Competition | January – March 2024
Enforcement Matters
Madras High Court upholds the CCI’s jurisdiction to decide on Google’s payment systems
On 19 January 2024, the division bench of the Madras High Court (“MHC“) upheld the rejection of various suits that inter-alia challenged aspects of Google’s billing policies and the way they were being implemented. Holding that the terms of the payment/billing systems between Google and app developers had already been tested before the CCI and as such any variation to such terms ought to also be tested by the CCI and not any other fora. The division bench observed that the provisions of the Competition Act that dealt with (i) the exclusion of the jurisdiction of civil courts and (ii) the applicability of other laws (Sections 61 & 62 of the Competition Act, respectively) must be read in conjunction to give a wholistic meaning to their applicability. Merely because the Competition Act provides that it is to be in addition to and not in derogation of the provisions of any other law in force, it cannot be interpreted to mean that any individual can institute proceedings in a commercial court alleging abuse of dominance, while completely ignoring Section 61 of the Competition Act.
CCI initiates investigation into Google’s billing policies for in-app purchases and paid apps
On 15 March 2024, the CCI ordered the Director General (“DG“) to investigate whether Google is abusing its dominance through its billing and service fee policies.
Observing that market regulators may be inclined to directly regulate price if, (i) there is a market with significant entry barriers coupled with (ii) a dominant player that is engaging in practices that harm consumers or stifle competition, and (iii) the market is not self-correcting, the CCI analyzed factors such as Google’s market position; the take-it or leave-it unilateral nature of Google’s policies; types of services being offered; Google’s costs compared to the quantum of fees being charges for service offered; type of purchases on which service fees were being charged etc. Based on an analysis of the aforesaid, the CCI prima-facie found these policies to be unfair in nature and discriminatory in application. Further noting that such conduct constrained the growth of the app market since fewer resources were available to app developers to enhance or develop their apps and that unfair service fees could increase operational costs of app developers thereby leading to denial of market access.
CCI dismisses complaint against PVR Limited
On 3 January 2024, the CCI dismissed a complaint filed against PVR Limited (“PVR“) alleging competitive harm caused to independent filmmakers due to PVR’s (i) discriminatory screen allocation policies for movie exhibition in favour of certain filmmakers and (ii) vertical integration in film production, distribution and exhibition segments.
In relation to the screen allocation policies, the CCI recognized that an exhibitor’s commercial decisions are governed by consumer demand and unless harm to competition is apparent, any intervention would lead to undesirable consequences by taking away the exhibitor’s autonomy and substituting it with the decision of the regulator. Additionally observing that exhibitors must be able to deal with movies the way they want, subject to the provisions of the Competition Act. Further, while dismissing allegations pertaining to PVR’s vertical integration, the CCI highlighted that vertical integration per se is not prohibited under the Competition Act.
CCI dismisses complaint against Kerala State Road Transport Corporation
On 22 January 2024, the CCI dismissed a complaint filed against Kerala State Road Transport Corporation (“KSRTC”) alleging that the exclusivity granted to KSRTC by the Government of Kerala for operating buses on the route to reach the Sabarimala temple coupled with the exorbitant fares charged from passengers on the said route amounted to an abuse of dominance.
In relation to the KSRTC’s exclusivity, the CCI observed that the grant of exclusivity under the provisions of the Motor Vehicles Act, 1988 (“MV Act“) was a policy decision of the Government of Kerala and as such may not be considered to be anticompetitive. Further in relation to the excessive fares being charged by KSRTC to its passengers, the CCI noted that (i) these fares were fixed in accordance with a Government notification that was applicable to both nationalized and non-nationalized routes and (ii) this notification also provisioned for enhancement of fares based on factors such as ghat roads, festival occasions etc. In this regard the CCI also observed that the fares on per kilometer basis were being charged on a uniform basis as per the said notification by both public and private operators and accordingly dismissed these allegations against KSRTC.
