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Exercising their Writ: Courts and Competition Enforcement in India

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This presentation attempts to compile all landmark judgments which have led to the evolution of modern jurisprudence on competition law in India

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Exercising their Writ: Courts and Competition Enforcement in India

  1. 1. Exercising their Writ: Courts and Competition Enforcement in India 1st UCL Conference South Asian Competition Law Conference At UCL, London 06 November 2018 MM Sharma Head, Competition Law and Policy
  2. 2. SCHEME OF PRESENTATION 1. Role in Regulatory Structure of the CCI 2. Role in Enforcement of the Competition Act,2002 (“Act” )  Procedural issues  Due process challenges  Substantive & Interpretational issues  Sectoral overlaps  Gun jumping 2
  3. 3. Role in Regulatory Structure  Though enacted in 2002, the Competition Act, 2002 (Act) could not be enforced due to challenges to the structure of CCI itself before the Supreme Court of India by an individual – chaired by bureaucrat instead of a judge- combining adjudicatory and regulatory functions . (Brahm Dutt v. Union of India, AIR 2005 SC 730)  Central Government proposed amendments in the Act to separate regulatory and adjudicatory functions.  The proposed amendments (Amendment Act, 2007) separated the regulatory and adjudicatory powers of the erstwhile CCI as follows: (a)Regulatory powers - to be exercised by the re-constituted CCI; (b)Adjudicatory powers- to be exercised by an Appellate Authority constituted in the nature of a judicial body. 3
  4. 4. Role in Regulatory Structure  The Amendment Act, 2007 led to setting up of the Competition Appellate Tribunal (COMPAT) to hear appeals against CCI orders.  Consequently, the main enforcement provisions relating to prohibition of anti-competitive agreements and abuse of dominant position (Section 3 and 4) and regulation of combinations i.e. merger control provisions of the Act (Section 5 and 6) were brought into force only on 20th May 2009 and 1st June, 2011 respectively.  The implementing regulations under the Act were also published in 2009. 4
  5. 5. Role in Enforcement of the Act  Courts in India, including COMPAT, have played a decisive role in streamlining the jurisprudence on enforcement of the main provisions of the Act by CCI- mainly in relation to the manner of exercise of powers of inquiry into anti-competitive agreements and/or abuse of dominant position and few “gun jumping” cases by CCI .  Due process challenges admitted by COMPAT – quashed many CCI orders on violation of the principles of natural justice.  Procedural challenges admitted by Courts but challenges to CCI jurisdiction on issues of sectoral overlap or forum shopping discouraged.  Few judgments on substantive law 5
  6. 6. Role in Enforcement of the Act Supreme Court- Procedural Challenge- Whether parties have right to be heard before formation of prima facie view by CCI- Whether order passed by CCI u/s- 26(1) of the Act is appealable ? Competition Commission of India (CCI) vs. Steel Authority of India (SAIL) and Ors., (2010) 10 SCC 744 (9.9.2010) Direction given by the CCI to the Director General (DG) u/s-26(1) of the Act to investigate an alleged anti-competitive conduct is merely administrative and inquisitorial in nature; CCI not expected to give notice to the parties or hear the parties at the preliminary stage before directing investigation by DG u/s- 26(1) of the Act; But the CCI is expected to record at least some reasons while forming its prima facie opinion i.e. while directing investigation by DG u/s- 26(1) of the Act. Prima facie order passed by CCI directing investigation by DG u/s- 26(1) of the Act cannot be challenged in appeal before COMPAT. 6
  7. 7. Role in Enforcement of the Act Delhi High Court –Limits DG’s power not to investigate into violation beyond specific direction by CCI in prima facie order u/s 26(1) of the Act. Grasim Industries Ltd. vs. Competition Commission of India - 206 (2014) DLT-42 (17.12.2013) DG not authorized to carry out investigation into any allegation of violation in an information which , in the first instance was not considered by the Commission while forming its opinion with respect to existence of a prima facie case of contravention of the provisions of the Act. The Act contains no provision authorizing the DG to investigate any contravention…. without a direction of the Commission u/s- 26(1). The formation of a prima facie view is a sine qua non for DG investigation. DG report is in the nature of recommendations, which do not bind the Commission. In this case CCI directed DG to investigate alleged violation of section 3(3) (a), (b), (c) but DG report recommended abuse of dominant position by Grasim u/s 4 of the Act. 7
