v) increasing unreasonably, —
(a) the prices at which goods are, or may be, sold or re-sold, or the charges at which the services are, or may be,
provided; or
(b) the profits which are, or may be, derived by the production, supply or distribution (including the sale or purchase) of
any goods or by the provisions of any services;
(vi) preventing or lessening competition in the production, supply or distribution of any goods or in the provision or
maintenance of any services by the adoption of unfair methods or unfair or deceptive practices
 iii. Offering gifts and prizes with the intention of not providing them and conducting
promotional contests.

1990- By the end of 1990- crisis started due to overbearing deficit- – import is more than export in
current account. Although there was an Import Export Act, it was more import oriented and not
export oriented.
1991- After March, 1991 Indian govt. was left with such less resources that they could finance only
three more weeks of imports. By June, new Government came. In order to implement policies, a lot
of changes were needed. India effected a series of changes. Eg- Fiscal Policy, Industrial Policy of
1991.
1992- The Foreign (Trade and Development) Act was introduced (S.5- empowered government to
bring a 5-year export import policy). The new policy was however put under the carpet. The
Liberalised Exchange Rate Management system was also introduced which provided partial product
convertibility. Any rate can be converted to rupees at a pre-determined rate.

Failure of the MRTP Act:

- When we look at the MRTP, we see that it is considered to be a huge failure. Pre-entry
restrictions were removed.
- From Sept 1991 to 31st May, 2011 - the merger controller examination went unregulated. The
companies act did not provide for regulation of it.
- Part A had sections 20-26. Part B contained sec 27 and 28. These combination provisions
entered into force due to the notification of MCA. After amendment into MRTP Act in 1991,
due to omission of sec 23, the entire merger review went unregulated and uncontrolled.
- The amendment in 1991 - many scholars hailed it to be new wine in an old bottle because the
structure remained the same (This is not a praise). The amendment was inadequate. Pre-entry
restriction went which was good but still inadequate.
- In 1994, India signed the agreement in Marrakech where there was an obligation to fix the
MRTP act. In 1999, they replaced it with FEMA. Despite this, it was very difficult for the
Government of India to enforce the MRTP Act.
- When the very MRTP act was compared to competition law of other jurisdictions, it was felt that
it is inadequate to meet the then challenges in the wake of globalisation.
- They felt that there was a need to replace the MRTP Act.

Shortcoming of MRTP Act:

- In addition to the various other problems, the MRTP Act did not provide definitory regulatory
provisions for regulating typical types of anti-competitive practices.
- It did not apply to extra-territorial operations and manage anti-competitive practice beyond
Indian borders.
- It did not have the definition of cartel, predatory pricing etc.
- From the 1991 amendment onwards, the merger review went uncontrolled due to the omission
of sec 23.
- The GOI thought that in 1999 that it was the right time to come up with a new law because the
existing law under MRTP act had become obsolete and outdated.

Setting up of Raghavan committee:

- With a view to eliminate anti-competitive practices, it was pertinent to bring a new law. In 1999
they set up a high-power committee on competition law and policy to be headed by SVS
Raghavan.
- They submitted a report in May 2000 and inter alia provided for a new law.
- Now we see that there is a definition of cartel, categorization of anti-competitive practice etc.
- Finally in December 2002, there was a new act. In January 2003 it came into force.

Competition Act, 2002

Objective:
1. The objectives of the act very clearly states that it is to prevent/prohibit anti-competitive
agreements.
2. Prohibition of the abuse of dominant position. Unlike the MRTP Act, the current competition
act does not prohibit/discourage a dominant position, it merely prohibits abuse of dominant
position. Ex: Sec 4(1) of Competition act provides for a prohibition wherein no enterprise or
group of enterprises should abuse its dominance.
3. It is to regulate/control anti-competitive M&A.
4. To provide for applicability of the act to the anti-competitive
activities/agreements/combinations that are taking place beyond Indian borders. (Sec 32)
5. Under sec 49 - they provide for the first time, competition advocacy by CCI. However, it need
not be binding on the CG. CCI is also obligated to go for advocacy programs to create
awareness of the provisions of the competition act.

Brahm Dutt v. UOI:

Facts: As soon as the competition act entered into force in 2003, in the same year in April, the
Government of India adopted Rules for the appointment of chairperson and other members of the
commission.
As per sec 9 of the competition act, Gov of India can make rules for constitution of the selection
committee who select members of the commission. Rule 3 of 2003 rules, the central government
was empowered to constitute a selection committee and the selection committee could appoint a
member of the commission and owing to this, the Central Government appointed a retired
bureaucrat (civil servant) as the chairperson of CCI.
As soon as the chairperson was appointed, the act was challenged by Senior Advocate Brahm Dutt
and moved the writ of mandamus. He contended that Rule 3 of the CCI rules was violative of
doctrine of separation of powers. They wanted it to be headed by a retired judge.

Issues
- Section 8 and 9 of the CCI Act and Rule 3 of the 2003 Rules were challenged.
- The Selection Committee selects 3 people out of which one person will be appointed by the CG.
(based on 2003 Rules)
- The one member must be a retired Judge of SC/HC, retired judge of tribunal, distinguished
jurist, senior advocate for 5 years time.
- One member must have professional expertise of at least 25 years in international trade,
commerce or industry
- Third person must have 25 years experience in finance, administration, management, finance.
This was challenged

Contention of Petitioner
a. There was no appeal for decision of CCI to HC (There was only to SC) The petitioner said it is a
trend to vest jurisdiction on HC. This can’t be done.
b. CCI would be exercising adjudicatory functions- not executive functions. As per general practice
for any body having quasi judicial functions, the chairperson should be retired judge of SC on
retired CJ of HC. The Selection committee must be headed by a retired Judge of SC/HC. The
appointment of the selection committee without reference to the head of the Judiciary was
undesirable in law. No Judge of the HC/Sc was referred to.
c. Election of members of a body must be made by the CJI or a committee constituted by his
nominees (this was against doctrine of SOP).
d. Petition cited the Sampat Kumar v. UoI - whereby decision from Central Administration tribunal
will lie to the SC, Chandrashekhar v. UoI which overruled this and said the appeal lies to HC and
then the SC.

Government Contentions
a. Competition Law is a specialised area which requires expertise in that area. Therefore, only
people with competence in that area are appointed. Since it is an expert area, CCI doesn't need
to be headed by a Judicial member.
b. Appeal from CCI would go to COMPAT and then finally to the SC.
c. CCI is an advisory body, and not an adjudicatory body.
d. Section 9 would be amended to comprise 5 members in the Selection Committee to select
members of CCI. it would be headed by CJI/ his nominee, having 2 ex-officio positions (Secy. to
the Ministry of Law and Justice and Secy. to the MCA), 2 experts having professional experience
as given above.
Supreme Court: SC did not stay the operation of the act. But CCI was not functional for a while. SC
merely disposed of the WP. SC was satisfied by the assurances given by the CG but kept open all the
questions to be challenged in the future.
The Amendment Bill of 2006 was finally passed in 2007, which is why it is called “Competition
(Amendment) Act 2007”.
Finally, as of 20 May 2009, the Competition Act entered into force formally barring 8 combination
provisions. (5,6, 20, 8, 43A etc.)
4/3/2011 Notification- 6 combination provisions were given effect to
End of May- sections 43A and 44 were given effect to
As of June 2011, all the 8 combination provisions had entered into force.
Section 53- establishment of COMPAT. Section 53 was amended via Finance Act of 2017.
COMPAT was replaced with NCLAT. This came into effect from May 2017.
Hub and Spoke cartels to be officially included by way of the proposed 2020 Amendment.
Writ Jurisdiction of HC still stays, it can never be taken away. Only appeals go to the NCLAT and
SC.

Haridas Export v. All India Manufacturers Association

S. 14 of MRTP can’t be applied to products from outside India. In 1994 – Marrakesh Agreement
was made by GOI – to provide proper competitive clause

MRTP Act and Competition Act difference:

- MRTP act was based on size. Size means economic size. Competition Act based on conduct.
- Prohibition of the abuse of dominant position. Unlike the MRTP Act, the current competition
act does not prohibit/discourage a dominant position, it merely prohibits abuse of dominant
position.
- MRTP act was more procedure oriented because it had DGIR. DGIR could investigate to any
extent. If you look at the competition act, the DG can only investigate when and to the extent
the committee directs.
- The Competition Act is result oriented and is not bound by the law of evidence. It is only bound
by principles of Natural justice specially audi alteram partem and nemo judex….
- MRTP was reformist and behaviourist in approach. MRTP Act did not provide for penalty and
it was reformatory. Under competition act, the penalty can be very heavy. For violation of sec 3
& 4, you have to pay a penalty of 10% turnover. For a cartel it can be 10% of turnover or three
times the profit earned.
- Under Section 42, non-compliance of CCI provisions can be subject to penalty and criminal
sentence to the person responsible up to three years. Same is not present under MRTP.
- The MRTP Act did contain UTP (unfair trade practice) since 1984. Present competition act does
not provide for UTP.
- CCI can take action suo motu on such cases based on media reports etc.
- MRTP did not provide for extra-territorial operation but competition act allowed.

MRTP Competition

Based on size Based on conduct

Frowned upon monopoly Prohibited monopoly – dominance should

not result in abuse or anti-competitive
behaviour

Rule of law Rule of reason – flexible – can operate if no

anti-competitive behaviour

Reformist and behaviouralist approach. No Punitive approach. S. 27 Penalty – 3 times of

penalties – only remedies of divesture, profit or penalty as given in section – higher
division of enterprise etc. were there in S. 28. of both. CCI can first issue cease and desist.
S. 28 also provides for division of enterprise.
EG. MCX Exchange v. NSE – Imposed the
remedy of division of enterprise for the first
time.

Under MRTP, no penalty could be imposed Under S. 42 Penalties for non-compliance of

for non-compliance of order CCI order – 3% of profit or 10% of
turnover – whichever is higher.

MRTP doesn’t have extra-territorial Under S. 32 – eta is provided for. CC can

application. In Soda Ash Case and Haridas consider anti-competitive behaviour outside
Exports v. All India Float Glass Association India.
– no injunction to appellants as MRTP didn’t
provide for extra-territorial operation under
S. 14.

Did not provide for competitive advocacy. S.49 provides for same. CCI can render
advice to CG.
 MODULE III – COMPETITION ACT, 2002

Section 3 of the Competition Act – Anti-competitive Agreements

S.3 of CA, 2002 provides for prohibition of anti-competitive agreements. It has 5 sub-sections
S. 3(1) provides for a general prohibition of anti-competitive agreements.
S. 3(2) provides for nullity provisions. Para 2 of Art. 101 – Analogous.
S. 3(3) provides for horizontal agreements causing horizontal restrains. Eg. Cartel, bidding
S. 3(4) provides for vertical agreements causing vertical restraints. Eg – Exclusive supply agreements.
S. 3(5) provides for exemption; S. 3(5)(1) IPR exemptions; S. 3(5)(2) – export cartel exemptions

a. General prohibition on anti-competitive agreements- by enterprises or person or association of

persons or enterprises.
b. Does not prohibit any types of agreements simply prohibits agreements between so and so
people who fall within the category of being ‘anticompetitive’.
c. Anti-competitive agreements- are those which cause appreciable adverse effect competition
[“AAEC”] (As defined under art. 19(3) of the CA)

Enterprise

S. 2(h) – Definition of Enterprise: “enterprise” means a person or a department of the Government, who or
which is, or has been, engaged in any activity, relating to the production, storage, supply, distribution, acquisition or
control of articles or goods, or the provision of services, of any kind, or in investment, or in the business of acquiring,
holding, underwriting or dealing with shares, debentures or other securities of any other body corporate, either directly
or through one or more of its units or divisions or subsidiaries, whether such unit or division or subsidiary is located at
the same place where the enterprise is located or at a different place or at different places, but does not include any
activity of the Government relatable to the sovereign functions of the Government including all activities carried on by
the departments of the Central Government dealing with atomic energy, currency, defence and space.

S. 2(h) focuses on functional aspect not institutional aspect- Focus of S.2(h)- not on the
institutional front but rather on the functional front- whether its carrying on an economic activity
It is a person or a govt. department which carries on any activity mentioned under S.3(1)- including
any activity involving the stock market
Exception- sovereign function of govt. departments are excluded- whereas sovereign and non
sovereign functions carried in four areas are fully excluded
1. Atomic energy
2. Currency
3. Space
4. Defence
S. 3(1) – Enterprise: No enterprise or association of enterprises or person or association of persons shall enter into
any agreement in respect of production, supply, distribution, storage, acquisition or control of goods or provision of
services, which causes or is likely to cause an appreciable adverse effect on competition within India.

6 types of agreement –
1. Production
2. Supply
3. Distribution
4. Storage
5. Acquisition or control of goods
6. Provision of services

[“Person” is applicable only to S. 3 and not to S.4. “Enterprise” is applicable to both S. 3 and S.4]

Union of India vs Competition Commission of India and Ors (High Court of Delhi, 23.02.2012);
M/s Mineral Enterprises Limited vs Ministry of Railways, Union of India, The Railway Board)
(CCI, 13.12.2012)

UoI v. CCI

Facts- Case related to S.3 and 4 of the Companies Act- company engaged in mining, logistics and
infrastructural development activity as a core activity- engaged in iron ore. Iron ore was exported via
containerised transportation

Challenge- they challenged the railways act of classifying and reclassifying and refixing rate of
container transportation. As per the information, railway board through S.31 was entitled to classify
or refix rates- they imposed discriminatory rates for (a) iron ore meant for domestic use and (b)
those meant for export.

Ministry of Railway through UoI moved to the Delhi HC

Single Judge- Ministry of Railway is an enterprise which falls under S.2(h)- ministry argued that their
function is that of a sovereign function. The functions of Ministry via Railway Board are not
sovereign functions. Sovereign Functions are inalienable legislative, taxation, judicial functions etc.
Invoking the S/54A and 54C of the competition act- it allows the central govt to exempt any
authority from the purview of the act due to public interest- since govt. hasn’t done this under these
sections- it is still subject to the law.

Ministry is an enterprise under S. 2(h). 4 decisions of SC on sovereign function were referred:

 a. Kasturilal Leila Ram Jain v. State of UP
b. Bangalore Sewage Board v. Rajjappa
c. Nagendra Rao v. State of Andhra
d. Common Cause v. UOI

In the same year however, CCI exonerated the railways saying that the railway board exercises a
delegated function as provided by the parent body- therefore they said no violation (Statutory
function- exempted under S.31)

The case was in connection with Mineral Enterprises v. Minister of Railways Limited(2012)

Mineral moved CCI under S. 19(1)(9) as informant and alleged that Minister of Railways has been
charging discriminatory rates for containerized transport of commodities meant for domestic as
opposed to commodities meant for exports. Charged higher for export consumption and low for
domestic consumption. Thus, Ministry is abusing its dominant position and violating S. 4 of the Act.
A PPP was entered into by Ministry and Mineral. This amounts to commercial functions and hence
under S. 2(h).
Mineral was engaged in mining, logistics and infra industries. Here, case arose as Mineral was
engaged in iron-ore mining for domestic consumption as well as export consumption. CCI issued
notice to Ministry. It argued that the Ministry is not an enterprise under S. 2(h)

CCI: Railway was exercising its functions as part of statutory function under S. 31 of Railways Act. It
empowers Railways to classify commodities, apply charges and change charges. It is a statutorily
delegated function. No questions of abuse.

PPP Model: Concession Agreement was entered into by Board and Mineral which was statutory. No
distinction was made clearly between statutory and sovereign function. No abuse here as it was
statutory function.

Reliance Big Entertainment v. Karnataka Film Chamber of Commerce

Facts: Reliance filed complaint under S. 19(1)(a). All cinemas were against KFCC and other’s movies
because of the screen space for regional cinemas. 3 issues were framed:

1. Whether the associations in questions could be considered as ‘enterprise’ within the definition
stated in Section 2(h) of the Act and consequently would their acts be violative of Section 4 of the
Act?

2. Whether the rules and regulation of the associations could be subject-matter for a Section 3
scrutiny.
3. Could the acts of the associations be said to be anti-competitive in terms of Section 3(3) and
Section 3(1) of the Act?

Enterprise under S. 2(h) focuses on functional front and not institutional front. To treat any entity as
an enterprise, it must be engaged in commercial activities. KFCC and Ors. are an association of film
producers, distributors, exhibitors and theatre owners. They are doing commercial activities but
KFCC is a platform but themselves don’t carry out any economic activity.

Therefore, KFCC and others are not enterprise and do not fall under S. 4(1). All enterprises are
person but not vice versa – not all persons are enterprises. If associations start doing economic
activity, then they will fall under definition of enterprise. AOA, MOA and rules for KFCC show that
they are running non-commercial activities.

With regard to the issue of violation of Section 4, the CCI held that associations could not be
termed as “enterprise” as understood under Section 2(h) of the Act and thus could not be held to be
in contravention of Section 4.

On the other hand, the CCI order held that the agreement was indeed anti-competitive and thus
contravened Section 3. [“Person” is applicable only to S. 3 and not to S.4. “Enterprise” is applicable
to both S. 3 and S.4]

Hemant Sharma v. UOI

Facts- All India Chess Federation- established under the ministry of youth and sports- ACF used to
collect minimum fees from players all over the country and organize chess tournaments across the
country.

Delhi HC- They used to collect fees and also played the role of an organizer therefore they had a
revenue dimension- it was held that it was an enterprise under S.2(h)

Surinder Singh Burmi v. BCCI (2013)

Facts- BCCI was a society registered under the TN Society Registration Act. CCI did not agree. They
said BCCI is the organizer and custodian of Indian cricket- only they have complete control over the
market. BCCI is the only body which selects Indian team (they also prescribe rate of ticket, and the
selection committee).

CCI held: The CCI traced the historical evolution of BCCI and its linkages with the International
Cricket Council (ICC) to hold that the BCCI is a de facto regulator of the sport of cricket in India.
At the same time, BCCI organized cricket events and decided the screening of matches in certain
channels. Thus, they were a commercial beneficiary of the sport. Given BCCI’s revenue-generating
capacity by virtue of being an organizer, the CCI held that BCCI was an ‘enterprise’ under the
Competition Act.
Person
S. 2(l) – Definition of Person: “person” includes— (i) an individual; (ii) a Hindu undivided family; (iii) a
company; (iv) a firm; (v) an association of persons or a body of individuals, whether incorporated or not, in India or
outside India; (vi) any corporation established by or under any Central, State or Provincial Act or a Government
company as defined in section 617 of the Companies Act, 1956 (1 of 1956); (vii) any body corporate incorporated by
or under the laws of a country outside India; (viii) a co-operative society registered under any law relating to
co-operative societies; (ix) a local authority; (x) every artificial juridical person, not falling within any of the preceding
sub-clauses;

a. S.3- uses the word ‘person’ or ‘association of persons’

b. All enterprises are persons but not all persons are enterprises
c. Enterprises are those which carry on an economic activity
d. S.3- person and enterprises; S.4- Enterprises (for establishment of dominant position)

Agreement
S. 2(b) - Definition of Agreement: “agreement” includes any arrangement or understanding or action in
concert,-
(i) whether or not, such arrangement, understanding or action is
formal or in writing; or
(ii) whether or not such arrangement, understanding or action is
intended to be enforceable by legal proceedings.
Unlike enterprises- agreement is a non exhaustive definition- therefore includes arrangement or
action in concert.

Appreciable Adverse Effect

S. 3(1) prohibits an agreement that causes appreciable adverse effect. However, AAE is not defined
in the act. There are two possible views on the meaning of the term ‘Appreciable’.
Minority view- Appreciable means substantial- this was found to be impractical
Majority view- Adverse effect on agreement must be what is capable of being estimated or judged
or measures.
Under section 19(3) the Commission shall, while determining whether an agreement has an appreciable adverse
effect on competition under section 3, have due regard to all or any of the following factors, namely:— (a) creation of
barriers to new entrants in the market; (b) driving existing competitors out of the market; (c) foreclosure of competition
by hindering entry into the market; (d) accrual of benefits to consumers; (e) improvements in production or distribution
of goods or provision of services; (f) promotion of technical, scientific and economic development by means of production
or distribution of goods or provision of services.

Six factors provided for under S.19(3) which are generally looked at for assessment of what would
cause AAEC
1. creation of barriers to new entrants in the market;
2. driving existing competitors out of the market;
3. foreclosure of competition by hindering entry into the market;
4. accrual of benefits to consumers;
5. improvements in production or distribution of goods or provision of services; or
6. promotion of technical, scientific and economic development by means of production or
distribution of goods or provision of services.

(Red- Negative factors, Green- Positive factors)

Examples

(a) Amenable to horizontal agreement between players who are at the same level or stage of
production. Example – 15 cement companies enter into an agreement but only 10 players actually
agree to increase price – this agreement won’t work if the 5 players don’t agree. The 10 players may
conspire against these 5 players. The capital investments for this are so huge that a new entrant
might not enter. This group of 10 creates an oligopoly as only profit max and creating market share
is their objective. No competition between companies due to this agreement. This brings down
competition as there is no competition between existing companies and the new companies don’t
enter due to entry barriers.

(b) If the 5 companies don’t agree to increase price, the other 10 companies might decide to sell
them at low price and thereby force the 5 companies to reduce their price to drive them out of the
market. The 10 players can influence adversely the raw material suppliers for eg – reduce limestone
supply.

Eg – Entrance of Jio caused losses to Idea, Airtel. It gained 70% market share in 3-4 months. CCI
did not impose ban as 70% is not huge and is acceptable. Also new entrants won’t enter the market.

(c) X,Y,Z – Limestone manufacturers, A,B,C – Cement producers. An agreement is entered into
between X&A. X has 45% share in the market while A has 44%.

[Horizontally – no difference between (a) and (c). (c) is to be seen vertically]

- Foreclosure is before closure – before completion of circle – competition is closed before

anyone enters.
- Eg- A enters into exclusive supply agreement with X and requires X to supply limestone
exclusively to A and not to B and C.
- As A has 44% share and X has 45% share, CCI will look at whether X stopped supplying
limestone to B and C. If yes, it is a case of foreclosure of competition at upstream and
downstream. A & X both won’t deal with Y & Z and B & C respectively. If affects existing
players and new entrants.
(d) Agreement is not void merely because it causes barrier for new entrants. If agreement brings
down cost of production or increases synergy vertically. An agreement of distributorship at global
level – admin decision and not productive decision – synergy is created – such vertical agreements
are valid – as it causes positive benefit to consumers – although it is anti-competitive. CCI sees that
positive outweighs negative. Thus, not all anti-competitive agreements are void.

(e) Vertical agreement – new entrant A and B is established player – A enters into production
sharing agreements – increases cost efficiency and reduces cost of production. Eg – using of
technology with zero royalty.

(f) Eg – Pharma R&D – One company relies on another – Pro-competitive effects more – can
outweigh anti-competitive effects.

Neeral Malhotra v. Deustche Post Bank Home Finance Ltd.

