1.REGULATORY DEVELOPMENTS
New secretary appointed at CCI
The Competition Commission of India (“CCI”) has appointed Mr. Inder Pal Singh Bindra as the new Secretary.
He was previously posted with the Income Tax Department and his current appointment with the CCI is on the basis of deputation for a period of three years.
Changes enacted and proposed by CCI to regulation son procedure
In May 2024, the CCI issued certain amendments to the Competition Commission of India (General) Regulations, 2009,such as imposition of stricter timelines for setting up confidentiality rings to avoid undue delays in the adjudication process, and an extended duration for inspecting CCI case records. Last month, the CCI proposed further amendments to the same regulations and released the draft for public consultation (now concluded).Key proposals include the opportunity to cross-examine witnesses, and appointment of monitoring agencies to oversee the implementation of CCI orders.
These amendments update the regulations to align them with the changes introduced by the Competition (Amendment) Act, 2023, and codify the existing practices of the CCI.
CCI launches a market study on AI
On 22 April 2024, a market study was launched by the CCI to understand the evolving landscape of the Artificial Intelligence (“AI”) sector and its application in markets in India. The objectives of the study include comprehending key AI ecosystems, analyzing emerging competition issues in the AI sector, and delineating opportunities and associated risks. In addition, the study aims to understand regulatory frameworks and analyze trends to establish enforcement priorities.
MCA begins to review public feedback on ex-ante regulation of digital platforms
In March 2024, the Government of India published the highly anticipated ‘Report of the Committee on Digital Competition Law’ (“CDCL Report”) including the ‘Digital Competition Bill, 2024’ (“Draft Bill”). The CDCL Report proposesex-ante regulation of the providers of ‘Core Digital Services’ (“CDS”) in India. While the CCI will be the nodal regulatory authority responsible for implementing both the Competition Act, 2002 (“Competition Act”) and the proposed new legislation, a specialized Digital Markets and Data Unit in the CCI will have the primary responsibility of enforcing the latter.
Enterprises that offer one or more CDS in India are proposed to be designated as ‘Systemically Significant Digital Enterprises’ (“SSDEs”) based on their financial strength (serving as proxy for economic power) and spread in India (i.e., the number of business users and end users). Those enterprises that are closely linked with SSDEs in their operations risk being designated as ‘Associate Digital Enterprises’ (“ADEs”).
The Draft Bill broadly outlines a series of behavioural obligations for SSDEs (and ADEs), which include the promotion of fair dealings, prohibitions against practices such as self-preferencing, tying and bundling, misuse of data, anti-steering etc. Moreover, the Draft Bill proposes heavy penalties for non-compliance, with fines of up to 10% of the global turnover for offending enterprises. Contraventions are proposed to be addressed through mechanisms similar to those in the Competition Act. Notably, the Government of India has been given the power to exempt companies from the provisions of the Draft Bill.
The Ministry of Corporate Affairs is now in the process of reviewing stakeholder feedback received through the public consultation and conducting meetings with stakeholders and industry bodies.
Draft rules on exemptions and fast-track merger approvals released
In March 2024, the Government also released the following draft rules for public consultation (which were closed in April 2024):
Once enacted, these rules are intended to facilitate the practical implementation of the amended merger control regime in India. They are expected to be brought into effect soon, as stated by the CCI Chairperson in recent media interactions (here).
2.ENFORCEMENT
CCI dismisses allegations of preferential treatment against Google
The CCI dismissed allegations brought by an individual complainant / informant against Google which claimed that it grants exclusive access to Truecaller for sharing private contact information while prohibiting other similar apps from doing the same. This creates a monopoly in the caller ID and spam protection app market. After reviewing the parties’ submissions, the CCI found no evidence of a contravention by Google.
The evidence presented did not support claims that Google provided preferential access to application programming interfaces (“APIs”) or commercial advantages to Truecaller; the Play Store (“Play Store”) policies and API access are uniformly applicable to all apps. The CCI accordingly, concluded that there was no prima facie case against Google and the request for interim relief was also rejected.
Notably, the CCI reaffirmed Google’s dominant position in the market for app stores for Android OS in India, highlighting that the market principles identified in previous cases remained unchanged.
High Court urges CCI to reconsider a confidentiality ring application
Inclusion of informants in confidentiality rings continues to be hotly contested. Recently, the Karnataka High Court ordered the CCI to reconsider the establishment of a confidentiality ring in an ongoing CCI inquiry (set up over 3 years ago). The case involves online food delivery platforms and an inquiry into their abuse of dominance. The Karnataka High Court found that the initial order by the CCI – which allowed the authorized representatives of the informant i.e. National Restaurant Association of India (“NRAI”)to access Swiggy’s confidential information (through the confidentiality ring) – was issued without adequate consideration of the principles of natural justice under the Competition Act. Interestingly, both parties agreed to the directive of the High Court to set aside the impugned order of the CCI and remand the matter back for fresh consideration, ensuring fair hearing and adherence to legal norms.
High Court quashes CCI order for want of fair procedure
Tyre manufacturer, MRF Ltd. (“MRF”) challenged orders passed by the CCI, directing an investigation into alleged anti-competitive practices where MRF was initially a third-party in the proceedings and its status was later revised to opposite party. It was contended by MRF that this was done without proper notice or opportunity to contest the revision in status, which subjected it to more stringent investigation and potential penalties.
The Madras High Court found that the process adopted by CCI lacked transparency and fairness, particularly in failing to notify MRF of the change in its change, thus violating principles of natural justice. Accordingly, the Court set aside the order of the CCI converting MRF to an opposite party (along with the corresponding notice issued by the DG Office).