  8. 8. Role in Enforcement of the Act Delhi High Court –Whether investigation by DG can be stayed pending examination of challenge to the manner of conduct of dawn raid by DG before the High Court ? Competition Commission of India vs. JCB India Ltd. & Ors.- LNIND 2014 DEL 5585- LPA 715/2014 (02.12.2014) Pending the challenge to the CCI prima facie order (directing investigation against JCB) before Delhi High Court in which the interim order allowed the investigation to continue, DG conducted a “dawn raid” , the manner of which was challenged again JCB resulting into passing the stay order dated 26.09.2014 against further investigation by the Single Bench. In the appeal filed by CCI before the DB to challenge the stay order, JCB objected to the locus of CCI to file the LPA when the original writ petition was still pending before the Single Bench. It was held that CCI did have the locus to prefer the appeal when its regulatory powers in relation to investigation process are hampered. The matter is still pending in the Single Bench . 8
  9. 9. Role in Enforcement of the Act Madras High Court –Whether DG can investigate parties other than those originally impleaded order u/s 26(1) of the Act. Hyundai Motor India Limited and Ors. vs. Competition Commission of India - (2015) 127 CLA 46 (Mad.): 2015 (3) CTC 290: (2015) 2 MLJ 560 (04.02.2015) Information was filed against Honda Siel cars, Fiat and Volkswagen for refusal to make genuine spare parts of their respective brands of cars freely available in the after market for OEM spare parts. On starting investigation DG found similar anti-competitive conduct being committed by Hyundai Motors , amongst others OEMs. DG placed this additional information before CCI with a memo requesting for including Hyundai and other OEMs in the investigation. CCI passed fresh prima facie order dated 22.06.2011 u/s 26(1) against Hyundai and other OEMs for investigation. Reliance was placed on the Grasim case decided by Delhi High Court. But Madras High Court did not find that the DG had exceeded its jurisdiction since it did not suo moto initiated the investigation but on the basis of CCI second prima facie order dated 22.06.2011. 9
  10. 10. Role in Enforcement of the Act COMPAT–Whether CCI should go into the merits or facts of the case in detail , while making a prima facie view u/s 26(1) of the Act ? North East Petroleum Dealers Association v CCI & Ors.,-Appeal No. 51/2014 ( 26.11.2015) Gujarat Industries Power Co. Ltd. vs. CCI & GAIL -Appeal No. 3/2016 (28.11.2016)  While examining the information u/s 26(1) of the Act to determine whether a prima facie case exists to merit DG investigation or not, CCI can not delve deep into the merits of the allegation, rely upon undisclosed material and record a finding. CCI is required to form a prima facie opinion on the basis of averments or contents in the information and can not make a detailed examination of the allegations in the information or evaluate/analyze the evidence produced with the information, particularly, after holding a preliminary conference. 10
  11. 11. Role in Enforcement of the Act Delhi High Court –Whether or not parties under investigation before the DG can be assisted by their counsels including during recording of statements before the DG? Oriental Rubber Industries Pvt. Ltd. vs. CCI - WP (C) 11411/2015 (22.04.2016) CCI vs. Oriental Rubber Industries Pvt. Ltd. – LPA No. 607/2016 (24.05.2018) Held that right to practice is not only a statutory right under the Advocates Act, 1961 but also a fundamental right of advocates. Section 30 of the Advocates Act, 1961 confers an advocate right to practice before any person legally authorized to take evidence and since DG is so authorized under the Act, advocate has right to practice before DG which would include accompanying a person who has been summoned by the DG for investigation. In the LPA filed by CCI, the DB however directed the DG to ensure that ‘the counsel does not sit in front of the witness but is some distance away and the witness should be not able to confer or consult her or him 11
  12. 12. Role in Enforcement of the Act Delhi High Court – (1) Whether DG can investigate without specific prima facie order against a party u/s 26(1) of the Act (2) Whether prima facie order can be recalled/ reviewed after DG investigation report (3) Whether CCI can hold simultaneous inquiry under section 48 of the Act against the Managing Director and other officials of the company without first arriving at a finding of violation of anti-competitive conduct against the company ? Cadila HealthCare Ltd. & Anr. vs. CCI & Ors.- W.P.(C) 2106/2018 (09.03.2018) Cadila HealthCare Ltd. & Anr. vs. CCI & Ors.- LPA 160/2018 & CM APPL. Nos. 11741-44/2018 (12.09.2018) (1) Relied upon SC judgement in Excel Crop and differed from Grasim Case – held that DG can investigate without any specific finding of a prima facie case against a party, if its named in the information. (2) Distinguished from the facts in the Google Case- Prima facie order cannot be recalled or reviewed after completion of investigation. (3) Simultaneous inquiry against the Managing Director and other officials of Cadila can be held without first finding Cadila guilty of the anti-competitive conduct. 12
