Competition Law Archives - Taxmann Blog Thu, 19 Dec 2024 14:29:04 +0000 en-US hourly 1 No Abuse of Dominance by ‘Astrotalk’ Due to the Presence of Several Other Competing Online Astrology Platforms | CCI https://www.taxmann.com/post/blog/no-abuse-of-dominance-by-astrotalk-due-to-the-presence-of-several-other-competing-online-astrology-platforms-cci https://www.taxmann.com/post/blog/no-abuse-of-dominance-by-astrotalk-due-to-the-presence-of-several-other-competing-online-astrology-platforms-cci#respond Thu, 19 Dec 2024 14:29:04 +0000 https://www.taxmann.com/post/?p=81967 Case Details: InstaAstro Technology (P.) … Continue reading "No Abuse of Dominance by ‘Astrotalk’ Due to the Presence of Several Other Competing Online Astrology Platforms | CCI"

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Abuse of dominance

Case Details: InstaAstro Technology (P.) Ltd. vs. Astrotalk Services (P.) Ltd. - [2024] 169 taxmann.com 312 (CCI)

Judiciary and Counsel Details

    • Ms Ravneet Kaur, Chairperson Anil Agrawal, Ms Sweta Kakkad & Deepak Anurag, Member

Facts of the Case

In the instant case, the informant was an App-based platform, offering on-demand astrology services through ‘InstaAstro’, which enabled users to schedule sessions with astrologers over chat/call and provide diversified services such as tarot reading, vastu, vedic astrology, match-making, horoscope reading, etc. Astrotalk was also an online platform as well as an app-based platform, which offered on-demand astrology services similar to ones offered by informant.

Informant filed information alleging contravention of sections 3 and 4 by OP alleging that OP was abusing its dominant position in relevant market of ‘sale of astrology related products and services provided by online platform for selling astrology related solutions in India’ and was poaching informant’s consultants and employees by offering them higher remuneration.

CCI Held

The CCI observed that the allegations primarily fell under purview of contract law. Consultants had freedom to provide their services to any entity as per their discretion and conduct of moving away from one entity to another (to offer services) in lieu of better remuneration, as such could not be examined under realm of Competition Law, more specifically, under provisions of section 3.

Since there existed well entrenched competition in form of several astrology online applications/platforms available in India in the delineated market, OP was not dominant in relevant market.

The CCI held that there existed no prima facie case of contravention of provisions of section 3 and 4 of the Competition Act, 2002 against OP.

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WhatsApp’s Updated Privacy Policy Mandating Data Sharing for Non-Service Purposes Violates Section 4 https://www.taxmann.com/post/blog/whatsapps-updated-privacy-policy-mandating-data-sharing-for-non-service-purposes-violates-section-4 https://www.taxmann.com/post/blog/whatsapps-updated-privacy-policy-mandating-data-sharing-for-non-service-purposes-violates-section-4#respond Mon, 09 Dec 2024 12:29:19 +0000 https://www.taxmann.com/post/?p=81466 Case Details: Updated Terms of … Continue reading "WhatsApp’s Updated Privacy Policy Mandating Data Sharing for Non-Service Purposes Violates Section 4"

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WhatsApp's Data-Sharing Policy

Case Details: Updated Terms of Service and Privacy Policy for WhatsApp Users, In re - [2024] 168 taxmann.com 482 (CCI)

Judiciary and Counsel Details

  • Ms Ravneet Kaur, Chairperson, Anil Agrawal & Deepak Anurag, Member
  • Arun Kathpalia, Sr. Adv., Yaman VermaMs Aisha KhanAniket GhoshMs Parinita KareMs Bani BrarMs Tahira Kathpalia and Ms Supritha Prodaturi, Advs. RajShekhar Rao, Sr. Adv. Naval ChopraMs Krithika RameshMs Meherunnisa A. JaitleyRajarshi RoyMs Nitika Dwivedi, Advs., Ms Ruth ChenRahul Satyan, Representatives of Meta.
  • Tejas KariaAatmik JainAakash KumbhatShashank Mishra, Advs. Vivek PandeySasthibrata PandaMs Shreya KapoorMs Biyanka Bhatia, Advs. for all Appearing Parties.