CCI dismisses complaint against manufacturers and sellers of Electric Two Wheelers
On 23 January 2024, the CCI dismissed a complaint filed against Ola Electric Ltd., VIDA Hero Moto Corp Limited, TVS Motors and Ather Energy Private Limited, (collectively the “OPs”) which alleged that the OPs had abused their dominance by underpricing and/or undertaking deceptive pricing and sales practices so that their electric two wheelers could avail the benefit of Government subsidies under the Faster Adoption and Manufacturing of Electric & Hybrid Vehicles Policy. In its order, the CCI analyzed factors such as the unstable market shares of players, recent entries into the market, and the presence of significant competitors. Further taking note of the nascency of the electric two wheeler market, the CCI observed that this market was in a ‘growth stage’ and as such competition is expected to intensify as market players fight for market share. Consequently, the CCI held that none of the OPs appeared to be dominant in the relevant market since no (single) player was able to exert market power in its favour or appeared to demonstrate a position of strength to operate independently of market forces.
Developments in the Legal Framework
Updated Leniency Regime has come into effect
The newly updated leniency regime was brought into force with effect from 20 February 2024. These changes were implemented through the simultaneous enforcement of certain provisions of the Competition Amendment Act, 2023 (“Amendment Act”) by the Central Government and the notification of the Competition Commission of India Lesser Penalty Regulations, 2024 (“Lesser Penalty Regulations”) by the CCI, which replaced the earlier 2009 regulations in this regard. The CCI has also issued ‘FAQs on Lesser Penalty Regime’ (“FAQs”) to provide additional clarity on this new leniency regime. One of the most significant changes to the erstwhile leniency regime is the introduction of the leniency plus mechanism, which provides that if a cartel participant seeks leniency for its involvement in a known cartel (first cartel) and also provides information regarding another undisclosed cartel (second cartel) to the CCI, then it stands to benefit from additional penalty reductions for its conduct in the known cartel as well as the newly disclosed cartel.
To know more about (i) the quantum of penalty reductions for leniency applicants; (ii) the procedure to apply for leniency and how it is granted; (iii) confidential treatment of information submitted in the leniency application; (iv) timelines to be followed; (v) who can file for leniency; (vi) the factors that the CCI will consider while granting leniency etc.; please read our detailed article available here.
New Commitments and Settlements Regime has come into effect
The commitments and settlements regime, under the Competition Act (as amended) was brought into force with effect from 6 March 2024. These changes were implemented through the simultaneous enforcement of certain provisions of Amendment Act and the notification of the Competition Commission of India (Commitment) Regulations, 2024 and the Competition Commission of India (Settlement) Regulations, 2024, collectively “Regulations”. Through these changes, a framework has been set up for the expedited resolution of matters pertaining to abuse of dominance and anti-competitive vertical agreements. This is done by allowing the entities under scrutiny to offer commitments and /or settlements to the CCI.
To know more about (i) when commitment or settlement applications can be made before the CCI; (ii) the nature of information and undertakings applicants are required to submit to the CCI; (iii) the CCI’s adjudication process, fees and the timelines within which proceedings are to be concluded; (iv) factors that the CCI may consider during its assessment; (v) nature and effect of commitment and/or settlement orders and when they can be revoked; (vi) how settlement amounts will be calculated; (vii) confidential treatment of information submitted to the CCI etc., please read our detailed article available here.
CCI notifies Turnover Regulations and Penalty Guidelines
The Competition Commission of India (Determination of Turnover or Income) Regulations, 2024 (“Turnover Regulations”) and the Competition Commission of India (Determination of Monetary Penalty) Guidelines, 2024 (“Penalty Guidelines”) were published in the official gazette on 6 March 2024. Through the introduction of the Turnover Regulations, the CCI has provided clarity on the nature of income that will be considered for calculating penalties relating to anticompetitive agreements and abuse of dominance violations. Whereas, the Penalty Guidelines provide a method for determining the quantum of penalty that can be imposed for the contravention of various provisions of the Competition Act as well as the various aggravating and mitigating factors that the CCI would consider while determining the quantum of penalty for offences related to (i) anticompetitive agreements and abuse of dominance violations by individuals or enterprises (including their KMPs); (ii) failure to comply with the CCI’s orders and/or directions; (iii) submission of false or misleading information; and (iv) gun-jumping violations.
To know more about (i) the types of income that will be considered ‘turnover’ for the purposes of imposing penalties; (ii) the method for calculating penalties; (iii) factors that the CCI will consider at the time of determining the quantum of penalty for various offences etc., please read our detailed article available here.
