If the CCI wanted to inaugurate its adjudicatory functions with a bang, well then it certainly did!! Though looking back, they probably would have preferred a less noisy cracker (read: controversial) first order.

In the matter of Neeraj Malhotra v. Deutsche Bank and Ors., the CCI analyzed the issue of whether pre payment charges levied on customers by banks and other home loan institutions were an anti – competitive agreement and resulted in an abuse of dominant position. In its order, the CCI reached the conclusion reached the conclusion that such charges are not anti – competitive and that there has been no abuse of their dominant position by the institutions.

Specifically, the following issues were framed before the commission:

1. Whether there is an agreement amongst the institutions to impose changes?
2. Whether there is an appreciable adverse effect on the market due to the levying of charges?
3. Whether there is an abuse of dominant position by the institutions?
4. Whether the changes levied impose an additional cost on customers?

I personally feel that the last issue was redundant in the present matter. However, for the sake of discussion, I shall proceed on the assumption that it is a valid question which was raised.

To summarise the order, the majority opinion (the order was decided by a majority of 3:2) rejected the contention that the institutions acted in concert and had an agreement to impose charges. It also observed, as a continuation to the above issues, that the levying of charges on the consumers has no impact on the relevant market, i.e. the home loan market in India, thereby restricting competition. On the issue of abuse of dominant position, the CCI noted that no single institution in India has the capability of operating independent of the competition or affecting consumers in his favour. As regard the last issue, the CCI observed that the institutions do suffer a cost when a borrower opts to pre – pay his loan. It felt that it would not be correct to look at the matter only form the point of view of the consumer and that the interests of the consumer cannot be protected at the cost of the service provider. The full text of the order can be found here.

At the very outset it is submitted that I firmly disagree with the views expressed by many that the CCI should look exclusively at the effect of an agreement on the competition within the relevant market and not express opinions or render judgements on a consumer impact criterion. Other than the well known fact that anti – trust mechanisms and consumer protection are intrinsically connected, the preamble of the Act itself provides for the protection of the interests of consumers in the relevant market and this intention is further enforced on a bare perusal of Sections 3, 4 and 18, all of which provide for consumer interest to be taken into consideration.

Coming to the order itself, there does not seem to be any fault in the reasoning of the majority Bench. However, what is interesting is the fallout which this order may have for the working of the commission in the future. More specifically, in the application of the rule of reason to decide whether or not a particular agreement is anti – competitive in nature. While in the present matter there may not have been conclusive evidence to prove the existence of an active cartel, one can wonder where and when the commission intends to draw the line on application of the above mentioned rule. It seems to have impliedly, through this order, given its assent to agreements which may appear broad in nature and which may not be entered into with a per se intention to form a cartel and to abuse a dominant position, but which may, consequently result in an adverse effect to competition in the relevant market, i.e. in the present case, the agreement to levy charges, as long as the imposition of such charges do not give the appearance of an active coordinating cartel. One may take the argument that by applying this interpretation of the rule of reason, many anti – competitive agreements may circumvent inspection as they may appear to be harmless for the relevant product/service market. However, taking into consideration the infancy of Indian competition jurisprudence, it is best to simply wait and watch to see the after effects of this order.