Facts of the Case

In the instant case, WhatsApp had updated its privacy policy and terms of service for WhatsApp users. It was inter alia reported that the new policy made it mandatory for users to accept terms and conditions in order to retain their WhatsApp account information and provided as to how it would share personalised user information with Facebook (later renamed as Meta) and its subsidiaries.

The Commission, decided to take suo-motu cognisance of the matter. It was noted that WhatsApp was dominant in the relevant market for Over The Top (OTT) messaging apps through smartphones in India. Further, users were made to accept the 2021 Update, which mandated the sharing of data for purposes other than providing WhatsApp services, without offering any choice to opt out of the same. This imposition disregards the legitimate expectations of users to decide how their data will be collected and used.

CCI Held

The CCI observed that by compelling all users to accept data-sharing conditions, WhatsApp reduces the level of privacy (an important non-price parameter of competition in digital markets) that users expect, thus diminishing consumer welfare. This would result in increasing entry barriers for rivals and thus potentially lead to their exclusion from the market.

The CCI held that the impugned conduct of data-sharing by WhatsApp with Facebook apparently amounted to the degradation of non-price parameters of competition, ultimately constituting an abuse of market power.

Further, the CCI held that WhatsApp had prima facie contravened the provisions of section 4 of the Competition Act, 2002, through its exploitative and exclusionary conduct in the garb of the policy update. Accordingly, in terms of provisions of Section 27(a) of the Act, WhatsApp was directed to cease and desist from indulging in such practices, which had been found to violate the provisions of the Act.

List of Cases Referred to

  • Legislation expressly or impliedly provides for retrospective application (In Zile Singh v. State of Haryana (2004) 8 SCC 1 (para 250)
  • Videocon International Limited v. SEBI (2015) 4 SCC 33 (para 250).

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CCI Orders Probe into Google’s Alleged Abuse of Dominance for Denying Market Access to Gaming App Developers https://www.taxmann.com/post/blog/cci-orders-probe-into-googles-alleged-abuse-of-dominance-for-denying-market-access-to-gaming-app-developers https://www.taxmann.com/post/blog/cci-orders-probe-into-googles-alleged-abuse-of-dominance-for-denying-market-access-to-gaming-app-developers#respond Wed, 04 Dec 2024 12:06:22 +0000 https://www.taxmann.com/post/?p=81252 Case Details: Winzo Games (P.) … Continue reading "CCI Orders Probe into Google’s Alleged Abuse of Dominance for Denying Market Access to Gaming App Developers"

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Google anti-competitive practices

Case Details: Winzo Games (P.) Ltd., In re - [2024] 168 taxmann.com 687 (CCI)

Judiciary and Counsel Details

  • Ms Ravneet Kaur, Chairperson, Anil Agrawal, Ms Sweta Kakkad & Deepak Anurag, Member
  • Abhishek MalhotraMs Srishti GuptaMs Atmaja TripathiMs Anukriti TrivediMs Nishtha Chaturvedi, Advs. for the Petitioner.
  • Sajan Poovaya, Sr. Adv., Karan Singh ChandhiokAvinash AmarnathRahul RaiMs Shivanghi SukumarMs Raksha AgarwalPalash MaheshwariMs Tarun DonadiUday BaliMs Aditi GopalakrishnanMs Arunima Chatterjee, Representatives of Google, for the Respondent.

Facts of the Case

In the instant case, the Informant was a digital gaming and technology company that operated an online digital gaming platform under its trademark and brand name, ‘Winzo’. Google operated ‘Google Play,’ wherein third-party app developers made their apps available to users. The Informant filed instant information and made various allegations against Google, inter alia, in relation to its app store and advertisement policies.