  13. 13. Role in Enforcement of the Act Delhi High Court -Existence of an arbitration agreement would not oust the jurisdiction of CCI. Union of India Vs Competition Commission of India (2012) AIR 66 (DelHC)(23.02.2012) Delhi High Court-Proceedings before CCI under the Act are not barred due to previous decisions of Uttarakhand High Court under principles of res judicata provided the scope of the petitions filed before the Uttarakhand High Court and the matter brought before CCI are materially different. Uttarakhand Agricultural Produce Marketing Board and Ors Vs Competition Commission of India-W.P (c) 10411/2016/ (22.09.2017) 13
  14. 14. Role in Enforcement of the Act Delhi High Court – Whether Writ Petition can be filed if no appeal lies u/s 53A of the Act?- Jyoti Swaroop Arora vs CCI and Ors. -W.P.(C) No.6262/2015 (16.05.2016) Held that if on the facts of the case there was no scope for intervention by the High Court and Writ jurisdiction can not be exercised to examine the correctness of the conclusions drawn by CCI, an expert body. COMPAT also refused to entertain appeals against orders of closure of cases passed by CCI where DG had found violation- grey area u/s 26(8) of the Act. Jindal Steel & Power Ltd. vs CCI & Ors.- Appeal No. 45/2012 (03.04.2013) M/s. Arshiya Rail Infrastructure Ltd vs CCI and Ors. -Appeal No.136/2012 (04.04.2013) 14
  15. 15. Role in Enforcement of the Act COMPAT- Due process challenges- When CCI disagrees with the findings of no violation recorded by the DG, then it shall indicate the reasons for such disagreement and issue notice to the parties incorporating the reasons of disagreement and give them opportunity to file their replies/ objections, and after receiving replies of the parties , it shall hear them before passing order of violation u/s 27 of the Act. Interglobe Aviation Ltd. (IndiGo Airlines) and Ors. Vs. The Secretary, Competition Commission of India & Ors., Appeal No. 07,8 and Appeal No. 07,8 and 11/2016 ( 18.04.2016) ( Fuel surcharge case) filed by Express Industry Council of India against major airlines. COMPAT- Due process challenges- After oral hearing was completed, final order signed by 2 new members who did not hear- Order quashed on grounds of violation of principles of natural justice. All India Organization of Chemists and Druggists v. Competition Commission of India, Appeal No. 56/2014 (24.04.2015) 15
  16. 16. Role in Enforcement of the Act COMPAT- Due process challenges- During oral hearing, though Chairman was not present yet he signed the Final Order- held the ability of the Chairman to influence other members cannot be ruled out -Order quashed on grounds of violation of principles of natural justice. Ambuja Cements Ltd. & Ors. vs CCI & Ors. Appeal No. 125-129/2012 (11.12.2015) Delhi High Court –Due process challenges- Cross examination of witnesses -other parties need not be heard by CCI before allowing application for cross examination during further investigation by DG u/s 26(7) of the Act. South Asia LPG Co. Pvt Ltd. vs. CCI – LPA 857/2013-(03.09.2014) 2014C ompLR285(Delhi), 2014(145)DRJ368 16
  17. 17. Role in Enforcement of the Act COMPAT- Due process challenges- CCI’s disagreement with relevant market determined by DG not informed to the Opposite party before passing final order of violation- quashed on violation of principles of natural justice Board of Control for Cricket in India v. Competition Commission of India,- Appeal No. 17/2013 (23.02.2015) COMPAT- Incorrect determination of relevant geographic market by CCI – led to closing of the case of abuse of dominance against Uber- Order quashed and DG directed to investigate the matter- Whether COMPAT has powers to direct investigation by the DG while quashing CCI Order of closure of case u/s 26(2) of the Act? – ambiguity in language of Section 53B(3)- Order challenged by Uber in Supreme Court. Meru Travels solution Pvt. Ltd vs CCI and Uber India and Ors.-Appeal No. 31/2016 (07.12.2016) COMPAT-Locus standi for filing appeal against CCI orders-only persons aggrieved by the order of the CCI can challenge the CCI’s orders in the appellate forum. Jitendra Bhargava v. CCI and Ors.,- Appeal No. 44/2013 (27.03.2014) 17