Facts- NM was a loan borrower from Deustche Bank. This case concerns the pre-payment penalty,
or pre-payment chargers when NM wanted to foreclose the loan [close the loan before maturity
period]

Neeraj moved CCI under S. 19(1) filing info and alleged that banks like Deutsche, HDFC, ICICI and
16 other banks were imposing pre-payment charges on foreclosure of loans (closing before loan
matures). Eg – Rs. 20 lacs loan – 8.5% for 20 years. Foreclosure – payment after 18 years – penalty
was levied on this pre-payment. The banks ran on interest-based income.

Issue: The issue involved is regarding banks and some non-banking financial companies (NBFC)
charging penalty on pre-payment of housing loans by the customers. The informant alleged that all
the home loan providers formed a cartel by levying a uniform 1-4% prepayment penalty if
borrowers were to prepay the loans by themselves or if they were re-financing their loans from
another bank/NBFC at cheaper rate of interest. This practice, according to the informant, was
anti-competitive and amounted to abuse of dominance by them since it restricts the choice of the
customers.

CCI ordered investigation by the DG into the matter on September 10, 2009 and DG’s investigation
report was submitted to the CCI on December 16, 2009. The DG’s found that the agreements were
in violation of Section 3(3) (b) of the Act. The DG also found that the group of banks have come
together and taken a collective decision under the auspices of the Indian Banking Association to
limit market competition and to generate fee-based income. In his finding DG noted that the said
collective decision of banks is beneficial to banks and on the contrary is anti-consumer and
anti-competitive. DG, therefore, concluded that, levying pre-payment charges by banks violates
provision of Section 19(3)(a), (c) and (d) of the Act.
In this case, the director general (DG), in his investigation report, found among other things that, in
two meetings of the Indian Banks Association, a collective decision was taken to impose a
prepayment charge. According to DG, this amounts to an agreement under 2(b).

CCI:

- Banks had convened a meeting under Indian Bank Association in 28th July 2003 and 28th
August 2003. Then a circular was released on 10th November 2003. CCI found that there was
discussion on pre-payment penalty from 0.5% to 1%. Discretion of banks to decide rate. CCI
found that the main purpose of convening the meetings was to decide on asset and liability
management.
- Businessmen used to take these loans as fall-back option and so a resolution was passed for
banks to charge penalty.
- CCI looked at the issue in its entirety and concluded that the resolution was consequential to the
asset liability management meeting. Agreement should be made in congruence and be associated
to a point in time. It should be a continuous act with no break and there should be harmony in
mind of people.
- 4:2 order – 2 dissenting – for agreement to fall under S. 3(1) –it can take place at a point in time.
- Meeting took place in 2003 – penalty imposition in 2009. Therefore, the majority felt that there
was no congruence.
- Majority couldn’t find a link between the penalty and meeting in 2003. S. 3(1) can’t be invoked
independently. The home loan buyer is a consumer and doesn't fall in the supply side but only
on the demand side. Competition takes place only on the supply side. 2 people are needed for
agreement. Here, only banks are suppliers – no agreement between service provider and
consumer. CCI said S.3(3) doesn’t work – there was no conspiracy but only a meeting of banks.

An agreement between a consumer and an enterprise cannot be scrutinized as being

anti-competitive, and therefore, it cannot be analyzed on the touchstone of the factors given under
Sector 19(3) as having/not having AAEC.

By a majority decision the validity of the prepayment charges was upheld and the bench observed
that “borrowers have a lot of choice about the banks from which they would take the home loan, with terms and
condition of each are known to them and included in their agreement/contract for taking the loan.” The bench held
that “we find there are no facts that point toward the dominant position of any of the banks / HFCs investigated”.
They also held that since none of the banks or HFCs (Housing finance Companies) investigated
individually had any dominant position in the market of retail home loans, hence provisions of
section 4 (abuse of dominant position) of the Act were not attracted to the facts of the present case.
On the issue of cartel like behaviour, the majority view noted that the reference to Indian Banks
Association meetings held in July and August, 2003 as starting point of concerted move by bank to
levy pre-payment penalties was misplaced. While noting that some of the banks such as HDFC Bank
were not even members of IBA, and others like LIC had been imposing pre-payment penalty since
1995. The majority held that, "The lack of imperative voice and intent is evident from the language and content
of the said circular of IBA. It would be patently unjust to use it as an evidence of either action in concert or process of
combined decision making by banks. This rules out any element of contravention of sub section (1) of section 3
(prohibition on agreements having appreciable adverse effect of competition)”. It was also held by the majority
that “It is equally clear that there is no agreement amongst the various service providers i.e. the banks/HFCs, nor is
there any uniform practice being followed by them.” The majority accordingly, held in favor of banks both in
terms of absence of dominant position and lack of any agreement having an anti-competitive effect,
and found that there was no violation of competition law in the present instance.

ICICI Bank, Citibank and Ors (Giving Agarwal)

Facts: There were 6 informants against home loan borrowers (case was transferred from MRTP to
CCI). Gulshan Kumar, MC Gupta, Bajpai and Govind Agarwal and 2 more. In this case, a person
took fluctuating rate of interest on a home loan @ 10.75%. Another loan advertisement was @
9.25%. Bank said that new loan can’t be availed as it was only for new customers. The banks or
financial institutions were levying pre-payment charges on customers making it expensive for them
to switch over to another bank on account of fluctuation of interest rates.

The CCI held that: “For applicability of Section 3(1) of the Act, the Agreement should be between
existing or potential competitors or between enterprises upstream or downstream in any production
chain. There could be a case of AAEC only if enterprises conspire either horizontally or vertically in
form of some agreement/concerted action/understanding/joint decision etc, to gather undue
market power. In the present case, the individual agreements between each informant and his bank
are not relevant or actionable ‘agreement’ conceived under Section 3. To assess an impact on
competition what must be examined is whether banks are entering into some malafide
understanding amongst themselves to the detriment of the consumers or competing banks, or
imposing vertical restraints up or down the production chain

Further, The Commission is of the view that Section 3(1) of the Act should not be evoked
independently. The philosophy of competition is concerned primarily with ensuring free competition
between existing or potential competitors because competition results in allocative and productive
efficiencies that result in consumer welfare. Imposition of switching costs cannot be per se
anti-competitive in absence of vertical or horizontal agreements This Commission would also like to
emphasize that a business practice in any trade cannot be dragged into the ambit of Section 3(3)
without any evidence that such practice has emerged from some sort of consensus or agreement.”
Therefore, in the instant cases, the Commission finds no contravention of Section 3

Consumer Online Foundation v Tata Sky Limited & Ors (CCI, 2011):

Facts: 4 service providers – Tata Sky, Dish TV, Reliance & Sun Direct were involved in this case. The
Consumer Online Foundation was the informant and said these 4 companies violated S. 3, S.4 of
2002 Act. It was alleged that the 4 companies entered into an exclusive supply agreement with set
top box manufacturers. This made inter-operability impossible. COF in its complaint before the CCI
had alleged that such a practice restricts choice of a direct to home (DTH) customer to enjoy the
services of another DTH operator.

Under the present situation, they will have to buy a new set top box from the new operator as a
customer cannot change CAM cards in its set top box. According to COF, DTH ser services should
be offered on the lines of mobile phone services where a consumer can use services of any telecom
operator by changing the SIM card in his/her phone.

Slightly confusing facts so I found these slides which are clearer:

CCI -

In respect of Section 3(4) read with section 3(1) of the Competition Act, 2002 the CCI held that, “A
manufacturer / service provider and the consumer cannot ever be said to be part of any ‘production
chain’ or even operating in ‘different markets’ because a consumer does not participate in
production and at the same time, the market for any good or service must include the producer and
the consumer. There cannot be any market that only has the producer or the consumer. Therefore,
both are, by definition, part of the same relevant market. Any ‘agreement’ between the
producer/service provider and consumer occurs after inter-brand or intra-brand competition has
already played out and therefore such agreements with the end consumers do not have any
competition aspect. Economic theory supports the view that if any such restraint is imposed by a
manufacturer/service provider on the end consumer, it would be resolved over time since the
consumers would start shifting to competitors who do not impose such restricting conditions”

L.H. Hiranandani Hospital, Mumbai v. CCI [COMPAT]; Ramakant Kini v. L.H. Hiranandani
Hospital, Mumbai [CCI]

Facts:

● The Appellant was a multi-speciality hospital providing healthcare services including

maternity services. It entered into an agreement with Cyrobank, commencing on 01.09.2011,
to provide umbilical cord stem cell bank facilities to maternity patients. Previously, the
appellant had entered into a similar agreement with Lifecell International Private Limited
(‘Lifecell’) for two years i.e 2009-2010 and 2010-2011.
● Mrs. Manju Jain, pregnant with her second child, had entered into an agreement with Lifecell
to obtain umbilical cord banking services. Mrs. Jain visited the appellant hospital on
17.10.2011 to consult Dr. Vinita Raut (Gynaecologist) working in the Hospital. At that time,
she neither disclosed that she had entered into an agreement with Lifecell for obtaining stem
cells form her umbilical cord nor got herself registered with the appellant. When she again
visited Dr. Raut, Mrs Jain disclosed that she had entered into an agreement with Lifecell.
Since, the appellant had entered into an exclusive contract with Cyrobank, Mrs. Jain was
informed that Lifecell could not be allowed to provide such services. This forced Mrs. Manju
Jain to change hospitals at the eleventh hour. Consequent to this incident, Mr. Ramakant
Kini, who was not related to Mrs Manju Jain, filed a complaint before the CCI alleging abuse
of dominant position and violation of free and fair trade.

CCI:

- That the Appellants had a dominant position in the mutli-specialty Hospital market (where, the
market was provision of maternity services by Super Speciality Hospitals within a distance of
0-12 K.M. from the Hiranandani Hospital covering S, L, N, K/E, T and P/SEBI wards of
Municipal Corporation of Greater Mumbai.)

- It imposed unfair conditions on its consumers and indulged in unfair practices as it forced the
patients admitted to the hospital to avail the facilities of only Cyrobank.

- It was further held that the actions of the Appellant led to denial of market access and that the
arrangement between Hiranandani Hospital and M/s. Cryobanks was an agreement in
contravention of section 3(1).

- The CCI after its investigations held the Appellant to be guilty and thus imposed a penalty of Rs.
3.81 crore [4% of turnover].
- Section 3(3) and section 3(4) are expansion of section 3(1) but are not exhaustive of the scope of
section 3(1) Scope of section 3(1) is independent of provision of section 3(3) & 3(4), Section
3(3) and section 3(4) are expansion of section 3(1) but are not exhaustive of the scope of section
3(1). There can be various kinds of agreements among enterprises which may fall under section
3(1) including agreements which are against the interests of consumers, affect freedom of trade
and cause or are likely to cause appreciable adverse effect on competition in India. Section 3(3)
carves out only an area of section 3(1). The scope of section 3(1) is thus vast and has to be
considered keeping in view the aims and objects of the Act i.e., freedom of trade, consumer
welfare etc. by ensuring that the markets are not distorted and made anti-competitive by such
agreements of the enterprises which appreciably adversely affect the market or are likely to
adversely affect the market.

COMPAT:

● The tribunal held that the commission was wrong in ascertaining the relevant market. While the
CCI ascertained the relevant market to be the maternity services provided by Multi-Speciality
Hospitals the COMPAT held that the whole case revolved around the stem cell services market
and currently there were 13 players throughout the country.
● The tribunal observed that the agreement between the hospital and Cyrobank only imposed a
restriction on the hospital to provide stem cell services through Cyrobank. This agreement did
not create any restrictions on the public to avail such services as there were 13 different players
in the market. This apart, Cyrobank could enrol any consumer availing maternity services at
other hospitals as well, so this agreement did not create any restrictions whatsoever.
Consequently, the Commission held that the refusal of the appellants to provide stem cell
services via Lifecell did not create any appreciable adverse effect on competition. Furthermore,
the tribunal pointed out that the entry of two new entities i.e. Novacord and Unistem
Biosciences further shows that the actions of the Appellant did not foreclose competition in the
relevant stem cell market.
● Additionally, the court held that the penalty imposed under section 27 of the Act could not be
upheld. This was because the ‘Turnover’ calculated to impose a penalty of the hospital could not
be based on the income earned through other sources. COMPAT said that penalty is imposed,
the authority must be very considerate. Penalty can be 10% of turnover of 3 financial years.
Today, there are multi-commodity entities which have different departments – gynac, surgery etc.
Blanket penalty cannot be imposed but only on the relevant turnover.
● They relied on Excel Corp Care Limited and the Sonam Sharma case for the same. The turnover
had to be the ‘relevant turnover’ earned directly through the infringement so identified i.e stem
cell services. CCI can’t impose such a harsh penalty that it kills the enterprise.

“Section 3(3) and section 3(4) are expansion of section 3(1) but are not exhaustive of the scope of section 3(1).....
Scope of section 3(1) is independent of provision of section 3(3) & 3(4). There can be various kinds of agreements
among enterprises which may fall under section 3(1) including agreements which are against the interests of consumers,
affect freedom of trade and cause or are likely to cause appreciable adverse effect on competition in India. Section 3(3)
carves out only an area of section 3(1). The scope of section 3(1) is thus vast and has to be considered keeping in view
the aims and objects of the Act i.e. freedom of trade, consumer welfare etc. by ensuring that the markets are not
distorted and made anti-competitive by such agreements of the enterprises which appreciably adversely affect the market
or are likely to adversely affect the market”

Sherman Anti-Trust Act, 1890

Section I: “Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint
of trade or commerce among the several States, or with foreign nations, is declared to be illegal.
Every person who shall make any contract or engage in any combination or conspiracy hereby
declared to be illegal shall be deemed guilty of a felony, and, on conviction thereof, shall be punished
by fine not exceeding $100,000,000 if a corporation, or, if any other person, $1,000,000, or by
imprisonment not exceeding 10 years, or by both said punishments, in the discretion of the court.

S.1- Contract in the form a trust, a conspiracy in restraint of trade or commerce among several states
or foreign nations, is declared illegal

a. Gives criminal prosecution- fine not exceeding 100 million for a company or cost exceeding
3,50,000 for any other person or imprisonment not exceeding three years, in the discretion of
the said court.

b. Provision has three levels

1. “among several states”- this means that in case a contract is entered into within one state,
S.1 can’t be invoked (this law is only for federal court, federal SC- not state courts)

2. “with foreign nations”

- Every contract or combination or conspiracy in restraint of trade in states or amongst

foreign nations is anti-competitive.

- Initially, US courts were clueless on anti-competitive activities happening outside the

States. US Federal Court of Appeal in Alcovo Case developed the effect test which
allowed Sherman Act and the Clayton Rule to have extra-territorial operation in other
states and nations as well.

- Further confirmed in Timberland and US Woodfire Case. Thus, anti-competitive trade

with a foreign country is also illegal.

3. “restraint of trade”

- The provision requires a joint contract between at least two entities to be invoked.
 - If contract or combination restraints trade of party, then only it’s considered invalid.
Even though meaning isn’t given, on this ground a contract can be invalidated. Most
courts used to literally interpret this provision. (Therefore earlier a lot of contracts used
to get invalidated on this ground)

Rule of Reason:
Section by its terms is directed against joint trade, but the nature of the joint conduct which is
prohibited is described only by the very general phrase restraint of trade. Initially, the Supreme court
had some difficulty in determining the appropriate interpretation of the statutory prohibitions. The
language of the section 1 is sweeping.

United States v. Addyston Pipe & Steel Company

Facts: Agreement among manufacturers of cast iron pipe to fix prices and divide markets in areas
where they competed in order to avoid the rigors of competition. Judge William Howard Taft
delivered the opinion.

Held: Taft inserted flexibility in the doctrine of restraint of trade through common law.

(1898, USSC) Judge W.H. Taft (while writing opinion for the court) though recognized that the
anticompetitive agreements in question could be disposed of by applying section 1 literally, he
nevertheless tested the legality of the agreements by reference both to common law rules and to
what subsequently developed into the “rule of reason”

“No conventional restraint of trade can be enforced unless the covenant embodying it merely
ancillary to the main purpose of a lawful contract, and necessary to protect the covenantee in the
enjoyment of the legitimate fruits of the contract, or to protect him from the dangers of an unjust
use of those fruits by the other party”

Eg of a valid restraint – Commitment by a seller of a business not to compete with the buyer for a
certain period of time.

To be truly ancillary, the restraint must be no broader than is necessary to protect the value of the
main contract. Thus, for example, a commitment by a seller of a local business not to compete with
the buyer anywhere in the country would be clearly in excess of the obligation needed to protect the
value of the business being sold. Only those restraints that were unreasonable were illegal. The main
purpose of the lawful contract should not be restraint.

Held: The agreements to fix prices and divide markets were plainly illegal. Far from being ancillary
to a valid main contract, the restraints constituted the main purpose of the contracts. The only
purpose of the agreements being to supress competition, a finding of illegality under the Sherman
Act necessarily followed.

Standard Oil Co. v. United States (1911, USSC): Rule of Reason

Supreme Court of USA itself the adopted the rule of reason in this case.

Facts: John D. Rockfeller had established Standar Oil company and eventually controlled entire
petroleum sector throughout US and integrated a backward and forward segment. To keep the
control, the company entered into contracts of fixing prices. dividing market and imposed resale
price margin.

Held: They were held to be violative of S.1 and 2 of the Sherman Act. However, they considered 4
factors to be tested in each and every case

1. Specific information about the business: When was it formed, object of business, manner in
which it was carried out, trust harmony between backward and forward segment nature of
business etc.

2. History, nature and effect of restraint: SC came to know that Standard Oil Co. integrated
backward segments through trusts and agreements. It also tried to control the forward segment
in the same manner.

If restraint is for regulation of competitors, then it is fine. However, if it is suppression of

competition, then there is no question of promotion of competition- contract must be struck down.
The agreement with good intentions can’t justify restraint. Restraints must be reasonable and
ancillary.

3. Applicable market power of distributors- Ex if there are 5 or 10 manufacturers, there is a

higher choice (biggest market player) and this may impose unfair conditions for downstream
players (therefore possibility of cartelization is to be assessed)

4. Reasons for restraint- these are to be analyzed- Good intention does not validate any restraint-
this may be reasonable- like non compete clauses(rule of reason must be analyzed).

In this case, it was held to be violative of S.1 and S.2. Consequently, structural remedy awarded –
company was ordered to be divided into 34 pieces.

Per Se Violation
The Courts in the course of time designated certain conduct as being so damaging to competition
that it must be condemned as unreasonable regardless of what justification may be proffered in a
particular case. To engage in one of the types of conduct that has been so labelled is to commit a
“per se” violation of the anti-trust laws.

Market division agreements, restrictive agreements, price fixing agreements, held to be violative of
S.1

Such agreements are plainly anticompetitive and they lack any redeeming value- therefore no fruit in
giving opportunity to parties to give justification.
1. Price fixing agreements
2. Market division agreements
3. Ground boycott agreement
4. Vertical pricing fixing.

Since Section 1 of the Sherman Act has been construed to prohibit only unreasonable restraints of
trade, every defendant should theoretically have the opportunity to show that its challenged activity
was reasonable in view of its business conditions, and that its conduct did not, in fact, substantially
and adversely impair existing competitive conditions. However, the courts soon foresaw that
allowing such a defense in every anti-trust case was not justified and would unnecessarily bog many
lawsuits down into a mass of detail. To avoid this undesirable result, the courts have in the course of
time designated certain conduct as being so damaging to competition that it must be condemned as
unreasonable regardless of what justification may be proferred in a particular case. To engage in one
of the types of conduct that has been so labelled is to commit a “per se” violation of the anti-trust
laws.
Proof of existence of agreement is sufficient to hold agreements as violative of S.1.
Price fixing agreements, group boycotts, horizontal market fixing agreements, vertical agreements
between buyers and sellers regarding resale prices are presumed to violate S.1. Only opportunity for
defendant is to prove that he was not a party or refute the existence of agreement.

Catalano, Inc. v. Target Sales (1980, USSC) (Price Fixing)

Facts- certified class of beer retailers brought a suit against beer wholesalers alleging that the beer
wholesalers had conspired with the manufacturers to eliminate special credit terms with the retailers
after the manufacturers stopped giving special credit terms as prescribed by California state law.

Held- An alleged agreement among respondent wholesalers to eliminate short-term trade credit
formerly granted to beer retailers and to require the retailers to make payment in cash, either in
advance or upon delivery, is plainly anticompetitive as being tantamount to an agreement to
eliminate discounts, and thus falls squarely within the traditional antitrust rule of per se illegality of
price fixing, without further examination under the rule of reason.

Palmer v. BRG of Georgia, Inc. (1990, USSC) (Division of Market)

Facts: Two corporations – BRG of Georgia and HBJ were offering Bar review courses. They came
together into agreement whereby they agreed that HBJ would not complete with Georgia in
Georgia, and HBJ would further only work in the rest of the US. HBJ was entitled to receive $100
per student enrolled by BRG and 40% of revenues over $350. Immediately after the parties entered
into the agreement, the price for BRG's course increased from $150 to $400. Petitioners, who
contracted to take BRG's course, filed suit, contending that BRG;s price was enhanced by reason of
the agreement in violation of § 1 of the Sherman Act.

Held: The agreement between HBJ and BRG was unlawful on its face. The agreement’s
revenue-sharing formula, coupled with the immediate price increase, indicate that the agreement was
“formed for the purposes and with the effect of raising” the bar review course’s prices in violation
of the Sherman Act. Agreements between competitors to allocate territories to minimize
competition are illegal, regardless of whether the parties split a market within which they both do
business or merely reserve one market for one and another for the other.

Broadcast Music v. Columbia Broadcasting System

The Supreme Court held that “certain agreements or practices are so plainly anticompetitive… and
so often lack any redeeming virtue… that they are conclusively presumed illegal without further
examination”.

Per Se to Rule of Reason

● Evolution of US philosophy from Per se to RoR - let us understand the chronology

● Vertical price fixing in the form of Resale Price maintenance- RPM is vertical agreement entered
into between multiple players. Eg – Producer and Distributor. It is a restriction on the latter
party that resale has to be made at a price determined by the producer. Eg – Rs. 10 is set as the
resale price – distributor must maintain a particular selling price – either above Rs. 10 or under
Rs. 10 (depending on the conditions set out).
● RPM is of two types- maximum and minimum.
- Maximum RPM is when there is a price ceiling fixed by the supplier wrt dealer etc. Producer
fixes a max price for resale. Eg – Sell at Rs. 100 but not more.
- Minimum RPM- there is a price floor and retailer is prohibited from discounting below a
price- eg. not below 100. The retailer can sell for anything above the floor price.

Kiefer Stewart Co. v. Joseph Seagram & Sons.

Facts- Wholesaler moved against Seagran alleging that the two companies started refusing to supply
liquor bottles to all wholesalers who refused to supply at an agreed price (only those who agreed to
the price were given the right to sell)

Held- such vertical restraints must be subject to per se standards. It takes away the selling ability of
the retailors. SC gave two reasons

1. Maximum RPM results in certain “advantageous” dealers, which is a discrimination and

this would lead to anticompetitive conduct.
 2. It would also takes away “non-price competition aspects” such as offering better services
to customers etc because it would result in a minimum price fixing scheme

Held it was a per se violation.

