NLSIU Certificate Course on Competition Law and Practice.

N.L.S.I.U., Bangalore is holding a three day Certificate Course on Competition Law and Practice from the 14th of November, 2014 to the 16th of November, 2014.

“In order to promote research, create awareness amongst professionals and students, to further endow them, and build their capacity and knowledge, in the field of Competition Law and Market Regulation, National Law School of India University, Bangalore is organizing a Three Day Non Residential Certificate Course on Competition Law in India.”

For further details, click here.

A Nobel for Competition Law. :)

Well, to be precise, it’s a Nobel for the Economics of Competition Law. And there can be no doubt that the man who’s picture you see above deserves it hands down !! Jean Tirole is the official winner of the 2014 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2014 “for his analysis of market power and regulation”. His work is extensive and if I start off, this is going to become a fairly long post, so I managed to find a fairly decent summary for our readers to get to know him and his work better.

UPDATE: Also find an Article by Prerna Katiyar titled “Jean Tirole: Why the Economics Nobel prize winner’s research is important for India” recently published on 19th October, 2014.

Director’s Brought Under The C.C.I. Scanner

The post below is by Kritika Sethi, a 4th year B.A. LLB. (Hons.) Student at NALSAR, Hyderabad. In it, she examines the Director’s Fiduciary competition law liability in light of the recent C.O.M.P.A.T. Order in National Stock Exchange v C.C.I., Appeal No. 15 of 2011.

The Competition Appellate Tribunal (C.O.M.P.A.T.) in its recent Order dated 05.08.2014 in the case of National Stock Exchange v C.C.I., Appeal No. 15 of 2011, has upheld the Order of the C.C.I. in MCX Stock Exchange Limited v. National Stock Exchange of India Ltd., Case No. 13 of 2009 [Majority Order, Dissenting Order, Section 38 Order] in holding the Company liable for abuse of its dominant position in the currency derivative business segment.

The case arose out of an information which was filed by the MCX Stock Exchange (“MCX”) against National Stock Exchange of India Ltd.(“NSE”) wherein it was alleged by the former that the latter has abused its dominant position in the Currency Derivatives (“CD”) segment. CD was introduced in accordance with the recommendations of R.B.I. and S.E.B.I. in August 2008. NSE had started its operation in the CD segment from that month itself. Further, vide its circular dated 26.08.2008, it had announced a waiver of transaction fee in all the currency future trade which included the CD segment. This waiver was extended from time to time. This extension was in operation when Section 4 of the Competition Act, 2002 was notified in 2009. MCX and NSE were the only active players that dealt in the currency derivatives market. The former operated in the CD segment only. It was not given the license to operate in any other segment like Stock Futures and Options, etc. On account of the waiver of the transaction fees and other associated charges in the CD segment by NSE, MCX was forced to waive various charges as well. It could not levy any other charge for income generation such as, inter alia, annuals subscription fees, and advance minimum transaction fees. By virtue of this waiver, it suffered huge losses. Further, NSE was charging annual subscription fees in the other segments, where MCX didn’t have a license to operate. Therefore, it was alleged by the MCX that this had a potential of removal of the only competitor and any potential competitor in the CD market due to its non-profitability.

NSE was held to be a dominant player in the market on account of its resources, size, higher degree of vertical integration, power in the market, absolute dependence of consumers etc. NSE had a higher market share than MCX and was financially stable and sufficiently resourceful to survive in the market despite waiver of any transaction charges, which was not the case with MCX.

The point to be appreciated is that the additional fiduciary duty which has been imposed on the director’s of the Company to be cautious in not violating the Competition Act, 2002. The Companies Act, 1956 did not codify the myriad of duties of the director’s of a Company and so the Courts had to rely upon common law in order to cast any duty on the directors. The Companies Act, 2013, on the other hand, recently codified various duties of a director of a Company under Section 166 of the Act. It provides for two kinds of duties i.e. duty of care, skill and diligence and fiduciary duties. One recent addition is the ‘fiduciary antitrust duty’ pursuant to which, if the company is in a dominant position in the market, the directors have a duty to take precautions so as to not to abuse the same. The Competition Act, under Section 4, does not proscribe enjoyment of a dominant position by an enterprise in the market. It is its abuse which is penalised under the Act.

The Tribunal opined that NSE must have known about the “activation” of Section 4. The Tribunal was “perplexed” when, after going through the minutes of the Pricing Meeting of the company, there was no mention of Section 4 being taken into consideration while deliberating on whether to extend the fee waiver on March 30, 2009 till June 2009; whereas the section was notified on 20 May 2009. The tribunal had expected NSE to take note of the activation of Section 4 of the Act as and when it was notified.

This ruling can have an immense impact on other companies which are assumed to be aware of their dominant position in the market. Its impact on cases brought up in the future will have to be analysed to fathom the scope of such a duty.

The penalty imposed on NSE by the CCI (and as upheld by the COMPAT), has been stayed by the Supreme Court by its Order on Sept 23, 2014.

The Speed Limit Debate

As the Network Neutrality debate rages in the U.S. over the Comcast – Time Warner Merger, here are two interesting pieces on the flak which Comcast is receiving. It goes without saying, Comcast isn’t happy and it seems to have started losing it’s cool over the issue.

The first is an article on how Network Neutrality is already being subverted through the indirect route of the broadband network. This is not surprising, as the potential for this abuse was already pointed out some time ago by Susan P. Crawford in the Yale Law and Policy Review.

