Competition Law Developments In 2018

Several key decisions were delivered by the SC, NCLAT and CCI along with amendments to the merger control regime

2018 was a significant year for competition law jurisprudence in India, with several key decisions being delivered by the Supreme Court of India (Supreme Court), National Company Law Appellate Tribunal (NCLAT), the Competition Commission of India (CCI), as also significant amendments to the merger control regime. This article summarizes the key developments of 2018.

Leniency regime

In 2018, the CCI passed seven final orders involving leniency applications by enterprises which led to the discovery of cartels in different markets, including dry cell batteries, sports broadcasting and bid rigging in municipal tenders. For the first time, the CCI also granted full immunity (100% penalty waiver) to a leniency applicant in the case of Panasonic.

Panasonic disclosed the existence of a cartel between manufacturers and suppliers of zinc carbon dry cell batteries - Eveready and Indo National. The CCI granted 100% penalty waiver to Panasonic on grounds that it had disclosed the existence of the cartel, provided vital disclosures and extended full and continuous co-operation to the CCI during the investigation.

Interestingly, in a separate case, Eveready as a leniency applicant alleged that the dry cell manufacturers had violated competition law by exchanging information pertaining to sales, production and pricing in relation to flashlights. However, the CCI held that though there was evidence of information exchange, there was no evidence that the parties had acted on the information and engaged in anti-competitive conduct.

The CCI has passed nine leniency orders to date and granted 100% immunity in 3 of the 7 leniency cases passed in 2018. This has provided a fillip to the leniency regime and signaled to the industry that full immunity will be the norm where the leniency applicant discloses the existence of a cartel not known to the CCI previously while also providing vital disclosures and offering complete co-operation during the investigation.

Guidance from Supreme Court

The Supreme Court set aside the concurrent findings of cartelization by the erstwhile Competition Appellate Tribunal (COMPAT) and the CCI in the LPG cylinder cartel case. The Supreme Court held that similar or identical bids by cylinder manufacturers were a necessity given the market conditions and not necessarily the result of a collusive arrangement.

As such, the Supreme Court observed that the cylinder manufacturers were able to rebut the presumption of appreciable adverse effect on competition (AAEC) and thereafter the CCI could not effectively contradict the submissions put forth by the LPG cylinder manufacturers. This is an important case as it establishes that the presumption of AAEC is rebuttable, and once rebutted, the onus is on the CCI to demonstrate how competition has been impacted.

Key decision by NCLAT

Hyundai filed an appeal against the first CCI order with respect to resale price maintenance, which had concluded that Hyundai had imposed a discount control mechanism on sale of Hyundai cars in Delhi/NCR in violation of Section 3(4)(e) of the Competition Act, 2002 (Competition Act).

However, the NCLAT set aside the order of the CCI after noting that the CCI had failed to independently analyze the evidence and instead affirmed or reproduced the findings of the Director General, CCI i.e. the investigative arm of the CCI (DG). The CCI has appealed the NCLAT order before the Supreme Court.

CCI decides on Google after six years of investigation

The CCI passed a final order penalizing Google for abusing its dominant position in the 'Online General Web Search' and 'Web Search Advertising Services' markets in India and imposed a penalty of र135.86 crores on Google based on the turnover of its India operations.

The CCI found Google to have abused its dominant position under Section 4(2)(a)(i) on three counts, including (i) ranking of universal results prior to 2010; (ii) prominent and specialized linked display of commercial flight unit; and (iii) prohibitions imposed under the negotiated search intermediation agreements upon publishers.

Interestingly, two members of the CCI wrote a dissenting opinion, concluding that there was not enough evidence to find an abuse of dominant position by Google under the provisions of the Competition Act.

Merger control developments

In October 2018, consistent with its annual practice of reviewing the Combination Regulations, the CCI, after taking into account stakeholder comments, made key amendments to the Combinations Regulations to further streamline the merger review process and permitted the possibility of modifications in phase I. In all, the amendments made have brought positive changes to the Combination Regulations, which would ultimately expedite the CCI approval process for a proposed combination.

Also, during the year, the CCI approved the merger of Linde and Praxair, after the parties undertook certain divestments post a phase II review of the transaction. This was the seventh phase II decision of the CCI.

Advocacy initiative

The CCI issued its first policy note, as part of its advocacy initiative, while recognizing that the pharmaceutical sector is an area of critical importance in the quest for ensuring affordable and quality healthcare through well-functioning markets.

Competition Law Review Committee

Finally, 2018 saw the Government constituting the Competition Law Review Committee (CLRC), under the aegis of the Ministry of Corporate Affairs. The mandate of the CLRC is to (i) review the Competition Act/ rules/regulations, in view of changing business environment and bring necessary changes, if required; (ii) look into international best practices in the field of competition, especially antitrust laws, merger guidelines and handling cross border competition issues; (iii) study other regulatory regimes/ institutional mechanisms/government policies which overlap with the Competition Act; and, (iv) study other matters related to the competition issue and considered necessary by the CLRC. The CLRC has also constituted working groups which would look into various aspects of competition law.

Disclaimer – The views expressed in this article are the personal views of the authors and are purely informative in nature.