The petitioner, Kiefer-Stewart Company, was an Indiana drug concern which does a wholesale
liquor business. Respondents, Seagram and Calvert corporations, are affiliated companies that sell
liquor in interstate commerce to Indiana wholesalers. Kiefer-Stewart brought this action in a federal
district court for treble damages under the Sherman Act, 15 U.S.C. § 1 and § 15. The complaint
charged that respondents had agreed or conspired to sell liquor only to those Indiana wholesalers
who would resell at prices fixed by Seagram and Calvert, and that this agreement deprived
Kiefer-Stewart of a continuing supply of liquor, to its great damage.

On the trial, evidence was introduced tending to show that Seagram had fixed maximum prices
above which the wholesalers could not resell. The jury returned a verdict for petitioner, and damages
were awarded. The United States Court of Appeals for the Seventh Circuit reversed.[2] It held that
an agreement among respondents to fix maximum resale prices did not violate the Sherman Act,
because such prices promoted, rather than restrained, competition. It also held the evidence
insufficient to show that respondents had acted in concert. Doubt as to the correctness of the
decision on questions important in antitrust litigation prompted the Supreme Court to grant
certiorari.

Held: The Supreme Court ruled that the Court of Appeals erred in holding that an agreement
among competitors to fix maximum resale prices of their products does not violate the Sherman
Act. For such agreements, no less than those to fix minimum prices, cripple the freedom of traders,
and thereby restrain their ability to sell in accordance with their own judgment.

Under the Sherman Act, a combination formed for the purpose and with the effect of raising,
depressing, fixing, pegging, or stabilizing the price of a commodity in interstate or foreign commerce
is illegal per se.

State Oil Co. v. Khan (1997)

Mr. Khan was the owner of a gas pump station. State Oil Co. was the supplier and set up a price
ceiling. SC did not strike the agreement down. It returned to the RoR and held that maximum RPMs
are also to be subjected to RoR. Maximum RPMs cannot be struck down just like that and they have
to be examined wrt the anticompetitive concerns. If maximum RPM results in lower prices for the
consumers, then they are good for the consumers. It should just not go so low as to become
predatory prices. RoR does not presume the agreement to be valid, it is simply a test for examining
the agreement.
The case before the court in 1997 involved a gasoline wholesaler and Chicago service station.[3]
State Oil Co. attempted to force the gasoline station owner, Barkat Khan, to sell State Oil's product
at certain prices. Khan resisted and filed suit, claiming a violation of anti-trust law.

Held:

● Court departed from per se violation to rule of reason for 1st time. Invalidation of reduced
price sale argument is not counter-intuitive. Agreement requiring other party to do max
RPM so that it doesn’t trigger pre-determine level is allowed. Can sell at any price below the
fixed price.

Held: held that vertical maximum price fixing was not inherently unlawful. The Court does not hold
that all vertical maximum price fixing is per se lawful, but simply that it should be evaluated under
the rule of reason, which can effectively identify those situations in which it amounts to
anticompetitive conduct.

Dr. Miles Medical Co. v. John D. Park & Sons Co

Dr. Miles was a herbal medical manufacturer. He had a minimum RPM with the dealers and retailers.
SC held this was a per se violation of Sherman Act.

Facts: Dr. supplied first to distributor and set minimum RPM that distributor is required to resale to
retailer and further another minimum RPM that retailer sells to customer.

Held:

● Minimum RPM are violative of S. 1 – per se violation. Manufacturer or products can’t set
price for future sales.
● Dr Miles had ruled that vertical price restraints were illegal per se under Section 1 of the
Sherman Antitrust Act.

Leegin Creative Leather Products Inc. v. PSKS Inc.

Leegin entered into minimum RPM agreements with retailers because it wanted to enable its retailers
to offer superior customer services. The District and Court of Appeals both applied per se test and
decided against Leegin. Finally, the SC applied the RoR and historically departed from the per se
violation test. SC held that minimum RPMs could have the capability of promoting inter-brand
competition (between two different brands) by removing intra-brand competition (between two
different retailers of the same brand). Minimum RPMs also have the power to promote competition
and can ensure minimum profit margins for retailers and retailers have a guaranteed profit margin
and can offer better services to customers.

Facts: Leegin, a manufacturer of leather apparel, concluded that its interests would be best served by
opting out of a price war "race to the bottom," focusing instead on quality and brand cachet.
Accordingly, with specific exceptions, it decided to refuse sale to retailers if they intended to
discount its products below their recommended retail price. Five years after this policy was
introduced, Leegin discovered that Kay's Kloset was violating the policy by marking down the
Leegin products by 20%. When Kay's refused to comply with Leegin's policy, Leegin cut them off.
PSKS, the parent company of Kay's, sued charging that Leegin had violated antitrust laws when it
entered into "agreements with retailers to charge only those prices fixed by Leegin." After the
district court refused to hear testimony describing the procompetitive effects of Leegin's pricing
policy, Leegin appealed seeking to have Dr. Miles overruled.

Held:

● Minimum RPM Agreement minimize intra-brand competition. Intra-brand at retailers level

for under-cutting price. In intra-brand, there is competition between retailers. Eg – A sells
for Rs. 10, B sells for Rs. 9. No effect on manufacturing.
● In inter-brand, there is an impact on manufacturing units.

In Leegin, the court resolved the tension by overruling Dr. Miles, the Court held that
manufacturer-imposed minimum resale prices can lead retailers to compete efficiently for customer
sales in ways other than cutting the retail price. Leegin established that the legality of such restraints
are to be judged based on the rule of reason.

Type of RMP Minimum Maximum

Per Se Dr. Miles v. John Kilfer v. Joseph

Shift to ROR Leegin v. PSKS State Oil v. Khan

contract, combination and conspiracy

The Terms of the section 1 of the Sherman Act referring to “contracts”, “combinations” or
“conspiracies” can be differentiated, although they have often been used interchangeably by the US
courts in antitrust cases to characterize the concert of action which is a prerequisite to the statute's
application.
1. Contract- refers to a formal agreement between two or more persons
2. Conspiracy- refers to a combination designed to accomplish an illegal purpose or a legal purpose
by illegal means
3. Combination- A union of activities by two or more persons conspiring

Eatern States Lumber Dealers Association v. USA

F- There were certain Lumber dealers who came to know that certain lumber wholesalers were
dealing directly with consumers. The retailers took a sheet of paper and started listing names of the
wholesalers who were selling goods to customers. This list was circulated among themselves.
Wholesalers got aggrieved
Q- How to infer infringement
Held- The periodic circulation of list did amount to blacklisting- these retailers after circulation
started refusing to deal with wholesalers.
These retailers were held to have consciously adhered to the list. (Thereby laid down the doctrine of
conscious adherence). The SC here said that there is an agreement because of this.

Facts: The Eastern States Retail Lumber Dealers’ Association (Lumber Association) (defendant) was
a lumber trade association composed of lumber retailers. Lumber Association compiled a list of
lumber wholesalers known to sell lumber directly to customers, a market that Lumber Association’s
members believed to be their exclusive domain. Lumber Association distributed the list to its
members, who were required to cease doing business with any of the wholesalers identified as selling
directly to customers in order to protect the members’ business of selling directly to consumers.
Although there was no express agreement to refrain from doing business with the listed wholesalers
or any penalty for doing such business, in practice Lumber Association refused to do business with
any of the wholesalers on the list. The United States (plaintiff) brought suit, alleging that Lumber
Association’s list was a violation of antitrust law as a conspiracy to restrain competition. Lumber
Association argued that, in order to prove a conspiracy under antitrust law, some agreement had to
be shown among the alleged conspirators. The district court found that Lumber Association’s list
was a conspiracy to restrain trade in violation of the Sherman Antitrust Act. Lumber Association
appealed the decision.
Held:
● The Periodic circulation of list amounted to blacklisting by retailers. This consciously
adhered retailers not to deal with wholesalers. This is a conspiracy as per S.1 of Sherman
Act.
● Conspiracies are seldom capable of proof by direct testimony, and may be inferred from the
things actually done; and when, in this case, by concerted action the names of wholesalers
who were reported as having made sales to consumers were periodically reported to the
other members of the associations, the conspiracy to accomplish that which was the natural
consequence of such action may be readily inferred.
● The circulation of these reports not only tends to directly restrain the freedom of commerce
by preventing the listed dealers from entering into competition with retailers, as was held by
the district court, but it directly tends to prevent other retailers who have no personal
grievance against him, and with whom he might trade, from so doing, they being deterred
solely because of the influence of the report circulated among the members of the
associations. In other words, the trade of the wholesaler with strangers was directly affected,
 not because of any supposed wrong which he had done to them, but because of the
grievance of a member of one of the associations, who had reported a wrong to himself,
which grievance, when brought to the attention of others, it was hoped would deter them
from dealing with the offending party. This practice takes the case out of those normal and
usual agreements in aid of trade and commerce which may be found not to be within the act,
and puts it within the prohibited class of undue and unreasonable restraints.

FTC v. Cement Institute

Facts: The Federal Trade Commission instituted a proceeding against an unincorporated trade
association composed of corporations which manufacture, sell, and distribute cement; corporate
members of the association, and officers and agents of the association. The complaint charged: (1)
that respondents had engaged in an unfair method of competition in violation of § 5 of the Federal
Trade Commission Act by acting in concert to restrain competition in the sale and distribution of
cement through use of a multiple basing point delivered-price system, which resulted in their quoting
and maintaining identical prices and terms of sale for cement at any given destination, and (2) that
this system of sales resulted in price discriminations violative of § 2 of the Clayton Act, as amended
by the Robinson-Patman Act.

Held: It is enough to warrant the finding of a ‘combination’ within the meaning of the Sherman Act
if there is evidence that persons, with knowledge of concerted action was contemplated and invited,
give adherence to and then participate in a scheme.

If there is evidence to show that persons had taken concerted action after deliberation and
knowledge – they had given adherence and had consciously implemented it.

Theatre Enterprises Inc. v. Paramount Film Distributing Corporation

Facts: In suburban area of Baltimore, theatre owner alleged that movie producers and distributors
conspired for first run of movies only in Baltimore downtown – commercial hub. Thus, first run was
supplied only to Baltimore Downtown. Due to this, other theatres lost their customers as people
went to Downtown.

Issue: Whether proof of consciously parallel action is alone sufficient to establish the requisite
combination or conspiracy? [Consciously Parallel:
https://legal-dictionary.thefreedictionary.com/conscious+parallelism]

Held: Though parallel action like identical pricing is some kind of evidence to constitute
agreement/conspiracy but it is not sufficient. Additional evidence is needed over and above
consciously parallel action to establish that the conduct of the parties stemmed from an agreement,
tacit or express, as distinct from independent decision. Nonetheless, in a given case, whether the
parties solely engaged in consciously parallel conduct or acted identically in compliance with a tacit
agreement is often an elusive question left to the wisdom of the fact finder – judge, jury or
prosecutor – to discern.

Eg – A provides for Rs. 50, B Rs. 49 and C Rs. 51.5. After few months, A increases to Rs. 55 and
then to Rs. 60 based on rumours that others will increase. Prices will stabilise at one level – identical
pricing naturally. This can be an added factor to prove conspiracy but it isn’t sufficient alone to
establish conspiracy. The seller will never expressly conspire – a wink or nod can also result in
conspiracy. An agreement will never be entered into in competition law – it must always be inferred.

Prohibited Agreements, Decisions & Commercial Practices under EC Law

Article 101

Article 101(1) of Treaty of the Functioning of EU – Nullity provision provided in para 2 similar to
Sec 3(2) of the 2002 Act. Article 101 of the Treaty on the Functioning of the European Union
prohibits cartels and other agreements that could disrupt free competition in the European
Economic Area's internal market.

1. The following shall be prohibited as incompatible with the internal market: all agreements
between undertakings, decisions by associations of undertakings and concerted practices which may
affect trade between Member States and which have as their object or effect the prevention,
restriction or distortion of competition within the internal market, and in particular those which:

(a) directly or indirectly fix purchase or selling prices or any other trading conditions;

(b) limit or control production, markets, technical development, or investment;

(c) share markets or sources of supply;

(d) apply dissimilar conditions to equivalent transactions with other trading parties, thereby placing
them at a competitive disadvantage;

(e) make the conclusion of contracts subject to acceptance by the other parties of supplementary
obligations which, by their nature or according to commercial usage, have no connection with the
subject of such contracts.

2. Any agreements or decisions prohibited pursuant to this Article shall be automatically void.

3. The provisions of paragraph 1 may, however, be declared inapplicable in the case of:

- any agreement or category of agreements between undertakings,

- any decision or category of decisions by associations of undertakings,

- any concerted practice or category of concerted practices,

which contributes to improving the production or distribution of goods or to promoting technical

or economic progress, while allowing consumers a fair share of the resulting benefit, and which does
not:

(a) impose on the undertakings concerned restrictions which are not indispensable to the attainment
of these objectives;

(b) afford such undertakings the possibility of eliminating competition in respect of a substantial
part of the products in question.

Similar to Sec 3(2) of the competition act of 2002:https://indiankanoon.org/doc/1153878/

1. Undertaking:

● Even a non-legal entity can be an undertaking provided it is carrying on economic activity

and is autonomous.
● Example – A Shop which is not registered.
● An employee cannot be an undertaking since it is not independent. An independent
contractor can be an undertaking since it is independent. Agreement reached between a
company and an independent contractor can fall under the category of conspiracy since it is
capable of acting on its own, at his will but an employee isn’t.
● Similarly, an agent is not in a position to conspire with the company since the agent is not
acting for himself or on his own behalf.
● Between Companies – no conspiracy as no agreement can be inferred between members of
a group company.

2. Agreement

Article 101(1) of TFEU (ex Article 81(1) of EC Treaty) is rest on the existence of a prohibited
agreement between undertakings, or a decision by an association of undertakings or a concerted
practice between undertakings.

Sandoz Prodotti Farmaceutici vs. Commission (1990, ECJ)

it was held that “so long as it reflects the will of the parties, an agreement can be covered by Article
81(1) even if it is not a valid and binding contract under national law.
SPF was a Italian Pharma manufacturer and supplied it to wholesalers. It never wanted to sell
beyond EC. SPF supplied drugs – through packages labelled ‘export prohibited’. As a result, other
member countries of EU could not get those drugs.

Commission held that the label amounted to a meeting if minds of SPF & Wholesalers to ensure
that drugs are not sold beyond. Italy wholesalers sold drugs according to the label. Agreement can
be inferred prohibiting export under S. 101. It does against the very spirit of a unified EU Market.

[The systematic dispatching by a supplier to his customers of invoices bearing the words "Export
prohibited" constitutes an agreement prohibited by Article 85(1 ) of the Treaty, and not unilateral
conduct, when it forms part of a set of continuous business relations governed by a general
agreement drawn up in advance, based on the consent of the supplier to the establishment of
business relations with each customer prior to any delivery and the tacit acceptance by the customers
of the conduct adopted by the supplier in their regard, which is attested by renewed orders placed
without protest on the same conditions].

Bayer AG v Commission of the European Communities.

the CFI ruled that the Commission had erred in finding “acquiescence of the wholesalers in Bayer’s
new policy has not been established and the Commission has therefore failed to prove the existence
of an agreement

Facts: The Bayer Group, one of the main European chemical and pharmaceutical groups, is
represented in all Member States by national subsidiaries. It produces and markets, amongst other
things, a range of medicinal products designed to treat cardio-vascular illnesses under the brand
name "Adalat" or "Adalate."

In most Member States, the price of medicinal products is fixed, directly or indirectly, by the
competent national authorities. From 1989 to 1993, the prices of Adalat in France and Spain were
much lower than those charged in the United Kingdom. Those price differences of about 40% led
Spanish wholesalers (from 1989) and French wholesalers (from 1991) to export a large quantity of
that medicinal product to the United Kingdom.

That practice of parallel imports caused a DM 230 million (Euro 118 million) loss of turnover for
the British subsidiary of Bayer. The Bayer Group then changed its supply policy and began no
longer to meet all orders placed by Spanish and French wholesalers. The wholesalers brought cases
to Commission.
Commission – Agreement can be inferred between Bayer AG and Wholesalers. it was sufficient, in
order to prove the existence of an agreement, to establish that the parties continued to maintain
their business relations.

Appealed to Court of First Instance - In the view of the CFI, neither the conduct of the Bayer
Group nor the attitudes of the wholesalers were factors constituting an agreement between
undertakings. [None of the documents submitted by the Commission contained evidence proving
either that Bayer intended to impose an export ban on its wholesalers or that supplies were made
conditional on compliance with that alleged ban. Nor had the Commission proved that the
wholesalers had adhered to that policy, their reaction showing, on the contrary, an attitude of
opposition. The Commission had not therefore proved the existence of an express or tacit
acquiescence by the wholesalers in the attitude adopted by the manufacturer.]

Appealed to ECJ - The plea was dismissed. The ECJ found that the existence of an agreement
within Article 81(1) can be deduced from the conduct of the parties concerned but cannot be based
on what is only the expression of a unilateral policy of one of the parties, which can be put into
effect without the assistance of others. ["For an agreement within the meaning of Article 85(1) of
the Treaty to be capable of being regarded as having been concluded by tacit acceptance, it is
necessary that the manifestation of the wish of one of the contracting parties to achieve an
anti-competitive goal constitute an invitation to the other party, whether express or implied, to fulfil
that goal jointly, and that applies all the more where, as in this case, such an agreement is not at first
sight in the interest of the other party, namely the wholesalers"].

ICI and others vs. Commission (1972, ECJ) (Dyestuffs Case)

it was held that a “concerted practice” is a form of coordination between undertakings which, while
lacking some of the elements of a true contract “in practice, consciously substitutes a practical
co-operation for the risk of competition

3. Effects v. Objects Test

Allianz Hungária (Case C-32/11, judgment of 14 March 2013)

Change in trend. Examination of whether an agreement is an anti-competitive agreement. For the
1st time, it was ruled that is important to examine effects of an agreement even though the objective
of the agreement may not be anti-competitive. This is different from earlier decisions, where merely
if the objective of the agreement was anti-competitive, there was no need to look at its effects. In
this case, insurance companies agreed to pay compensation for cars on hourly basis for its repair in
body shops. The ECJ held this to be anti-competitive as it harmed other car manufacturers. Here,
ECJ observed the market effects and did not stop at analysing just the object.
[“Accordingly, where the anti-competitive object of the agreement is established it is not necessary to
examine its effects on competition. Where, however, the analysis of the content of the agreement
does not reveal a sufficient degree of harm to competition, the effects of the agreement should then
be considered and, for it to be caught by the prohibition, it is necessary to find that factors are
present which show that competition has in fact been prevented, restricted or distorted to an
appreciable extent […]

In order to determine whether an agreement involves a restriction of competition ‘by object’, regard
must be had to the content of its provisions, its objectives and the economic and legal context of
which it forms a part […]. When determining that context, it is also appropriate to take into
consideration the nature of the goods or services affected, as well as the real conditions of the
functioning and structure of the market or markets in question”].

Concerted practice case- In the Dyestuffs Case, it was held that a “concerted practice” is a form of
coordination between undertakings which, while lacking some of the elements of a true contract “in
practice, consciously substitutes a practical co-operation for the risk of competition. It was held that
in the absence of express agreement it is not possible to discern the objective, hence it is necessary
to observe the effects of the implied agreement

Anic Case

Facts: In Anic, polypropylene producers throughout Europe set target prices for their products, had
meetings to discuss strategy, and had quotas.

Held: ECJ held that the very objective of conducting the meeting was anti-competitive, although the
meeting might not immediately have adverse effect. The meeting resulted in removal of uncertainty
in the market. Market should never be certain for manufacturers. Removal of uncertainty also
removes competition from market. Thus, ECJ held the practice as anti-competitive based on
‘objects’ analysis.

[However, the analysis of concerted practices changed with the Anic decision. In Anic, Advocate
General Cosmas stated that there could be concerted practices that violate Article 85 by object
without looking at the actual effects of the concerted practice on the market. He determined that
since one can have agreements by object or effect that violate Article 85, there must also be
concerted practices by object or effect that violate Article 85. Advocate General Cosmas found there
was a concerted practice by object on the polypropylene market because the companies attended
meetings where information was shared among competitors. It did not matter if a company did not
share information at the meeting; all that mattered was that the company attended the meeting
where a participant shared information. In so doing, the companies reduced independent action on
the market through the sharing of information. Autonomy on the market is critical for meaningful
competition to flourish. Uncertainty on the market cannot be replaced by certainty without
effectively eliminating competition.

The ECJ agreed with Advocate General Cosmas that there could be a concerted practice by object
that violates Article 101 without any consideration of the effects on the market. The ECJ stated that
the polypropylene companies participated in collusion for the purpose of restricting competition and
that collusion does not have to manifest itself on the market but rather is in and of itself a violation
of Article 101.

Anic created a new standard for concerted practices by object. The critical part of the analysis is that
some sharing of information removed uncertainty on the market. This means that one no longer has
to look at the effects a concerted practice has on the market, only that there was sharing of
information that eliminated uncertainty on the market.]

T Mobile v. Commission

Facts: The T-Mobile case involved five mobile carriers in the Netherlands that had a legal meeting
where one company shared information about its commissions for dealers.[50] The meeting was a
one-time occurrence and the sharing of the information had no actual effect on the other
companies’ decision making.

Held: The ECJ agreed with the Advocate General and found a concerted practice that had the
object of harming competition. The concerted practice violated Article 101 because information was
shared with competitors; the competitors remained on the market; and, therefore, when they
remained on the market it was presumed they used the information in their decision-making, which
reduced uncertainty. The ECJ again reiterated that the actual effects on the market are irrelevant in
determining if there is a concerted practice by object that harms competition in the common
market.

Companies need to operate independently and if they receive information and remain on the market,
it is presumed they used the information in their decision-making and stopped acting independently.

John Deere v. Commission

In 1998, one year before Anic started the ‘object’ trend, the John Deere case involved tractor
manufacturers in the United Kingdom established a registry whereby they shared information on
past sales of tractors in the United Kingdom. The Advocate General found that this registry had the
effect of reducing uncertainty on the market and therefore violated Article 85. The ECJ agreed and
stated that the effect of the agreement limited competition because it reduced uncertainty and had
the effect of preventing manufacturers from entering the market because they may have concerns
regarding participation in the registry. The ECJ did not examine how the agreement would have
helped the market; all that mattered was that it had the effect of reducing uncertainty on the market.
Only the negative effects of the agreement were deemed relevant.

Boehringer Mannheim v Commission (1970, ECJ; Quinine Cartel Case)

Facts: Certain French, German & Dutch company producing Quinine products entered into a cartel
arrangement to execute price fixing, market division and product control acts. The companies
divided market, fixed prices and prescribed higher prices for markets in EU. They controlled supply
to create artificial shortage and increase prices. The Commission busted the entire cartel and
imposed huge penalty.

[The parties had concluded a 'gentleman's agreement' by which their respective national markets
remained the 'reserved' territory of each local producer. This agreement was combined with an
additional agreement allocating export quotas and fixing prices so as to discourage sales between
member states. The Commission found that the various elements of the agreements complemented
one another and constituted such a serious violation that, for the first time, it decided to impose
fines. On appeal, the European Court of Justice reversed parts of the Commission's findings but
confirmed that the agreements guaranteed protection of each of the producers' domestic markets.]

