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Recent Developments in Competition Law In India

The year 2022 witnessed significant developments in the field of competition law in India. The Competition Commission of India (CCI) efficiently approved notified combinations within reasonable timelines, conducted impactful dawn raids, issued noteworthy orders that garnered international attention, and conducted market studies.

Extensive discussions took place regarding the expected amendments to the Competition Act, 2002 (Act) in various settings, including conference rooms and informal conversations. It is worth noting that the CCI has been unable to achieve quorum for conducting formal business since the departure of Chairperson Mr. Ashok Gupta on October 24, 2022. As a result, numerous deals worth billions of dollars remain pending without approval.

The text refers to the Competition Amendment Bill, 2022, and the accompanying report from the Parliamentary Standing Committee on Finance.
The introduction of the Competition (Amendment) Bill, 2022 (Bill) was the most noteworthy development this year, as it proposes substantial changes to the Act. The Parliamentary Standing Committee on Finance (SCF) has adopted the Bill and proposed amendments. The Bill is expected to be presented in Parliament during its upcoming session in February 2023.

The Bill suggests a global deal value threshold of INR 20 billion (approximately USD 251 million / EUR 247 million) for transactions involving parties with significant business operations in India. The SCF recommends that the Bill include provisions outlining the method for determining the value of a proposed transaction. It has been proposed that when evaluating a proposed transaction, the assessment of "substantial business operations in India" should focus solely on the target entity, rather than considering the presence of the parties involved.

The Bill proposes to reduce the merger review period from 210 days to 150 days. Additionally, if the Competition Commission of India (CCI) does not form an opinion within 20 days, the merger will be deemed approved at a prima facie stage. The current regulations grant the Commission a period of 30 working days for the prima facie stage, without any provision for automatic approval during this stage. The SCF has noted that the proposed reduction in timelines could pose a burden to the CCI, based on feedback from practitioners and the CCI itself. It is recommended that the current timelines for merger approvals remain unchanged.

The Bill introduces a provision for "settlement" and "commitment" to enable parties being investigated for potential violations of vertical agreements or abuse of dominance to propose commitments or reach a settlement with the Competition Commission of India (CCI). Parties have the ability to provide commitments prior to the submission of the investigation report by the Director General (DG) to the Competition Commission of India (CCI).

Settlements can be reached after the Competition Commission of India (CCI) has received the investigation report from the Director General (DG), but before the CCI issues its final order. The Bill mandates the compulsory involvement of the Director General (DG), relevant stakeholders, and third parties in submitting objections and suggestions regarding commitment and settlement proposals.

The inclusion of cartels in settlement proposals has been recommended by the SCF. It has been proposed that if the CCI rejects a settlement proposal, parties should have the option to appeal to the appellate tribunal. However, if the party accepts the commitment proposal, no appeal should be allowed to the appellate tribunal.

The SCF has noted that involving third parties in commitment and settlement proposals can compromise confidentiality. Therefore, it suggests that the decision to include third parties in the process should be at the discretion of the CCI, rather than being mandatory as it currently is.

The Bill provides a clear definition of "hub and spoke" cartels and establishes the framework for incorporating third parties that aid cartels without being direct competitors. The SCF found the language of the Bill, which proposed a presumption of illegality against third parties who "actively participated" in cartel conduct, to be excessively severe. It recommended that the definition be revised to include an element of intention, in order to address situations where third parties may have unknowingly facilitated anti-competitive behaviour among competitors.

The Bill grants the DG the authority to question the legal advisors of the individuals associated with the party under investigation, and to administer oaths during the examination process. The Supreme Court of India (SCF) has expressed its view that the proposed amendment has a broad scope.

It argues that the Director General (DG) or any investigative authority, like the Competition Commission of India (CCI), should not be allowed to question legal professionals or other privileged advisors, as this would violate the principle of 'attorney-client privilege'. It is likely that if such a provision were included, it could be deemed unconstitutional by the constitutional courts.

Gun jumping and the green channel are two concepts related to merger control in competition law. Gun jumping refers to the premature implementation of a merger or acquisition before obtaining the necessary regulatory approvals. This can include actions such as transferring ownership or control of assets, or integrating operations.

The 'Green Channel' was implemented in August 2019, inspired by Indian customs laws. It allows for expedited approval of mergers where the parties involved do not have any horizontal overlaps, vertical relationships, or complementary connections. In 2022, the Competition Commission of India (CCI) granted approval to a total of 80 proposed combinations, with 25 of them being approved through the green channel process.

