Category: C.C.I.

N. Sanjeev Rao v. Andhra Pradesh Hire Purchase Association, Case No. 49/2012

The case of N. Sanjeev Rao v. Andhra Pradesh Hire Purchase Association, Case No. 49/2012, which was recently dismissed by the Commission, highlights two important developments which are a must in Indian competition jurisprudence.:

1.  It is necessary that the Parliament pass the Competition Amendment Bill, 2012 (see here and here for our previous posts on the same) at the earliest to recognise the concept of collective dominance under the Competition Act. Personally, I am of the opinion that too many genuine cases are getting dismissed due to this wide lacuna within the Act.

2. The Commission should apply a certain amount of pragmatism while deciding the relevant market in a particular case. For example, in this case, it is obvious that the market should have been, as submitted by the informants, “private auto financiers market in the cities of Hyderabad and Secunderabad, Andhra Pradesh.” The decision of the CCI that there was no case to differentiate private auto financers and other banking/non-banking entities which are in the business of extending automobile finance is clearly erroneous in light of practical realities. It is a well known fact that autowallahs would never qualify for an automobile loan with any decent bank, which is the exact reason why they need to resort to such financers in the first place, thus creating a clear distinction between the two different financial markets.

Belaire owners’ Association v. DLF, Case No. 19/2010 (Supplementary Order)

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The CCI has just come out with the Supplementary Order in the case of Belaire owners’ Association v. DLF, Case No. 19/2010 (Main Order/Supplementary Order) which contains the Modified Buyers’ Agreement (begins from page 25 of the document). A clause by clause analysis of the new agreement would not be only be time consuming (which unfortunately, due to ongoing examinations, I presently don’t have) but would till a large extent be mundane and irrelevant. What is important to summarise are the following points:

1. The CCI has clarified that any such agreement, including the modified agreement drafted by it in this case, would have to comply with the laws and regulations of the respective state (in this case, Haryana) and no agreement, whether framed by the Commission or any other party, could supersede any such Acts,  Rules and Regulations.

2. The CCI decided to basically draft an entirely new agreement along with all the modifications it considers necessary rather than specify specific clauses which require amendment.

Furthermore, this Order in no way affects the merits of DLF’s appeal before the COMPAT. Rather, the reason the COMPAT has directed the CCI to draft a Modified Buyers’ Agreement was to clarify the Commissions stand to help in the effective adjudication of the appeal. 

And So The Lobbying Begins….

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This wasn’t exactly unexpected. After all, there’s a lot of money at stake, so its natural that the cement companies would start pestering the Government to help them get a remedy sometime or the other.

Oh well, is there anything one can do about it ?! As of now, it seems best to just be content with drinking a jug of beer and raising a toast saying “long live the Republic of India !! ”

An Update:

This is probably why the CCI has asked lobby groups to draw up self regulating data-release rules. Better to begin preemptive action. This was at an meeting on “Competition Law & Trade Associations” which was held on 17th December 2012 at the India Habitat Centre, New Delhi. (Photos)

Ajay Devgan v. Yash Raj | This movie has Action, Romance And Monoplistic Practice

Here is my latest post on the India Law and Technology Blog on the Ajay Devgan Films v. Yash Raj Films Order.

Click here to view the post.

P.S.: Also find here Volume 2 of “Fair Play”, the quarterly newsletter of the CCI.

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.

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.

Insurance Management

Apparently, the CCI has sent a letter to the Department of Financial Services last month enquiring whether its  directions to four insurance companies to avoid any competition among themselves would lead to some sort of cartelisation. to quote from the report:

“….It asked the finance ministry to share the letter with it along with the justification for the move. In the absence of any reply from the finance ministry on the issue so far, the CCI is now planning to send a notice to the department to answer its queries.”

Now frankly, if the government wants the existence of a tacit cartel between four of the biggest Indian Insurance companies, then the Commission cannot do much about it. Government intervention, no matter how anti-competitive it may seem, is as of now justifiable under Indian competition law.

However, what is surprising is that the government seems to be least concerned about the procedure to be used by it in order to do so. Section 55 clearly allows the Central Government to issue directions to the Commission whenever it deems necessary on questions of policy. Furthermore, Section 56 also allows the Central Government to supersede the CCI, with Section 56(1)(c) clearly allowing such supersession when “circumstances exist which render it necessary in the public interest to do so.” by notification and for reasons to be specified therein.

We have highlighted this problem earlier in the Cement cartel case, wherein again the collection of information was not exempted by the Government via a notification and hence, became a ground for the action against the CMA on the grounds of cartelisation.