Category: Anti-Competitive Agreements

Dish TV India Limited v. Hathway Cable & Datacom Limited and Others, Case No. 78 of 2013

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Here’s something which came up sooner than I had expected. A D.T.H. Service Provider filed an information against several M.S.O.’s (Multiple Service Operators) alleging a collective abuse of dominance by them. The issue raised is genuine as we’ve highlighted before here, here and here.

 

To be frank, am disappointed with the Information. The Informant seem to have pressed for “Collective Dominance”, which every Indian competition lawyer worth his salt knows is presently not addressed in the Act and their seems to have been no elaboration on the Relevant Market (Though not sure about this one. Only have access to the Order and not to the copy of the Information itself.) Furthermore, there seems to have been no attempt to build a case under Section 3. Needless to say, the Information was dismissed without a submission to the D.G. for an investigation. At the same time, it is surprising that the C.C.I. chose to dismiss this straightaway, since there already exists a T.R.A.I. Consultation Paper on this issue. In case it was worried about a regulatory conflict, it should have clearly stated so in the Order.

 

Interestingly, D.T.H. Service Providers are also facing scrutiny under the Competition Act. An Information against TATA Sky was dismissed in 2011, but the same as been appealed against and is presently pending before the Competition Appellate Tribunal.

Anonymous v. Bengal Greenfield Housing Dev. Co. Ltd And Others, Case No. 103/2013

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This is one case which has surprisingly been closed by the Commission, with the finding that that no case has been made out of the existence of an Anti-Competitive Agreement or of an Abuse of Dominant Position.  However, in my humble opinion, I am not so sure. While the conclusion of the D.G. in the end may have been that there was no Competition Law violation, it was definitely a case which merited a reference to the D.G. for further investigation.

The Informant in the present case claimed that the absorption of new supply of flats despite prices having gone up from Rs. 1,100/- to 4,800/- per square feet and the sale of Application Forms and allotment through lottery suggesting huge demand gave a clear impression of manipulation and restriction of supply and use of monopolistic and dominant status for monopolistic pricing as the the parcel of land for the township was being developed selectively despite the final allotment of land to the respective builders.

The reason the case is so important is because the Commission seems to have not given enough consideration, though it has been mentioned in the Order of the Commission, is that all the Respondents/Opposite Parties except for DLF Universal Ltd., are in fact joint ventures between the West Bengal Housing Board and various individual private entities. Therefore, all the entities have a common partner which definitely gives an impression of the various Respondents possessing the capability to effectively communicate with each other, or at the very least, coordinating with each other per force the directive of the W.B.H.B. Granted, it is a government body which claims as it’s objective to provide affordable housing to the people of West Bengal. But as we all already know, Government Bodies are not innocent when it comes to violation of Competition Law.

 

In my humble opinion, there exists a prima-facie case to be investigated on the violation of Section 3(3)(a) and Section 3(3)(b) of the Act and to be frank, it is unfortunate that the Commission chose to close the case.

First Ever Extradition On An Antitrust Charge

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In what is being claimed (and probably is)  as the first ever extradition on an Antitrust charge, Romano Pisciotti, an Italian national, was extradited from Germany to the United States  on a charge of participating in a conspiracy to suppress and eliminate competition by rigging bids, fixing prices and allocating market shares for sales of marine hose sold in the United States and elsewhere, the Department of Justice announced today. According to the Department of Justice (D. O. J.) of the U.S.:

 

“This first of its kind extradition on an antitrust charge allows the department to bring an alleged price fixer to the United States to face charges of participating in a worldwide conspiracy,” said Assistant Attorney General Bill Baer in charge of the Department of Justice’s Antitrust Division. “This marks a significant step forward in our ongoing efforts to work with our international antitrust colleagues to ensure that those who seek to subvert U.S. law are brought to justice.”

 

A copy of the Official Press Release can be found here. 

 

P.S.: For those who don’t know, Antitrust laws in the U.S.A. provide for both civil and criminal remedies.

The C.C.I.’s Jet-Etihad Combination Order: Ambiguous and Incomplete

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I recently wrote a critique for Legally India on the Jet – Etihad Combination Order (Main Order/Dissenting Order/Section 38 Order/Section 43A Main Order/ Section 43A Partially Dissenting Order.)

Please feel free to provide feedback and comments, especially if your opinions are contrary to mine.

Click here to read the Article.

