There IS a Better Way to Call India: A Quick Comment On Competition Law And Advertising.

In all the chaotic hullabaloo which arose on Airtel’s VoIP Data charges issue (detailed article on the issue currently in progress), another protest which drew comparatively little attention (probably due to the substantially lesser individuals/entities it affected) was the protest by International Long distance(I.L.D.) Operators against the Company’s practice of advertising it’s own VoIP Application Airtel Talk over long distance calls. Specifically, a few seconds before connecting the call.

I am a total outsider to the precise details of the case, and the facts are also disputed (I.L.D. Operators claim the advertisement was run selectively only on those networks with whom Airtel had not entered into collaboration agreements. Airtel denies this and claims that the advertisement was played on all networks equally without any discrimination.) But it did get me thinking on the issue of Advertising in Competition Law.

Prima-facie, one would consider advertising and competition law as congruous to each other. After all, advertising is an essential part of the competitive process in any economy. If a consumer is not aware as to what goods and services are on offer and at what price they are on offer, he or she will be unable to choose between the suppliers of the goods or services, and therefore, competition between suppliers may get diminished. But in this imperfect and admittedly anti-competitive world that we live in, it never is that simple. There are two different scenarios which need to be considered while addressing the issue of advertising and competition law.:

Individual Advertising

Individual Advertising is what I referred to above, i.e., an individual entity choosing to advertise it’s products with the aim to grab market share from competitors in the same sector. This would generally not be subject to perceived anti-competitive harm. Misleading and false advertising, including comparative advertising, may be concerns, but in India they would dealt before other fora. There is however some literature which suggests that advertising paradoxically carries with it an inherent anti-competitive effect as advertising costs act as a serious barrier to the entry of new entities wishing to enter a market which is already dominated by a few relatively large competitors, especially in markets which inherently require enormous amounts to be spent in building up a brand name for the product/company. In fact, Bork has even gone so far as to state that it should be considered as a Barrier to trade !! (See Robert H. Bork, The Antitrust Paradox.)

Horizontal Agreements on Advertising

This refers to agreements among competitors in a market, and needless to say, these are a bit problematic. Any agreement among entities which restricts advertising would generally be considered as an anti-competitive agreement.

However, the reaction of the European Commission (E.C.) has been mixed depending upon the facts and circumstances of each case. While in the case of Belgian Roofing Felt, OJ [1986] L 232/15 (later upheld on Appeal in Belasco v. Commission, [1989] ECR 2117) the Commission ruled against joint advertising which led to a uniform image of products in a market wherein individual advertising would have facilitated differentiation, and consequently competition, on the other hand, in Re CECIMO, OJ [1969] L 69/13 and UNIDI, OJ [1984] L 322/10 (later upheld on Appeal in ANCIDES v. Commission, [1987] ECR 3131), it was accepted that it is sometimes desirable to rationalise and coordinate advertising efforts while imposing certain conditions on such coordination.

Post Script: The Advertising Market

As a post script, other than the above, an important area where competition needs to be maintained is the advertising market itself. It is important that the advertising media itself should function in a competitive manner free from any anti-competitive practices, including (but not limited to) any practice which might lead to reduction of advertising space in the market. This has been affirmed in the U.S. as far back as 1951 in Lorain Journal Co. v. United States, 342 US 143 (1951). One such allegation has already arisen before the C.C.I. is the case of Advertising Agencies Guild v. Indian Broadcasting Foundation, Case No. 35 of 2013. Though that particular Information was closed, the currently running Google Investigation before the C.C.I. involves similar issues (among others) and one will have to wait and watch for further competition law developments in this area.

What Goes Around, Comes Around.

VERIZON’S HUGE VICTORY IS ABOUT TO TURN INTO A HUMILIATING DEFEAT.

(Ya the Justin Timberlake image may not be the most appropriate. 🙂 )

G.C.R.: Immunity, Sanctions & Settlements.

This is admittedly super cool and super useful !! The Global Competition Review (G.C.R.) has an amazing “Know-How” Compilation on “Immunity, Sanctions & Settlements” across all major competition jurisdictions. So if you want an answer to a query related to sanctions and immunity’s across various jurisdictions or even for a particular jurisdiction, simply tick mark the relevant boxes and the answers come right on. 🙂 Even important F.A.Q.’s have been compiled for ease of access and the answers have also been compiled by authoritative practitioners in he field in the relevant jurisdictions. On a cursory glance, I’ve found almost all basic questions covered within them and in some even more.

There are similar compilations for “Private Litigation” and “I.P. & Antitrust”.

By far one of the coolest initiatives in competition law jurisprudence. (Ya I know I sound like a total nerd. :D)

Gabriele Accardo, Vertical Antitrust Enforcement: Transatlantic Perspectives on Restrictions of Online Distribution under E.U. and U.S. Competition Laws.

As a follow up to my previous post, I recently read a very nice Working Paper by Gabriele Accardo, titled “Vertical Antitrust Enforcement: Transatlantic Perspectives on Restrictions of Online Distribution under E.U. and U.S. Competition Laws.”

The paper lucidly discusses the growth, economics, advantages and disadvantages of the E-Commerce Sector and looks at how E.U. and U.S. competition laws deal with restrictions of online sales in distribution agreements. It discusses how “…The growing importance of online commerce highlights how vertical competition law enforcement is still an important building block of competition law policies, both in the U.S. and in Europe”. While discussing the difference in approach between the two jurisdictions, the paper highlights the new competition law rules adopted by the E.U. specifically targeting restrictions of online sales in distribution agreements and explains why the U.S. antitrust doctrine is less concerned about the need to adopt specific rules applicable to restrictions of online sales.

