Author: Sudipto Sircar

Supporting And Growing Our Premise

In our post titled “Executive Actions And Indian Competition Law:A Premise”, we tried to develop a premise on when the executive actions may be considered anti-competitive under the Competition Act. In an attempt to grow on that post, a recent article in Mint titled “Ending India’s Food Cartels“ helps us to further stress on the point in the above post. The article focuses on the monopoly of the Food Corporation of India (FCI) and the Agricultural Produce Marketing Committees (APMC’s).

While I do not entirely agree with the article ( APMC’s cannot be considered for anti-competitive practices, the reasons for which please read the previous posts and “hoarding” by the FCI is forgetting the fact that the FCI is also the organisation to manage the buffer stocks of the country), I do feel there may be a case against the FCI with regards some of its procurement policies. However, only a detailed in-dept investigation can reveal more.

Cabinet Approves Amendments To the Competition Act, 2002

As per a press release by the Ministry of Corporate Affairs,

“The Union Cabinet has approved the proposal of the Ministry of Corporate Affairs to further amend the Competition Act, 2002, with a view to fine tune it and to meet the present day needs in the field of competition, in the light of the experiences gained in the actual working of the Competition Commission of India in the last few years.”

Unfortunately, we could not find a draft of the Amendment Bill on the Ministry’s website. Will write a detailed piece on the same as soon as it is made public. In the meantime, if anybody finds the draft, please post the link to the same in the comments below.

Good Intentions Do Not Imply Good Actions

It has been recently reported that the Central Electricity Regulatory Commission (CERC) has issued draft regulations intended to prevent abuse of market power and regulate the conduct of companies harming or potentially harming competition in the sector.

As per the news article:

“The proposals allow it to issue directions in the event of anti-competitive agreements, abuse of dominant position or anti-competitive combinations entered into by any entity, licensee, deemed licensee and licence-exempt ones.”

While am sure that the intentions of the CERC are good and their initiative may be applauded in terms of pro-activity, it doesn’t exactly help in settling the jurisdictional conflicts between the CCI and various other sectoral regulators, many of whom have been lobbying to prevent loss of turf.  In fact, a bare perusal of the draft shows that the CERC is merely empowering itself with the powers already enumerated for the CCI under the Competition Act. It grants itself the power to investigate anti-competitive agreements, abuses of dominant positions and even combinations related to the power sector !! The only rider is under the proviso to Regulation 8(1) and Regulation 8(2) of the draft which are as follows respectively:

“…Provided that a complaint under sub-regulation (a) or a reference under subregulation (b) shall be accompanied by an affidavit stating that the Competition Commission of India is not inquiring into the matter referred to in the said complaint or the said reference.”

“If during the course of the said inquiry or any subsequent proceedings, it comes to the notice of the Central Commission that the matter under its consideration is also being inquired into by the Competition Commission of India, the Central Commission may refer the matter to the Competition Commission of India as provided in regulation 12 or may seek the opinion of the Competition Commission of India as provided in Regulation 13.”

Click on the following links for the regulations. (Public Notice/ Explanatory Memorandum/ Draft)

Executive Actions and Indian Competition Law: A Premise

In one of our previous posts, I had tried to highlight that a regulatory authority of the government could not in most cases be challenged as anti-competitive or an abuse of dominant position. Using the facts of that particular case, I had tried to show that in most cases such authority of a ministry or a sub-division of the ministry could not be challenged.

To grow upon that post, I submit the Commissions order in Arshiya Rail Infrastructure Ltd. (ARIL) vs Ministry of Railway (MoR) & Ors.  (Main Order/Per S.N. Dhingra, Member/Per M.L. Tayal, Member/Per R. Prasad, Member (Dissenting)) is one of the few cases where executive actions could be challenged as anti-competitive. While once again the Commission dismissed the case on merits, the Order helps in clarifying the Commissions stand regarding this issue and consequently, also helps us to update our previous premise to as follows:

1.   Exercise of executive authority through regulations or rules issued by an executive authority for the purposes of regulation of the provision of any goods or service cannot by itself be considered a service on the part of the Government.  It is merely the exercise of the legitimate state authority, and thus cannot be challenged as anti-competitive or an abuse of dominant position.

2. Any action of such a government authority when  a subdivision of that ministry or authority ( in this case, the Indian Railways) wherein the ministry or executive authority’s position results in a DIRECT relation as a competitor in the relevant market may be challenged as anti-competitive or an abuse of dominant position as the ministry or its sub-division would end up coming under the ambit of the definition of “enterprise” under Section 2(h) of the Act and thus could also be interpreted under the definition of “group” as given under clause (b) in the Explanation to Section 5.

We welcome your comments, criticism and feedback on the above premise.

