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.
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. 🙂
Achromic Point is organising a Business Program on “Takeover Code and Competition Law” scheduled in Hotel Eros in New Delhi on 21st December 2012.
Topics being Covered:-
• SEBI Takeover Regulations-An overview and critical analysis of Important Definitions
• Reporting, Disclosures, Indirect Acquisition and Open Offer, Public Announcement and process to be followed for Voluntary Offer and Compulsory Offer
• Overview of Competition Law
• Anti Competition Agreement, Abuse of Dominance, Combination Regulation of Combinations (Mergers & Acquisitions)
For more details and registrations, please Provide your Contact Details :-
Email:- billing@achromicpoint.com
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.
I recently wrote a post titled “A Few Thoughts on Competition Law in the Technology and Media Sector” for the India Law and technology Blog. To read the article, please click here.
At the very outset, it should be mentioned that the speedy clearance for the proposal of combination of The Walt Disney Company (South Asia) and UTV Software Communications Limited is encouraging, despite the apparent staff shortage at the CCI. However, while I find no reason as of now to oppose the merger, the reasoning of the Commission on a certain ground is questionable and does lay some credence to the criticisms leveled against the Commission on the reasoning of its orders.
The Commission seems to have relied heavily on the fact that Disney is primarily an English broadcasting medium whereas UTV is a Hindi broadcasting medium. Such reasoning is unsound and questionable. The language of communication in any merger of broadcasting or media companies is irrelevant. What is relevant is the impact which the merger would have on the entertainment industry, and consequently, the audience as a whole. Assuming hypothetically that the merger would result in dominant position in the media entertainment market for Disney, the language of broadcasting would not matter in case it tried to abuse its dominance. If Disney had to do so, it would do it by asserting itself in the industry as a whole, not in the Hindi or English segment specifically. In other words, the ‘relevant market’ to be determined should not be based on the language of broadcasting but rather the entire broadcasting industry as a whole.
The Order can be found here.
Much has been said about the notification empowering the Competition Commission with its full merger control powers (as usual, I am late in publishing this post. I really must learn to be more punctual with this blog). To summarise, “the Central Government hereby appoints the 1st day of June, 2011 as the date on which Sections 5, 6, 20, 29, 30 and section 31 of the said Act shall come into force.”
However, the same notification also exempts, “in public interest”, the “group” exercising less than fifty percent of voting rights in the other enterprise from the provisions of Section 5 of the Act for a period of five years. At the same time, the Central Government has also again, “in public interest”, exempted an enterprise, whose control, shares, voting rights or assets are being acquired has assets of the value of not more than 250/- crores or turnover of not more than 750/- crores from the provisions of Section 5 of the said Act for a period of five years.
While what construes as “public interest” is subject to interpretation by the reader, what is not subject to interpretation is the fact that the exemptions more or less render the notification of the above mentioned sections, particularly Sections 5 and 6, worthless and as good as not having been notified at all. In fact, when read carefully, it is evident that the exemptions are in fact, clearly NOT in public interest.
Firstly, looking at the exemption of groups, it is evident that consequent to the exemption, any such “group” as defined in the act can effectively acquire voting rights in an enterprise through stock purchase, thus controlling the company. Since the term “group” has been used under Section 5(b)(ii) of the Act, the purpose of this part, i.e., to prevent combinations of or among enterprises engaged in production, distribution or trading of a similar or identical or substitutable goods or provision of a similar or identical or substitutable service, remains unfulfilled in preventing horizontal mergers inhibitory to competition in the market and the growth of a dominance of a single group in the relevant market.
Secondly, the exemption relating to acquired enterprises in even more disastrous in consequences than the previous one. It blatantly allows a larger enterprise and one endowed with considerably large pool of resources (which most large enterprises without a doubt have) to buy out any other comparatively smaller venture which has the potential to or is already building up a competitive position in the market. The acquired enterprise having been exempted, such acquisitions cannot fall under the regulatory jurisdiction of the CCI.
An argument may be raised that any such merger or acquisition would still be subject to the procedure of approval under the Companies Act, 1956. However, with all frankness, taking into account real practice, the procedure laid down under the above act under Section 372 is not an effective mechanism to check or determine the effect of an acquisition or merger on competition in the markets. Sanctions are usually granted with little objection, and the procedure relates more to internal formalities within the companies rather than regulatory external control.
On a sarcastic note, maybe “public interest” means not the interest of the citizens of India and the Indian market, but rather the “public” government.
Indian Competition and Anti-Trust Blog 