The second is a novel solution (and one which I really liked) by BitTorrent, Inc. CEO Eric Klinker on reaching a middle ground on the Network neutrality debate and torrent websites: pay the torrent websites to slow down rather than the websites paying the network provider for equal treatment at par with other websites. Interestingly, BitTorrent, according to the post, “has voluntarily remained in a “slow lane” of sorts for several years because of the uTorrent Transport Protocol (uTP), which reduces the speed of data transmissions when they might harm other applications. BitTorrent and its users don’t get paid for relying on this protocol, of course, but Klinker suggested they should.”

Latest Network Neutrality Update.

The top news is of course, September 10 (Wednesday), which will see it headlined as “Internet Slowdown Day”, a symbolic protest in favour of Network Neutrality. The protest will involve websites posting symbolic “loading” icons on their sites to demonstrate what could happen to them if the F.C.C. comes through with it’s plan to sanction Internet “fast lanes” that would completely kill off Network Neutrality. And make no mistake, the concept is gaining ground. A number of major websites have committed their participation to the event, including major porn websites. 😉

In other news, Tim Wu is entering politics !! (Or atleast trying to.)

Invitation to Fill C.O.M.P.A.T. Vacancy

The Ministry of Corporate Affairs has released an Internal Communication within certain departments, calling for Applications for the post of “Member”, Competition Appellate Tribunal. I found a copy of it which was circulated in Ministry of Finance, Department of Revenue, Central Board of Excise and Customs calling all Chief Commissioners and Director General’s interested to apply.

Actually, it was released on 12th June and the copy which is on the link was circulated within the Department on 26th June, so am presuming the appointment process must be almost over by now. About time. There is a tonne of work waiting for the Tribunal when it starts sitting again.

P.S.: In related news, Mr. U. C. Nahta has been appointed as a Member of the C.C.I. He belongs to the Indian Corporate Law Service and was formerly the Director (Inspection & Investigation) in the Ministry of Corporate Affairs. He will serve a full term of five years.

Round One To Network Neutrality !!

T.R.A.I. JUNKS PROPOSAL TO MAKE WHATSAPP, VIBER AND SKYPE PAID.

C.C.I. Double Standards Or Bad Reporting ??

The recent reports on the alleged demand of the C.C.I. against a number of builders and C.R.E.D.A.I. “to respond to findings by its investigation arm that they engaged in unfair trade practices such as one-sided contracts with inadequate disclosure” have generated a substantial amount of hype and glee and grimace alike. But to be honest, the news report has (at he risk of sounding stupid) left me confused more than anything else. Listed below are the reasons for my confusion:

1. The report states that the Commission began investigations based on a complaint by an individual, Jyoti Swarup Arora, against Gurgaon-based builder Tulip Infratech, the director of town and country planning, Haryana, and the Haryana Urban Development Authority. However, memory served me correct, as I clearly remember the Case being dismissed at the threshold itself. (It is Case No. 7/2011. Order dated 06.04.2011). There is also no supplementary Order of a later date available on the Commissions website therefore it is difficult to believe that the matter was appealed before the Competition Appellate Tribunal and was referred back from there.

2. As per the report, the “CCI has sought responses from Unitech, Oberoi Realty, BPTP Ltd, Gaursons India, K Raheja Corp, Amrapali Group, Supertech Ltd, Tata Housing Development Company, Ansal Properties & Infrastructure, Purvankara Projects, Prestige Estates Projects and Ambuja Neotia Group.The competition watchdog has also sought responses from Avalon Group, Aparna Construction and Estate, Amit Enterprises Housing, Omaxe, Parsvnath Developers, PS Groups Salarpuria Group and Purohit Construction. The Confederation of Real Estate Developers’ Associations of India (C.R.E.D.A.I.) lobby group has also been asked to comment.”

Notwithstanding what has been stated in point one above, there are already cases which have been filed against some of the above mentioned developers which have raised the exact same issues as given the article, and all of them have been dismissed. Assuming the article is not a case of bad news reporting, surely it is nothing less than double standard on the part of the C.C.I., not to mention that those Orders are Orders In Rem, and thus create a clear balance of convenience against these companies which have been showcaused. The Orders are as follows:

Omaxe (Case No. 77/2013 and Case No. 83/2011)

BPTP (Case No. 25 of 2014 and Case No. 33 of 2013 and Case No. 42/2010)

Raheja Group (Case No. 62/2011)

Supertech (Case No. 86/2013 and Case No. 3/2013 and Case No. 28/2012)

Unitech (Case No. 27/2011 and Case No. 21/2011)

Note: Since many of these developers are also involved in commercial construction market, I have chosen to exclude the Informations/Complaints filed against their commercial/office spaces but rather have limited the Orders on the subject matter at hand, i.e., residential apartments/spaces. But just for the record, all the Orders related to commercial spaces have also been held in favour of the above mentioned developers.

3. To quote directly from the article:

“The complainant alleged an understanding among all real estate players in the market to the detriment of consumers, saying that the code of conduct adopted by Credai indicated collusion among its members. The commission directed the investigation officer to probe the matter after observing that the conduct of Tulip and other members of Credai indicated prima facie violation of the provisions of the Companies Act.”

Not only is the second half of the above quoted stanza factually wrong due to the reasons mentioned in point one, but the very basis of the Complaint/Information as stated in the first half of the stanza is questionable. After all, as per the numerous decisions of the Commission itself, Collective Dominance is presently not recognised under the Competition Act. Furthermore, as the Article creates an impression that these developers are involved in a Cartel through C.R.E.D.A.I., to address this argument, it cannot succeed as the requisites of Section 3(3) of the Act can’t arise and be met in the present case. (There is a reason why all Information’s have been filed under Section 4 of the act.)

I look forward to any form of of clarification or even a correction against me to any and all my doubts. After all, I am purely going by the newspaper report and there is always the possibility that I may have missed something during my analysis.