It was noted that where Google updated its Developer Program Policies and Developer Distribution Policy under which it commenced a Pilot Program to test placement of only two types of real-money gaming (RMGs) in Google’s Play Store in India i.e., Daily Fantasy Sports (DFS) and Rummy, such direct access to end-users via dominant Play Store provides a significant competitive edge to DFS and Rummy apps, potentially disadvantaging other RMG applications.

CCI Held

The CCI held that this selective onboarding prima facie distorts the competitive landscape to the disadvantage of apps not covered in the Pilot. Further, Google had restricted its advertisements policy (modified ad policy) by only allowing DFS and Rummy app advertisers to host advertisements using Google Ads.

This selective onboarding of certain app categories (i.e., DFS and Rummy) appeared to distort the competitive landscape to the disadvantage of other RMG apps excluded from advertising on Google. Such practices were in violation of Section 4(2)(b) of the Competition Act, 2002.

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CCI May Now Appoint Monitoring Agencies to Ensure Compliance and Supervise the Implementation of Its Orders https://www.taxmann.com/post/blog/cci-may-now-appoint-monitoring-agencies-to-ensure-compliance-and-supervise-the-implementation-of-its-orders https://www.taxmann.com/post/blog/cci-may-now-appoint-monitoring-agencies-to-ensure-compliance-and-supervise-the-implementation-of-its-orders#respond Thu, 19 Sep 2024 12:18:19 +0000 https://www.taxmann.com/post/?p=76808 Notification No. CCI/ Reg-G.R./08/ 2024-25, … Continue reading "CCI May Now Appoint Monitoring Agencies to Ensure Compliance and Supervise the Implementation of Its Orders"

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CCI (General) Regulations

Notification No. CCI/ Reg-G.R./08/ 2024-25, Dated: 17.09.2024

The CCI has notified the CCI (General) Regulations, 2024. As per the notified norms, when the Commission deems it necessary to monitor the implementation of its orders under Sections 31, 48A, 48B, or any related provisions, it may appoint agencies to oversee the implementation. These agencies will operate under the terms and conditions set by the Commission. Further, the appointed agencies must be independent of the parties involved in the proceedings and must not have any conflict of interest with them.

The agencies may include an accounting firm, management consultancy, or any other professional organisation, chartered accountants/company secretaries/cost accountants. The agencies appointed must carry out the responsibilities as specified by the Commission, including monitoring the implementation of the orders of the Commission in accordance with its terms of engagement, informing the Commission of any non-implementation or non-compliance of such orders, and maintaining the highest standards of confidentiality in respect of information received or collected during the discharge of its obligations.

Also, the Commission may suspend, or terminate the engagement of these agencies as may be determined by terms of its engagement.

Click Here To Read The Full Notification

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[Analysis] Decoding the CCI (Combinations) Regulations 2024 – Recent Amendments | Impact | Implications https://www.taxmann.com/post/blog/analysis-decoding-the-cci-combinations-regulations/ https://www.taxmann.com/post/blog/analysis-decoding-the-cci-combinations-regulations/#respond Mon, 16 Sep 2024 12:52:56 +0000 https://www.taxmann.com/post/?p=76436 The CCI (Combinations) Regulations, 2024 … Continue reading "[Analysis] Decoding the CCI (Combinations) Regulations 2024 – Recent Amendments | Impact | Implications"

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CCI (Combinations) Regulations

The CCI (Combinations) Regulations, 2024 were introduced by the Competition Commission of India to provide a more stringent framework for overseeing mergers and acquisitions, particularly targeting significant transactions in the digital sector. These regulations came into effect on September 10, 2024, under the newly amended competition law. These regulations signify a significant shift towards a more comprehensive regulatory approach, particularly concerning high-value and influential transactions in the digital arena, enhancing the CCI's ability to oversee and maintain fair competition in the market