Cement Handlers Case

It was a cement manufacturers association – Dutch VCH Cement Association. They account for
2/3rd of Cement Production & Supply. They set mandatory resale prices for those customers who by
less than 100 tons. For above 100 tons, it recommended price range, but not mandatory.

Mandatory pricing is violation of S. 81(1)(a) since even recommendatory price allowed members to
foresee with reasonable degree of certainty the prices of product.

Section 3(3) of the Competition Act, 2002

In the Indian context, similar provision to the above, is Section 3 of the Competition Act which
contains agreements that are prohibited.

3(2) “Any agreement entered into in contravention of the provisions contained in subsection (1)
shall be void.”

3(3) “Any agreement entered into between enterprises or associations of enterprises or persons or
associations of persons or between any person and enterprise or practice carried on, or decision
taken by, any association of enterprises or association of persons, including cartels, engaged in
identical or similar trade of goods or provision of services, which—

(a) directly or indirectly determines purchase or sale prices;

(b) limits or controls production, supply, markets, technical development, investment or provision of
services

(c) shares the market or source of production or provision of services by way of allocation of
geographical area of market, or type of goods or services, or number of customers in the market;

(d) directly or indirectly results in bid rigging or collusive bidding, shall be presumed to have an
appreciable adverse effect on competition”

Provided that nothing contained in this sub-section shall apply to any agreement entered into by way
of joint ventures if such agreement increases efficiency in production, supply, distribution, storage,
acquisition or control of goods or provision of services.

M.P. Mehrotra vs. Jet Airways (India) Ltd. & Kingfisher Airlines Ltd. ((CCI, 2011) for Section
3(3)(a)/(b)/(c))

MP brought a case on the basis of an announcement made in a conference on 13/10/08 informing

that the two respondent companies were going to enter into the following agreements in the near
future:
● Special Re-Protection Agreement
● Technical MOU
● Interline Traffic Agreement
● Interline Electronic Ticketing Arrangement

CCI Examined: Both companies entered into MOU to reduce the cost of services including
common ground handling facilities, cross utilisation of crew members or hassle free flight. Such
types of agreements are common among airlines in the world.

The SRPA was not found violative of 3(3) – through this agreement, if Jet Airways flight did not fly
due to any snag, then KF would take the passengers.

But Kingfisher was penalised by the CCI. Appealed to HC and challenged the jurisdiction of CCI.
Argued that 2 agreements were entered into before the enactment of the Competition Act and the
other 2 agreements were entered into 3-4 days after the enactment. But HC held that CCI had
jurisdiction as even though agreement was before the Act, if it was effective after the Act, the CCI
would have jurisdiction.
Cartel
Section 2(c): “The term “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.

Cartels are included in the category of agreements, which are presumed to have appreciable adverse
effect on competition. However, this is a rebuttable presumption. Subjective proof in accordance
with Section 4 of the Evidence Act must be used to prove existence of Cartel. Some cartels often
escape the rigour of competition law by taking efficiency defences under 19(3).

[Section 19(3) (3) The Commission shall, while determining whether an agreement has an
appreciable adverse effect on competition under section 3, have due regard to all or any of the
following factors, namely:— (a) creation of barriers to new entrants in the market; (b) driving
existing competitors out of the market; (c) foreclosure of competition by hindering entry into the
market; (d) accrual of benefits to consumers; (e) improvements in production or distribution of
goods or provision of services; or (f) promotion of technical, scientific and economic development
by means of production or distribution of goods or provision of services.]

However, this is bad for competition law and ideally cartels should not be allowed to take these
defences and be removed from the purview of S.3 so as to prevent this from happening. The only
rebuttable presumption that should be allowed should be to defend cartel by saying that it does not
fall under S. 3(3). Amendment proposed under S. 3(3) allows vertical or non horizontal player to be a
part of the cartel like retailer, politician actively taking part in it.

The three ingredients to constitute Cartel are:-

(a) an agreement which includes arrangement or understanding;

(b) agreement is amongst producers, sellers, distributors, traders or service providers i.e., parties are
engaged in identical or similar trade of goods or provision of service; and

(c) agreement aims to limit, control or attempt to control the production, distribution, sale or price
of, or, trade in goods or provision of services.

An obvious question arises as to why a “Cartel” is presumed to have an appreciable adverse effect
on competition. In case of cartel, competitors agree not to compete on price, product, customers
etc. Since direct competitors agree to forego competition and opt for collusion, the consumers and
business houses lose the benefits of competition.

Competitors know that such an agreement is unlawful and it compels them to keep such agreement
secretive and resultantly it is invariably not reduced to writing and it is often found to be in the form
of arrangement or understanding.
Section 3(3) – Cartel is a horizontal agreement.

A cartel agreement is aimed at controlling production, distribution etc. It aims to maximize

anti-competitive profits. People come together for maximising profits. Cartel is therefore looking for
fixing price of the product produced. First, the price is stabilised, then when the demand increases,
the price is hiked.

What Makes It Conducive to Cartelize

● Small number of firms in an industry, barriers to entry, low technological advancement,

homogeneous product, strong ability of competing firms to exchange information on price
and other terms of sale, uniformity in cost or efficiency, severe punishment which can be
inflicted on the cheater, and effective trade association etc. make it conducive for firms to
cartelize and to continue as such on a long term basis.

● Non-contestable markets with entry barriers are also prone to cartel.

● No tech advancement can lead to cartel.

● Inelastic, non-substitutable product homogenous products like cement give rise to cartels.

● When competing firms are able to exchange price and non-price information relating to
production, supply, distribution, market becomes certain and transparent and leads to
uniformity in cost and efficiency.

● Cartels are flowing and temporary – when a high price is fixed, few members may cheat on
the members of the cartel and sell at a undercut price. When a person leaves a cartel, it may
be subject to a penalty for eg. – supply of raw material may become severly limited such a
member who leaves the cartel.

● Cartels are generally formed on long term basis since in short duration it is not possible to
achieve the aims of dividing markets, fixing prices etc.

Types of cartels

Cartels can be either domestic or international.

Builders’ Association of India v. Cement Manufacturers’ Association & Ors. (CCI, 2012)

Market Structure of the Cement Industry; Circumstantial evidence is sufficient to prove violation;
Section 3 does not require a delineation of relevant market; CMA is engaged in collecting
competition sensitive data; High Power Committee Meetings; Amendments to the CMA
constitutional documents; Price Parallelism; Limiting and controlling production; Limiting and
controlling supply; Production Parallelism; Dispatch Parallelism; Increase in price; Price Leadership;
High Profit Margins.
Facts: BAI moved CCI in 2010 complaining against CMU alleging that CMU entered into a cartel for
the purpose of fixing prices and dividing market. It is adversely affecting builder and other cement
players who are not members of the cartel. Therefore, cartel formed has AAEC.

CCI found that:

● Market structure of cement industry is oligopolistic. 12 Companies accounts for 75% and 21
Companies accounted for 90% market share.

● Circumstantial evidence is sufficient to prove AAEC – This was argued. CCI agreed that it is
generally not possible to find direct evidence as proof of cartels. Therefore, circumstantial
evidence suffices since they are tacit agreements.

● CCI also held that Section 3 does not required a delineation of relevant market – existence of
cartel is itself sufficient to penalise them.

● Circumstantial evidence in this case: It was found that CMA used to collect price and
non-price info wrt price, supply, production, utilisation etc. CMA tried to defend it by saying
that purpose of collecting data was not to cartelize but to send info to MCA. CCI rejected
the argument by saying that info was not only used for statutory purpose but it was divulged
to manufacturer. CMA also conducted high power committee meetings where sensitive info
was shared.

● Further, CMA Consti docs were not amended in accordance to Competition Act. This was a
clear sign to CCI that aim of CMA was to form cartels. The consti docs were amended only
after receiving notice from CCI.

● Further, there was indication of price parallelism inspite of different production costs. This
was another circ evidence.

● Further, in November and December, the producer who were members of CMA Ltd. or
controlled their production and supply by identical range and %>

● Production parallelism was found – production in similar ratios.

● Dispatch parallelism – during Nov-Dec 2009 and 2010 – all members reduced supply and
dispatch parallely in identical ratio.

● There was parallel increase in price as well.

[Market Structure of the Cement Industry; Circumstantial evidence is sufficient to prove violation;
Section 3 does not require a delineation of relevant market; CMA is engaged in collecting
competition sensitive data; High Power Committee Meetings; Amendments to the CMA
constitutional documents; Price Parallelism; Limiting and controlling production; Limiting and
controlling supply; Production Parallelism; Dispatch Parallelism; Increase in price; Price Leadership;
High Profit Margins.]

All India Tyre Dealers’ Federation v. Tyre Manufacturers (CCI, 2012)

The DG, CCI in his report, concluded that there was a cartel among tyre manufacturers in India
based on economic evidence including
(i) price parallelism across the manufacturers related to the net weighted average dealer price of tyres
and the percentage change in prices;
(ii) positive correlation of data involving production, capacity utilization, cost analysis, cost of sales,
margins, etc.

However, the CCI decided that “It is safe to conclude that on a superficial basis the industry displays
some characteristics of a cartel but there has been no substantive evidence of the existence of a
cartel.”

To arrive at its final decision, CCI first considered various structural factors conducive to
cartelization. These included
(i) the highly concentrated market for tyre manufacturers where 5 manufacturers control 95% of tyre
production. This could give rise to collusion but may also indicate “rational” conscious parallelism
where competing firms are conscious of each other’s activities;
(ii) the cyclical and predictable nature of demand for tyres;
(iii) homogenous products;
(iv) competitive constraints of re-treaded tyres and imports;
(v) entry barrier caused by the requirement of substantial capital investment;
(vi) existence of an active trade association. Some of these factors support cartelization while others
militate against it.

According to CCI, a conclusive determination was only possible based on circumstantial evidence.
In this regard, CCI found that:
(i) the DG had failed to study the price-cost trend;
(ii) the price parallelism methodology was not sound since there was no parallelism in absolute
prices and price movement but only in the directional change of prices;
(iii) capacity utilization showed mixed trends and suppression of capacity made little sense in light of
imports;
(iv) there was no uniformity in margin trends;
(v) excessive margins were absent and varied from 1% to 10%;
(vi) rise in market share of one of the manufacturers was inconsistent with cartelization; and
(vii) the activities of the trade association did not contravene the Act. Based on these findings, CCI
held that the evidence was insufficient to substantiate the claim of cartelization among tyre
manufacturers.
Cartel Evidence
- Circumstantial evidence can either be communication evidence or economic evidence.
Communication evidence proves that the cartel members met or otherwise communicated
(although the substance of the communication is not known with surety).
- Economic evidence can be of two types - evidence of conduct and/or "structural" evidence.
Evidence of conduct includes parallel pricing, abnormally high profits, stable market shares and
a history of competition law violations. Economic conduct evidence also includes "facilitating
practices" – practices that can make it easier for competitors to reach or sustain an agreement.
Facilitating practices include information exchanges, price signalling, freight equalisation, price
protection, and unnecessarily restrictive product standards.

Bid Rigging

(Section 3(3) Explanation: For the purposes of this subsection, “bid rigging” means any agreement,
between enterprises or persons referred to in sub-section (3) engaged in identical or similar
production or trading of goods or provision of services, which has the effect of eliminating or
reducing competition for bids or adversely affecting or manipulating the process for bidding.

Bid rigging occurs when by collusion among other bidders, actual or potential, the members of that
group keep the bid amount at a predetermined manipulated level.

It is a form of price fixing and market allocation, often practiced where contracts are determined by
a call for bids as usual in the case of government construction contracts.

Bid rigging may take place in different forms:

- Bid Suppression- when bidders agree to either abstain from bidding or withdraw a bid. For
example if there are three bidders in a tender process two or more bidders will remove their bid
for no apparent reasons or will not bid at all so that one bidder wins the contract.
- Complementary Bidding- occurs where some of the bidders agree to submit bids that are
intended not to be successful, so that another conspirator or ‘partner in crime’ can win the
contract.
- Bid Rotation- bidders take turns to submit a lower bid so that each bidder wins a bid in a
rotation basis.
- Subcontracting- when bidders submit bids that are not realistic such as bids that are too
expensive, bidders not meeting requirements etc... and a bigger enterprise wins the bid and then
sub-contracts that particular contract with the non-winning bidder.

In Re-- Aluminium Phosphide Tablets Manufacturers (CCI 2012 & COMPAT 2013)
CCI found a clear-cut bid rigging on the part of 4 ALP tablet manufacturers. Chairman cum MD of
Food Corporation of India wrote a letter to CCI, informing it that for the past few years there is a
rigging taking place in respect for the tender that FCI used to float for procuring certain quantities
of ALP tablets. FCI is a body for procuring and distributing food products throughout the country.
For the purpose of safely keeping these food products like wheat, rice etc, they need ALP tablets, to
protect food from rats, insects and therefore protecting food from spoiling. FCI used to procure
these ALP tablets in tons of quantities annually. The new CMD came to know that there was rigging
that was happening and the FCI was facing losses by purchasing tablets at higher prices. DG was
ordered to investigate and submit the report.

There were four companies, UPL, SOCL, ECCL and ACL – 4 chemical companies were known to
produce substantial quantities of ALP tablets. They used to participate and secure the contract. It
was anti-competitive prices that these companies used. In 2002, all 4 companies stated the same
price and the tender was awarded at the same price for all four of the companies. Same thing
happened in march 2005 and all 4 quoted the same price at 310 per kg and the tender was scrapped
and the CI found that it was much higher in price. In November 2005, none of them participated in
the tender process and the whole tender was cancelled. All have abstained from participating and
therefore they were indulging in bid rigging process. Anti competitive behaviour. In 2007 all 4
quoted different rates for the tender. One quoted price much below the price that was quoted by the
other parties. In 2009, all stated the same price and all were awarded the tender at Rs 386.

This means that the behaviours of these participants is certain. They submit the bid at the high
prices and do that pursuant to a conspiracy. DG found that out of these four companies, 8 May
2009 – 2 PM was the last date for submitting the bid – at 1:25 PM, the officials or representatives
came to the reception – they entered at the same time and there was record as their entries were
marked – one person from one company entered and from his own handwriting, he wrote the
entries of two officials from other companies and signed on their behalf as well. Also the price
written in the bid documents of all the three companies is a hand written price. Therefore, the
rigging was found and the CCI found a clear and conscious action, planning on part of all the three
players. It was held to be bid rigging. CCI imposed a penalty of more than 3 Cr. On 3 players. CCI
applied the beyond reasonable doubt standard test. Now it relies on the balance of probabilities test.

In Re-- suo-motu case against LPG cylinder manufacturers (CCI, 2012) -

https://www.khaitanco.com/thought-leaderships/CCI-dismisses-two-cases-of-alleged-collusive-bidd
ing-by-LPG-cylinder-manufacturers

Medical Equipment Cartel Case (CCI, 2012)

In 2009, the ministry of health and family welfare thought of establishing a sport injury centre at
Safdarjung Hospital in Delhi. GoI wanted to established a specialized centre. Medical equipment are
required. Needed equipment. MDD, PSE and Medical Products services submitted their bids.
Estimated cost as per floated tender was 1.5 million dollars and the lowest bid submitted was 2.4
million dollars. Awarded the contract – clear manipulation of the process by submitting a bid at
increased prices. Information was filed by another competitior to the CCI alleging that something is
going wrong at some hospitals in terms of supplying equipment. CCI found that it was not only a
complementary bidding but also a bid rotation. JP Narayan apex ttrauma centre was there a few
years back housed in AIIMS for which there was a tender. CCI via DG also found that there was a
common typographical error in the bidding documents submitted by 3 bidders in all the three docs.

Shailesh Kumar v. M/s Tata Chemicals Limited and Ors. (Soda Ash Cartel Case) (CCI, 2013)

CCI didn’t find any cartel- here soda bottle was to be supplied to government by different
companies- CCI couldn’t find a case of cartel

Director General (Supplies & Disposals) v. M/s Puja Enterprises (CCI, 2013 & COMPAT, 2016)
(Shoe Cartel Case)

F- 11 show manufacturers were the Opposite Parties. It was a case moved by the Government. The
DG of supplies and disposal under the ministry of commerce, GOI, invited bids for the supply of
certain quantities of ankle boot soles.

The DG found that it was a higher price which was being offered by parties- wrote letter to CCI
who took up investigation accordingly. CCI found that the prices which were offered by 11
manufacturers were identical or nearly identical. Like the coal India case, one or few of them were
able to supply the shoes to the govt., however there was no such exception. Here they were able to
supply the goods in full amount as required, however, they have nt agreed to supply the full thing,
and supply parts only (all of them would benefit this way). CCI here because of price quote and
production capacity found that there was a conspiracy between shoe manufacturers.

Cases where a number of people engage in rigging over a lot of years, then it will constitute
cartelized rigging.

Evidence by CCI

a. Can be direct or circumstantial (mostly you wont get direct evidence in case of cartel)

b. Evidence is heavily relied in line with international practice- relies a lot on circumstantial
evidence-
 1. Communication evidence- fact that they communicated at a certain time, maybe in a lot of
quantities (content of the communication may not be known)

2. Economic evidence as circumstantial evidence

- Evidence of conduct- parallel or identical pricing, abnormally high profits, stable market
share, facilitating practices (include informational exchanges, telephonic call, SMS Whatsapp,
price signalling, freight equalisation, price protection, unnecessarily restrictive standards etc)

- Structural evidence- why certain structural features make a particular market more
susceptible to cartel conduct like number of competitors, market concentration, entry
barriers.

Cartel Leniency

Leniency is a programme under CCI under the competition act and the relevant regulations to be
used to pardon or offering amnesty as per law to the violators of the cartels including bid rigging
cartels (all cartels need not be bid rigging cartels but in bid rigging, it is presumed that there is a
cartel). Those found guilty can be given amnesty/pardon by the commission after following some
procedures under the competition act and the regulations.

It is a type of whistleblower protection program. The whistleblower is also one of the

perpetrators/alleged violator. He must report to the CCI about the cartel. Submit information
honestly by submitting information to the CCI. These cartels can be detected or investigated by the
CCI (suo moto or on the basis of the information filed by some third party which may not
necessarily be a member of the cartel). But under the process of leniency, a member of the cartel has
to move an application. Though CCI may have taken investigation suo motu or information by third
party but well before the investigation is completed, the member of the cartel can give information
relevant for the investigation and then claim leniency.

Section 46 of the Competition Act provides for leniency. It allows even for complete exoneration of
the penalty. A person who has to the fullest extent cooperated with the CCI. Even though penalty
will be imposed, he will be exonerated. Section 46 is the parent provision. There is also a regulation
made by the CCI wrt to the effective implementation of Section 46. CCI (Lesser Penalty
Regulations), 2009 have been formulated to provide the mechanisms to do this process.

Section 46 of the Act - there is a main provision and there are three provisos which make the
application of the lesser penalty very clear (read out the bare act provision).
The operative part of the provision provides that the lesser penalty or benefit of reduction penalty
can be granted to a producer or a seller or a distributer, trader or a service provider engaged in the
cartel including a bid rigging cartel. This can be done by such member moving an application by
making a full, true and vital disclosure in relation to such cartel violations. Upon the satisfaction of
the same, the CCI can give the benefit.

4 Provisos:

1. Lesser penalty will not be given if the report of information has been received after the
report of the investigation has been submitted by the DG
2. It is a repetition of the main paragraph of the same provision. If incomplete info is filed just
to claim benefits of lesser penalty, then the CCI will not offer leniency. Vital disclosure
means that such information must enable the DG or the CCI to enable them to form an
opinion about the behaviour of the cartel.
3. Lesser penalty shall not be imposed if the person making the disclosure does` not continue
to cooperate with the CCI till the conclusion of the proceedings before the commission.
4. If the person making the disclosure has not complied with any conditions or has made false
statements and has made disclosures that may not be vital, he may be tried in the same
manner as if the lesser penalty has not been imposed. No question of lesser penalty on such
person who is not cooperating

Penalty will be imposed by CCI on all members of the cartel including the leniency applicant.
Afterwards, while deciding the leniency application of the applicant, it has to decide the percentage
of lenience as per the LP Regulations.

CCI (Lesser Penalty Regulations), 2009

Regulation 3 and 4 are relevant – read bare act

https://www.cci.gov.in/sites/default/files/regulation_pdf/Lesser%20Penalty%20Regulations%20wi
th%20Amendments.pdf

In Re: Cartelization in respect of tenders floated by Indian Railways for supply of Brushless DC
Fans and other electrical items (CCI, 18.01.2017)

First leniency case in which CCI granted leniency. It is a bid rigging cartel case. There are three
opposite parties – CBI Crime Branch wrote a letter to the CCI conveying that while conducting an
investigation against alleged violations by a public servant, they came to know of certain companies
rigging the tender process floated by the Indian Railways and Bharat Earth Mover Ltd. CCI took up
the investigation because of the letter ordered DG to conduct an investigation. 3 opp parties – M/s
Pyramid Electronics from Himachal Pradesh, M/s Kanwar Electricals (Noida) and M/s Western
Electric and Trading Company Ltd (Delhi).They had cartelised to rig the bidding process. They used
to rig the bidding processes issued for the tender of supply of brushless DC fans and other electrical
items. CCI found all three guilty and imposed a penalty also. In respect of Pyramis and Western, it
imposed a penalty up to 1 times (100% of) their turnover for the financial year 2012-13. For
Kanwar, it was decided at 10% of their turnover. As soon as DG issues the summons to appear for
investigation, Pyramid electronics and its officer responsible and one Mr. Goel moved leniency
application before the CCI. CCi accepted the leniency application for the first time of both the first
applicant and its responsible officer. They cooperated throughout the investigation procedure.
Second and third party were not considered. CCI did not grant a full leniency. Granted upto 75%
reduction in the quantum of the penalty. The reason was that the company moved the application at
a later stage of application.

In Re: Cartelisation in respect of zinc carbon dry cell batteries market in India (CCI, 19.04.2018)

There were three opposite parties and all the members moved the leniency applications in the order
of priority. All of their applications were considered though in respect of different amounts.

There are three zinc carbon dry cell manufacturer: Panasonic Energy India Ltd, Eveready Batteries
from US, Nippo batteries. They were respectively leniency applicant number 1, 2 and 3. Panasonic
through a letter informed the CCI on its own that there was a cartel amongst the three major dry
cell battery manufacturers including it because during the year 2013, owing to some market situation,
and high cost of raw materials and difficult market conditions in India, all three came together
because their senior level mgt knew each other – they met a few times for forming the cartel and set
out the plan of action clearly – they agreed not to competitively push their products via their dealers
– they did not want to rigorously compete and go together – all three of them agreed to increase the
selling price of batteries. Other two members of the cartel came to know and also moved the
leniency applications. CCI found that they had engaged in cartel and had tried to divide the market
across India and found guilty of Section 3(3(a), (b) and (c) and also imposed a penalty. It considered
the leniency applications in the same order. Panasonic was granted a leniency to the amount of
100% leniency in this case. Eveready was granted 30% leniency (was eligible upto or equal to 50%).
Nippon, the third applicant was eligible upto or equal to 30% but was given a benefit upto 20%.