  18. 18. Role in Enforcement of the Act Delhi High Court –Interpretational Challenge- Whether Ministry of Railways is an “Enterprise” u/s 2(h) of the Act ? Union of India vs. Competition Commission of India (2012) AIR 66 (DelHC) (20.03.2012) It was urged that operating the Indian Railways was a “sovereign” function and hence excluded from the purview of the Act under the definition of “Enterprise” u/s 2(h) of the Act. Held that there is a "commercial angle" to the services rendered by the Indian Railways and it is not an inalienable function of the State, which is capable of being performed by private enterprises, like in other developed Countries. Court also noted that Central Government had also rejected the request of the Indian Railways seeking exemption from the ambit of Competition Act u/s 54 of the Act . 18
  19. 19. Role in Enforcement of the Act Delhi High Court- Substantive law - Whether CCI has right to review/recall its prima facie order u/s 26(1) of the Act? Google Inc. & Ors. vs. Competition Commission of India & Ors. [2015] 127 CLA 367 (Delhi) ; 2015 CompLR 391 (Delhi) (27.04.2015) Held that CCI has an inherent power to recall its own order finding a prima facie case under section 26(1) of the Act in certain limited circumstances, e.g. where the order was passed by the Commission on account of fraud, misrepresentation or suppression of material facts by the informant or where the allegations are absurd or inherently improbable or where there is an express legal bar to the institutions and continuance of the investigation or where the information / reference / complaint is filed with mala fide or ulterior motives or the like. CCI objection that its power to review its orders u/s 37 of the Act were specifically deleted in the Competition (Amendment ) Act, 2007 rejected. 19
  20. 20. Role in Enforcement of the Act Supreme Court – Substantive law laid on extent of penalty – Whether on the “total” turnover or on the “relevant” turnover. Also clarified procedural issue - Whether DG can investigate into all allegations made in the information in the absence of specific direction of CCI to investigate each of them u/s 26(1) of the Act directing investigation by DG? Excel Crop Care Ltd. vs. CCI & Anr. (2017) 8 SCC 47 (08.05.2017) Collusive bidding and bid rigging mean the same thing. Anti-competitive agreement entered prior to 20.05.2009 but continued after the said date can be examined by CCI – applied the rule of retroactivity to antitrust proceeding. In a multi product company, penalty can not be disproportionate and imposed on the “total” turnover and has to be restricted to the turnover derived from the sale of the product in respect of which anti-competitive conduct was found i.e. on the “relevant” turnover; applied doctrine of proportionality and “purposive interpretation”. DG can investigate parties other than those mentioned in prima facie CCI order or even in the information. Information is only the starting point of inquiry. Even the prima facie opinion by CCI can’t foresee and predict completely. 20
  21. 21. Role in Enforcement of the Act Supreme Court of India- Substantive law/ Interpretations Rejected COMPAT’s finding that denial of market access u/s 4(2)(c) can only be by one competitor against another and that as a broadcaster cannot be said to compete with MSOs, there would be no violation of either Section 3 or Section 4 of the Act. Further, also rejected the finding that there cannot be an abuse of dominance of denial of market access against a consumer u/s 4(2)(c) of the Act. Competition Commission of India Vs Fastway Transmission Pvt. Ltd and Ors. Civil Appeal No. 7215/2014 ( 24.01.2018) Determination of a ‘relevant market’ is not a mandatory pre-condition for undertaking an assessment of an alleged violation of Section 3 of the Act. Competition Commission of India vs Co-ordination committee of artists and Ors. Civil Appeal No. 6691/2014 (07.05.2018) 21
  22. 22. Role in Enforcement of the Act Supreme Court of India- Landmark judgment on cartels/ bid rigging In the absence of sufficient evidence to establish collusion amongst bidders, it cannot be presumed under the standard of proof of “preponderance of probability”. It is necessary to demonstrate by evidence that such “agreement” even when presumed resulted into foreclosure of entry of new players i.e. it resulted in an appreciable adverse effect on competition in the relevant market. In brief, in a oligopsonistic market where buyers ultimately decide the lowest price at which suppliers will supply, an “agreement” for collusive bid rigging cannot be presumed merely by quotation of parallel or identical prices by the bidders under the preponderance of probability standard provided there are no direct or indirect evidence of such collusion. Rajasthan Cylinder and Containers Ltd & Ors vs Union of India & Anr. -Civil Appeal No. 3546/2014 and 43 others ( 01.10.2018) 22
