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Competition | April – June 2023

Enforcement Matters

Supreme Court holds that the Competition Act is applicable to Coal India Limited

On 15 June 2023, the Supreme Court rejected an appeal filed by Coal India Limited (“CIL“) which primarily contended that CIL and its subsidiaries could not be bound by the provisions of the Competition Act since it was a statutory monopoly, set up under the Coal Mines (Nationalisation) Act, 1973 (“Nationalisation Act“).

The Supreme Court acknowledged that CIL was a statutory monopoly tasked with the power and duty to distribute coal. The court also noted that CIL had a duty to follow the directive principles of state policy which require material resources to be distributed in a way that serves the ‘common good’. In this regard the Supreme Court observed that the concept of ‘common good’ is dynamic in nature and the Parliament was best suited to determine how ‘common good’ is to be served. Thereafter the Supreme Court, while relying on the principle that when Parliament enacts laws it is deemed to be aware of all the existing laws, found that Parliament was aware of the Nationalisation Act at the time of enacting the Competition Act.

On the corner stone of this understanding, the Supreme Court observed that the Competition Act’s departure from the erstwhile law (which sought to protect government entities from its reach) indicated the Parliament’s intention to bring state monopolies, government companies and public sector units within the purview of the Competition Act. The court further substantiated this observation by touching upon certain provisions of the Competition Act including the definition of ‘enterprise’ which expressly includes government departments; and the factors used to assess ‘dominance’ which includes acquiring market position by virtue of a statute. As such, whilst deciding on the applicability of the Competition Act to CIL, the Supreme Court held that if Parliament intended to include state monopolies under the anvil of the new economic regime, such inclusion cannot be flawed on the ground that it takes away from the ‘common good’ the monopoly was earlier subserving. Accordingly, the Supreme Court found that there was no reason to hold a state monopoly, being run through the medium of a government company, outside the purview of the Competition Act.

Delhi HC quashes CCI’s investigation into ICAI’s conduct

On 2 May 2023, the Delhi High Court (“Delhi HC”) quashed the CCI’s order directing its investigative arm, the Director General Investigation (“DG“), to investigate the Institute of Chartered Accountants of India (“ICAI”) on account of certain alleged abusive conduct relating to the way Continuing Professional Education (“CPE”) programs were being organized and conducted by the ICAI.

The Delhi HC noted that the ICAI was set up pursuant to the provisions of the Chartered Accountants Act, 1949 and was inter alia charged with the responsibility of regulation and maintenance of the status and standards of professional qualifications. As such, the ICAI performed both regulatory and non- regulatory activities. In this regard, while acknowledging that the provisions of the Competition Act would apply to the ICAI in so far as the non-regulatory activities of ICAI are concerned, the Delhi HC further observed that ICAI could also be considered a statutory authority under the provisions of the Competition Act and that decisions relating to the CPE programmes were made in furtherance of such regulatory responsibilities. To this end, the Delhi HC held that decisions in exercise of regulatory powers can only be restrained by the provisions of the statute that confer such powers and cannot not be the subject matter of review by the CCI. Further stating that, the CCI’s scope of examination should be “confined to only those areas of economic activities, which have a bearing on the market that engages entities involved in trade and commerce”.

Calcutta High Court refuses to stay an inquiry into steel cartel

On 18 May 2023, the Calcutta High Court (“Calcutta HC”) refused to stay an inquiry relating to the conduct of steel manufactures. Notably, these anti-trust proceedings were initiated pursuant to an order of the Madras High Court (“Madras HC”) that instructed the DG to investigate collusive conduct relating to the pricing and supply of steel. While taking note of averments in relation to deviations from the inquiry process set out in the Competition Act, the Calcutta HC observed that the process for investigation was compressed and subsumed on account of the Madras HC’s order. Further, it was held that the preliminary stages of investigation do not involve an adjudicatory process of determining the rights and obligations of parties involved and is merely a fact-finding exercise. Consequently, holding that there are no immediate threats or civil consequences to such parties since the findings can be challenged at a later stage. Additionally, the Calcutta HC noted that it was necessary to continue the probe as the ramifications of manipulating the supply and price of steel extended to the general public, including end-users, consumers, and home buyers. Thus, there existed no pressing or compelling reason to interfere with the ongoing investigation.

NCLAT reduces the penalty imposed on Geep Industries

Geep Industries Private Limited (“Geep“) had filed an appeal before the National Company Law Appellate Tribunal(“NCLAT”) challenging the CCI’s order dated 30 August 2018 which imposed a penalty of INR 96.41 million (~USD 1.17 million) on Geep for participating in a bilateral ancillary cartel for the sale of dry cell batteries in India. The NCLAT, while upholding the CCI’s findings on merits, reduced the penalty imposed from 4% to 1% of Geep’s turnover for each year of continuance of the cartel activity.