Joint Venture
Section 3(3) contains an exception for joint ventures- Provided that nothing contained in this
subsection shall apply to any agreement entered into by way of joint ventures if such agreement
increases efficiency in production, supply, distribution, storage, acquisition or control of goods or
provision of services.
- While competition authorities around the world view horizontal agreements with a degree of
suspicion, all horizontal arrangements cannot be outrightly prohibited as efficiency gains may
follow from cooperation that are sufficient to outweigh any restriction of competition
- To determine whether a joint venture agreement would have an appreciable adverse effect on
competition, the Commission would give due regard to factors as mentioned in section 19(3) of
the Act.
- If a joint venture agreement is challenged before the Commission under section 3, it is not
enough to claim that the agreement in question is in the nature of a joint venture agreement and
yields efficiencies; rather, the claim of efficiencies must be supported.
- In the event that the joint venture is established by way of acquiring shares of an already existing
joint venture company, from one of the joint venture partners, the transaction (if it meets the
prescribed thresholds) would be an acquisition and would become notifiable to the Commission.
- However, in the event the joint venture is established by way of the joint venture partners
subscribing to the share capital of a newly incorporated company (i.e., the formation of a new
joint venture as contrasted with the acquisition of ownership interests in an existing joint
venture), the Act provides no clarity as to whether the merger control provisions of the Act
would apply.
- JV is not defined anywhere. JV is an exception only to S. 3(3) and not to other anti-competitive
agreements as given in S. 3. The rule of rebuttale presumption cannot be applied to JV. Thus, a
horizontal JV agreement cannot be examined under S. 3(3) of the Act. [Rebuttable Presumption
- A presumption is made by CCI - but entities are given the opportunity to produce efficiency
defences.]
- Section 3 has a trigger to S. 5 of the Competition Act. Section 5 deals with combinations. In a
JV, one entity will acquire shares of the other. In such a case, high possibility of the agreement
falling under S. 5.
- There will be some agreements which do not fall under the definition of combination. These will
escape examination. But for those that do, they will be struck by S. 5. Will escape S.3(3) but not
S. 5 in this case.
- Cases on Combination will be dealt with in Module 5 - not here.
- Second category of JV provides for contractual JV - a new entity is set up by which two
companies acquire shares in that entity. A new entity might not be a combination therefore may
escape the scrutiny of s.5 (he is saying may repeated). If such a contractual JV satisfies the
efficiency standard under the provisio (reduces cost, increases supply across country, better
distribution etc), will escape S. 3(3) scrutiny before CCI.
- What is the standard of proof: Parties must be allowed to have recourse of S. 9(3) efficiency
defences embedded in Clauses (d)-(f).
Vertical Agreement
Section 3(4) deals with vertical agreements
3(4). Any agreement amongst enterprises or persons at different stages or levels of the production
chain in different markets, in respect of production, supply, distribution, storage, sale or price of, or
trade in goods or provision of services, including-
(a) tie-in arrangement;
(b) exclusive supply agreement;
(c) exclusive distribution agreement;
(d) refusal to deal;
(e) resale price maintenance, shall be an agreement in contravention of subsection(1) if such
agreement causes or is likely to cause an appreciable adverse effect on competition in India.
Explanation.- For the purposes of this subsection,—
(a) "tie-in arrangement" includes any agreement requiring a purchaser of goods, as a condition of
such purchase, to purchase some other goods;
(b) "exclusive supply agreement" includes any agreement restricting in any manner the purchaser in
the course of his trade from acquiring or otherwise dealing in any goods other than those of the
seller or any other person;
(c) "exclusive distribution agreement" includes any agreement to limit, restrict or withhold the
output or supply of any goods or allocate any area or market for the disposal or sale of the goods
(d) "refusal to deal" includes any agreement which restricts, or is likely to restrict, by any method the
persons or classes of persons to whom goods are sold or from whom goods are bought;
(e) "resale price maintenance" includes any agreement to sell goods on condition that the prices to
be charged on the resale by the purchaser shall be the prices stipulated by the seller unless it is clearly
stated that prices lower than those prices may be charged

Vertical agreement is not specifically mentioned - but deciphered on the basis of the language used
in the section - "different stages or levels of production chain in different markets" - from these
words we can learn that S. 3(4) provides for vertical agreement.

Vertical Agreement meaning: An agreement entered into between players or entities who are
different stages or levels of production chain or supply chain. For eg - Producer - Retailer,
Distributor - Retailer, Manufacturer - Distributor. Producer does not directly supply goods to
consumers - different stages or levels of supply chain.

For eg - Raw material supplier and manufacturer - raw material supplier is not a retailer - raw
material is used in the production of the final output. Limestone supplier is not a final product.
Different stages of manufacturing chain.
"Different markets" is a vital part of this. Necessarily Vertical Agreements must be entered into
between producers in different market. Limestone market and cement market are two different
markets. For eg - Production of cement and supply of cement are two different markets (the latter is
a service market even though it is the same product). Can be two product markets, two supply
markets or one of each. Must be two different markets basically.

Q: Can an agreement between a retailer and consumer under this section? No. There is a case where
the CCI held that S. 3(1) can be applied to a producer and a consumer. However, this interpretation
is limited to S. 3(1). Because Section 3(3) and S. 3(4) are not exhaustive of S. 3(1) - S. 3(1) has a
broader scope than clauses 3 and 4. CCI only interpreted it this way (he doesnt mention case name).

Answer to Question: Thus, Section 3(4) does not include an agreement between a producer and a
consumer. Because consumer does not fall into production or supply chain - required to fall under S.
3(4). This was stated in the Hiranandani and Tata Sky case. Consumer only falls under the demand
side.

Tie in arrangement: Includes any agreement requiring a purchaser of goods, as a condition of such
purchase, to purchase some other goods. Eg - A manufactures a printer – it is the producer. It
supplies to distributors. Distributor is the customer/purchaser of the printer. B is the purchaser and
A is the supplier of printer. A is known for the manufacture and supply of a highly usable printer for
a decade. Off late, since the last 6 months, A started manufacturing cartridges. A requires B from
today onwards also to purchase the cartridges from A along with the purchase of the printer. It is a
different product and falls under a different market. Both do not fall within the same market. This
means that in order to create a demand for his other product, he is forcing the purchaser of printer
to buy a certain amount of another product. It is not indispensable for the functioning of the
original product. Cartridge produced by another cartridge manufacturer can be used for the use of
printer. [See Explanation 1 to 3(4)]

Exclusive Supply Agreement: In case of ESA, one can find a vertical agreement entered into
between a producer and a distributor or a producer/seller and a retailer (assuming producer is the
seller).

What does it indicate: It is an alternative to the vertical integration. Generally, any producer may prefer
to enter into ESA as opposed to Vertical Integration. In case of VI, the producer either opens up his
own outlets across the country or establishes a subsidiary of his own. Allows for the access of his
goods across the country. However, the producer may not be familiar with the market and might
have to incur extra costs due to market inexperience.
As opposed to this, a more convenient route is to enter into an ESA with a distributor. Exclusivity is
found here. Also known as a "Requirement Contract" in some jurisdictions. In this agreement, the
seller requires the distributor to take exclusive supply of the products from the seller. ESA is entered
into between the players for a long period of time (2, 3 years etc., generally not for months).

Advantage of ESA: The seller doesn't have to worry about exploring the market - a skilled distributor
is taking care of that. Generally, an experienced, good distributor is used. Transaction costs are
reduced. Distributor on the other hand, has an assured supply of the goods - does not need to worry
about price fluctuations for the time period of the contract (unless contractually mentioned in the
agreement). Generally, prices are fixed in the ESA.

As a result of the ESA, there is a restriction - the distributor is bound to take supply from the seller
for the period of time set out in the agreement. Cannot take supply from the seller's competitors.

Case: Consumer Guidance Society v. Hindustan Coca Cola Beverages Ltd. & INOX Leisure Pvt.
Ltd.

Facts: Petitioners alleged that ESA between the two parties regarding supply of products to the
multiplex theatres owned by INOX. 4 month agreement - 1st Sep to 31st Dec 2010.

CCI: Informant is a regd soc brought information to CCI – about exclusive supply agreement
between these two to supply in the multiplex theatres owned by INOX across the country. Case
came up before the CCI – CCI found that the supply of the opposite party no. 1 to INOX
multiplexes owned by opposite party number 2 was only small in volume – there were 10,000
screens across the country and 9100 were single screen theatres – 900 were multiplexes, around 600
multiplexes were owned by another competitor of INOX – INOX owns only 214 screens in such
multiplexes across the country – CCI found that the supply via such agreements to INOX was a
very limited volume – amounted to only less than 0.3% of the overall sales of the non alcoholic
beverages across the country by non alcoholic beverage suppliers. Therefore there was no
appreciable adverse effect on competition in India.

Exclusive Distribution Agreement: Another form of exclusivity. Also known as providing for
territorial exclusivity. Exclusivity should be understood in terms of the geographical area. A seller
can enter into both ESA and EDA. But they are slightly different. In EDA, the seller compels
distributor to sell its products in the limits of a particular geographical area. Ex - in Gujarat. S.
3(4)(c) is area specific. Distributor is obligated to not supply these products outside the stipulated
territory. Thus, for example, the distributor cannot supply these products in Maharashtra.
When such EDA is for a short time, it may not be violated of S. 3, may not cause an AAE on
competition.

Advantages: In EDA, Seller can compel to sell its products in an area. Distributor can rigorously
pursue selling of its products, create brand image.

On the other hand, this may reduce inter-brand competition. Dealer is prevented from selling
outside the area. This is especially so where this is both an ESA and EDA. Consumers are at the
receiving end. Forced to purchase only a particular product. Seller may also be incentivized to
increase price.

Litmus test: Dominant position of players - if there is no DP, may not be violative. It depends on the
factual circumstances.

Refusal to Deal

● In case of RTD, there must be an agreement between two players. Eg - X is a company

producing lead, supplies lead to Y for many years. Y produces pencils. Now, if there is an
ESA between X and Y - another company Z comes into picture, it also produces pencils. X
may be interested to go with Z. Y might get deprived in such a case. If X is the main or
dominant player, if it denies Y because of a new agreement between X and Z, this becomes a
refusal to deal situation with respect to Y. This may be cause AAE to Y.
● 3(4)(a) and (d) may go together. So can b and d.

Resale Price Maintenance: Includes any agreement to sell goods on condition that the prices to
be charged on the resale by the purchaser shall be the prices stipulated by the seller unless it is
clearly stated that prices lower than those prices may be charged.

Shamsher Kataria v. Honda Siel Cars India Ltd. & Ors.

An appeal was filed by Toyota Kirloskar Motor Private Limited (Toyota), Ford India Private Limited
(Ford) and Nissan Motor India Private Limited (Nissan) against the common order of the
Competition Commission of India

Emphasising on clauses in relation to sale of automobile components only in the aftermarket, the
following are allegations raised by Mr Shamsher Kataria (informant) in the form of information filed
by him on 18-1-2011 before the Commission and investigation report made by the Director General
(DG):
(i) The authorised dealers could source spare parts including diagnostic tools, technical information,
fault codes, repair manuals, etc. only from original equipment manufacturers (OEMs) or their
approved vendors. Thus, there are restrictions on authorised dealers from sourcing spare parts from
OEMs of other vehicle manufacturers (VMs). Such agreements were therefore found by the DG to
be in the nature of exclusive supply agreements in terms of Section 3(4)(b) of the Act.

(ii) Also, not only purchase but there are restrictions imposed on the sale of spare parts including
diagnostic tools, technical information, fault codes, repair manuals, etc., by the OEMs on their
authorised dealers to independent repairers. Such agreements were therefore found by the DG to be
in the nature of exclusive distribution agreement and refusal to deal in terms of Sections 3(4)(c) and
3(4)(d) of the Act.

Kataria was the owner of Volkswagen, Honda and Fiat cars. He moved before CCI informing that
all three foreign car companies (mentioned in previous line), were not making available the spare
parts and after sale replacement parts of the car, tools, technical info required for repairing, servicing
or maintenance the car in the open market. No information given to the independent service
providers or multi brand repairers/service providers – allegation was brought forward – DG found
that he needs to investigate so many other car companies – 17 car companies were investigated –
CCI gave decision comprising 14 car companies as opposite parties – 3 car companies were not
brought and an order was made against Mahendra Rewa, Hyundai India and another company in
2015 separately – Hyundai had gotten the stay from CCI proceedings before the Mad Hc – Mad HC
later lifted the stay and order was made against Hyundai India by the CCI.

Original equipment Manufacturers (OEMs) – Original Equipment Suppliers (OESs) or auto spare
part manufacturers - Authorized Dealers (Ads) who are individual dealers but have agreement with
manufacturers and they have their own showrooms and service centres. These are the three relevant
entities.

As per the basic allegation, the car manufactuers or OEMs entered into an exclusive supply
agreement (u/s 3(4)(b)) with OESs. OESs would manufacture the spare parts required for the
specific cars. OEM also entered into agreement with ADs. It prevented the availability of auto parts
to independent repairers, multi brand service providers and individual car owners in the open
market. Owing to this vertical agreement, and also an exclusive distribution agreement was there.
ADs are required to service the car within the areas that are allowed to them. This therefore
involved both 3(4)(b) and 3(4)(c) and Section 3(4)(d) also (refusal to deal). He also alleged that the
OEMs were dominant in the spare parts market and they were in a position to refuse to deal with
the owners, the independent repairers and multi brand service providers. Therefore, he also alleged a
Section 4 violation, which is abuse of dominance. Therefore no availability of spare parts, technical
information, diagnostic tools and software programs which are essential for providing these services.

On the basis of this, CCI directed investigation by the DG. The DG felt that this investigation’s
scope must be expanded. He felt that other car companies should also be investigated. It was
expended on request by the DG. It was later expanded to 17 OEMs including the first 3. Almost all
the car manufacturers were included within the purview of this investigation.

(in between – as soon as Hyundai India recd. Notice by CCI, it moved the Mad. HC seeking a stay
on the proceedings. The court issued a stay on the notice issued by the CCI on Hyundai. In respect
of other car companies, the investigation was going on. Out of 17, CCI could bring in its
investigation net, 14 car companies at the first instance and at the time of the first order (there are
two decisions, first decision is from August 2014 and the second one is from July 2015) in the
second decision, there was Hyundai India, Mahindra Rewa and another for whom the decision came
in 2015 – in the month of August 2014, the main decision came and both are case No. 3 of 2011)

For the purpose of convenience, this has been decided on the basis of 4 issues:

1. Whether the automobile market as a whole is a single unified ‘systems market’ or there
exist separate relevant markets at different stages?

Car manufacturers argued that this market for cars and spare parts and services later on is an
indivisible single unified market. CCI did not agree with this. It reasoned that in the automobile
industry in India, one car cannot be so easily substitutable to another competing product. This is
because the switch over costs is very high. It is not easy for everybody. It is not interchangeable.

Another argument brought by opposite parties – it is indivisible because there is a whole care life
costing – CCI rejected this argument because it is not possible to have whole life/full life costing.
This is also called lifespan costing. For this, data must be available with the respective car
manufacturers. If I go to buy Honda Amaze, but the dealer cannot provide any other price other
than the car selling price. It is not a one time product. It is a durable product. Will be used it for a
long time maybe 10 years. For the value of services and parts etc. cannot be set for the next 10 years.
Cannot provide for every conceivable service in the next 10 years.

For example, in the security service market – there are security cameras. Though they are different
products and services, they form part of one market. This can be distinguished from the car and
services markets.
Therefore, this type of a market cannot operate in the automobile industry. There exist separate
markets at different stages. CCI said that there exist three separate relevant market at different
stages:

i. Primary market for the manufacture and sale of cars

ii. Aftermarket (which is a spare parts market). Further divided into two:
a) Aftermarket for the sale of genuine auto spare parts, diagnostic tools etc
b) Market for the sale of repair and maintenance services.
Therefore, these three markets exist at two different stages.

2. Whether agreements entered into by the OEMs with OESs and ADs are
anti-competitive?

The CCI found that they are anti-competitive in nature. It involved three provisions of Section 3(4)
mentioned above:

Section 3(4)(b) – Exclusive supply agreement – between OEMs and OESs. They are vertical
agreements and are restrictive in nature. ADs are confined to service along with the supply of
genuine spare parts that they get from OEMs. ADs are required to supply genuine spare parts and
service vehicle within their areas. Both 3(4)(b) and 3(4)(c) are covered.

Independent service providers and multi brand service providers and repairers are not able to get
spare parts and other relevant diagnostic tools, technical know how etc – they refuse to deal with
these people – all are a result of the restrictive agreements entered into between OEMs with OESs
and ADs. Therefore, all three are violated.

3. Is there any abuse of dominancy by the OEMs on the spare parts market?

CCI found that there was an abuse of dominance by the OEMs in the spare parts markets
(remember, this does not include the primary car sale market). This is because of non-substitutability
of cares and non-substitutability of genuine spare parts. It was found by the CCI that all the car
companies are dominant in their respective aftermarkets for the supply of spare parts owing to
exclusive supply agreements. Therefore because of Section 3(4)(b), there us a violation of Section 4.
4(2)(a)(ii) – unfair pricing, 4(2)(c) – denial of market access and 4(2)(e). There is 100% dominance.

a. Section 4(2)(a)(ii) – discriminatory purchase/selling price. These spare part costs prices are
so high and as high as 5000% in some cases. Clear case of unfair pricing
b. Section 4(2)(c) – CCI found that exclusive supply and distribution agreements resulted in
denial of market access for the independent service suppliers as well as multi brand service
suppliers – it leads to denial of market access- it operates mostly in the third market, i.e.
 the service, repairs and maintenance market. There is a refusal to deal. They don’t get
parts and diagnostic tools with softwares. This non availability also amounts to denial of
market access for these suppliers to the market for service, maintenance, and repair
services.
c. Section 4(2)(e) – deals with leveraging. Means using dominance in one relevant market to
enter into or to protect another relevant market. The OEM is dominant in the spare parts
market (100% dominant found by CCI). It tries to gain and continue dominance in the
third market, that is the service market.

4. Whether the OEMs are entitled to the benefits of IPR exemptions provided to
agreements under Section 3(5)(i).

Spare parts, diagnostic tools, software programs and technological understanding are all their IPR.
OEMs argued that they are allowed to impose reasonable restrictions to protect their IP rights.
There is no international IP law. IP regime is territorial in nature. None of the opposite parties have
submitted any document to DG indicating the protections that have been granted under the Indian
IP regime. ‘have been or may be conferred rights’ under Section 3(5)(1) – atleast you show proof
that you have applied for the IP protection. Section 3(5) exemption cannot therefore apply to any of
the companies

CCI found that all 14 players abused their dominant position and violated various parts of Section
3(4). It imposed on the 14 parties as huge as 2544.65 crores. When the stay was vacated by Mad. HC,
Hyundai was penalized with the penalty of 420 crores. It has for now been stayed by the SC. CCI
found 15 opposite parties to have violated Section 3(4) and 4(1) of the Comp Act. on appeal, the
COMPAT upheld the decision and modified the quantum of penalty. CCI granted penalty at 2% of
the total turnover but COMPAT considered only relevant turnover from the market/product where
the violation has been found. Turnover must be from the auto spare parts and services and not, for
instance, from the sale of cars. Therefore, the penalty was reduced.
 MODULE IV – ABUSE OF DOMINANCE

Prohibition of abuse of Dominant Position: Competition Act, 2002

Section 4(1): “No enterprise or group shall abuse its dominant position”.
For the purposes of section 4 the expression—

(a) “dominant position” means a position of strength, enjoyed by an enterprise, in the relevant
market, in India, which enables it to— (i) operate independently of competitive forces prevailing in
the relevant market; or (ii) affect its competitors or consumers or the relevant market in its favour.-
(i) operate independently of competitive forces prevailing in the relevant market; or
(ii) affect its competitors or consumers or the relevant market in its favour

Group:
● Group here means group of enterprises - Entities coming under a single group. Joint and
collective dominance does not fall under S. 4(1) due to the use of "group". Thus, when a number
of distinct entities coming together to abuse dominance does not fall under S. 4. This is present
in EU and US.
● During the drafting, they wanted to include language which allowed for this but in the final draft
it was not included.
● In the proposed amendment, there is no reference to this. Uday says S. 4 must provide for joint
dominance - he has given comments apparently. (can be added as part of your critique or view if
there is such a question that arises)
● Read definition of dominant position in the provision.
● Definition of group given in explanation to Section 5.

Unites States of America – Law under the Sherman Act

Section 2- Monopolisation-

“Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any
other person or persons, to monopolize any part of the trade or commerce among the several States,
or with foreign nations, shall be deemed guilty of a felony.”

● This is the main prohibition to abuse of dominant position in US Federal law.

● "Monopoly position" is the more correct term for US Law.

● Monopoly power is the power a firm holds to dictate prices and control output. Monopoly
power is explained as holding a position of dominance within an industry so as to command
 power to fix prices or exclude competition within the industry (includes case of predatory
pricing, as well as to exclude players).

● Monopolisation is the act of abuse.

● Market power may be used to increase price or predatory pricing.

● The following things are prevented through the provision:

1. Act of monopolisation

2. Attempt to monopolise

3. Combine or conspiracy to monopolize

Does not prohibit the status of monopoly. But prohibits the act of monopolization or attempted act
of monopolization. Monopolisation is the behaviour of abuse. India the word is abuse, USA it is
monopolisation. Similar understanding as in India.

● It prohibits even attempted monopolisation. Act of monopolisation involves a company

holding a monopoly position and then subsequently engaging in anti-competitive activity.

● Plaintiff has to prove anti-trust loss as a result of anti-competitive behaviour. Thus,

three-pronged test exists:

1. Holding of position
2. Anti-competitive behaviour
3. Anti-trust loss

Evidence of Attempt of monopolisation:

1. Accused company has engaged in a specific type of anti-competitive conduct.

2. Accused company has specific intent to monopolize
3. There exists a dangerous probability enabling the accused to succeed in getting monopoly
power and abusing it

To prove abuse of dominant position, three things must be done:

1. Delineation of relevant market

2. Determination of dominant position/monopoly position
3. Establishment of abuse of dominance

US v. Aluminium Co. Of America (Alcoa) [1945, US Court of Appeals for the Second Circuit)
Facts: Alcoa was a dominant company in the manufacturing and sale of Aluminium and Aluminium
ingots. It doubled its production capacity - it started producing more ingots to have its presence
across the US.

Held: Any company which acquires dominant position through superior skill, foresight and industry
does not engage in anti-competitive activity. Not violate of Section 2. The acquisition of dominant
position is legal and the maintenance of this lawfully acquired position must be lawful - if this is
fulfilled, then not violate of Section 2. But if maintained unlawfully then violates Section 2. This was
the general legal proposition laid down.

However, in the facts of this case, Judge Hands found Alcoa guilty of monopolizing because in its
determination to maintain control of the aluminium ingot market, it "effectively anticipated and
forestalled all competition" by “doubling and redoubling its capacity before other enters the field”.
According to Uday, this was a highly contradictory decision and was widely criticised by scholars in
the US.