Table of Contents

  1. Introduction
  2. Broader Definition of ‘Transaction Value’ u/s 5(d) of the Competition Act, 2002
  3. Criteria for Assessing ‘Substantial Business Operations in India’ u/s 5(d) of the Act
  4. Streamlining Notice Requirements u/s 6 and Section 6A of the Competition Act for ‘Combinations’
  5. Restrictions on Acquirer’s Influence and Rights During Acquisition under Section 6A(a)
  6. Commission to Carefully Assess Confidentiality Requests During Inquiries
  7. Obligations for Filing ‘Combination’ Notices
  8. Amendment to Fee Structure for Filing Notice
  9. Scrutiny and Validating Notices of ‘Combinations’ Form
  10. Notice Requirements for ‘Combinations’
  11. Hearing Procedures and Statutory Timelines in ‘Combination Inquiries’
  12. Modification to the Proposed ‘Combination’
  13. Compliance and Monitoring Requirements for Combination Modifications
  14. Conclusion

1. Introduction

A “combination” refers to mergers, acquisitions, and amalgamations between enterprises, which have the potential to significantly affect market competition. To manage these combinations and avoid any appreciable adverse effects on competition (AAEC), the Competition Commission of India (CCI) oversees such activities. Recently, the CCI introduced the Competition Commission of India (Combinations) Regulations, 2024, on September 9, 2024. These regulations are set to be implemented starting September 10, 2024. Key highlights of the newly announced Combination Regulations include:

Taxmann.com | Research | Competition Law

2. Broader Definition of ‘Transaction Value’ u/s 5(d) of the Competition Act, 2002

Under Section 5(a) of the Competition Act, 2002, an acquisition, merger, or amalgamation qualifies as a combination if the transaction involving control, shares, voting rights, or assets exceeds a value of Rs. 2,000 crore. For the purposes of Section 5(d) of the Act, the transaction value now includes all valuable considerations, not limited to:

  • Considerations for covenants, undertakings, or restrictions imposed on the seller or others, agreed upon separately.
  • Considerations for all interconnected steps and transactions.
  • Payments due within two years related to technology, intellectual property rights, usage, supply, branding, and marketing arrangements.
  • Considerations for call options and shares, assuming full exercise.
  • Payments are based on specified future outcomes as detailed in transaction documents.
Comments
The expanded interpretation of Section 5(d) under the Competition Act, 2002 significantly broadens the definition of transaction value in evaluating combinations. This inclusive approach ensures that all financial components of an acquisition, merger, or amalgamation are thoroughly considered. This provides enhanced regulatory clarity and helps mitigate the risks of anti-competitive practices.

3. Criteria for Assessing ‘Substantial Business Operations in India’ u/s 5(d) of the Act

According to the proviso to Section 5(d) of the Act, an enterprise undergoing acquisition, merger, or amalgamation must have significant business operations in India, as outlined by specific regulations. An enterprise is considered to have significant operations in India if:

  • For digital services, at least 10% of its global business or end users are located in India.
  • Its gross merchandise value (GMV) in India for the preceding 12 months constitutes at least 10% of its global GMV and exceeds Rs. 500 crores.
  • Its revenue from Indian operations during the previous financial year accounts for at least 10% of its global turnover and surpasses Rs. 500 crores.
Comments
The proviso to Section 5(d) of the Act specifies criteria for when an enterprise involved in an acquisition, control, merger, or amalgamation has substantial business operations in India. It sets clear thresholds for digital services, gross merchandise value, and turnover, ensuring that only enterprises with a significant presence in the Indian market come under regulatory examination. This strategy enhances oversight by guaranteeing that major transactions are thoroughly assessed to prevent anti-competitive practices and maintain market integrity.

4. Streamlining Notice Requirements u/s 6 and Section 6A of the Competition Act for ‘Combinations’

A notice for entering into ‘Combinations’ under Section 6(2) or Section 6A(a) must be submitted using Form I, accompanied by proof of fee payment. Alternatively, if:

  • The combined market share of the entities involved exceeds 15% in any relevant market, or
  • The entities control more than 25% of the market share at different stages of the production chain.

