India: private practice perspective

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For the first time in its history, the Competition Commission of India (CCI) has a woman chairperson in Ms Ravneet Kaur, who was appointed in May 2023. She will also be the first chairperson to have a full five-year term – which is a welcome move and will help build and preserve institutional memory.

Indian competition law is currently undergoing a significant revamp with legislative amendments, including provisions related to settlement and commitments, penalty based on global turnover, hub and spoke cartels, leniency plus and deal value thresholds for merger control. The CCI has been actively investigating companies operating in the digital economy space and has passed several novel market correction directions.

In this backdrop, the following is a summary of key developments in the Indian competition law regime, during the period between February 2022 and August 2023. This includes several key decisions of the CCI, as well legislative changes to the Indian competition law.

Legislative changes

Competition (Amendment) Act 2023

In April 2023, the Indian Parliament passed an amendment bill to the Competition Act 2002 (Act), which is the principal legislation governing competition law in India.

The Competition (Amendment) Act 2023 (Amendment Act) is a mixed bag with several positive changes intended to bring the Act in line with practices of various international jurisdictions. The key changes introduced through the Amendment Act have been summarized below.

Key amendments that are yet to come into effect

  • Settlement and commitments: The Amendment Act introduces settlements and commitments regime for anticompetitive agreements (other than cartels) and abuse of dominance cases. The introduction of settlements and commitments is an industry-friendly move, as it will lead to saving of management time and costs for industry, ensure faster disposal of cases, and avoid protracted litigation for the CCI as well as for parties.
    • The draft implementation regulations for settlement and commitments were issued by CCI for public consultation in August 2023 – these draft regulations lack a mandatory right of hearing prior to rejecting a settlement or commitment application and do not provide a clause in relation to grandfathering for ongoing cases.
  • Leniency plus and withdrawal: The Amendment Act introduces a leniency plus regime whereby if a leniency applicant discloses another or a new cartel, then the applicant may get a reduction in penalty for the cartel that is already under investigation. This is in line with other jurisdictions (ie, United Kingdom, United States of America, Singapore and Brazil), which follow a leniency plus approach. The Amendment Act also provides that a leniency applicant can subsequently withdraw its application; however, such withdrawal will not preclude the CCI from using the evidence already provided by the applicant.
  • Penalty on global turnover: The Amendment Act provides that the criteria for calculation of penalty for anticompetitive agreements and abuse of dominance will be based on the ‘global turnover’ derived from all products and services. This will have a significant impact on the industry and is a departure from the current practice of considering ‘relevant turnover’.
  • Introduction of a deal value threshold for merger control: The Amendment Act introduces a new merger control threshold based on the value of the transaction (of 20 billion rupees) which needs to be coupled with the target enterprise having ‘substantial business operations in India’. The details of what constitutes substantial business operations in India will be provided under regulations, which are yet to be enacted. The Amendment Act also proposes a reduction in the merger review timelines.

Key amendment that has come into effect

Hub and spoke cartels: The Amendment Act, with effect from 18 May 2023, has widened the ambit of cartels to recognise hub and spoke cartels. Accordingly, a party which is not a horizontally placed competitor, may now be also made liable for cartelisation if it participates or intended to participate in furtherance of a horizontal agreement.

Revisiting the Act in 14 years of its existence to bring it in line with international best practices and make it more industry-friendly is a laudable move by the Indian government. It is imperative that the implementing regulations be co-terminus with the amendments and be brought in only after stakeholder consultation to ensure that there are no implementation-related impediments subsequently.

Proposed Digital Competition Act

In December 2022, the Standing Committee on Finance submitted a report on ‘Anti-competitive Practices by Big Tech Companies’ in Parliament.

The report, among other things, noted that the digital economy differs from the traditional markets, as it features economies of scale and scope that exaggerate the tipping of markets and expedite the impact of anticompetitive conduct. It recommended regulatory changes to keep digital markets contestable and ensure that a few players are not able to adversely impact the market.

The Standing Committee recommended the formulation of a new digital competition law to cover (i) ex-ante regulation of digital markets, and (ii) regulation of ‘systematically important digital intermediaries’ that have the ability to negatively influence competitive conduct (akin to gatekeepers). The government has setup a committee to draft the Digital Competition Act.

The introduction of an ex-ante framework will result in a shift away from the light touch approach to market regulation. It would favour precaution over disruption and innovation in the Indian markets, and potentially impact the ease of doing business and investments.