This year, the Commission imposed penalties on Trian Partners AM Holdco, Ltd. and Trian Fund Management, L.P. Trian, as a collective entity, was found to have engaged in gun jumping in relation to a green channel notification. The Competition Commission of India (CCI) had initially approved a green channel notification submitted by Trian for the acquisition of shares in Invesco Limited.

This approval was granted based on the absence of any overlaps in the business activities of Trian and Invesco Limited. The CCI found that the proposed combination had been implemented prior to its deemed approval. This occurred because two of Trian's founding partners were appointed as directors on the board of Invesco Limited before filing the green channel notification. The penalty imposed was INR 2 million, equivalent to approximately USD 0.02 million or EUR 0.02 million.

The CCI fined Adani Green Energy Limited INR 500,000 (approximately USD 0.06 million / EUR 0.05 million) for engaging in gun-jumping during its acquisition of S.B. Energy Holding Limited is a company. The CCI determined that a contractual clause in a transaction document was excessive in relation to its intended purpose of protecting the economic value of the target entity.

Additionally, the clause did not include measures to prevent the sharing of competitively sensitive information before the CCI's approval of the transaction. The case is important because the CCI has stated that standstill covenants are acceptable if they are proportionate to the objective of ensuring certainty in business valuation and do not interfere with the target entity's ordinary course activities.

Following this case, the Competition Commission of India (CCI) has conducted thorough examinations of standstill covenants in various other transactions. In certain instances, the CCI has requested parties to provide a justification for including such a clause. The CCI has gone as far as asking parties to submit emails or other records pertaining to the objective of the clause.

Comprehensive Analysis of Select Mergers
The Competition Commission of India (CCI) has the authority to issue a Show-Cause Notice (SCN) to parties involved in a combination if it believes that it may result in a significant adverse effect on competition (AAEC) in India. This notice serves to determine whether a Phase-II investigation should be initiated. The CCI thoroughly examined two combinations this year.

Digital payments refer to the electronic transfer of funds between parties for the purpose of making transactions.

The Competition Commission of India (CCI) issued a Show Cause Notice (SCN) to PayU India, which is an indirect subsidiary of Naspers, a global consumer internet company. The SCN was issued in relation to PayU India's intended acquisition of Limited, an Indian digital payments platform known as 'BillDesk'.

The CCI expressed disagreement with PayU India's proposed definition of the broad relevant market, which suggested that all online payment services made in-store on an app or website should be considered part of the same relevant market. The CCI identified two pertinent markets: (a) the market for online payment aggregation services, which can be either recurring or standalone; and (b) the market for 'Bharat Bill Payment Services,' which is an interoperable and accessible bill payment ecosystem that operates through digital infrastructure and a network of agents and bank branches.

The CCI determined that the merger did not pose any competitive issues in the relevant markets. As a result, no further investigation or remedies were deemed necessary. The transaction was cancelled because certain conditions precedent were not met. The CCI order is noteworthy as it is the first instance where no remedies, whether behavioural or structural, were mandated by the CCI following the issuance of a Show Cause Notice (SCN).

The media and entertainment industries.
Culver Max Entertainment Private Limited (Sony), Bangla Entertainment Private Limited (a wholly-owned subsidiary of Sony) (BEEPL), and Zed Entertainment Enterprises Limited (ZED) (a competitor of Sony) have jointly filed a notice. These companies are prominent operators of television channels and OTT video services in India. The notice pertains to the amalgamation of ZED and BEEPL into Sony.

The CCI observed that television advertising has the greatest market reach in India. The merged company would become the largest broadcasting company in India, possessing around 92 television channels with significant market shares in four market segments. The television industry in India includes various genres such as Hindi general entertainment channels (GEC), Marathi GEC, Bengali GEC, and Hindi films. The merged entity would possess the capacity and motivation to raise prices for advertisers and viewers in the specified market segments. The company could charge high prices and engage in differential pricing and behaviour with Distribution Platform Operators, such as those operating through cable or DTH.

The parties involved in the CCI responded to the SCN by offering to divest ZEE's ownership in three Hindi-language channels. They also agreed not to sell these channels to Star India or Viacom 18 Media, the two largest competitors in the market segments. The CCI approved the amalgamation without a Phase II investigation after accepting the remedy and considering the voluntary structural commitments.