Brief Notes – II

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Continuing with my comments on contemporary competition case law, on the agenda today is the decision of the Competition Appellate Tribunal in M/s. United Phosphorous Limited and Others v. Competition Commission of India & Others. The decision is well known and has been already debated upon a lot and frankly, I have nothing new to contribute. The C.C.I. will probably file an Appeal in the Supreme Court against the decision. It is an open debate as of today. However, if a wager was in order, the odds are that the concept of “Relevant Turnover” for the calculation of penalty is probably here to stay under Indian Competition Law. But what is frustrating is that the Competition Act just does not help to reach a solution. In fact, truth be told, the C.O.M.P.A.T. has reached it’s conclusion more on the basis of international precedents rather than actual application and interpretation of Indian law. This is not surprising. To quote Section 2(y) of the Act:

“turnover” includes value of sale of goods or services;

Ambiguous and exceedingly broad, to say the least. Furthermore, since Section 2(z) of the Act allows for borrowing definitions from the Companies Act, 1956, then one may try to derive an interpretation through the definition of “Turnover” as given under Section 43A of the same:

“turnover” of a company, means the aggregate value of the realisation made from the sale, supply or distribution of goods or on account of services rendered, or both, by the company during a financial year;

But not only can this definition not be taken in light of Section 2(y), but also, Section 43A lends the definition on a different context to that of the issue in the case.

Two observations of the Tribunal do deserve a mention. Firstly, the C.O.M.P.A.T. has affirmed and now firmly established that mere price parallelism alone cannot be enough for drawing an inference of cartelisation. Secondly, it has differentiated between the terms of “Restricted Turnover” (as used by it in MDD Medical Systems India Pvt. Ltd. v. Foundation for Common Cause & Ors.; Appeal No. 93 of 2012) and “Relevant Turnover” as delivered in this Order – the discussion can be found on page 48 of the Order.

Brief Notes

I have been falling behind in case law readings in recent weeks, which is why a number of posts are presently saved as half finished drafts on the Dashboard of the Blog. Nevertheless, while trying to finish the backlog, I recently had the opportunity to sift through the recent Orders of the Commission. Two of them stand out and thus deserve a special mention.:

The first is that of Mr. Larry Lee Mccallister v. M/s Pangea3 Legal Database Systems Pvt. Ltd., mostly for the reason that as far as can be recalled, this is the first time the Commission has dealt with Non-Compete clauses under the Competition Act. The reasoning seems to be sound on the facts and circumstances of the case as the matter was more about the personal grievances of a particular individual rather than that of anti-competitive or consumer harm. Personally, am waiting for the day when the C.C.I. has to deal with a Telefonica like situation in the context of cooperative joint ventures or M & A transactions.

For those who are not aware about the above mentioned case, in 2010, Telefonica acquired sole control of the Brazilian mobile operator, Vivo, which was previously jointly owned by Telefonica and Portugal Telecom. In the context of this transaction, the parties inserted a clause in the purchase agreement indicating that Telefonica and Portugal Telecom would not compete with each other in Spain and Portugal as between the end of September 2010 and the end of 2011. The European Commission opened an investigation in January 2011, and the parties terminated the non-compete agreement in early February 2011. The European Commission held that, by virtue of the non-compete agreement, Telefonica and Portugal Telecom had deliberately agreed to stay out of each other’s home market. The European Commission considered that this preserved the status quo in Spain and Portugal, which hindered the integration process of the E.U. telecom sector and prevented the parties from competing with each other for offering clients the most advantageous conditions. Despite the short duration of the infringement, which was only 4 months, the European Commission fined Telefonica €66,894,000 and Portugal Telecom €12,290,000.

The second one is Shubham Srivastava v. Department of Industrial Policy & Promotion (D.I.P.P.)/Supplementary Order , which deserves to be added in the growing list of Orders of the Commission on determining the scope of the definition of the term “Enterprise” under Section 2(h) of the Act. In the Order, while dismissing the Information, the C.C.I. has held that D.I.P.P., under the Ministry of Commerce and Industry, would fall under the definition of “Enterprise” under the Act.

Hope this satisfies readers for now. More (finally) finished posts to follow in the next few days. 🙂

Cooperative Joint Ventures In China: A Post Script

Some time ago, I wrote a paper titled “Status And Effect of Cooperative Joint Ventures under Indian Competition Law” which was published in the Manupatra Competition Law Reports. During the course of research for the paper, I had come across a number of articles on Cooperative Joint Ventures in China. It seems they are considered a convenient method of doing business there. Therefore, as a post script to the paper, the following is a short post on the concept of Chinese Cooperative Joint Ventures and their utility under the Competition Law of China.:

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Firstly, the concept of a Cooperative joint Venture is much the same as in any other jurisdiction, and so for a detailed discussion on the definition of the Cooperative joint Venture, kindly refer to the paper mentioned above.

Secondly, Cooperative Joint Ventures are common between foreign and Chinese firms as foreign entities consider them a convenient gateway into the Chinese market. They are in fact so popular, that there is a separate Law on Sino-foreign Cooperative Joint Ventures.