Uday sir - if you effectively foresee, there is nothing wrong in that. That’s just fair market
competition. Wrong decision

United States v. Grinnell Corporation (1966)

Facts: Grinell engaged in the manufacture of plumbing materials and sprinklers.

Held: Grinell Corporation and its 3 affiliaties engaged in market division, set discriminatory pricing
with a view to maintain monopoly position in the plumbing market. Found to be guilty of Section 2.
The Court tried to explain the act of monopolisation.

A Section 2 violation requires "the wilfull acquisition or maintenance of monopoly power as

distinguished from growth or development as a consequence of a superior product, business acumen
or historical accident". But did not explain what "wilfull" meant.

Distinguishes between unlawful and lawful acquisition of monopoly position.

Also criticised a bit since it did not explain wilful meant.

Relevant Market
While acquiring or maintaining dominant position, ascertaining the identity and scope of relevant
market becomes important.
- Relevant Market refers to a line of commerce in which competition has been restrained
- Two dimensions: Relevant Geographic Market and Relevant Product Market.

Relevant Product Market: Line of commerce where products are in competition with each other.
Products and services are substitutable. Relevant market comprises substitutable or interchangeable
products.

US v. E.I. Du Pont de Nemours & Co. (1956, US - Cellophane Case)

Facts: US DOJ charged Du Pont for the act of monopolisation in the cellophane market. When the
case come before the US Supreme Court, it did not question that Du Pont was in a monopoly
position in the Cellophane market.

As per SC, Du Pont found competition from every other use of flexible packaging materials. In
other words, every other manufacturer of flexible packaging material was its competition.
Cellophane was only one of a number of flexible packaging material.

On the basis of the principle of cross-price elasticity of demand, all flexible packaging material are
reasonably interchangeable and functionally substitutable. Consumers will switch from one product
to another in the event of a price increase from one product to another. If price of butter goes up,
demand for margarine will go up. Because they are substitutable and not complementary.

Thus, the relevant product market is the totality of all flexible packaging material products.

Du Pont only had 20% of this market. But had 75% of the cellophane market. Du Pont was not in a
dominant position in this relevant market. No question of abuse of dominance.

This judgement was criticized by economists and scholars. The Court only relied on cross price
elasticity of demand. This was impractical according to criticism.

In 1959, three years later, US economists in reaction developed a test called the Small But Significant
and Non-Transitory Increase in Price Test. It was mentioned in the 1982 merger guidelines by the
DOJ. This was when the efficiency doctrine was roaring and Chicago school was at peak. This is a
reaction to the cellophane case. It has three points

1. Price Increase

As a first element, it must be noted that the price increase must be a non transitory increase
(increase for a long period of time or permanent). For a provisional/temporary increase, they
may still continue to use the same product and might not switch. They must not see that the
increase will cbe taken back in a short period of time. Eg – Butter and Margarin and cake baking
 biz. – bakers use butter generally for baking the cake – there is increase in the price of butter – if
the bakers come to know that it would be an increase for a long period of time, they will
certainly switch over to using margarine which can be used in an equivalent manner.

Second, the price increase must be a small increase. A huge increase in price, people will
definitely switch over. That is not the purpose of the understanding. Small increase would enable
the competition authority to identify close substitutes. Large increase would compel them to go
for distant substitutes.

Third, the small increase must be a significant increase. It may be 2% increase. An insignificant
increase in price may not attract the reaction of purchasers. Purchasers will not react at all. It
doesn’t matter a lot. It has to be significant increase so as to enable a purchaser to react.
Generally it is considered that 5% increase would be considered to be a significant increase. This
is also called the hypothetical monopolist test or 5-10% test.

2. Reaction of purchaser

Because of this increase, the cake baker switch to margarine, they fall in the same market and
therefore it is in the same market

3. Small size requirement

The market must be a small one. It enables the competition authority in not going from bracketing
non-substitutable products. Eg car and bake are absolutely distant substitutes. Non substitute
products must not be there in the same relevant market. Small size requirement was there.

This test was also criticized. It is not an end in itself. It is merely a means/tool to delineate relevant
market. It does not take care of the quality element. It talks only about price increase. Even if 20%
increase is there, they may buy the same product because they are quality conscious people.
Therefore, the SSNIP test will fail. CCI also tried to apply this test in India in certain cases but it was
not successful.]

Relevant Geographic Market

- Refers to a market comprising of a particular geographic area containing substitutable products
or services.
- The geographic bounds of the market are usually determined by an examination of the sources
and locations to which the various customers of the firm under scrutiny may readily turn for
supply of the relevant product.
- If price of sugar increases in Gandhinagar, if consumers go to warehouses in Ahmedabad to buy
substitutes then Ahmedabad is also a part of the relevant geographic market.

Factors:

- Consumption pattern and preferences of the consumers are important.

- Shipment patterns are important.
- Transportation costs also
- If cement is shipped from NY to California, transporation costs may be viable as sellling
costs will not rise too much due to low transporation costs. But NY to Washington is very
far so selling cost will be too high and not viable - as a result California may be a part of
RGM but not Washington.
- Perishability - Relevant geographic market cannot extend so far such that goods perish.
RGM Is limited in these cases.
- What one has to see is to what extent would both products would remain substitutable - to
the extent they remain substitutable, the RGM exists.

Monopolistic Practices
These are anti-competitive practices.
1. Predatory Pricing
- Predatory pricing refers to a situation where a firm charges a price below its cost of production,
with the intent of forcing its competition to either immediately exit the market, or to exit the
market after facing losses for a while.
- Involves two stages: Predation stage and recoupment stage.
- During the first stage, a market player starts selling its product at below cost price. Eg - X is a
maker of soda ash and sells to glass industry. Y is another soda ash maker. X starts selling soda
ash at a below cost price. Y loses all its demand because it is unable to compete at these prices. Y
will have to exit industry or incur huge loss. X is a big player which can incur loss for a while but
Y is small and cannot afford to sell at loss. X is selling below short run marginal cost due to its
deep pockets.
- Post Predation or Recoupment stage - X then starts selling goods to the consumers at super
inflated prices in order to ‘recoup’ the amount it lost during the period of predation or
investment.

Brooke Group Ltd. V. Brown & Williamson Tobacco Corporation

Facts: Initially, the main company was called Ligett, which was acquired by Brooke Group.
Ligett was one of the six tobacco manufacturers in the US. During the mid 80s, Lidgett with a view
to increase its market share decided to enter into an economy segment and started making and
selling generic cigarettes vis a vis branded cigarettes (which are costlier). By the 80s, they acquired 4
percent of the market.

Brown and Williamson (BW), a competitor who feared losing market share also then entered the
generic cigarette market. This started a price war between the two, with BW selling it much much
below the normal price. Brooke complained.

Held: SC here held that a plaintiff seeking to establish a competitive injury by reason of a rival’s low
pricing must prove that the prices complained of are below an appropriate measure of the rivals
costs.

SC further reasoned that the above cost prices, if they are below the general market levels, they are
not inflicting injury based on anti trust laws. SC stated that pricing is predatory if it is below the
‘appropriate level of cost’. However, there is no uniform cost bench mark that was prescribed

(Uday- some federal courts had agreed the average total cost to be the appropriate benchmark-
therefore a predator coulnt price goods below the average cost of producing a single unit of an
item).

SC also said that in order to prove predatory behavious, plaintiff must prove that the defendent has
recouped or has taken steps to recoup within a reasonable period of time.

(Uday 2- some scholars believe that recoupment can only be proved all the time- and hence this cant
be made a mandatory condition).

US v. American Airline Case

Facts: DoJ brought a suit against American airlines- the allegation was that American, with a view to
drive competitors out of the market- it used to keep its air prices so low. This hurt a lot of
competitors. SC did not agree.

Held: in as much as American airlines was found consistently fairing its air tickets above average cost-
it was not possible to hold them as to have entered into predatory pricing. Therefore, air fare was
above the average variable cost.

US v. AT&T
Facts: DoJ here alleged that AT and T used to resort to predatory pricing in certain segments or
markets. It used to provide services at low costs where there is competition. It raised prices to set off
costs later. In this way it used to maintain control all the market.

Held: It was predatory pricing.

2. Refusal to deal
- A business is normally entitled unilaterally to refuse to deal with any other business. However, a
monopolist may refuse to deal in variety of situations where the refusal will further entrench or
extend its monopoly position.
- Refers to a situation where a company can refuse to deal with another party.
- In case of monopoly power, the monopolist cannot refuse to deal with a long-standing
customer. Such behaviour would become anti-competitive in the Sherman Act.
- However, such behaviour by a non-monopolist firm would not be a violation of Section 2.
- Under the Indian Act, refusal to deal is a result of a vertical agreement between an upstream and
downstream party.

Aspen Skiing Co. V. Aspen Highlands Skiing Corp. [US SCOTUS]

Facts- both the parties were horizontal players who were engaged in conducting of the same
business. They entered into a cooperation agreement for the purpose of running a skiing business.
They did this on four skiing mountains.

Aspen had a major share in the business, and had control over three areas- Aspen mountain, Aspen
snowmass and Aspen Highlands. They used to offer to their business four sloping tickets. This
meant that they can ski together in four mountains. On all these tickets, Aspen had control over
three shares, and Aspen highlands had control over one part.

Aspen skiing then withdrew from this company, therefore the minor partner aspen highlands was
left to compete with other competitors. Now, because A highlands offered only one ticket as
opposed to A skiing which gave three, more customers preferred A skiing, and highlands ran out of
business. Case then went to court and came before SC in 1985

Held- SC held that it is a violation of S.2 of the Act.- Aspen skiing being a dominant company, which
is in a partnership with Aspen highlands, a minor partner- revoking agreement amounts to refusal to
deal (As it exploits a smaller company and takes away a usefull option to consumers)

3. Tie-in Arrangements
Tying is the practice of making the sale of one good (the tying good) to the de facto or de jure
customer conditional on the purchase of a second distinctive good (the tied good).

Eastman Kodak Co. V. Image Technical Serices Inc., 1992

Facts: Kodak engaged in the sale of complex business such as photographic and other micro-graphic
equipment. Kodak also used to manufacture to its customers the after sale replacement parts. [US
SCOTUS used the word "aftermarket" for the replacement parts market which as borrowed by
Indian courts in the Shamsher Kataria case]

Kodak had a 85% share in the aftermarket. Kodak's replacement parts were made to only be
compatible with Kodak's machines. Afterparts made by competitors would not be compatible with
Kodak's machines.

There were 18 independent Independent Service organisations - they used to get until a certain part
some original after sale parts from Kodak. Now Kodak changed its policy and stopped supply of
after sale replacement parts to these 18 ISOs.

Two allegations:

1. Attempted to monopolise service market by not making available the original after sale
replacement parts
2. Tie in arrangement

Federal District Court: Entered a summary judgement in favour of Kodak - Plaintiff lost the case -
no violation

Federal Court of Appeal - Reversed decision - said it did not deserve a summary decision.

Kodak moved SCOTUS

SC:

● By a 6:3 majority, upheld the order of the Court of Appeals. Did not hold anything on the
merits of the case - only on summary disposal.
● SC raised some questions though:

1. Whether the after sale replacement part and service are two distinctive product?
2. Whether the behavior of Kodak, refusing to deal with the ISOs, and also tying the same
service to the after sale replacement part would amount to a tie-in arrangement?
Kodak did not demonstrate that it would be unfair for the courts to infer that it would attempt to
monopolize the service market. This did not merit a summary judgement. Was remanded to a
district court for a fresh hearing.

On the fresh hearing, the plaintiffs dropped the tie-in charge. Only Section 2 charge was continued -
attempt to monopolize. Jury found attempt to monopolize - damages awarded worth 71.8$ million.
District court agreed and entered a 10 year injunction against Kodak.

United States v. Microsoft

Facts: DOJ moved a case against Microsoft at US Federal Court of tie-in and predatory pricing.

Alleged that Microsoft had a monopoly position in the intel-compatible Microsoft operating system
- more than 90% share worldwide. Owing to this extraordinary monopoly power, it engaged in
certain practices such as tie-in arrangement and its behaviour was also predatory which results in
both a Section 1 and Section 2 violation.

Microsoft for its windows operating system started tying its flagship web browser called "Internet
Explorer". So Microsoft Windows necessarily came with IE. Other browsers wanted to be
compatible with Windows. But Microsoft manipulated the API, it made Windows compatible only
with IE

Held: Federal District Court of Columbia held in June 2000 that Microsoft committed Section 1 and
Section 2 violations having had a huge monopoly power in the Intel powered Windows Operating
system market. Microsoft also engaged in a predatory behaviour by charging no price for the
internet explorer and also that owing to its monopoly power in the Windows Operating System
through its OEM, Microsoft manipulated its application programming interfaces with a view to
make its internet explorer only to be compatible with the windows operating system. Thus, fucked
over its competitors such as Netscape.

While holding microsoft in S1 and S2 violation, a structural remedy was granted. He ordered that
Microsoft should be split into two parts -

1. Windows operating system and related parts

2. Internet explorer, email operations and related products

These two must be two separate entities, each separtely sustainable and with all IP rights.

Soon after this decision, Microsoft moved an appeal before the Court of Appeal. Soon after the
verdict, Microsoft moved an appeal before the US Court of Appeals for the Columbia Circuit. In the
next year, June 2001, the court of appeal, in part, accepted the decisions of the Dist. Court that
Microsoft was in a monopoly position and had procured more than 90% market share in the intel
compatible Windows operating systems market and it did engage in anti-competitive conduct in
Windows OS Market. The court of Appeal did not accept the Dist Court’s decision with regard to
the attempted to monopolization allegation in the web browser market as levelled by the DoJ and 20
states of the US. This was because as per the CoA, the DoJ and 20 states did not produce enough
evidence to produce the alleged attempted monopolization act on part of Microsoft in the Internet
Explorer Market. Moreover, the CoA remanded the case (especially the attempted monopolization
allegation) to a separate Dist. Judge because the CoA came to know that Judge Jackson of the Dist.
Court conducted a very secretive meeting with the media members and it was against the code of
conduct 0of the judges of the US. Judge Jackson levelled allegations over allegations over Microsoft
with the media. It was considered to be the unbecoming behaviour of the judge. It raised an
appearance of partiality. It remanded it to a fresh hearing before a different Dist. Judge.

Court of Appeal held: In part accepted the district court that M held monopoly position in the intel
compatible windows operating system market. Did not accept the allegation of attempted
monopolisation - the DOJ and 20 states did not produce enough evidence to prove the attempted
act of monopolisation. Moreover, Court of Appeals remanded the case to a separate district judge -
it raised an appearance of lack of bias due to a media conference the previous judge had done in
relation to Microsoft.

Microsoft reached a compromise with the parties and filed this with the Court of Appeals. In the
compromise decree, FIRST, Microsoft agreed to provide all its records, source code related to the
API and access to its operating system to the middle man such as Netscape so they can make it
compatible with Windows.

Second, a committee would be set up for a period of 5 years, comprising experts to oversee and
monitor the elements of compromise. The committee set up in 2002 expired in 2007 and it was
again extended for 5 years for monitoring the activities of Microsoft.

With this compromise, Microsoft was allowed to continue tying in Internet Explorer with Microsoft.
Thus case ended with a compromise decree.

Abuse of Dominant Position: EC Law

Article 102 of the TFEU (ex Article 82 of the EC Treaty): “Any abuse by one or more undertakings
of a dominant position within the internal market or in a substantial part of it shall be prohibited as
incompatible with the internal market in so far as it may affect trade between Member States.”

This provision, unlike the Indian provision, provides for the joint dominance application or
collective dominance application. Any abuse by one or more undertakings.

3 things need to be proved:

1. An undertaking holds a dominant position.

 2. It has abused its dominant position.

3. Affected or is likely to affect trade between member states.

[The term ‘may’ is included to indicate a potential effect on trade. Actual effect on trade need not be
proved. Only the possibility must be proved - if it is probable, it is sufficient]

1. Dominant Position: Article 102 does not define dominant position.

Article 66 of the ECSC Treaty defines dominance in terms of an undertaking having a position so
strong as to enable it to be shielded from effective competition.

In Continental can (1971) case, the Commission declared that “undertakings are in a dominant
position when they have the power to behave independently, which puts them in a position to act
without taking into account their competitors, purchasers or suppliers.

Facts: Continental Can was an American manufacturer - acquired 80% of shares and convertible
debentures in a Dutch company Thomason Driver.

Held: The commission described dominant position. The case was one relating to an Article 82
violation with regard to post acquisition joint dominance was concerned. Continent can was an
American multinational, engaged in the manufacturing of metals – it had European subsidiary in
Brussels – through the subsidiary it acquired 80% shares and debentures in a Dutch company –
Thomasen NV – EC held that that particular acquisition of shares and convertible debentures
actually posed a joint dominance post acquisition. The EC held that it was therefore in violation of
Article 82. It was an ex-post examination. While dealing with the case, the commission described
dominant position as:

“undertakings are in a dominant position when they have the power to behave independently, which
puts them in a position to act without taking into account their competitors, purchasers or
suppliers”

United Brands v. Commissioner, 1978 ECJ

United Brands was an American multinational engaged in food business – it is a food giant – it had
an extensive distribution system and an extensive plantation business also, in the South American
countries – it had a clear control over the fruit ripening processes. All these business elements of
United Brands made other competitors to be in a competitively disadvantageous position. The
observation of the ECJ on the dominant position was:

“A position of economic strength enjoyed by an undertaking which enables it to prevent effective

competition being maintained on the relevant market by giving it the power to behave to an
appreciable extent independently of its competitors, customers and ultimately of its consumers”
Explanation – ‘economic strength’ is the phrase use – similar to the meaning given in Article 66 – all
vertical players included and also includes consumers who may be affected by the abuse of
dominance.

40-45% share in banana market was sufficient to hold United Brands in a dominant position.

Hoffman-La Roche (Vitamins) Case 1979, ECJ

Multinational Pharma Manufacturer is Hoffman – it had held a market share ranging from 47% to
95% for various vitamins – it was known for producing and supplying various types of vitamins –
this case was particularly with regard to Vitamin A – for Vitamin A, it was holding 47% market
share:

“no single factor would determine whether an undertaking enjoyed dominant position, but among
the determinative factors, a highly important one is the existence of a very large market shares”
“very large shares are in themselves and save in exceptionally circumstances, are evidence of the
existence of a dominant position”

In this case, 47% market share was found by ECJ to be sufficient to place it in a dominant position.
Also was found to violate Article 86 in respect of Vitamin A market because 2 of its competitors did
not jointly exceed a 47% market share.

(In EU law, if 70% market share, then there is unequivocal and irrefutable dominance in the market)

2. Abusive Practices

Article 102

Such abuse may, in particular, consist in:

A. Directly or indirectly imposing unfair purchase or selling prices or other unfair trading
conditions
● "imposing" is used to show that there need not be an agreement to fix price. Rather it can be
imposed by only one party
● Eg - Predatory prices, Price element connected conditions, fidelity rebates or loyalty
conditions
B. Limiting production, markets or technical development to the prejudice of consumers
● Limiting production - creates artificial scarcity - increases price
● Does not promote technical development to the prejudice of consumers
C. Applying dissimilar conditions to equivalent transactions with other trading parties, thereby
placing them at a competitive disadvantage
● Discriminatory pricing
 D. Making the conclusion of contracts subject to acceptance by the other parties of
supplementary obligations which, by their nature or according to commercial usage, have no
connection with the subject of such contracts
● Tie-in arrangement, Excessive, Predatory Pricing

Factors to determine abuse of dominant position

There are primarily three stages in determining whether an enterprise has abused its dominant
position.:

1. The first stage is defining the relevant market.

2. The second is determining whether the concerned undertaking/enterprise/firm is in a
dominant position/ has a substantial degree of market power/ has monopoly power in that
relevant market.
3. The third stage is the determination of whether the undertaking in a dominant position/
having substantial market power/monopoly power has engaged in conducts specifically
prohibited by the statute or amounting to abuse of dominant position/monopoly or attempt
to monopolize under the applicable law.

Relevant Market
Delineation of Relevant Market: Market structure, including the market share of the undertaking under
scrutiny, has usually taken primacy in the assessment of dominance.

For determining the dominant position/monopoly position ascertaining the identity and scope of
relevant market becomes important.

There must be a determination of the geographic boundaries of the market.

The enforcement of the provisions of ant-trust law would be not possible without referring to the
market where competition takes place

Michelin v. Commission

Held: The relevant product market as one including the totality of the products which, with respect
to their characteristics, are particularly suitable for satisfying constant needs and are only to a limited
extent interchangeable with other products.

1997 EU Notice on the Definition of Relevant Market:

The relevant market combines the product market and the geographic market, defined as follows:
Relevant product market: comprises all those products and/or services which are regarded as
interchangeable or substitutable by the consumer as reason of the products' characteristics, their
prices and their intended use

Relevant Geographic Market: Comprises the area in which the firms concerned are involved in the
supply of products or services and in which the conditions of competition are sufficiently
homogenous and which can be distinguished from the neighbouring areas because the conditions of
competition are appreciably different in those areas.

(not sure if he’s done this bit in class)

Although these are two different facets of relevant product market, they are deeply connected. One
cannot be done without the other.

The products must not be strictly homogenous - there are products which can be used
interchangeably - these should be a part of the relevant market. Thus, only sufficiently homogenous
is required but not strictly.

It provides better clarity on delineation of relevant product market. It comprises all the products and
services that are interchangeable or substitutable products or services. How they are to be
interchanged or substituted – in the form of physical characteristics, their prices and their intended
use. Shape, size texture and their deidhn and the price of the product. It is based on the corss price
elasticity of demand in the US law – what is the end use for the final consumer – products may have
identical physical characteristics or similar pricing but might not be used for thr identical purpose –
cannot be classified in the same relevant market.

In the definition of relevant geographic market – there has to be a requirement for homogeneity –
heterogenous products can also be brought here – “sufficient” homogeneity has to be required – are
the products being supplied – if the demand of Y goes up, then that area could be brought within
the delineation of the relevant product market – if the cellophane is being supplied, only cellophane
is not the product – have to understand that to what extend the change in price of cellophane affect
other flexible packaging mterials – demand has to raise for the increase in the price of cellophane –
all these products would form part of the same relevant geographic market.

Relevant Market-Competition Act, 2002

Section 2(r): “relevant market” means the market which may be determined by the Commission with
reference to the relevant product market or the relevant geographic market or with reference to both
the markets

Section 2(s): "relevant geographic market" means a market comprising the area in which the
conditions of competition for supply of goods or provision of services or demand of goods or
services are distinctly homogenous and can be distinguished from the conditions prevailing in the
neighbouring areas

The geographic bounds of the market are usually determined by an examination of the sources and
locations to which the various customers of the firm under scrutiny may readily turn for supply of
the relevant product. In addition to the geographic factor, the term relevant market contemplates the
identification of the product or service line of commerce in terms of which market power will be
examined.

Article 19(6): The Commission shall, while determining the "relevant geographic market", have due
regard to all or any of the following factors, namely:—

(a) regulatory trade barriers;

(b) local specification requirements;

(c) national procurement policies;

(d) adequate distribution facilities;

(e) transport costs;

(f) language;

(g) consumer preferences;

(h) need for secure or regular supplies or rapid aftersales services.