I.C.N. Merger Workshop to go Online !!

In an excellent initiative by the C.C.I. (especially for the “aam aadmi” bourgeoisie like us who can’t get in !!), the Commission will be broadcasting the sessions of the I.C.N. Merger Workshop, 2014, which starts from tomorrow, on an Official Youtube Channel created exclusively for the Conference.

It is still not entirely clear whether the entire event will be broadcast live or only the relevant speeches by the speakers, but either way, it a great way to finally get a chance to listen in on the conference.

The link to the channel can be found here.

International Conference on Competitiveness, Competition Regulation and Corporate Strategy.

“Indian Institute of Management (IIM) Kashipur, and Indian Institute of Management (IIM) Raipur- premium institutes of management education set up by the Government of India – are pleased to announce an International Conference on Competitiveness, Competition Regulation and Corporate Strategy on December 03, 2014 at Indian Habitat Center, Lodi Road, New Delhi, India. The conference is being organized by the Centre of Excellence on Competitiveness (“CoE”), IIM Kashipur and IIM Raipur India in association with Corporate Knowledge Foundation (CKF) and AZB & Partners as Knowledge Partner. The conference is expected to be attended by company CEOs, top business executives, senior policy makers, eminent lawyers, economists, researchers and thought leaders from India & Abroad.”

The Conference is on 3rd December at the Indian Habitat Centre (I.H.C.), Lodhi Road, New Delhi.

For further details, click here.

I.C.N. Merger Workshop, 2014 – Delhi (1st and 2nd December, 2014)

“The 2014 I.C.N. Merger Workshop will be hosted by the Competition Commission of India (C.C.I.) under the auspices of the I.C.N., and is a continuation of the series of agency-led conferences that began in 2002. During the two-day Workshop, discussions will focus on the role of international cooperation in merger enforcement. The workshop will take stock of the extant mechanism for international cooperation between competition agencies in merger enforcement and focus on building an effective framework for international cooperation in the areas of merger remedies, and outreach initiatives in the context of merger control.”

For details, see here.

The E – Commerce Debate: A Different Perspective.

The business and commercial class of the Country has for quite some time now been debating about the predatory effects of e-commerce websites in India, with Flipkart in India and Amazon abroad (see our previous posts here and here) being predominant recipients of the flak. And publishing houses are now the latest to enter the fray.

Many of our opinions would be repetitive to those already cited innumerable number of times in the media, so we’ll keep them out of this post. Rather, I want to discuss a perspective which is being discussed less on public fora.

Firstly, a Times of India Article has claimed to cite sources in the C.C.I. stating that the practice will not be predatory pricing as the relevant market would be the entire retail market of India, wherein e-commerce websites possess a meager one to two percent share. I am not aware about the authority of the papers “sources”, but I would respectfully beg to differ with the quotes in the piece. The relevant market can easily be differentiated to be the “E-Commerce Retail Market” and not the entire Retail Market as a whole. The most important reasoning for the definition is the presently low internet penetration in the Country. People without access to the internet (which comprises a large majority of the population, am sure everyone would agree) cannot possibly buy any items from these websites (or even choose to) and therefore would have to compulsorily rely on Brick and Mortar stores. Furthermore, internet users buying from these sites can be considered a different “Class” unto themselves, especially for certain category of items, which may result in a drastic fall in Brick and Mortar retail sales of certain category of items, for example, especially books, which these internet users may not buy anymore (evidence for this is quite significant).

I do however, concede that the case becomes a bit complicated in light of recent developments, i.e., Amazon deciding to open it’s first “Brick and Mortar” store in New York. Indian E-Commerce start-ups are also not far behind., which will require an analysis as to how much business would be sourced from these stores to the E-stores, and what will have to be taken into consideration is that these Brick and Mortar stores are being/would be set up in metropolitan cities or large towns and would have a relatively small “influential radius”. Add to this the trend in India where a number of individuals, especially individuals below the age of thirty, prefer to browse through the Brick and Mortar Store, check and choose what they like, and then go online to find the best deal among these e-commerce websites.

Secondly, the factual question which needs to be clarified, (as aptly stated here), is the contours of the agreements which are being entered into between the websites and the sellers/retailers. There have been too many contradictory statements in the media, with retailers often claiming they lack bargaining power against the likes of Flipkart and Amazon, whereas one reads counter accusations from the websites that the sellers themselves set the price and they as mere intermediaries. What also needs to be clarified factually is which party decides on the discounts, including how much to give and in what proportion are the burden of the discounts borne between the parties. In case evidence is found that it is the websites who bare the burden of the discount, it may bring about a case of atleast Margin Squeezing, if not Predatory Pricing. Granted, the concept of Margin Squeezing would be an absolutely new concept to be introduced into Indian competition law jurisprudence, but it is certainly recognised under Section 4(2) of the Act.

In conclusion, this is definitely not the last post on this Blog on the issue, but facts do go to show that E-Commerce websites may not be as “destructive” as many (including the author) had predicted. What we see is that a successful company like Flipkart or Amazon cannot absolutely divest itself from the hard and competitive world of Brick and Mortar Retail, but rather is required to augment it with arguably questionable tactic to justify the absurd valuations to which the companies have been raised.