If the only concern of the Standing Committee is that negative impact of anticompetitive conduct can be fast perpetrated by digital participants operating in the economy – the CCI’s existing power of granting interim reliefs are more than sufficient to remedy such conduct – as was witnessed in CCI’s use of interim measures in the case involving MakeMyTrip, an online travel intermediary. It remains to be seen what form the proposed Digital Competition Act will take and its impact on innovation and the economy.

In a welcome move, the CCI has set up a Digital Markets Unit (DMU) to enhance its capacity and to deal with the increasing number of digital markets cases in a fast-track manner. The DMU is likely to include data scientists and forensic experts; and will enhance CCI’s regulatory powers giving it new tools for digital economy investigations.

Confidentiality regime

In April 2022, the CCI had also undertaken significant changes in the confidentiality regime, as a result of which: (i) there is an efficient self-certification regime that does not require the CCI to assess the confidentiality claim, and (ii) there are confidentiality rings which allow the designated individuals to access confidential information in order to effectively defend themselves.

Mergers

The Indian merger control regime is a suspensory and mandatory regime, whereby parties need to obtain the CCI’s prior approval regarding any proposed combination, prior to closing.

In the reporting period, the CCI has approved 135 transactions, which includes 37 green-channel or fast-track filings, four orders with voluntary modifications and 12 gun-jumping orders. Notable transactions evaluated by the CCI in the recent past include the following.

The proposed acquisition of BillDesk by Prosus backed PayU India for US$4.7 billion

In September 2022, the CCI approved the largest transaction in the fintech sector in India (ie, PayU India’s acquisition of IndiaIdeas.com Limited (popularly known as BillDesk)). The transaction was a consolidation of two prominent payment aggregators in India that had various horizontal overlaps and vertical linkages.[2]

In certain overlapping markets, the combined market shares of the parties were between 30 per cent and 35 per cent along with the combined entities’ portfolio of payments and related services, as well as the first mover advantage that the parties enjoyed in certain segments.

The CCI issued a show cause notice seeking reasons as to why the transaction would not cause appreciable adverse effect on competition in India (AAEC) and why an in-depth Phase II investigation should not be initiated.

Thereafter, upon considering the submission of PayU India, the CCI approved the transaction unconditionally. This was (and remains) the first instance where the CCI issued a show cause notice expressing prima facie concerns of AAEC in relation to the transaction and yet cleared the transaction without any remedies, upon considering the submissions of PayU India.

This is a welcome move and demonstrates the CCI’s nimble and progressive approach on digital economy transactions. The CCI’s approval order delved into a detailed discussion on key concepts such as portfolio effects, network effects as well as demand and supply side substitutability from the perspective of the digital economy and remains the first case in which the CCI assessed these aspects from a digital economy perspective.[3]

Acquisition of Hindusthan National Glass & Industries Limited (HNG) by AGI Greenpac Limited (AGI), as part of a corporate insolvency resolution process.

In the covered period, the CCI also had the opportunity to examine a transaction in which the target company was undergoing a corporate insolvency resolution process (CIRP) under the Indian Insolvency and Bankruptcy Code. This is the first time a voluntary remedy was offered by a bidder for obtaining the CCI’s approval in relation to a transaction undertaken through the CIRP.

The transaction involved AGI, a publicly listed company, which is engaged in the manufacture and supply of (among other things) glass containers, PET (polyethene terephthalate) bottles, and caps closures. AGI submitted a resolution plan to acquire HNG, which was also a listed company and a market leader that was undergoing CIRP, given its inefficient state of operations.

After conducting a detailed assessment of the business activities, the CCI noted that the market for glass-based packaging is concentrated and the target (ie, HNG is the market leader). The proposed transaction led to a consolidation of market share with high incremental market share. Further, the CCI expressed concerns regarding availability of glass-based packaging material to India’s small-scale industries.

The CCI’s concerns were addressed through a structural remedy, whereby it was agreed that a particular plant of HNG will be hived off, which would incentivise a new entrant or strengthen an existing competitor in India with an approximate 5 per cent market share in the market for container glass.

Amalgamation of ZEE Entertainment Enterprises Limited and Bangla Entertainment Private Limited with and into Culver Max Entertainment Private Limited

In October 2022, the CCI approved the merger between Zee Entertainment Enterprises Ltd. with Sony Pictures Networks India Pvt Ltd and Bangla Entertainment Pvt Ltd,[4] while accepting the modifications proposed by the companies to the deal they had announced in December 2021. This ranks among the largest consolidations in the Indian media and entertainment space.