Section 2(t): "relevant product market" means a market comprising all those products or services
which are regarded as interchangeable or substitutable by the consumer, by reason of characteristics
of the products or services, their prices and intended use.

Defining the relevant product market strictly along the lines of the accused firm’s product line is not
fair if that product is completely interchangeable in the marketplace with certain other types of
products.

US vs. E.I. Du Pont de Nemours & Co. (1956, US) (Cellophane case). This case relates to the
determination as to which commodities are “reasonably interchangeable” by users for the same
purpose.

The Supreme Court held that cellophane and other flexible packaging materials were in the same
relevant product market because there was a high degree of cross-elasticity of demand measures the
extent to which consumers will switch from one product to another in the event of a price or quality
change in the first product. [Refer above to the full case + SSNIP]
Section 19(7) of the Competition Act, 2002: The Commission shall, while determining the "relevant
product market", have due regard to all or any of the following factors, namely: —

(a) physical characteristics or end-use of goods;

(b) price of goods or service;

(c) consumer preferences;

(d) exclusion of in-house production;

(e) existence of specialised producers;

(f) classification of industrial products

Dominant Position – Competition Act 2002

Refer to Section 4

Dominant Position:
● Dominant position is a position of economic strength held in a relevant market.
● Analysis of Section 4: Dominant position allows entities to operate independently of competitive
forces in the market.
● Affects its competitors or consumers or the relevant market
● The holding of dominant position in and of itself is not prohibited under the act. This is
different from the MRTP Act where holding 1/4th of the market share was by itself frowned
upon - government could interfere. Under the Competition Act, there must be abuse of this
dominant position.

Please refer to Page 74 of PDF- Section 19(4): The Commission shall, while inquiring whether an
enterprise enjoys a dominant position or not under section 4, have due regard to all or any of the
following factors, namely:—
(a) market share of the enterprise;
(b) size and resources of the enterprise;
(c) size and importance of the competitors;
(d) economic power of the enterprise including commercial advantages over competitors
(e) vertical integration of the enterprises or sale or service network of such enterprises;
(f) dependence of consumers on the enterprise;
(g) monopoly or dominant position whether acquired as a result of any statute or by virtue of being
a Government company or a public sector undertaking or otherwise;
(h) entry barriers including barriers such as regulatory barriers, financial risk, high capital cost of
entry, marketing entry barriers, technical entry barriers, economies of scale, high cost of substitutable
goods or service for consumers
(i) countervailing buying power;
(j) market structure and size of market;
(k) social obligations and social costs;
(l) relative advantage, by way of the contribution to the economic development, by the enterprise
enjoying a dominant position having or likely to have an appreciable adverse effect on competition;
(m) any other factor which the Commission may consider relevant for the inquiry.

Abuse of Dominant Position

Read Section 4(2)

Section 4(2) is the relevant provision in this regard. Abuses as specified in the Competition Act fall
into two broad categories: exploitative (excessive or discriminatory pricing, including predatory
pricing) and exclusionary (for example, denial of market access).

There are 5 types of abusive practices by a dominant firm have been prohibited by virtue of Section
4(1) – Section 4(2) merely mentions those 5 types of abusive practices:

1. Direct or indirect imposition of unfair or discriminatory purchase or selling conditions or

purchase or selling price (including predatory pricing) – this may be a vertical purchase
condition, or an unfair selling condition – or a tying in condition which is also a vertical
condition – an exception has been provided here that is to meet the conditions of
competition – eg – holding 30% market share – no clarity on dominance – going predatory
– if another firm reduces selling price, it cannot be termed to be an abuse because it is doing
so only to meet the conditions of competition. Meeting competiton has not been defined
and cases have not explained this aspect as well. It is a very subjective threshold but still is a
relevant exception only for Section 4(2)(a).

2. Limits or restricts the production of goods and services or limites the supply or limites
technical and scientific development of goods and services to the prejudice of consumers.

3. Indulges in the practice resulting in denial of market access – car companies case (kataria)

4. Tying in arrangement

5. Leveraging – using dominant position in one market to enter into or protect another relevant
market – Katartia Automobiles case also shows an example of this – you want to protect
service market or enter into repair market along with the automobile market – using financial
 clout in one market to enter or protect another relevant market which is a relatively weaker
market for you and you are creating demant in this manner – like AT&T case

Cases for Abuse of Dominant position-

Tetra Pak International SA v. Commission (1996, ECJ)

F- It was regarding manufacturing of packaging material which is used for various food and other
products, and also engaged in manufacturing of packaging machines. Tetra Pak was found to supply
packaging cartons to customers across the EC states with different prices. With a view to implement
this differential pricing, it also imposed certain resale restrictions on its customers cross the EC.
Therefore, the differential or price differences implemented via the resale restrictions was found by
the ECJ appeals court to be abusive in the market for packaging materials. Therefore tetrapack was
considered to be in violation of art. 82(a) and (c) of the EC treaty. The abusive behaviour resulted in
partitioning of the EC market into national markets. Therefore it is violation of art. 82

Court condemed as abusive the conduct of dominant manufacturer of packaging cartons, finding that the company’s
resale restrictions on customers and price differences set along national lines were an unlawful attempt to divide the EC
market on national lines

Brooke Group Ltd. vs. Brown & Williamson Tobacco Corporation (1993, US) refer above

Akzo Chemie v. Commission (1991, ECJ)

● Established a clear cost benchmark for predatory pricing

Facts: Small player called ECS was a producer of organic peroxides to the flour industry to treat as
an additive to flour. In the course of time ECS planned to expand its business - thought of
extending supply to plastic industry. There was a major producer of these chemicals called Akzo
Chemie wanted to eliminate competitors. As per the allegation of ECS and as per the investigation
conducted by EC, it was found that Akzo Chemie started supplying organic peroxide to the regular
customers of ECS at below cost prices with a view to eliminate ECS as a competitor from the
market.

Held: Abusive of Article 82(a). ECJ upheld the decision of the Commission.

But ECJ while holding Akzo was abusive laid down a two tier standard:

1. If the dominant firms selling prices are below average variable cost so that is a clear case of
predatory pricing

2. If the dominant firms selling prices are above AVC but below ATC, then that may be
predatory pricing provided the intention of the dominant firm is proved i.e. To eliminate
competition.
Comparison with Brooke Group case:

IN BG case, while holding on Predatory pricing, it did not define what predatory pricing is - SC did
not set a cost benchmark.

In US, recoupment is an essential element to prove predatory pricing. In EU Law, it is not - only the
injury part is relevant.

Under US - realistically predatory pricing is not possible without recoupment - in the post predatory
stage, it cannot recoup - because if a player is eliminated then another player will enter or the same
player will renter due to which the dominant player will again reduce prices - so it won't be able to
recoup - if it can't recoup then no one would engage in predatory pricing.

But EU believed that injury should be the main focus - competitors have suffered massive losses.

The following are the types of abuses:

Predatory Pricing
- The “predatory price” under the Act means “the sale of goods or provision of services, at a
price which is below the cost, as may be determined by regulations, of production of goods or
provision of services, with a view to reduce competition or eliminate the competitors.”
[Explanation (b) of Section 4]
- Stated in simple terms, Predatory Pricing (PP) under section 4 refers to a practice of driving
rivals out of business by selling at a price below the cost of production.
- PP is a commercial strategy by which a dominant firm first lowers its price to a level which will
ultimately force its rivals out of the market. When the latter have been successfully expelled, the
company can raise the prices again and reap the rewards.
The major elements involved in the determination of predatory behaviour are:
i. Establishment of dominant position of the enterprise in the relevant market.
ii. Pricing below cost for the relevant product in the relevant market by the dominant
enterprise [‘Cost’, for this purpose, has been defined in the Competition Commission of
India (Determination of Cost of Production) Regulations, 2009 as notified by the
Commission.]
iii. Intention to reduce competition or eliminate competitors. This is traditionally known as the
predatory intent test.
How to understand ‘below cost’
Regulation 2(1)(c)(i): “Cost” as used in Regulation 3 and its derivation may have reference to : “total
cost” means the actual cost of production including items, such as cost of material consumed, direct
wages and salaries, direct expenses, work overheads, quality control cost, research and development
cost, packaging cost, finance and administrative overheads attributable to the product during the
referred period ;
Regulation 2(1)(c)(ii): “total variable cost” means the total cost referred to in clause (i) minus the
fixed cost and share of fixed overheads, if any, during the referred period
Regulation 3: Determination of cost— (1) “Cost” in the Explanation to section 4 of the Act shall,
generally, be taken as average variable cost, as a proxy for marginal cost: Provided that in specific
cases, for reasons to be recorded in writing, the Commission may, depending on the nature of the
industry, market and technology used, consider any other relevant cost concept such as avoidable
cost, long run average incremental cost, market value.
Case laws for predatory pricing (also relevant for ‘relevant market’ bit)
MCX Stock Exchange Ltd. v. National Stock Exchange & Ors. (CCI, 2011; COMPAT, 2014)
It talks about the entry of MCX S Ex into the currency derivates segment. As far as facts are
considered, MCXSX entered into the CD segment in the middle of 2008. At that time, the only
player was NSE – it was dealing in all segments, equity, debt, futures and options – as a first entrant
to the CD segment, it faced a lot of difficulties from the so called business practices of NSE – as per
the allegations of MCXSX, as soon as MCX entered, NSE started waiving the transaction fee for its
customers with a view to retaining the customers (brokers and others) and it also started waiving the
admission fee and deposit level – waiver of data feed fee and not accepted going for integrated
market watch – these fee waivers are the revenues that a player can get in the stock market
As a result, MCX could not gain as many customers in the CD segment – the waiver of all these fees
amounted to predatory pricing – finding a prima facie case, it ordered DG to investigate. On
perusing the DG’s report, the CCI arrived at the decision that there was abuse of dominance by
NSE. They were found to violating 4(2)(a)(ii) in particular and thereby leveraging under 4(2)(e)
(whatever losses it could incur in the CD segment, it could set them off from profits that it could
gain from other segments) – informant also raised leveraging allegation – CCI found a violation of
Section 4 as a whole by NSE – it imposed a penalty of around 55 crores. The reasoning of the CCI:
1. It concluded that all these fee waivers did amount to an abusive practice on part of the NSE
against a nerw entrant because the revenue or the income which the stock exchange used to
derive in other segments enabled NSE to set off the losses in the CD segment
2. CCI did not hold NSE guilty of predatory pricing – the violation of the same provision was
found but not for predatory pricing as alleged – both CCI and DG could not find an
appropriate cost benchmarks (set by 2009 regulations as average variable cost) this was
because there is no Avg. Variable Cost as such – these entities operate in a network industry
– there is no input/raw material cost as such and therefore, AVC was not a suitable cost
benchmark – therefore could not arrive at predatory priving violation
3. CCI, used the same provision and held that waiving the fee amounted to zero pricing –both
DG and CCI found this – this is not used in the Act – violation of Section 4(2)(a)(ii) in
 terms of unfair pricing, which is a term used in the provision – not exactly predatory
behaviour but unfair pricing.
While CCI found relevant market for NSE, CD segment was held as relevant market across the
country – COMPAT, while modifying held that relevant market would be all the segments –
otherwise, it upheld the order of CCI. The SC has, however stayed the order and there has been no
decision yet.
H.L.S. Asia Limited, New Delhi vs Schlumberger Asia Services Ltd. Gurgaon (CCI, 2013):
There was a tender floated by ONGC, inviting bids from eligible entities for supplying the
perforation pipes – ONGS is an oil exploration company – Schlumberger Ltd. Is a French company
and has offices in many countries – Schlumberger Asia is a subsidiary – it specializes on offering
perforation services – they are supporting companies – HLS Asia couldn’t get it – in the info filed
before CCI, there was predatory pricing being resorted to by Schlumberger Asia to get the contract
being awarded by predatory pricing like last year – as per the allegation, Schlumberger Asia quoted
40% lower than the estimated cost mentioned in the tender by ONGC – this was 50% lower than
the previous year’s quote – HLS alleged that this was a clear case of predatory pricing –
On what grounds CCI found Schlumberger not in violation of predatory pricing protections:
i. CCI liked its reasoning to the behaviour of the informant – A party will generally bid at a
price which is equal to minimum of its AVC to exploit economies of scale
ii. Its able to run its business without keeping its capacity idle –
iii. CCI set AVC as the cost benchmark in this case, as provided under 2009 regulations
iv. No prima facie case was made out – as far as behaviour was concerned, CCI said that the
informant lost the bid to an efficient competitor in the bidding process
“A party will bid at a price which is equal to the minimum of its average variable cost to exploit scale
economies. It will be not prudent for abiding firm to keep its capacity idle and bid at a price higher
than its minimum average variable cost. Hence, the aspect of predatory pricing has to be looked at
from an appropriate cost benchmark”. Therefore, the CCI held that, “no prima facie case was made
out in this case… Informant lost in a bidding process to an efficient competitor who had quoted a
price that was not only lower than the ONGC estimates but also lower than previous year's price
quote”.

Mr. Mohit Manglani vs M/s Flipkart India Private Limited & Ors. (CCI, 2014) -
https://www.mondaq.com/india/trade-regulation-practices/400076/cci39s-take-on-the-ind
ian-e-commerce-market-protect-competition-not-competitors
First E-commerce case – though CCI did not find any violation of Section 4(2)
Facts: The investigation was started as a result of information filed by Mr. Mohit Manglani (the
"Informant") against four major online retail players of the Indian e-commerce industry, namely,
Flipkart, Jasper Infotech, Xerion Retail, Amazon and Vector E-commerce (collectively, the
"Opposite Parties"). The Informant alleged that the Opposite Parties have been indulging in
anti-competitive practices in violation of the Competition Act, 2002 by means of exclusive supply
and distribution agreements with manufacturers/sellers of goods and services. The Informant also
stipulated that the Opposite Parties had executed exclusive agreements for sale of certain products
to the exclusion of other e-portals or physical channels. For instance, he cited writer Chetan Bhagat's
latest novel which was launched exclusively on Flipkart. This, according to the Informant, enables
the Opposite Parties to control the supply of the goods exclusively sold on their portals, thereby,
creating an impression of scarcity, which often leads to foreclosure of the market for the traders
operating in the physical market. The Informant also alleged that due to such exclusive
arrangements, the Opposite Parties had acquired a product specific monopoly, i.e., each of the
Opposite Parties had a 100% dominance in the market for those goods that were exclusively sold on
their portals. According to the Informant, this enabled them to manipulate prices and impose other
terms and conditions detrimental to the interest of the consumers.
Held: The CCI stated the relevant market could not be product specific as it includes all substitutes
of a product. Therefore, it could not be said that the Opposite Parties were 100% dominant in the
market for those products which were exclusively marketed by them. The CCI went on to state that
irrespective of whether the online retail market is considered to be a separate relevant product
market or a subset of the retail market, none of the Opposite Parties could be said to be individually
dominant, given the multitude of e-portals in the market offering similar facilities. Based on this
reasoning, the CCI refused to comment further on allegations of abuse of the alleged dominance of
the Opposite Parties.
The key findings of the CCI with regard to the effect that the e commerce parties have on
competition in the retail market can be summarized as follows:
(i) The relevant market for a product marketed through an e-portal is not product specific, but
includes all its substitutes which can exercise a restraint on the pricing of such product.
(ii) The exclusive marketing arrangements between e-portals and manufacturers/suppliers do not
create any entry barriers in the market, as the manufacturers/suppliers are free to sell their products
on their own websites as well as the physical market.
(iii) The availability of a large number of substitutable products, coupled with the multitude of
companies operating e-portal services in the market, is enough to prevent the dominance of any
single entity in this sector.
(iv) E-portals, in fact, improve price transparency, allowing consumers to make a more informed
decision, and thereby enhance competition.

Mr. Ashish Ahuja v. Snapdeal.com – pg 83 of PDF has extra facts and stuff

“Relevant product market in the present case is the market for portable small-sized consumer
storage devices that includes USB pen drives, SD Memory Cards and Micro SD Cards. Based on
factors such as intended use and price, both pen drives and memory cards (including both SD cards
and Micro SD cards) can be considered as substitutes”.

“Both offline and online markets differ in terms of discounts and shopping experience and buyers
weigh the options available in both markets and decides accordingly. If the price in the online market
increase significantly, then the consumer is likely to shift towards the offline market and vice versa.
Therefore, the Commission is of the view that these two markets are different channels of
distribution of the same product and are not two different relevant markets”

“The relevant geographic market would be India. Based on the above discussion, the relevant market
will be market for portable small-sized consumer storage devices such as USB pen drives, SD
Memory Cards and Micro SD Cards in India.”

“The Commission observes that the insistence by SanDisk that the storage devices sold through the
online portals should be bought from its authorised distributors by itself cannot be considered as
abusive as it is within its rights to protect the sanctity of its distribution channel. In a quality driven
market, brand image and goodwill are important concerns and it appears a prudent business policy
that sale of products emanating from unknown/ unverified/ unauthorised sources are not
encouraged/allowed.”

M/s Fast Track Call Cab Private Limited vs M/s ANI Technologies Pvt. Ltd. (CCI, 2015 and
2017)

Fast Track started operations in Hyderaad, Kolkata, etc. ANI operates Ola cabs across the country
radio taxi services. FT filed information. Ola started operations in B’luru with abusive behaviour –
went for pedatory behaviour – the fares were below its running cost = INR 6/km. Ola used to
incentivise its drivers with so much discounts and around INR 230/trip loss was suffered by Ola and
less charged from passenger. Moreover, it received funding from global VC funds. CCI directed DG
to submit order. CCI found that relevant market would be radio taxi service aggregators in the city
of B’luru. CCI concluded that the radio taxi market in big cities gets divided into 3 types – 1.
Asset-owned model (company owns the cab cars and drivers are hired); 2. Aggregator-based model
(Ola doesn’t own any car, they connect the driver to the passenger, but overall managed by co. itself);
3. Hybrid model (mixture of both). People who use such cabs would not switch to yellow black taxis
and would substantially depend on such radio taxis. Therefore, the relevant market was confined to
radio taxi services market and no other transport forms were included. CCI issued a S. 26(6) order –
closure of case on finding no violation on the part of opposite parties. But this order can be passed
only if there is a S. 26(2) order. From 2013 Sep till May 2014, Ola had a market share of 69% in
B’luru. Ola also had acquired the ‘Taxi 4 Sure’ and its market share was also included in the 69%.
When Uber entered in 2014, CCI found that July onwards, the market share of Ola was being
affected. This was also argued by Ola – because competitor had come and their share had fallen,
they cannot be in a dominant position. CCI found that it was not predatory pricing but aggressive
pricing. CCI – not dominant, cannot be joint dominance also because the Act doesn’t provide for it.
CCI held FT cannot bring a case under S. 27(b) because it is a penal provision but must be brought
under the charging section of s. 4. Held not dominant.

Meru Travel Solutions Private Limited (MTSPL) vs Uber India Systems Pvt. Ltd. and Ors (CCI,
December 2015)

1st case to be closed immediately within the year. Directly entered the S. 26(2) closure. Meru Cabs
moved a case agaisnt Ola. 2017 order was a clubbed order of case no. 6 and 24 of 2015. Meru said
Uber entered the Kolkata market in August 2014. In september 2014, Meru also entered the Kolkata
car market under the cab name Meru Flexi. The market was served by yellow taxis – which were
offering competitive prices to the passengers with a price of INR 20-22 per km. When Uber entered
the market, it started charging the passengers at a price of INR 15/km. After that Meru entered with
a base price of INR 20/km. Later brought down to INR 15/km. After this, Uber brought down to
INR 9/km. Meru did not find it feasible and possible to bring the base price to that leve. Uber US
was also able to manage because it was funded by VC of around USD 10bn. CCI found that Uber
was not dominant – Uber’s market share was much lesser in the relevant market. Relevant
geographic market = Kolkata. Relevant product market was radio taxi services market + yellow taxi
services because they were very competitive. Ola had also acquired around 1000 yellow taxis for
operations in the city. But when the relevant market was enlarged like this, the market share of Uber
was around 6%. Less than 10% even = found Uber cannot be dominant. Thus, no question of
abuse.

These 2 decisions were criticised by many people. CCI lifted its hands. Could have read the
beneficial interpretation.

Tying in Arrangement and Refusal to deal

Hilti AG v. Commission

Hilti AG is a German Company – was known for manufacture and supply of nail guns (used to drive
nails into wood or other materials) – also used to manufacture and supply cartridges and nails used
along with the nail guns – allegation was that Hilti AG was tying all the three products – ECJ upheld
the decision of the commission – found that all 3 were distinct products falling in three different
markets and thee were indeed tied in by Hilti AG – Hilti argued before ECJ that we were selling
these three together because all the three products, the cartridges and nails were part of the same
product, all three were a single power actuated system – ECJ did not agree with this contention- they
brough another argument that we were doing this because we want to protect consumers from
defective products – because cartridges and nails provided by other suppliers may be defective or of
low quality – being the part of a single power actuated system, we are selling them together –
commission rejected – it is not for you as a manufacturer to be bothered with this protection of
consumers – it is the responsibility of the authority to protect consumers.

Tetra Pak International SA v. Commission

Another count charge that was brought by the commission was that Tetra Pak resorted to tying in
arrangement – Tetra Pak was manufacturing the packaging cartons – Tetra pak also started
manufacturing machines which are used for the purpose of packaging, in which the cartons can be
used for packaging food products – ECJ, while agreeing with the commission held that both were
two distinct products (packaging machines and cartons) which fell into two different markets – so
many other manufacturers of machines and so many other manufacturers of cartons – it is not that
it is just your machines can use those cartons – Tetra Pak argued that we want to protect the health
of the consumers who actually consume the products packaged in the cartons using these machines
– other machines may not be so good in terms of packaging – this argument was rejected by the ECJ
– it is not for you to be bothered with the health concerns as a manufacturer of the product and it is
for the public authorities to be concerned with the protection of the health of the final users.

Limiting Production, Markets or Technical Development

Has the discretion to limit production, supply and technical development – there is a grey area –
breadth of the provision is very difficult to apply in practice – When does it becomes improper for a
firm to limit the production or supply or technical development in respect of a product? Particularly,
when the undertaking is a dominant one, it is a concern but being dominant by itself is not enough –
therefore, the test is not very clear. There is a similar concept – when an undertaking is granted an
exlusive right or privilege by the state itself to exercise or fulfil certain obligations – generally such an
undertaking is considered to be in a dominant position – when it does not discharge responsibilities
and does not exercise the right lawfully, then we can find an abuse on its behalf.

United States v. Microsoft (refer above)

Shri Sonam Sharma v. Apple Inc. (CCI, 2013) (Tying)

OP1 = Apple, OP3 =Vodafone, OP4 = Airtel.

Apple Inc. entered into an exclusive agreement with OP 3 and 4 whereby it was agreed that
Vodafone and Airtel would supply iphone in Indian market. Apple Inc. did not want to enter into
market with its own direct physical presence. Benefit to the OP3 and 4 was that they were allowed to
tweak their services into the handphone set, i.e. iPhone sets. The consumers who buy iphones would
not be able to use the network services from other providers. Jailbraking was also not successful –
absolutely restrictive condition. Alleged that violative of s. 4(2)(d). CCI held that the relevant market
to be handset market. Smartphone market only amounted to 0.1% of the handset market. Vodafone
and Airtel did not tweak their services. CCI concluded that tweaking was not made available in the
imported handsets. CCI also concluded that consumers by paying unlocking fee could use any othe
network. Held – no dominance and S. 4(2)(d) could not be made out.