The NCLAT, while reducing the penalty, reasoned that the quantum of penalty imposed should act as a deterrent to regulate anti-competitive activity, however, this should be seen in the context of extenuating circumstances. Based on the facts of this case, the NCLAT considered the following mitigating factors (a) Geep’s small market share and minimal market presence; (b) Geep’s inability to actually influence price in the market; (c) Geep’s inability, on account of its minimal market presence, to contest provisions of a Product Supply Agreement whereby it agreed to follow the market prices set by the primary cartel; and (d) the large penalty imposed on Geep would be fatal for its business and would lead to its exit from the market. However, it is pertinent to note that the NCLAT did not modify the penalty imposed on the office bearers of Geep, holding that they were responsible for entering into the anti-competitive agreements and they should have had knowledge and understanding of the law in relation to behaviour of corporate entities in a market.

NCLAT upholds CCI’s order in the SBI bid-rigging case

On 23 May 2023, the NCLAT upheld the CCI’s findings of bid rigging and cartelisation in the tender floated by SBI Infra Management Solution (P) Ltd. (“SBI“) for the supply and installation of signages across India. Consequently, the NCLAT dismissed the appeal filed on behalf of one of the cartel participants and its director, Mr. Manish Jodhavat. Whilst coming to its conclusion, the NCLAT observed that even though some of the emails used as evidence to establish Mr. Jodhavat’s involvement in the anti-competitive activity were not addressed or sent to him, such emails could still be used as evidence to corroborate Mr. Jodhavat’s involvement in the anti-competitive activity. In this regard, the NCLAT placed reliance on the CCI’s reasoning that an agreement under the Competition Act can include an arrangement or understanding or action in concert whether or not formal or in writing; and that in absence of direct evidence of coordination, evidence should be assessed on the basis of preponderance of probabilities.

Merger Control

CCI fines Bank of Baroda for gun-jumping

On 20 June 2023, the CCI imposed a gun-jumping penalty of INR 500,000 (~USD 6,100) on Bank of Baroda (“B.O.B”) in relation to its acquisition of 21% of IndiaFirst Life Insurance Company Limited (“IFLIC“) from the Union Bank of India (“Proposed Combination”).

B.O.B, in its submissions, averred that the belated notification of the Proposed Combination was on account of its erroneous interpretation of Section 6(4) of the Competition Act, which under specific circumstances, allows for a post-completion notification of transactions to the CCI. B.O.B also contended that this was its first instance of contravention; there was no mala fide intention to evade compliance with the law; and that B.O.B had fully cooperated with the CCI by actively engaging in meetings and diligently complying with all prescribed timelines for re-filing the transaction notice.

While the CCI did consider B.O.B’s averments as mitigating factors at the time of deciding quantum of penalty, the CCI held that by consummating the Proposed Combination prior to CCI’s approval, albeit due to an erroneous interpretation of the law, B.O.B had contravened the provisions of the Competition Act and was accordingly liable to be penalised.

Merger of Credit Suisse Group AG with UBS Group AG

On 18 May 2023, the CCI approved the proposed merger of Credit Suisse Group AG (“Credit Suisse”) with UBS Group AG (“UBS”) (“Proposed Combination”). The Proposed Combination was structured as an absorption merger pursuant to which all of Credit Suisse’s assets, liabilities and contracts would be transferred to UBS; thus making it the surviving legal entity.

The CCI assessed the overlaps between the parties in the market for brokerage services in India and observed that the combined and incremental market share of the parties was in the range of 0-5% and there were several other well-established players in the market. Accordingly, the CCI approved the Proposed Combination since it was unlikely to cause an appreciable adverse effect to competition in India (“AAEC“).

Sanjay Chamria acquires certain stake in Jaguar and Magma HDI

On 3 May 2023, the CCI approved the acquisition of 51.11% of Jaguar Advisory Services (“Jaguar”) by Sanjay Chamria (“SC”) from Poonawalla Fincorp and HDI Global SE. This also led to an indirect acquisition of 5.44% of Magma HDI General Insurance Company Limited (“Magma HDI”) by SC (“Proposed Combination”). While undertaking its analysis, the CCI inter alia assessed the vertical and complimentary overlaps between (a) Magma HDI which was involved in the provision of general/non-insurance services, including motor insurance services and (b) the SC group which included SC, his immediate family members and certain enterprises in which SC and his family directly/indirectly held shares/voting interests (“SC Group”). Noting that there were overlaps between the SC Group and Magma HDI, qua the distribution of motor insurance policies;

the CCI held that the Proposed Combination will not cause an AAEC due to the presence of well-established and deep-rooted players that pose sufficient competitive constraints within the relevant market(s).  