Thirdly, as to the advantages and disadvantages of entering into a Cooperative Joint Venture in China, it’s best to hand over the floor to Paul H. Folta, who has written an informative piece on Cooperative joint Ventures in China.

 

 

 

 

 

In Re M/s Puja Enterprises et. al., Ref. Case No. 01 of 2012 : A Critique

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Click here for the Order.

FACTS:

The reference was filed by Director General (Supplies & Disposals), Directorate General of Supplies & Disposals (D.G. S&D), Department of Commerce, Ministry of Commerce & Industry, Government of India, New Delhi (“the Informant”) under Section 19(1)(b) of the Competition Act, 2002 against opposite parties alleging Bid Rigging and market allocation in contravention of the provisions of Section 3 of the Act while bidding against the Tender Enquiry dated 14.06.2011 floated by D.G. S&D for concluding Rate Contracts (R.C.) of product (Polyester Blended Duck Ankle Boot Rubber Sole) for the period from 01.12.2011 to 30.11.2012.

The Wool and Leather (W.L.) Directorate of D.G. S&D had issued Tender Enquiry No. AB(Duck)/WL-6/ RC-11050000/ 1112/ 66 dated 14.06.2011 for conclusion of new Rate Contracts relating to the period from 01.12.2011 to 30.11.2012 for polyester blended duck ankle boots rubber sole (‘the product’), with tender opening date as 29.07.2011. The estimated requirement indicated in the Tender Enquiry was valued at Rs. 10.45 crores. The Tender Enquiry consisted of 45 items of different sizes and colours of the product, as in the previous Rate Contract for the year 2010-11 which was awarded to the eleven parties who were also  holding the Rate Contract for the year 2009-10. On scrutiny of the tenders for year 2011-12 opened on 29.07.2011, it was found that the difference in quoted prices of different bidders was in a very narrow range and all the tenderers barring one, had restricted the quantity to be supplied by it during the Rate Contract period. Nine tenderers had also stipulated the maximum quantity to  be supplied by them to a particular Direct Demanding Officer (D.D.O.). This
was stated to indicate a pre-determined, collusive and restrictive bidding pattern or cartel formation by the bidders thereby violating the various provisions of the Act.

ISSUE(S):

Only one broad issue. Whether the opposite parties were guilty of Bid Rigging in the Tender ??

CRITIQUE:

While it is best to reserve judgement on the Final decision in the Order of the Commission on whether the parties were actually guilty of Bid Rigging (For all we know, they actually were), the reasoning used to arrive at the conclusion both by the D.G. and the C.C.I. definitely merits some assessment:

1.  The fact that the same set of bidders/manufacturers have been bidding consistently since the past few years cannot be a sufficient ground to accuse them of Bid Rigging. This is because if the bidders have over time come to understand the system and have learnt to bid intelligently, it shows that they’ve been smart, but certainly cannot clearly point to Bid Rigging.

2. Following from the above, the quantity restrictions could have easily been a move of efficiency to optimize production with maximum possible profits, again a consequence of having been smart enough to understand the modalities of production and supply of the product in the present tender.

3. It was pointed out on behalf of the opposite parties at the very outset that the units against which the investigation was ordered by the Commission were small/ micro enterprises enjoying certain concessions/ exemptions from the Government of India and the state Governments.

4. The D.G. took into account a meeting organized by Federation of Industries of India (F.I.I.) on 20.10.2009 to presume that the opposite parties could have shared the information and therefore, there was meeting of minds. Frankly, this is a bit absurd. It is one thing to infer such a conclusion  when the association was one specific to the industry, e.g., in the Cement Cartel Case. However, to assume similar conclusions in the case of a general industry body is in my respectful view pushing the ambit of circumstantial evidence in Competition Law a bit too far. Furthermore, there does not seem to have been any evidence to suggest that any of the opposite parties discussed the particular Rate Contract in the meeting.

5. Both the D.G. and the Commission seemed to have omitted considering that fluctuation in the prices of raw materials is not a good enough indicator to determine cost for two reasons. Firstly, sensible industries do not buy raw materials at spot rates. They buy them under long term contracts at fixed rates. Secondly, manufacturers will often hedge against the cost of the raw materials to ensure effective cost considerations both during production and accounting.

6. Practical experience while dealing with the government is a good enough reason for anybody to impose quantitative restrictions on production. Ask any businessman having to deal with the government. The unanimous opinion will be that it is a headache when it comes to demand, supply and payment for providing goods and services !!

In conclusion, to reiterate, it is quite possible that the opposite parties actually were guilty of Big Rigging, and in fact, there are certain evidences unearthed by the D.G. in it’s favour. What I really want to indicate through this post is that if the reasoning in Orders are going to be so flawed or open to loopholes and cracks of ambiguity, then it will become all the more easy to defend against them in Appellate forums.