Also, JIO case – moved by Vodafone and Airtel. CCI lifted the hands by noting that Jio had a 7%
market share – so no abuse.

British Leyland v. Commission & Port of Genova Case (1991, ECJ) pg 68

Refusal to deal – Commercial Solvents Case – Pg 64

Joint/Collective Dominance
Article 102 of TFEU (ex Article 82 of the EC Treaty): Any abuse by one or more undertakings of a
dominant position within the internal market or in a substantial part of it shall be prohibited as
incompatible with the internal market in so far as it may affect trade between Member States.

The words one or more undertakings is understood to provide for joint or collective dominance. No
difference as such.

Q: When conduct by two or more undertakings prohibited abusive conduct under Article 102 and
how this particular prohibition relates to Article 81?

It is not always clear. The Commission is free to bring proceedings under either of the provisions. It
is a settled principle.

• It is not clear when conduct by two or more undertaking constitutes prohibited abusive
conduct and how that is related immediately to Article 81 of EC Treaty. Generally, as per Hoffman
La Roche, the ECJ made it clear that when the conditions of both Article 81 and 82, it is for the
commission to bring proceedings under either of the provisions. Commission is free to bring. It is a
settled principle under EU Competition Law that the EC can bring proceedings under both the
provisions.

• What is not clear is that what conduct or relationship involving two or undertakings
manifests joint dominance for the purpose of applying Article 82/102. The problem may be there as
to what conduct or relationship of such dominant firms would be considered for dominance.

European Sugar Industry Case

Here were two sugar manufacturers. They were found by the Commission not individually dominant
undertakings. But they were found jointly dominant because they were found to have dealt with
third parties as a single entity, even though they were different undertakings legally. There was no
legal link as such. They were, in effect, operating together and were jointly found to be dominant.
The commission involked article 86 (the then equivalent provision of Article 82/102) to conclude
joint dominance.
Italian Flat Glass Case

Facts: Three Italian Flat Glass manufacturers accounting for 95% of the car glass market and 79% of
semi-automatic market.

Commission found that their exchanges of products were so extensive that it represented structural
links amongst them rather than mere concerted practices.

The Court of First Instance on appeal did not agree with Commission on Article 86. They viewed
that for a violation of Section 86, it is not suffice to recycle the facts which show a violation of
Article 85 (Court of First Appeal agreed with finding on Article 85). Specific facts which show
conduct which show dominance under Article 86 have to be shown.

In general entities must be linked in such a way that they adopt the same conduct on the market. In
a way, the third parties/customers must be misled.

--

Subsequently, EC started going beyond structural links and for the purposes of Article 102 - started
looking at other factors such as the similarity of cost structure of companies, high entry barriers
product homogeneity to show collective abusive conduct.

[There were 3 Italian flat glass manufacturers accounting for 95% of car glass (automotive) market
and 79% of the non-automotive market. Both the provision s were charged against them, Article
81/82 (then article 85/86) – as far as the allegation of Article 86, Commission applied it – it
reasoned that these flat glass manufacturers were so extensively exchanged so as to conclude of
structured links amongst them and not concerted practice – their product exchanges were very
extensive. Therefore, not only a violation of Article 85, the commission also found a violation of
Article 86. They were extensive so as to represent structural links. They are functionally a single
company. There was an appeal by these companies, the court of first instance did not agree with the
commission’s ruling so far as Article 86 is concerned. It reversed the decision of the commission.
The court of first instance viewed that while the provision might be applicable where they have
substantial economic links, but for the purpose of establishing an infringement of Article 86, it is not
sufficient to recycle the facts constituting an infringement. You cannot reshuffle the fact only to fit
to an infringement of Article 86. For example, only concerted practice behaviour is not sufficient to
find a violation of article 86. Therefore, reshuffling of facts to support Article 85 argument is not
sufficient. Their joint dominance was so much inter connected by economic links, in terms of
representing to third parties and customers, but it was not the case. The court also held that, in
general, the entities must be linked in such a way that they adopt the same conduct in the market.

• Similarity of Cost Structures (involves a similarity in production costs), product

homogeneity, mature production technology, high entry barriers (Depends largely on market shares
and the type of industry and the products that they produce) – EC, for the purpose of applying
Article 102, started relying not only on structural links but on these factors – all these factors
contribute to joint dominance – Vishesh].

Compagnie Mritime Belge Transports and Others v. Commission

It relates to the behaviour of a group of shipping companies related by an agreement. These

companies transport cargoes between Africa and certain parts of Europe. A few shipping
companies, through a liner conference system (an agreement that the shipping companies of
different lines would enter into for the purpose of categorizing or bifurcating their routes of
transportation between different countries and regions) agreement. The behaviour of these countries
was involved. A violation of Article 82 was brought through joint dominance.

The ECJ held that a dominant position may be held by two or more economic entities legally
independent of each other provided that from an economic point of view they present themselves
or act together on a particular market as a collective entity.

[The concept of joint dominance is absent from India. An effort was made by bringing an
amendment proposal but it was not passed in Parliament and it could not become law. Joint
dominance has not become a reality so far in India.]
 MODULE V – COMBINATIONS
[refer to slides as well]
Mergers are a legitimate means by which firms can grow and are generally as much part of the
natural process of industrial evolution and restructuring as new entry, growth and exit.

It may be said that a merger leads to a “bad” outcome only if it creates a dominant enterprise that
subsequently abuses its dominance.

The general principle, in keeping the overall goal, is that mergers should be challenged only if they
reduce or harm competition and adversely affect welfare.

Mergers can be: (1) Horizontal; (2) Vertical, and (3) Conglomerate

Called ‘concentration’ in EU law. Mergers may be:

a) Horizontal: considered to have major anti-competitive effects generally – takes place

between direct competitors, because substantial reduction of competition.

b) Vertical: at least one of the parties is engaged in producing of the product. Done between
parties at different levels vertically up or down – to create synergy. Focus on the
administrative set up and beneficial that would result in. May not as such be anti-competitive.

c) Conglomerate: between parties in unrelated business segments. Considered to have lesser

anti-competitive effect on the markets. Lesser than vertical. But in GE trying to acquire
Honibal Int’l was not approved.

Eg - Walmart (offline market) acquired Flipkart (e-tailer) – vertical combination – approved by CCI.
Amazon wanted to acquire Flipkart – but it was not approved by CCI – because both horizontal
parties. That’s why abandoned the idea.

6 substantive provisions: 5, 6, 20, 29-31: came into force on 1 June, 2011 and 2 penalty provisions –
brought into force on May 30 by another notification.

Section 5
Section 5: The acquisition of one or more enterprises by one or more persons or merger or
amalgamation of enterprises shall be a combination of such enterprises and persons or enterprises,
if—

(a) any acquisition where—

(i) the parties to the acquisition, being the acquirer and the enterprise, whose control, shares, voting
rights or assets have been acquired or are being acquired jointly have,—

(A) either, in India, the assets of the value of more than rupees one thousand crores or
turnover more than rupees three thousand crores; or

(B) in India or outside India, in aggregate, the assets of the value of more than five hundred
million US dollars, including at least rupees five hundred crores in India, or turnover more
than fifteen hundred million US dollars, including at least rupees fifteen hundred crores in
India; or

(ii) the group, to which the enterprise whose control, shares, assets or voting rights have been
acquired or are being acquired, would belong after the acquisition, jointly have or would jointly
have,—

(A) either in India, the assets of the value of more than rupees four thousand crores or
turnover more than rupees twelve thousand crores; or

(B) in India or outside India, in aggregate, the assets of the value of more than two billion
US dollars, including at least rupees five hundred crores in India, or turnover more than six
billion US dollars, including at least rupees fifteen hundred crores in India; or

(b) acquiring of control by a person over an enterprise when such person has already direct or
indirect control over another enterprise engaged in production, distribution or trading of a similar or
identical or substitutable goods or provision of a similar or identical or substitutable service, if—

(i) the enterprise over which control has been acquired along with the enterprise over which the
acquirer already has direct or indirect control jointly have,—

(A) either in India, the assets of the value of more than rupees one thousand crores or
turnover more than rupees three thousand crores; or

(B) in India or outside India, in aggregate, the assets of the value of more than five hundred
million US dollars, including at least rupees five hundred crores in India, or turnover more
than fifteen hundred million US dollars, including at least rupees fifteen hundred crores in
India; or

(ii) the group, to which enterprise whose control has been acquired, or is being acquired, would
belong after the acquisition, jointly have or would jointly have,—

(A) either in India, the assets of the value of more than rupees four thousand crores or
turnover more than rupees twelve thousand crores; or
 (B) in India or outside India, in aggregate, the assets of the value of more than two billion
US dollars, including at least rupees five hundred crores in India, or turnover more than six
billion US dollars, including at least rupees fifteen hundred crores in India; or

(c) any merger or amalgamation in which—

(i) the enterprise remaining after merger or the enterprise created as a result of the amalgamation, as
the case may be, have,—

(A) either in India, the assets of the value of more than rupees one thousand crores or
turnover more than rupees three thousand crores; or

(B) in India or outside India, in aggregate, the assets of the value of more than five hundred
million US dollars, including at least rupees five hundred crores in India, or turnover more
than fifteen hundred million US dollars, including at least rupees fifteen hundred crores in
India; or

(ii) the group, to which the enterprise remaining after the merger or the enterprise created as a result
of the amalgamation, would belong after the merger or the amalgamation, as the case may be, have
or would have,—

(A) either in India, the assets of the value of more than rupees four-thousand crores or
turnover more than rupees twelve thousand crores; or

(B) in India or outside India, in aggregate, the assets of the value of more than two billion
US dollars, including at least rupees five hundred crores in India, or turnover more than six
billion US dollars, including at least rupees fifteen hundred crores in India;
Explanation.— For the purposes of this section,—

(a) "control" includes controlling the affairs or management by—

(i) one or more enterprises, either jointly or singly, over another enterprise or group;

(ii) one or more groups, either jointly or singly, over another group or enterprise;

(b) "group" means two or more enterprises which, directly or indirectly, are in a position to —

(i) exercise twenty-six per cent or more of the voting rights in the other enterprise; or

(ii) appoint more than fifty per cent of the members of the board of directors in the other enterprise;
or

(iii) control the management or affairs of the other enterprise;

Section 5: Any transaction of merger or acquisition must be a combination = has to fall w/in s. 5 =
must trigger threshold limits set u/s. 5. S. 5(a)(i) tells us what sort of acquisition shall be a
combination. The entities must jointly trigger either of the threshold limit. 2 threshold limits: 1.
Asset value; 2. Turnover.
The combination may be domestic or foreign. Higher threshold for foreign with a requirement of
India leg (a part of the assets or turnover within India) which also gets enhanced becuas of the
below notification. Irrespective of the parties having or satisfying the threshold abroad, the
mandatory domestic or India leg must be fulfilled or satisfied for section 5 to be triggered.

By virtue of s. 20(3): The value of assets or value of turnover may either be enhanced or reduced by
the Govt. by notifying it on the basis of wholesale price index u/s. 5 after every 2 years. This
threshold limit was enhanced by 50% - this went up to 5 years. After this, in 2016 – the threshold
limit was enhanced by 100% of the original value. Now the section will read: assets value more than
INR 2,000 cr, and turnover more than INR 6,000 cr. This is the current threshold. The current
group threshold is: asset value not more than INR 8,000 cr and turnover more than INR 24,000 cr.

Same threshold limits for acquisition of control u/s. 5(b) – the only difference is that it relates to
horizontal control. (c) gives same threshold limits for M&As. If the parties jointly trigger the
threshold limits, then such transaction becomes a combination u/s. 5 of the Act. Same threshold
limits for group of enterprises wrt similar entries of (a), (b) and (c).

Explanation to s. 5 provides for meaning of ‘group’: where 2 or more enterprises are directly or
indirectly are able to exercise 26% or more of the voting rights in the target; or appoint more than
50% of the members of the BOD of the target; or control the management or affairs of the target.

The CG has the power u/s. 54(a) to exempt any particular provision from application on any class
of enterprises in public interest or in interest of security of state. By this power, the CG exempted
the group of co.’s which exercise less than 50% of voting rights in the target from s. 5 for 5 years in
public interest in 2011. In 2016, the exemption was extended to 2021.

In case of acquisition – the acquirer has to notify the CCI. In case of M&A, all the parties have to
notify the CCI u/s. 6. S. 6 – control over combinations. S. 6(1): provides that any combination
having or likely to have AAAE on relevant market in India is void. It has overriding effect over other
laws. Once CCI holds a transaction to be void, then other authorities and regulators cannot give
effect to it.

S. 6(2): mandates the parties to file a pre-merger filing before the CCI w/in 30 days. The word ‘may’
was used before the amendment in 2007, after which it was changed to ‘shall’. Reg. 5(8) of CCI
Combination Regs provides for the meaning ‘other document’. Important to know from which date
the period of 30 days will start.

S. 43A – Penalty on gun-jumping: on failure to notify the CCI w/in 30 days u/s. 6(2). Penalty shall
be up to 1% of combined turnover or the assets, whichever is higher. CCI either did not start the
penalty proceedings or if started, did not impse the penalty.

Tetra Level BV v. Alpha Level BV (2012)

TL having Swedish origin – wanted to acquire certain amount of shares in AL. TL did not notify
CCI w/in 30 days – filed a belated notice (filed late) – after consummation of the transaction in
Europe. CCI took serious note of the delay and post consummation, but did not initiate penalty
proceedings because it was the first year of the combination provisions coming into force – adopted
a lenient approach.

Amalgamation of Seimens Power & Engg Ltd. into Seimens Ltd. (1 week after the previous case,
2012)

CCI instituted penalty proceeding but did not impose penalty. Similar issue – merger b/w 1 co. and
Seimens Ltd. – because of the same reason did not impse penalty.

Case: In 2013, the 3rd year of implementation of combination provisions, Uttam Steel & Power Ltd
to be merged w/ Uttam Galva Steels Ltd. CCI initiated the penalty proceedings but did not
impose penalty – on ground that the delay was by a week and such delay was inadvertent.

Baxalta (2016)

Acquisition of a subsidiary by the parent. CCI – appropriate to impose penalty when the delay was
huge, i.e. more than 70 days. CCI imposed a nominal penalty in cases of consummation. [Sir – S.
43A doesn’t give discretion to the CCI to not impose penalty, only the amount is discretionary.]

Johnson & Johnson, Google Inc. and Anr.

For a foreign JV, filed notice after delay of 43 days. But still imposed nominal penalty.

Trigger Event Exemption:

Trigger event – date on which the BOD decide to merge of both parties (merger) or date on
document in case of acquisition. MCA issued a notification exempting the parties to giving notice
u/s. 6(2) w/in a period of 30 days for a period of 5 years from June 29, 2017, subject to s. 6(2A) and
s. 43A.

S. 6(2A) – makes Indian merger control regime a suspensory jurisdiction. The transaction would
automatically get suspended till the max. period of 210 days from the date of merger filing u/s. 6(2)
or CCI has passed order u/s. 31 of the Act. Done to create checks and balances – both the parties
cannot take to their advantage too much flexibility, and does not allow CCI to prolong the decision
on the transaction. If they do consummate the transaction, then penalty will be imposed u/s. 43A.

The notification means that s. 6(2) still prevails and continues – the reqt of filing cannot be taken
away by executive. The trigger event of 30 day period was exempted or relaxed. The parties still have
to file the filing but may be filed after 30 days from the trigger event also but before the date of
consummation. The parties cannot indulge in gun jumping, neither can go for part consummation
(in an entirely foreign to foreign transaction – the parties will have to file multi-jurisdictional filing –
cannot consummate transaction substantially in US but not in India – CCI: will defeat the very
purpose of the provisions). After this, the headache of determining the date from which the 30 days
starts is gone now. So now CCI cannot impose penalty or initiate penalty proceedings in cases of
belated filing.

Baxalta of Bioscience(2016)

Pursuant to a global separation and distribution agreement (GSDA). Parent Baxter transferred the
business to Baxalta, subsidiary of the parent – already consummated. India separation took place
later on. If the transaction is consummated globally even before giving notice in India, then it
defeats the very purpose of suspensory jurisdiction of the merger control regime in India.

Sch II of the Combination regs provides for the form I-III of filing u/s. 6(2). [See Regulation 5 also]

Section 20(3) of the Competition Act, 2002: “Notwithstanding anything contained in section 5, the
Central Government shall, on the expiry of a period of two years from the date of commencement
of this Act and thereafter every two years, in consultation with the Commission, by notification,
enhance or reduce, on the basis of the wholesale price index or fluctuations in exchange rate of
rupee or foreign currencies, the value of assets or the value of turnover, for the purposes of that
section.”

Section 54 of the Competition Act, 2002: “The Central Government may, by notification, exempt
from the application of this Act, or any provision thereof, and for such period as it may specify in
such notification—

(a) any class of enterprises if such exemption is necessary in the interest of security of the State or
public interest; … ”.

Regulation of combinations
Section 6(1): No person or enterprise shall enter into a combination which causes or is likely to
cause an appreciable adverse effect on competition within the relevant market in India and such a
combination shall be void.

Section 6(2) Subject to the provisions contained in sub-section (1), any person or enterprise, who or
which proposes to enter into a combination, shall give notice to the Commission, in the form as may
be specified, and the fee which may be determined, by regulations, disclosing the details of the
proposed combination, within thirty days of—

(a) approval of the proposal relating to merger or amalgamation, referred to in clause (c) of section
5, by the board of directors of the enterprises concerned with such merger or amalgamation, as the
case may be;
(b) execution of any agreement or other document for acquisition referred to in clause (a) of section
5 or acquiring of control referred to in clause (b) of that section.

Section 6(2A) No combination shall come into effect until two hundred and ten days have passed
from the day on which the notice has been given to the Commission under sub-section(2) or the
Commission has passed orders under section 31, whichever is earlier.

(3) The Commission shall, after receipt of notice under sub-section (2), deal with such notice in
accordance with the provisions contained in sections 29, 30 and 31.

(4) The provisions of this section shall not apply to share subscription or financing facility or any
acquisition, by a public financial institution, foreign institutional investor, bank or venture capital
fund, pursuant to any covenant of a loan agreement or investment agreement.

(5) The public financial institution, foreign institutional investor, bank or venture capital fund,
referred to in sub-section (4), shall, within seven days from the date of the acquisition, file, in the
form as may be specified by regulations, with the Commission the details of the acquisition including
the details of control, the circumstances for exercise of such control and the consequences of default
arising out of such loan agreement or investment agreement, as the case may be.

The CCI Combinations Regulations, 2011

Regulations 4: Categories of transactions not likely to have appreciable adverse effect on
competition in India

“In view of the duty cast upon the Commission under section 18 and powers conferred under
section 36 of the Act, and having regard to the mandate given to the Commission to, inter- alia,
regulate combinations which have caused or are likely to cause appreciable adverse effect on
competition in terms of sub-section (1) of section 6 of the Act, it is clarified that since the categories
of combinations mentioned in Schedule I are ordinarily not likely to cause an appreciable adverse
effect on competition in India, notice under sub-section(2) of section 6 of the Act need not
normally be filed.”

Section 29 of the Competition Act, 2002: Procedure for investigation of combination

Section 30 of the Competition Act, 2002: Procedure in case of notice under sub-section (2) of
section 6

Section 31 of the Competition Act, 2002: Orders of Commission on certain combinations Section
43A of the Competition Act, 2002: “If any person or enterprise who fails to give notice to the
Commission under sub- section(2) of section 6, the Commission shall impose on such person or
enterprise a penalty which may extend to one per cent, of the total turnover or the assets, whichever
is higher, of such a combination.”

Relevant Factors under Section 20(4)

20. Inquiry into combination by Commission

For the purposes of determining whether a combination would have the effect of or is likely to have
an appreciable adverse effect on competition in the relevant market, the Commission shall have due
regard to all or any of the following factors, namely:—

(a) actual and potential level of competition through imports in the market;

(b) extent of barriers to entry into the market;

(c) level of combination in the market;

(d) degree of countervailing power in the market;

(e) likelihood that the combination would result in the parties to the combination being able to
significantly and sustainably increase prices or profit margins;

(f) extent of effective competition likely to sustain in a market;

(g) extent to which substitutes are available or are likely to be available in the market;

(h) market share, in the relevant market, of the persons or enterprise in a combination, individually
and as a combination;

(i) likelihood that the combination would result in the removal of a vigorous and effective
competitor or competitors in the market;

(j) nature and extent of vertical integration in the market;

(k) possibility of a failing business;

(l) nature and extent of innovation;

(m) relative advantage, by way of the contribution to the economic development, by any
combination having or likely to have appreciable adverse effect on competition;

(n) whether the benefits of the combination outweigh the adverse impact of the combination, if any.

Bunch of cases in the slides

Titan International Inc./Titan Europe Plc [(C2013/02/109) (2 April 2013)]

Combination was executed outside India, also resulted in an indirect acquisition of an India-based
subsidiary of one of the parties. It was submitted that as the merger regime of the CCI was still in a
nascent stage, a lenient approach should be taken by CCI against the parties. CCI acknowledged lack
of awareness of Indian competition law at that time and imposed a lesser penalty on the parties
jumping the gun.

Exide/ING Life [(C-2013/01/108) (19 February 2013)]

Exide wanted acquire remaining 50%equity share of ING Vyasa Life Insurance Company from the
exiting shareholders ING Insurance International B.V., Netherlands and the Indian Shareholders.
CCI noted that the acquisition of sole control over ING by Exide was not likely to cause any
competition concerns in India.

Glenmark Generics Limited, Glenmark Access Limited and Glenmark Pharmaceuticals Limited
(CCI 2014)

On March 5, 2014, CCI cleared the proposed amalgamation of Glenmark Access Limited
(‘GAL’) and Glenmark Generics Limited (‘GGL’) with Glenmark Pharmaceuticals Ltd. (‘GPL’). The
notice was filed pursuant to the scheme of amalgamation dated January 31, 2014 approved by
GAL, GGL and GGL.

CCI took note of the fact that 99.93% of the share capital of GGL was held by GPL
(including 1.19% being held by GAL) and observed that the transaction was in the nature of a
merger or amalgamation of enterprises within the same group.

Intra-group transactions, which do not result in change control, are normally exempt from the
notification requirement to CCI in terms of Regulation 4 read with Schedule I, item 9 of
CCI Combination Regulation. Accordingly, CCI approved the transaction.

PVR/DLF ((DT Cinemas) [(C-2015/07/288 PVR) (4 May 2016)]

https://www.competitionlawyer.in/pvr-dt-cinemas-merger/

Sun/Ranbaxy [(C-2014/05/170) (5 December 2014)]

Holcim/Lafarge [(C-2014/07/190) (30 March 2015)]

Abbott Laboratories [(C-2016/08/418) (13 December 2016)]