After an assessment of horizontal overlaps in six relevant markets, the CCI observed that the proposed combination is prima facie likely to cause AAEC, and hence issued a show cause notice to parties given that the combined entity would have approximately 92 television channels, with high market share in Hindi General Entertainment Channel (GEC), Hindi Films, Marathi GEC and Bengali GEC, thereby having the ability to increase prices for advertisers, distribution platform operators and the viewers.

To address the concerns identified by the CCI, the parties offered structural remedy related to divestment of three channels owned by Zee, resulting in a phase one clearance of the proposed transaction. The divestiture was related to sale of Big Magic (Hindi GEC channel), Zee Action and Zee Classic (Hindi films channels). The remedy proposal mandates that the sale of the divested channel shall not be made to the prominent players in the market.

Revised long-form notification format

Aside from the above merger control orders, in April 2022, the CCI revised the format for its long-form notification (known as Form II). The revision has led to deletion of various dated questions such as distribution and pricing information, access to raw materials, while the time period for market-facing data (such as details of customers, suppliers, etc) has been increased from three to five years.

The CCI has also specifically included queries regarding vertical and complementary overlaps. This change has been welcomed as it aligns the long form with the previously amended short form (Form I).

Round-up on enforcement regime

The CCI has also penalised various companies for violating provisions of the Act in relation to anticompetitive agreements and abuse of dominant position. This includes a few noteworthy decisions, such as:

  • a penalty on Google for abusing its dominant position in the market for mobile operating systems, app stores for android mobiles, online video hosting platforms and general web search in India (Google OS Case).
  • a penalty on Google for abusing its dominant position by mandating apps to use its own in-house payment system (Google Payments Case); and
  • a penalty on MakeMyTrip for abusing its dominant position in the market for online travel intermediation (MakeMyTrip Case).

Each of these decisions has been discussed below.

Google OS Case and Google Payments Case

In 2018, the Google OS Case was initiated with three individuals filing an information against Google, alleging that it is engaging in various anticompetitive practices in markets where it holds a dominant position, as well as in adjacent markets. Broadly, it was alleged that Google:

  • was mandating smartphone and tablet manufacturers to exclusively pre-instal Google applications;
  • bundled certain Google applications and services with Google’s services and application programming interfaces;
  • was mandating favorable positioning of its applications; and
  • was preventing smartphone manufacturers from creating modified versions of Android OS.

In the Google OS Case, the CCI found Google to be dominant in multiple markets including:

  • the market for licensable OS for smart mobile devices in India;
  • the market for app store for Android smart mobile OS in India;
  • the market for general web search in India; and
  • the market for online video hosting platforms in India.

The CCI noted that Google abused its dominant position by making pre-installation of Google’s proprietary apps (particularly Google Play Store) conditional upon signing of certain agreements for device manufacturers, which has reduced the ability and incentive of device manufacturers to develop and sell devices operating on alternative versions of Android. The CCI also noted that Google’s suite of applications, such as Gmail, YouTube, etc, cannot be uninstalled from Android phones and can only be disabled, which often influences consumer behaviour and makes Google’s applications the default on Android phones.

On the other hand, the Google Payments Case was initiated in 2020, with the Match Group as well as the Alliance of Digital India Foundation filing separate information alleging that Google had abused its dominant position in the market for licensable mobile operating systems by:

  • mandating use of its own payment system for in-app purchases; and
  • pre-installing Google Pay on Android phones and placing it at prominent positions in the user interface.

In the Google Payments case, the CCI held that Google was dominant in various relevant markets, including:

  • market for licensable OS for smart mobile devices in India;
  • market for app stores for Android OS in India; and
  • market for apps facilitating payments through UPI in India.

The CCI held that Google had deep pockets and market power, which enabled it to control the entire Android ecosystem, especially the application developers. It had abused its dominant position by restricting other applications from using any other payment facilitation services, while allowing its own apps such as YouTube, to use third-party payment systems, which charge lower commissions.

The orders of the CCI were appealed before the appellate authority, and the order in the Google OS Case has been upheld with certain modifications.

MakeMyTrip Case

MakeMyTrip (MMT) is a multi-sided platform that provides intermediation services. The intermediation service is provided through a two-sided platform, which connects two distinct user groups (ie, consumers and hotels/hoteliers). In 2019, the informants of this case alleged that MMT had entered into anticompetitive agreements of vertical restraint and had abused their dominant position w.r.t hotels that list on their platform through:

  • Price parity clauses which restricted hotels to list a lower price on their own or any other online portal.
  • Room parity clauses which restrict hotels from refusing to list rooms on MMT, if such rooms are available on MMT’s competitor platforms.
  • Denying hotel chains, namely Treebo and FabHotels, from listing on MMT’s platform while entering into exclusivity agreements with Treebo and FabHotels’ competitor, OYO (another hotel chain).
  • Misrepresenting the availability of rooms in such hotels that make a request to remove/ delist from MMTs platform.

