Fixing Market Wrongs: Remedies in Competition Law

Competition law helps keep markets fair and open by stopping monopolies, price-fixing, and other unfair business practices. In India, the Competition Commission of India (CCI) is responsible for enforcing these rules. It looks into cases of Antitrust Violations, which primarily fall under two categories: Anti-competitive Agreements (such as cartels and price-fixing) and the Abuse of Dominant Position (where a firm uses its market power unfairly). The CCI also reviews mergers between companies to ensure they do not harm competition.

Remedies are steps or actions taken to fix or reduce the negative effects of anti-competitive behaviour. These remedies help bring back healthy competition in the market. They are often used during merger reviews or investigations into companies that break competition rules.

In short, remedies are like “market medicine” — they correct problems that could hurt fair competition and protect consumers’ interests.

What Are Remedies?

Remedies are actions or conditions set by competition authorities—or sometimes agreed to by the companies themselves—to fix problems that could harm competition.

They are mainly used in two situations:

• Merger Control: To stop a merger from reducing competition in the market, remedies may change or add conditions to the deal.
• Antitrust Violations: To fix harm caused when a company acts unfairly or abuses its market power.

The main goals of remedies are to:

• Bring back fair competition
• Remove any threats to competition
• Protect consumers’ interests

Usually, remedies are decided after discussions between the companies and the competition authority. They must be fair (proportionate), effective, and easy to enforce.

Types of Remedies:

1. Structural Remedies – Emphasizing “Carve-Outs”:

Structural remedies directly change the structure of the market to remove or reduce unfair competition. They are usually one-time actions that permanently fix the issue.

The most common example is divestiture, which means selling part of a business or certain assets. To make sure the new owner can actually compete effectively, competition authorities often mandate a “carve-out.”

A carve-out requires the merging parties to sell a self-contained, viable business unit rather than just a collection of scattered assets. This unit must include all the necessary elements—like production facilities, intellectual property, key personnel, supply contracts, and customer lists—to operate immediately as a genuine, independent competitor.

Examples of Structural Remedies:

• Selling a division or a specific product line (divestiture).
• Leaving a joint venture where competitive decisions were shared.
• Changing who owns or controls a company.

Advantages:

• Usually very effective, as they permanently alter the market structure.
• Simple for authorities to monitor and enforce, often requiring only a single compliance check.

Disadvantages:

• Hard to find the right buyer for the divested business.
• If the divestiture is not a complete “carve-out,” the new owners may lack the resources to compete successfully, leading to the creation of a weak competitor (a “failing firm” risk), which fails to restore full competition.

When considering the disadvantages of Structural Remedies, particularly divestiture, the primary risk is that the mandated sale may result in the creation of a weak competitor or, in extreme cases, a failing firm. This happens when the divested assets are not a truly self-contained, viable business unit (a successful “carve-out”), meaning the new owner lacks the necessary resources, intellectual property, or market access to effectively challenge the remaining entity.

Consequently, the remedy fails to restore competition to the market, as the weak competitor cannot exert sufficient competitive pressure, thereby undermining the core goal of the competition authority.

Illustrative Cases on Remedies in Competition Law:

Holcim v. Lafarge: To address concerns of reduced competition, the merging parties divested several cement plants, ensuring market rivalry remained intact.

Sun Pharma v. Ranbaxy: The acquirer sold overlapping pharmaceutical products to preserve competitive dynamics and prevent dominance in key therapeutic segments.

Agrium v. Potash: Agrium divested its stake in a rival firm to mitigate risks of coordinated conduct and maintain fair market power distribution.

2. Behavioral Remedies:

Behavioral remedies regulate the conduct of firms post-transaction or post-violation. They can be:

• Positive: Require specific actions (e.g., supply commitments)
• Negative: Prohibit certain behaviors (e.g., price caps)

Examples:

• Amending governance provisions
• Ensuring non-discriminatory access to infrastructure
• Pricing commitments
• Ring-fencing strategic information

Case Examples:

• PVR/DT: Initially rejected due to concerns over the complexity and monitoring challenges of the proposed behavioural commitments.
• Schneider Electric: Behavioral remedies were accepted as a pragmatic alternative given the significant difficulty in structuring a divestiture (structural remedy).
• Hyundai/Kia: Commitment to ensure algorithm neutrality for ride-sharing drivers (e.g., Ola) to prevent discriminatory practices.
• Dish TV/Videocon: Required cost-bearing commitments related to technological realignment to ensure smooth market transition and continued service.

Pros:

• Flexible and customizable
• Suitable for nuanced competition issues

Cons:

• Complex to design and monitor
• Enforcement challenges due to ongoing oversight

3. Hybrid Remedies:

Hybrid remedies combine structural and behavioural elements to offer a balanced solution, often used when a simple change in structure alone is insufficient to address complex competition concerns.

Case Examples:

• PVR/DT: Structural remedy involving the exclusion (divestiture) of specific screens combined with a behavioural commitment not to expand in the relevant geographic area.
• Bayer/Monsanto: Structural remedy of divestments of certain assets, coupled with behavioural non-bundling and licensing obligations for remaining products.
• China National Agrochemical/Syngenta: Structural remedy of divestments of overlapping businesses, reinforced by a behavioural commitment to compete independently for a defined period (7 years).

These remedies are particularly useful when structural changes alone cannot fully address competition concerns.

Guiding Principles for Effective Remedies:

Effective remedies must adhere to the following principles:

1. Established Competition Concern: Remedies should only be considered when a clear concern exists.
2. Restore or Preserve Competition: Remedies must fully address the harm.
3. Easy Does It: Choose solutions that don’t create extra, unneeded difficulties.
4. Keep it About Fair Play: Solutions should focus solely on improving competition, not on other business or government aims.
5. Workable and Watchable: Solutions must be practical to put in place and easy to check that they are being followed.

 Remedy Selection – Antitrust vs. Merger Cases:

The remedies used by the Competition Commission of India (CCI) depend on the type of problem they are solving:

 While structural remedies are standard in merger cases, the CCI should look more often at using behavioural remedies for mergers. If a behavioural remedy is fair and effective enough to solve the problem, it should be considered the better option.

Conclusion:

To make sure competition laws are followed, having solutions is absolutely necessary. These solutions can involve changing how a company is built (structural), how it behaves (behavioural), or a mix of both (hybrid). Each one must be custom-made for the specific problem it’s trying to solve. They also need to be effective (they must work), balanced (fair and not excessive), and truly possible to carry out.

India’s competition watchdog, the CCI, is always refining its methods. Their flexible approach means they often prefer structural changes (like breaking up companies) when businesses merge. But for cases where companies are acting unfairly to stifle competition, they tend to favour behavioural changes (making companies alter their practices). For the most complicated market challenges, they are increasingly using a blend of both types of solutions.