The Asia-Pacific Antitrust Review 2017

India: Competition Commission

05 April 2017

Secretary

Introduction

A modern competition law regime was introduced in India by the enactment of the Competition Act 2002 (the Act). The provisions of the Act relating to anticompetitive agreements and abuse of dominant position were notified on 20 May 2009, and the provisions relating to regulation of combinations came into force from 1 June  2011. The Competition Commission of India (the Commission) has been established as an expert body to administer the Act with the mandate to prevent practices having adverse effect on competition, to promote and sustain competition in markets, to protect the interests of consumers and to ensure freedom of trade carried on by other participants in markets in India.

Enforcement

The Commission has received about 800 cases to date since the notification of the relevant provisions of the Act alleging anticompetitive conduct, of which more than 600 cases have been disposed of. These cases cover a variety of sectors, such as aviation, banking and finance, retail, real estate, pharmaceuticals, commodities, telecommunications, media and broadcasting, capital markets, high-technology industries, transport, health and pharmaceuticals.  The number of cases being closed at the prima facie stage has been increasing over this period. In the past year, the Commission closed about 80 per cent of the cases at the prima facie stage. This underscores the judicious approach followed by the Commission in antitrust scrutiny. It also indicates the need for qualitatively better filings by informants relating to competition issues.

A number of important cases were considered by the Commission this year. In In re: Alleged cartelisation by Cement Manufacturers, the Commission imposed a penalty of over 67 billion rupees on 10 cement companies, including their trade association, on charges of cartelisation in the sector. While holding the cement companies and the trade association in contravention of the Act, it was noted by the Commission that the cement companies used the platform provided by the trade association and shared details relating to prices, capacity utilisation, production and dispatch and thereby restricted production and supplies in the market, contravening the provisions of section 3(1) read with section 3(3)(b) of the Act. Further, the Commission also found the cement companies to be acting in concert in fixing prices of cement in contravention of the provisions of section 3(1) read with section 3(3)(a) of the Act.

In In re: Maruti & Company v Karnataka Chemists & Druggists Association & Ors, the Commission found Karnataka Chemists and Druggist Association (KCDA) and Lupin Ltd (Lupin) to be in contravention of the provisions of the Act. In this case filed by Maruti & Co, it was brought to the notice of the Commission that KCDA restrains pharmaceutical companies from appointing new stockists in the State of Karnataka unless a no objection certificate (NOC) is obtained from it. It was alleged that Lupin refused to supply drugs to Maruti & Co on account of not having obtained an NOC from KCDA. After investigation and hearing, the Commission concluded that KCDA had been indulging in the practice of insisting upon an NOC prior to the appointment of stockist by pharmaceutical companies, which had the effect of limiting and controlling the supply of drugs in the market in contravention of the provisions of Section 3 of the Act. Accordingly, KCDA, Lupin and their office bearers and officials were directed to cease and desist from indulging in the practice of mandating an NOC prior to appointment of stockists. The Commission also imposed monetary penalties upon the parties and their respective office bearers and officials.

Regarding mergers and acquisitions, the focus of the Commission has been on expeditious approval of combinations that do not cause, or are not likely to cause, appreciable adverse effect on competition. The Commission is conscious of the need and significance of inorganic growth for the enterprises to attain the size, scale and efficiency required for surviving and succeeding in a liberalised environment. Based on the experience of administration of combination regulations and keeping in view international best practices and in consultation with stakeholders, the Regulations relating to combinations have been amended with a view to simplify the compliance requirements, enhance transparency of the review process, relax the verification norms and bring about certainty with respect to the trigger events.

Outreach

Being a relatively young agency, competition advocacy is a priority for the Commission as it builds awareness about the Act, and at the same time helps businesses adopt compliance programmes. In addition to the regular advocacy measures that the Commission undertakes, some novel initiatives were introduced in this year to widen and strengthen the advocacy efforts. This year the Commission has signed memoranda of understanding with the three professional institutions: the Institute of Chartered Accountants of India, Institute of Company Secretaries of India and The Institute of Cost Accountants of India. Together they form the core of corporate professionals engaged in business strategy, pricing and corporate compliance. The Commission has also engaged seven leading and most reputed educational institutions in the field of law, economics and management for carrying out competition assessment of legislations. Seven legislations or policies of the government, covering various sectors, were selected for conducting competition assessment thereof. The assessments were done in-house by the officers of the Commission, along with the seven academic institutions.

Another initiative taken by the Commission during this year was the holding of the first National Conference on ‘Economics of Competition Law’ on 3–4 March 2016. In view of the vital role that economic theories, principles and methods have in the enforcement of competition law, the Conference was an attempt to bring together scholars and practitioners from across the country and stimulate research, as well as debate contemporary issues in the field of the economics of competition law. The Minister of State for Finance, Shri Jayant Sinha, while inaugurating the conference, emphasised the need to build a community of experts in the field of economics of competition law. As a step in that direction, the Commission has decided to make this Conference an annual feature.

International cooperation

The competition authorities are increasingly grappling with  cross-border anticompetitive issues resulting from rapid globalisation of businesses. This necessitates mutual cooperation and understanding among the competition authorities in various jurisdictions. Such cooperation also enables sharing of knowledge and results in capacity building. Therefore, the Commission has been pro-actively engaging with various international organisations such as the International Competition Network, the Organisation for Economic Cooperation and Development (OECD) and UNCTAD, as well as other competition authorities. Having an observer status in the Competition Committee of OECD, the Commission has been making regular contributions at various roundtables during the conferences and meetings of the OECD.

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