Interestingly in this case, the CCI changed its position regarding the market definition adopted by it in case of online travel agencies (OTA). While in its previous decisions the CCI has maintained that online and offline travel booking services exert competitive constraints on one another such that they comprise the same relevant market, in the MMT case, the CCI has categorised OTAs as a distinct market.

The CCI found that MMT had abused its dominant position, inter alia, by imposing wide parity obligations and exclusivity conditions, in an ecosystem that reinforces MMT’s dominant position. Additionally, it noted that the agreements imposed by MMT impeded competition between OTAs, as well as various hotel chains. CCI also found MMT guilty for limiting the dissemination of information regarding hotel room availability, to the detriment of consumers and hotel chains alike.

The CCI imposed a penalty of 2.23 billion rupees, while mandating MMT to significantly alter its agreements and terms of business. The decision of the CCI is presently pending in appeal.

Delhi High Court in Monsanto v CCI

In July 2023, a division bench of the Delhi High Court delivered a judgment in Monsanto v CCI where it excluded the CCI’s jurisdiction on issues pertaining to the licensing of patents. The decision of the High Court analysed the Indian Patent Act 1970 to come to the conclusion that issues pertaining to abuse of patent holders’ rights, licensing and specifically compulsory licensing was within the domain of the Controller of Patents. The Delhi High Court ruled that these provisions especially grant jurisdiction to the Controller of Patents, and thus override any possibility for the CCI to assume jurisdiction under the Competition Act over these issues. The CCI has therefore received clear directions on its scope of operations in terms of complaints that it may receive on issuing pertaining to intellectual property laws.

Macleods Pharmaceuticals v Boehringer Ingelheim

The CCI has shown significant maturity in a landmark case against global pharmaceutical innovator, Boehringer Ingelheim in a case alleging sham litigation.[5] The CCI has indicated that the various high courts have exclusive jurisdiction over issues pertaining to the validity of patents. Further, the competition regulator has clarified that when determining issues of vexatious litigation (in this case, by enforcement of a patent whose validity was challenged), the CCI’s analysis ought to only be based on whether the case filed was objectively baseless and was therefore only an instrument to harass, such that the litigation was conceived with an anticompetitive intent.

Advocacy initiatives

During the reporting period, the CCI also engaged in various advocacy initiatives to enhance the awareness regarding competition law and its enforcement in India. To aid this, the CCI has also set up regional offices across India (in Chennai, Kolkata and Mumbai).

In October 2023, the CCI will be hosting the 8th BRICS International Competition Conference to discuss new issues in competition law and policy.

Conclusion

The CCI has long established itself as a regulator to watch out for despite being only operational for 14 years. Its strongest track record has been in merger control where M&A activities have never been impacted by the CCI’s timelines, despite the merger unit being extremely under-staffed, it is renowned for efficiency.

Like its global counterparts, the CCI has been at the forefront of all digital economy investigations, be it the Android investigations, or the investigations around digital news or delivery platforms. The recently established Digital Markets Unit is expected to further add new tools for the CCI in assessing dynamic digital markets.

The Amendment Act brings in game changer moves from leniency plus to shortened merger review timelines. Adequate implementation of some of these proposed provisions like settlements and commitments will help in establishing sound jurisprudence and in maintaining a balanced approach between excessive regulation and enabling a business-friendly environment.

However, the proposed Digital Competition Act may not be the best harbinger, given it has the potential of stifling innovation and impacting investments. This proposed law may not be fully in sync with the government of India’s laudatory initiatives like Make in India, Build in India and Startup India. The CCI will have to ensure future regulation does not impact innovation and economic development.


Notes

[1] Nisha Kaur Uberoi is senior partner and national competition head at Trilegal. Rudresh Singh and Gautam Chawla are partners in the competition practice. The authors would like to acknowledge the assistance of Sarthak Pande, senior associate and Pramothesh Mukherjee, associate.

[2] The transaction was subsequently abandoned.

[3] By way of full disclosure, Trilegal represented Prosus and PayU India in this matter.

[4] By way of full disclosure, Trilegal represented ZEE Entertainment Enterprises Limited and Essel Group in this matter.

[5] By way of full disclosure, Trilegal represented the Boehringer Ingelheim group in this matter.

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