Court clarifies calculation of interest on CCI penalties
The Delhi High Court recently affirmed that interest on penalties is applicable from when the period specified in the demand notice lapses, not from the date of the CCI order finding infringement. In 2018, the CCI had found Geep Industries (India) Pvt. Ltd. (“Geep”) and its key personnel to be involved in the dry-cell batteries cartel in India and accordingly imposed penalties. On appeal, the National Company Law Appellate Tribunal (“NCLAT”) upheld the decision but reduced the quantum of penalty imposed.
On receiving the demand notice from CCI for payment of penalty, Geep challenged itin the Delhi High Court, arguing that the procedure in the Competition Commission of India (Manner of Recovery of Monetary Penalty) Regulations, 2011 (“Recovery Regulations”) was not followed. The Recovery Regulations state that CCI must issue a demand notice before levy of interest. In this case, the CCI issued its demand notice on Geep following the NCLAT order in 2023 but interest was demanded in the notice from the date of its original decision in 2018. The Court ruled in favour of Geep, holding that accrual of interest does not begin until the period specified in the demand notice lapses.
Appellate Tribunal reduces cartel penalty on account of inconsistency with other parties
On 5 April 2024, the NCLAT reduced the penalty imposed on Godrej & Boyce Manufacturing Co Ltd. (“Godrej”), for its participation in the dry-cell battery cartel in India. Godrej appealed the CCI’s penalty which was imposed at 4% of the company’s turnover, arguing Godrej’s lack of bargaining power, ongoing losses, and lower pricing compared to competitors. The NCLAT acknowledged similarities with co-accused Geep and identified Godrej as a small player with only 2% market share, compared to 88% held by primary cartel members. The NCLAT noted discrepancies in penalties between Godrej and Geep, reducing Godrej’s penalty to align more closely with Geep’s i.e.,to 2% of the company’s turnover, keeping penalties on officials unchanged and declining to waive accruing interest during the pendency of the appeal.
Appellate Tribunal affirms non-objection to receipt of commercially sensitive information suggests involvement in cartel
On 2 April 2024, the NCLAT dismissed an appeal by Sundaram Brake Linings Ltd (“SBL”) challenging a CCI order dated 10 July 2020, issued pursuant to leniency applications involving bid rigging in the composite brake block manufacturing market. SBL argued that it had wrongly been implicated in the cartel by CCI as: (i) admissions by an employee were unauthorized and uncorroborated;(ii) witnesses exonerated SBL;(iii) company only bid on three tenders without discussing them with cartel members; and(iv) mere receipt of information does not constitute a competition law violation.
The NCLAT found substantial evidence of SBL’s participation in the cartel, including confessions and email exchanges. It was noted that evidence, such as continuous receipt of cartel-related emails without objection for over five years, indicated a ‘meeting of minds’; reiterating that an attempt to rig bids or merely exchanging information is sufficient to establish competition law violations. The decision reinforces the strict stance of the CCI that passive receipt of commercially sensitive information constitutes a violation of the Competition Act.
Investigation of Google Play store policies again but no interim relief
The CCI initiated an investigation into Google’s Play Store based on its revised billing policies, including User Choice Billing (“UCB”). Prima facie,the CCI found Google to be abusing its dominance by imposing unfair and excessive service fee / commission only on app developers offering in-app purchases (“IAP”) of paid and digital content. It was noted that the excessive fee / commission charged by Google impedes the app developers’ ability to improve the quality of their app offerings, thereby limiting technical development. Further, the imposition of the fee / commission on app developers diminishes incentives for monetization through digital IAPs and paid apps, obstructing market access for app developers.In addition, thedistinction between apps offering physical goods and those offering digital goods was prima facie found to bearbitrary and discriminatory, as both types of apps use similar services on Play Store.
The complainant’sprayer for interim relief washowever, rejected by the CCI on the grounds that the complainants did not sufficiently demonstrate the necessary conditions for the grant of such relief: (i) a clear prima facie case, (ii) a balance of convenience in their favor, and (iii) that Google’s conduct would cause irreparable damage. This order is currently in appeal before the NCLAT.
3.MERGER CONTROL
CCI provides clarification on “shares”
On 2 April 2024, CCI approved the acquisition of 10.39% of equity share capital of Annapurna Finance (“AN Finance”) by Piramal Alternatives (“Piramal”).
Piramal also acquired the right to nominate a director and observeron the board of AN Finance.The parties had insignificant market shares in the overlapping business activities so the CCI concluded that the transaction would not cause an appreciable adverse effect on competition in India, and accordingly approved the same.
The transaction also proposeda subscription tocertain optionally convertible debentures (“OCDs”) of AN Finance by Piramal;this was excluded from CCI’s assessment of the transaction. The OCDs would convert to equity shares i.e., shares with voting rights, of AN Finance only with the ‘mutual consent’ of the debenture holder (Piramal) and AN Finance. The CCI noted that the definition of ‘shares’ under the Competition Act does not include OCDs and for any security to be considered asa ‘share’ under the Competition Act, the security should entitle the acquirer/holder to receive shares with voting rights. In the present instance, the entitlement for Piramal to receive such shares with voting rights would arise only after consent from AN Finance. Therefore, the CCI did not consider the debenture subscription as an acquisition of shares to be approved under the Competition Act and held that the requirement to notify the acquisition of shares pursuant to the conversion of OCDs, will have to be considered as per extant law at the time of such conversion.
Authors – Sonam Mathur – Partner, Dhruv Dikshit – Managing Associate
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