Changes to the Monetary Thresholds that Trigger Merger Notifications
Vide two notifications dated 7 March 2024, the Ministry of Corporate Affairs has (i) enhanced the wholesale price index of the monetary thresholds provided under Section 5 of the Competition Act (“Jurisdictional Thresholds”) by 150% and (ii) increased the monetary thresholds provided under the existing small target or De-minimis Exemption (“De-minimis Thresholds”). Pursuant to these revised De-minimis Thresholds, transactions where the target enterprise has (i) assets of less than INR 450 crore (~ apx. USD 54 million) or (ii) a turnover of less than 1250 crore (~ apx. USD 151 million) in India will be exempt from needing CCI approval. To know more about these revisions and see the details of each of the new Jurisdictional Thresholds please read our detailed article available here.
Committee on Digital Competition Law suggests ex-ante regulation of digital enterprises and introduces a Draft Digital Competition Bill
On 12 March 2024, the Ministry of Corporate Affairs published the report of the Committee on Digital Competition Law (“CDCL”), which includes a draft of the proposed Digital Competition Bill, 2024 (“DC Bill”), and has invited comments on the same up to 15 May 2024 (as extended). By way of a brief background, it may be noted that the CDCL was formed on 6 February 2023 with the primary objective of determining whether the existing provisions of the Competition Act could efficiently deal with the digital markets or whether a separate law was needed to regulate the same. At the end of its deliberations, the CDCL concluded that (i) the ex-post framework of the Competition Act may not be sufficient to address competition concerns in digital markets since these markets were propelled by strong network effects and tended to ‘tip’ quickly, which often resulted in a ‘winner-takes-most’ outcome; and (ii) the existing legal framework pertaining to digital enterprises regulated such entities in a piecemeal fashion and did not consider challenges to digital markets from a competition law perspective.
To allay these concerns and after considering global best practices, the draft DC Bill was formulated. Through this bill, it is envisaged that if an entity provides any of the 9 identified ‘Core Digital Services’ (“CD Service(s)”) (i.e., (i) online search engines; (ii) online social networking services; (iii) video-sharing platform services; (iv) interpersonal communications services; (v) operating systems; (vi) web browsers; (vii) cloud services; (viii) advertising services; and (ix) online intermediation services) and if it meets certain financial and user thresholds, it would be designated as a ‘Systematically Significant Digital Enterprise’ (“SSD Enterprise”). If so designated, then it, along with its group enterprises that provide CD Services (“Associate Digital Enterprise /AD Enterprise”), will be subjected to certain ex-ante obligations which are aimed to regulate such entity’s market facing conduct.
To know more about (i) the monetary and user thresholds to be categorized as SSD Enterprise and the CCI’s discretion in this regard; (ii) duration of the SSD Enterprise designation and how it can be revoked; (iii) ex-ante obligations of an SSD Enterprise with respect to (a) self-preferencing, (b) data usage, (c) third party applications, (d) anti-steering, (e) tying and bundling and (f) compliance reporting; (iv) the proposed adjudication process, anticircumvention safeguards, and penalties etc. please read our detailed article available here.
Other Regulatory updates
Draft Merger Control Rules: On 11 March 2024, the MCA published three draft rules relating to the Indian merger regime for public consultation. More particularly, these rules aim to provide clarity on the types of transactions that (i) can avail the benefit of the existing green channel filing route, through the Competition Commission of India (Green Channel) Rules 2024; (ii) can avail the benefit of the De-minimis Exemption, through the Competition Commission of India (De-minimis) Rules 2024; and (iii) will be exempt from requiring CCI approval even if the Jurisdictional Thresholds are met, through the Competition Commission of India (Exempted Combination) Rules 2024
Proposed Changes to the General Regulations: On 26 February 2024, the CCI proposed certain amendments to the CCI General Regulations with an aim of inter-alia streamlining the processes relating confidentiality rings and their review of documents in order to ensure timely & effective disposal of matters. Further, these proposed amendments also contemplate a revision to the charges for carrying out inspection(s) for documents submitted to the CCI.
For more information contact:
Zenia Cassinath
Practice Head – Competition
zenia.cassinath@veritaslegal.in
DISCLAIMER
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.