Wide platform parity clauses are not advisable.
In 2020, the Competition Commission of India (CCI) began investigating allegations of abuse of dominance by MakeMyTrip India Private Limited and Go-Ibibo, which are the top online travel companies in India, collectively referred to as MMT-Go. The allegations involve confidential exclusivity agreements between MMT-Go and OYO, an Indian multinational hospitality chain.

These agreements stipulate that MMT-Go will offer preferential treatment to OYO on its platform. Moreover, there were allegations that MMT-Go had engaged in price parity agreements with its hotel partners, which restricted them from offering rooms at lower prices on alternative platforms. The investigations were initiated based on complaints filed by the Federation of Hotel & Restaurant Associations of India and Treebo, a budget hotel brand.

The CCI determined that MMT-Go's wide parity obligations and exclusivity conditions constituted abuses of dominance due to their unfair and discriminatory nature. The CCI acknowledged that narrow parity could be justified to address concerns of free riding, as hotels benefiting from the investments made by online platforms could harm the business of MMT-Go and other online travel agencies. [5] MMT-Go incurred a penalty of INR 2.23 billion, equivalent to approximately USD 27 million or EUR 25.6 million. The CCI issued directives that involved removing price and room availability parity obligations, eliminating exclusivity conditions, and ensuring non-discriminatory access of hotels to the MMT-Go platforms.

The CCI discovered that the commercial agreement between MMT-Go and OYO, which involved a "refusal to deal," resulted in the removal of FabHotels, Treebo, and other independent hotels from the platform. OYO incurred a penalty of INR 1.68 billion (approximately USD 20 million / EUR 18.96 million) due to the exclusive agreements between MMT-Go and OYO.

In 2022, an investigation was conducted against BookMyShow, an online ticketing platform. The purpose of the investigation was to examine allegations of abuse of dominance by the platform, as well as exclusivity and refusal to deal arrangements between BookMyShow and specific theatres/multiplexes [6].

CCI imposes penalty on Google.
In 2022, the CCI's imposition of monetary penalties and directions on Google in two significant orders garnered significant media attention. The CCI has imposed a provisional penalty of INR 9.36 billion on Google for allegedly abusing its dominant position in relation to its Play Store billing system, policies, and UPI application (GPay). This marks the first instance of an antitrust regulator issuing a formal order regarding Google's exclusive use of its billing system and service fee. The service fee was not deemed to be exploitative. The CCI has potentially exceeded its authority by issuing broad ex ante directives that may not be directly related to the subject matter of the investigation.

In a separate inquiry into Google's android ecosystem, the CCI imposed a provisional penalty of INR 13.37 billion on Google for its abuse of dominance in various markets related to the Android mobile device ecosystem. The CCI has identified similar issues to the European Commission (EC) in the 2018 Google Android decision. However, the CCI's directions are more intrusive compared to the EC's decision.

Further advancements in the digital industry
Google is under investigation for allegedly imposing unfair and opaque revenue generation terms in online digital advertising intermediation services. The Competition Commission of India (CCI) is investigating Zomato Limited and Bundl Technologies Private Limited (Swiggy) for allegations of price parity arrangements, data masking, and platform neutrality. The CCI conducted raids on the premises of various sellers on Amazon and Flipkart, investigating exclusive vertical agreements with certain sellers on their platforms.

Dawn raids refer to surprise inspections conducted by regulatory authorities or law enforcement agencies at the premises of companies or individuals suspected of engaging in illegal activities.

Apart from the raids on Amazon and Flipkart, the CCI conducted four additional raids on entities operating in various sectors in 2022.

In March, multiple raids were conducted on the facilities of at least four tyre manufacturers due to allegations of engaging in cartel activities.

In April, raids were conducted at mining companies in West Bengal and Jharkhand due to allegations of bid-rigging in coal mining tenders issued by Bharat Coking Coal Limited, a public sector company.

In December, authorities conducted raids on small-scale steel companies in West Bengal, Punjab, Tamil Nadu, and New Delhi due to allegations of price collusion in the production of steel products used in construction.

In December, a raid was conducted at the premises of prominent cement companies in Southern India to investigate potential violations of competition law.

Market studies and frequently asked questions (FAQs) updates.