  23. 23. Role in Enforcement of the Act Delhi High Court- Jurisdictional Challenge –Sectoral overlap- Whether CCI has jurisdiction to examine allegations of anti-competitive conduct and abuse of dominance even if the Patents Act provides for efficacious remedies in the nature of grant of compulsory licenses? Telefonaktiabolaget LM Ericsson (PUBL) vs. CCI & Anr. – W.P. (C) 464/2014 (30.03.2016) Ericsson challenged jurisdiction of CCI, on grounds that since an efficacious remedy in the nature of compulsory license exists under the Patents Act, the Competition Act will not apply and CCI has no jurisdiction to decide the rate of royalty and other terms for grant of license for its SEP to two Indian mobile manufacturers. Held that the jurisdiction of the CCI under the Act to probe allegations of anti-competitive practices and abuse of dominance arising out of the monopoly granted by patent rights cannot be taken away even if the Patents Act provides for efficacious remedies inter alia in the nature of grant of compulsory license. 23
  24. 24. Role in Enforcement of the Act Delhi High Court-Jurisdictional challenge-Sectoral overlap – In case of conflict between the Act and the Copyright Act,1957, the jurisdiction issue will be decided by CCI. CCI decided that it has jurisdiction to examine allegations of abuse of dominant position in charging royalties for music licensed to one FM Radio station since there is no provision for such violation in Copyright Act. Moreover, there is no exemption to prevent exercise of monopoly power under the Copyright Act u/s 4 of the Act unlike section 3(5) of the Act. Super Cassettes Industries Ltd. vs UOI & Ors. W.P(c) 1119/2012 (04.10.2012) COMPAT-sectoral overlap -In case of a conflict between the Act and the Electricity Act,2003 , even though Section 60 of Act contains a non obstante clause, the Electricity Act would prevail as it is a ‘later special statute’. Moreover, Electricity Act has its own system to check on Abuse of dominance and specifically mentions the Act. Anand Prakash Agarwal Vs Dakshin Haryana Bijli Vitran Nigam and Ors-Appeal No. 33 of 2016 (16.02.2017) 24
  25. 25. Role in Enforcement of the Act Supreme Court of India – “Gun jumping”- Market purchase of 9.93% shares from open market constitutes “inter- dependent” or “composite transactions” under Regulation 9(4) and therefore needs to be notified, even if the market purchase target was in the ambit of de minims exemption.. Not notifying the above constituted “substantial” gun jumping and penalty under Section 43A leviable. There is no requirement of mens rea u/s 43A of the Act or intentional breach as an essential element for levy of penalty. Competition Commission of India Vs Thomas Cook (India) Ltd. & Ors. -Civil Appeal No. 13578 of 2015/ (17.04.2018) 25
  26. 26. Role in Enforcement of the Act Supreme Court of India – “Gun jumping”- First purchase of 24.46% of equity shares on a single day were strategic and cannot be considered as having been made as investment in the ordinary course of business – Hence benefit of exemption under Item 1 of Schedule 1 of the Combination Regulations not available. Constitutes substantial gun- jumping u/s 43A of the Act. Second purchase of 1.7% of equity shares and keeping them in escrow account until receipt of the CCI approval did not absolve the party from the violation of procedural gun-jumping u/s 43A of the Act. Sections 31 and 43A of the Act operate in two different fields. Grant of approval for the transaction by CCI u/s 31 of the Act does not absolve the parties from violation of gun-jumping. There is no requirement of mens rea u/s 43A of the Act or intentional breach as an essential element for levy of penalty. SCM Solifert Limited & Ors. Vs Competition Commission of India Civil Appeal No. 10678/2016 (17.04.2018) 26
  27. 27. Disclaimer This presentation is intended to provide general information in a summary form. It does not constitute legal advice and should not be relied upon as such. Formal legal advice should be sought in particular matters 27
  28. 28. 28Disclaimer: While every care has been taken to ensure accuracy of this presentation, Vaish Associates shall not assume any liability/ responsibility for any errors that might creep in. The material herein does not constitute/ substitute professional advice that may be required before acting on any matter. 1st Floor, Mohan Dev Building 13, Tolstoy Marg New Delhi - 110001 9th Floor, Mohan Dev Building 13, Tolstoy Marg New Delhi - 110001, India 1105, 11th Floor Tolstoy House Tolstoy Marg New Delhi - 110001, India 106, Peninsula Centre Dr. S. S. Rao Road, Parel Mumbai - 400012, India Unit No. 305, 3rd Floor Prestige Meridian-II, Building No. 30 M.G. Road, Bengaluru - 560001, India DELHI MUMBAI BENGALURU
  29. 29. Thank You Contact: MM Sharma , Advocate , Head-Competition Law & Policy Vaish Associates, Advocates Ex-Addl. Registrar, CCI E- mmsharma@vaishlaw.com Mobile- +91-9958821720

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