Jamnalal Sons Private Limited acquires 5.51% in Mukand Sumi Special Steel Limited

On 12 April 2023, the CCI approved the acquisition of an additional 5.51% of Mukand Sumi Special Steel Limited (“MSSSL”) by Jamnalal Sons Private Limited (“JSPL”) (“Proposed Combination”). Notably, the selling entity and JSPL were both ultimately controlled by the Bajaj group of companies. Pursuant to the Proposed Combination, JSPL’s shareholding would increase from 44.2% to 49.71% without acquisition of any additional or special rights. The CCI observed that there were no overlaps between MSSSL and JSPL and further observing that the minimal overlaps between MSSSL and the selling entity (which was part of the same group as JSPL) would not affect the competition landscape to raise any concerns.

Developments in the Legal Framework

Provisions of the Competition Amendment Act, 2023 have been brought into effect

Certain provisions of the Competition (Amendment) Act, 2023 (“Amendment Act”) were brought into force with effect from 18 May 2023. A brief overview of some of these key changes are set out below:

Horizontal Agreements: The existing provisions of the Competition Act, relating to anti-competitive horizontal agreements, have been expanded to include any entity that participates or intends to participate in the furtherance of such agreements. Thus, addressing the limited scope of anti-competitive collusion (as presently set out in the Competition Act) and widening it to also include facilitators of such activities. 

Vertical Agreements:  The scope of vertical restraints has been expanded to include agreements between enterprises that are not at different stages or levels of the production chain but are in the nature of commercial arrangements discussed under Section 3(4) of the Competition Act. Additionally, the Amendment Act also makes an exclusion for agreements between enterprises and end consumers from the purview of vertical restraints.

Cognisance of Matters: The CCI has been barred from entertaining any matter in relation to anti-competitive agreements or abuse of dominance violations unless the information relating to the same has been filed within three years from the date of the cause of action. That said, the CCI has the discretion to take up matters after the three-year time period lapses, if it is satisfied that there was sufficient cause for the delay. Further, the CCI cannot conduct inquiries into anti-competitive agreements or abuse of dominance violations that are based on facts or issues that have already been decided by the CCI in a previous order.

DG’s Powers of Investigation: The DG’s powers to investigate contraventions have been widened to allow it to examine ‘agents’ of the party being investigated which include such entity’s bankers, legal advisors, and auditors. The Amendment Act also sets out how documents in the DG’s custody are to be handled and the process that must be adopted while conducting search & seizure operations.

Penalty Provisions: The maximum penalty that can be imposed for the omission of material information and submission of false statements has been increased from INR 10 million (~USD 121,000) to INR 50 million (~ USD 600,000).

25% of Penalty to be Deposited: Parties who want to appeal a decision of the CCI before the National Company Law Appellate Tribunal will now be required to deposit 25% of the penalty amount ordered by the CCI as a condition to such appeal being entertained.

Enacting Regulations: To increase transparency during the process of framing and implementing regulations, the CCI is now required to publish the proposed draft regulations on its website and invite public comments. Thereafter, on or before the date of notifying such regulations, the CCI is also required to provide a general statement responding to such public comments.

CCI Confirms the Establishment of Three Regional Offices

The CCI, currently headed out of New Delhi, confirmed the establishment of 3 regional offices each having the following jurisdictions: 

Mumbai, Western Regional Office: The jurisdiction of the Mumbai office extends to Maharashtra; Gujarat; Goa; Dadra and Nagar Haveli; and Daman and Diu.

Chennai, Southern Regional Office: The jurisdiction of the Chennai office extends to Andhra Pradesh; Telangana; Karnataka; Kerala; Tamil Nadu; Lakshadweep; and Puducherry.

Kolkata, Eastern Regional Office: The jurisdiction of the Kolkata office extends to Bihar; Jharkhand; Odisha; West Bengal; Chhattisgarh; Arunachal Pradesh; Assam; Manipur; Mizoram; Meghalaya; Nagaland; Sikkim; Tripura, and Andaman and Nicobar Islands.

For more information contact:

Zenia Cassinath
Practice Head – Competition

VERSED by Veritas Legal intends to provide the readers with an overview of some of the noteworthy legal developments for education / information purposes only. This newsletter should not be construed or relied on as legal advice, or to create a lawyer-client relationship. Readers should reach out to us for any specific factual or legal questions or clarifications; and are encouraged to seek legal advice before acting on any information provided herein. The enclosed information is available in the public domain and shall not be construed as dissemination of any confidential information.

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