Competition Act: Allegations in terms of Section 4 can be analysed by delineating the relevant market as per Section 2(r)

Competition Act: Allegations in terms of Section 4 can be analysed by delineating the relevant market as per Section 2(r)

The Competition Commission of India (CCI) has directed that the Information filed under Section 19(1)(a) of the Competition Act, 2002 (Act) by Automotive Tyres Manufacturers Association (Informant) against General Insurance Corporation of India (Opposite Party/ GIC Re) alleging contravention of the provisions of Sections 3 and 4 of the Act be closed forthwith in terms of the provisions contained in Section 26 (2).

In this case, the gravamen of allegations of the Informant emanated out of the implementation of the circular dated 12.02.2019 by GIC Re resulting in alleged significant increase in insurance premium for the policyholders of the members of the Informant. The Informant had alleged violation of different provisions of Section 4 as well as Section 3 of the Act.

The Commission noted that the insurance companies were having commercial freedom to price their policy as they deem fit according to the market conditions and GIC Re did not place any restriction on insurance companies to offer products to their customers. Accordingly, the Commission was of the view that allegations of resale price maintenance on the part of the OP, in terms of Section 3(4)(e) of the Act, were not established.

It was noted that the Informant had merely alleged increase in premium rates by GIC Re as "excessive pricing" without providing any basis. Setting of premium rates for reinsurance polices would be based on many factors and without proper evidence being furnished before the Commission, the allegations of 'excessive pricing/unfair pricing' could not be analysed. Therefore, no case was made out against GIC Re on that count.

It was also stated that Section 4(2)(c) of the Act provides that practice or practices resulting in denial of market access in any manner on the part of a dominant enterprise would be considered as an abuse of such dominant position. The Informant had alleged that certain regulations had been enforced that would restrict other reinsurance service providers from being able to operate on a level-playing field with GIC Re. In this regard, it was noted that such regulations had not been made by GIC Re and therefore, proceedings, if any, could not be initiated against GIC Re.

Adverting to the alleged contravention of the provisions of Section 3 of the Act, it was noted that the Informant had averred that GIC Re had entered into agreements with insurance companies that by their very nature were anti-competitive and were causing appreciable adverse effect on competition in the market of provision of insurance services.

It was alleged that GIC Re dictated to the general insurance companies in India that in case any discounts are offered on the specified minimum rates by the insurance companies to the policyholders, such policies shall not have reinsurance support. Such conduct on the part of GIC Re was alleged to be in the nature of 'resale price maintenance' by not allowing insurance companies to determine the discounts that can be offered to policyholders on the premium rates charged for risk coverage and thus, a violation of Section 3(4)(e) of the Act.

It was observed that GIC Re in its submissions had contested the Informant's claims that reinsurers and insurance companies were in a vertical relationship. GIC Re had asserted that the relationships between policyholders, insurers, reinsurers are not the typical "vertical" relationships that is generally understood in the context of competition law.

In this regard, the Commission noted that the issue whether the two are placed vertically with each other, was of no significance and consequence since any agreement between two players, which was not captured within the framework of Section 3(4) of the Act, can be appropriately examined within the residual and plenary width of Section 3(1) of the Act.

It was observed that the position pre and post COVID-19 pandemic remains unchanged as far as the exclusion of contagious diseases is concerned and the insurance companies are entirely free to offer any kind of insurance to the policyholders. Therefore, any decision by GIC Re in this regard could not be termed as 'refusal to deal' in terms of Section 3(4)(d) of the Act.

The Commission observed that the Informant had failed to adduce any material in support of its allegation that Insurance companies were using the GIC Re as a platform to exchange sensitive information, including information on prices which may facilitate price fixing or GIC Re was otherwise facilitating any price fixing between the insurance companies.

Moreover, GIC had categorically stated that the insurance companies have commercial freedom to price their policy as they deem fit and GIC had not placed any restriction on them in terms of price or coverage of risk. Therefore, the allegation of cartel arrangement between GIC Re and insurance companies was also not made out.