The CCI published a market study in September 2022 on the Indian taxi and cab-aggregator industry, specifically examining prominent cab aggregators like Ola and Uber. A controlled experiment was conducted to investigate the dynamic pricing strategies employed by cab aggregators. The report determined that surge pricing is influenced by factors such as demand, supply, and potentially, individual rider characteristics. According to the Report, transparency in the algorithms and data processing practises of Cab Aggregators is necessary to address the information imbalance between Cab Aggregators and their drivers.

The CCI released a market study on the 'Film Distribution Chain in India' in October 2022. The major competition law issues pertaining to multiplexes, film producers, and distributors include the identification of bargaining power imbalance, lack of transparency in box office revenue collections, and the virtual print fee acting as a barrier to entry for producers seeking to exhibit their films in theatres.

The CCI proposed several significant recommendations, including the implementation of customised agreements between producers and exhibitors based on the content being presented, allowing multiplexes to negotiate deals, ensuring fair and reasonable terms for producers regarding promotions, eliminating trade restrictions in exhibition by multiplexes, and adopting a standardised and audited box office monitoring system.

The 2020 'Market study on e-commerce in India' prompted an investigation into the e-commerce platforms Amazon and Flipkart.

The CCI is anticipated to release a market study on the common ownership of shares by private equity funds across various portfolio companies. The findings of the CCI are anticipated to provide clarification on the issues related to common ownership in portfolio companies within the same sector. India is among the limited number of jurisdictions that mandate the notification of minority acquisitions, which includes the acquisition of control in the target company, as per a broad definition.

The CCI provides clarifications on procedural and legal aspects of Indian competition law through the publication of 'Frequently Asked Questions' (FAQs) on its website. In 2022, the FAQs were revised for the first time in five years, incorporating several significant additions to the existing framework.

Revised Confidentiality Protocol
The CCI issued amendments to the Competition Commission of India (General) Regulations, 2009 in April 2022. In enforcement proceedings, parties must provide undertakings certifying that the disclosure of confidential information or documents would result in commercial or competitive harm. Engaging in deceptive activities can result in a fine of up to INR 10 million (approximately USD 0.12 million / EUR 0.11 million). Additionally, the CCI has the authority to withdraw the confidentiality status of relevant documents or information.

In the past, fines were not imposed and claims of confidentiality were accepted without question.

The CCI has issued guidelines for establishing "confidentiality rings" in accordance with international norms. These rings allow authorised representatives of opposing parties in ongoing proceedings to access confidential information and documents. Informants and third parties are excluded from confidentiality rings, unless otherwise directed by the CCI.

The CCI is dedicated to actively addressing anti-competitive behaviour and consistently exhibits a cooperative approach to reviewing mergers, while also increasing scrutiny of transaction documents and enforcing merger regulations. The decisions made by the organisation, particularly in the technology and digital sector, have established new legal principles that are anticipated to develop further in the future.

Enacting the Bill into law, while considering the recommendations of the SCF, would enhance the sophistication of competition law enforcement in India.

  1. Competition Commission of India (Procedure in regard to the transactions of business relating to combinations) Regulations, 2011.
  2. Trian Partners / Trian Fund Management, Combination Registration No. C-2021/01/810.
  3. PayU Payments Private Limited, Combination Registration No. C-2022/04/920.
  4. Culver Max Entertainment Private Limited, Zee Entertainment Enterprises Limited, Bangla Entertainment Private Limited, and Essel Group Participants, Combination Registration No. C-2022/04/923.
  5. In Re: Federation of Hotel & Restaurant Associations of India and Ors v. Make My Trip India Pvt. Ltd, Case No. 14 of 2019 and 01 of 2020
  6. In Re: Vijay Gopal v. Big Tree Entertainment Pvt. Ltd and Ors., Case No. 46 of 2021
  7. In Re: Match Group, Inc. and Alphabet Inc. Google LLC and Ors, Case No. 14 of 2021.
  8. In Re: Umar Javeed and Ors v. Google LCC and Ors, Case No. 39 of 2018.
  9. Google Android, Case AT.40099.
  10. Digital News Publishers Association v. Alphabet Inc. and Others, Case No. 41 of 2021, The Indian Newspaper Society v. Alphabet Inc., and Others, Case No. 10 of 2022; News Broadcasters and Digital Association v Alphabet Inc. and Others, Case No. 36 of 2022.
  11. In Re: National Restaurant Association of India and Zomato Limited and Anr., Case No. 16 of 2021.

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