Case No COMP/M.6281 – MICROSOFT/ SKYPE

This time, during my “competition surfing sessions”,  I was fortunate enough to come across the original order of the European Commission Regulation on the approval of the Microsoft-Skype Merger. While there is nothing controversial about the Order itself, it is an interesting read, especially on the classification and sub-classification of the relevant market by the EC.

The merger garnered much attention after CISCO challenged the Merger in the EU after it received the approval of the European Commission.

The link to download the document can be found here.

CCI National Level Essay Competition 2012: Results

The results of the National Level Essay Competition 2012 conducted by the CCI are out !!

Congratulations to all the winners. 🙂

Click here for a pdf. copy of the results sheet.

CCI’s Limits

A small issue in the recent Order of the Commission in Saurabh Bhargava v. Ministry of Agriculture (Main Order/Dissenting) was whether the Commission had the authority to issue a notice to the Ministry of Agriculture or even reprimand it for any laws which it may enact which may be considered ‘anti-competitive’ in the relevant market economy. The main order does not bother to stress on the issue (presumably because the case as it is stands dismissed on merits). However, it is respectfully submitted that the CCI would not have any statutory authority for the following reasons.:

1. The definition of enterprise has been defined under Section 2(h) as follows:

“enterprise” means a person or a department of the Government, who or which is, or has been, engaged in any activity, relating to the production, storage, supply, distribution, acquisition or control of articles or goods, or the provision of services, of any kind, or in investment, or in the business
of acquiring, holding, underwriting or dealing with shares, debentures or other securities of any other body corporate, either directly or through one or more of its units or divisions or subsidiaries, whether such unit or division or subsidiary is located at the same place where the enterprise is
located or at a different place or at different places, but does not include any activity of the Government relatable to the sovereign functions of the Government including all activities carried on by the departments of the Central Government dealing with atomic energy, currency, defence and space.

Now firstly, regulations or rules issued by any executive authority for the purposes of regulation of the provision of any goods or service cannot be it self be considered a service on the part of the Government.  It is merely the exercise of the legitimate state authority. Secondly, using the phrase “..relating to the….” to justify such sanction of such executive authority is I feel too broad an interpretation of the definition of the term “enterprise”.

2. Section 3 is irrelevant in such cases as the Government does not enter into an agreement of any form in stipulating certain regulatory criteria which requires fulfillment by an individual to commence his or her operations.

3. An argument against the government under Section 4 would also fail in light of the definition of the term “Dominant Position” under the explanation to Section 4.:

(a) “dominant position” means a position of strength, enjoyed by an enterprise, in the relevant market, in India, which enables it to—
(i) operate independently of competitive forces prevailing in the relevant market; or
(ii) affect its competitors or consumers or the relevant market in its favour.

The dual requirements of this definition cannot be fulfilled since any such ministry or other governmental department is not part of any relevant market or catering to any consumers with any goods or services.

4. A notification under Section 54 would also not be necessary in such a circumstance for the reasons mentioned above.

However, I should clarify that I certainly do not intend to say that a PSU cannot be held accountable under the Act. The above argument would apply strictly to an executive authority of the government such as a ministry or a sub-division of a ministry.

It’s Not the End of the World You know….

A recent article in the Economic Times pointed out a flaw in the Competition Act, 2002 that the Commission under Section 26  cannot close a case if the Director-General of investigation points out a contravention after a matter is referred to it for investigation.

While the oversight is unfortunate, the concerns of the author in the article are slightly exaggerated. Assuming a party in the future was to raise the issue before CCI or a higher forum, it will in all probability be remedied considering the stance of the hon’ble Supreme Court on the interpretation of statutes. Don’t get the wrong impression. I am certainly not condoning the error on the part of the government. To quote the lament of the late great Nani Palkhivala, “we legislate first, and think afterwords….” (Source:  Soli J Sorabjee and Arvind P Datar, Nani Palkhivala: The Courtroom Genius)

Coming back to the interpretation of statutes, a court of law is entitled to depart from the literal rule of interpretation (i.e. words of a statute should be construed as they are) and insert words into a statute wherever required. To quote from Hameedia Hardware Stores v. B. Mohan Lal Sowear, 1988 (2) SCC 513 

“Words may also be read to give effect to the intention of the Legislature which is apparent from the Act read as a whole”

This rule has been used a number of times by the Court in cases such as Siraj-ul-haq v. Sunni Central Board, U.P., AIR 1959 SC 198; State Bank of Travancore v. Mohammad, AIR 1981 SC 1744 and Union of India v. Seppo Rally, AIR 2000 SC 62. There can be no doubt that the intention of the legislature was in general, subject to the exceptions under sections 54 to 56, to grant supremacy to the CCI to be the final arbiter as to any perceived anti-competitive conduct in the country. Therefore, there does exist an effective judicial solution to the problem if required. And of course, there is always the option of a retrospective amendment to the Act. However, considering the present state of affairs in the country, don’t see that happening anytime soon.