Further, notices must be filed using Form II. Additionally, all notices must adhere to the guidelines set by the Commission, available on its website. For transactions under Section 6A(a), notices must be submitted within 30 days of the acquisition of shares or securities, along with the necessary fee proof.

Notices under Section 6(4) should also be filed using Form I, including the required declaration and fee. If a notice is initially submitted in Form I but the Commission later requires details available in Form II, the Commission will direct the submission of Form II. Any fee paid for Form I will be adjusted if Form II is filed within 45 days.

Comments
This amendment enhances the procedural clarity for filing notices concerning combinations under Sections 6 and 6A of the Act. By simplifying the compliance process and establishing clear timelines, the amendment streamlines regulatory submissions and promotes more efficient oversight by the Commission.

5. Restrictions on Acquirer’s Influence and Rights During Acquisition under Section 6A(a)

  • When an acquisition falls under Section 6A(a) of the Act, the acquirer is permitted to: (a) Receive economic benefits, including dividends, distributions, rights issues, bonus shares, stock splits, and buy-backs.
  • Exercise voting rights solely concerning liquidation or insolvency issues.

However, the acquirer, along with its group entities and affiliates, is prohibited from exerting direct or indirect influence over the enterprise whose shares or securities are being acquired.

Comments
This regulation permits the acquirer to enjoy economic benefits while establishing strict boundaries to prevent undue control over the enterprise. By limiting influence in significant areas such as liquidation or insolvency, this approach promotes transparency and preserves corporate independence, ensuring a fair and regulated acquisition process.

6. Commission to Carefully Assess Confidentiality Requests During Inquiries

The Commission will meticulously review any requests for confidentiality concerning information or documents provided during an inquiry. These requests must explicitly outline the reasons, justifications, and potential business impacts for the involved parties. This thorough detailing enables the Commission to consider all pertinent factors before making a decision.

Comments
This policy strengthens the safeguarding of sensitive information while ensuring transparency and a thorough evaluation process. By demanding detailed explanations and implications, this provision strikes a balance between the necessity for confidentiality and the Commission’s requirement for comprehensive insight.

7. Obligations for Filing ‘Combination’ Notices

The obligations associated with filing ‘Combination’ notices are outlined below:

  • Acquisition or Control The acquirer is required to submit the notice using either Form I or Form II, duly signed by the authorized person(s). In the case of companies, any authorized signatory may also sign the form.
  • Without Consent – If an enterprise is acquired without consent, the acquirer must submit all available information within ten days of filing. Should complete information not be available at the time of filing, the Commission may request additional details directly from the acquired enterprise. The time taken to gather this information will not be included in the statutory deadlines.
  • Merger or Amalgamation – Parties involved in a merger or amalgamation must jointly submit the notice using either Form I or Form II, signed by the authorized person(s). For companies, any authorized signatory may fulfil this requirement.
  • Series of Transactions – A single notice should be filed for interconnected steps or a series of smaller transactions that together constitute a combination.
  • Substance over Structure – The obligation to file a notice is determined by the substance of the transaction rather than any structural configurations aimed at circumventing the filing requirements.

8. Amendment to Fee Structure for Filing Notice

The fee structure for filing notices under the regulations has been updated. The new fee for notices filed using Form I is Rs 30 lakh, an increase from the previous fee of Rs 20 lakh. For notices filed using Form II, the fee is now set at Rs 90 lakh. The fee structure for Form II has been adjusted to reflect this change.

Comments
The increase in fees may prompt a more diligent assessment and preparation prior to submission, aiming to enhance the thoroughness and accuracy of the notices filed.

9. Scrutiny and Validating Notices of ‘Combinations’Form

The current regulations introduce significant updates to the process of scrutinizing and validating notices of combinations, with the goal of improving clarity and efficiency in regulatory compliance:

  • Completeness and Compliance – Notices filed for proposed combinations must be complete and compliant. Incomplete notices will be returned with a request for missing information, which will be communicated within ten working days.
  • Addressing Defects – Parties must correct any defects or provide additional information as directed by the Commission within the specified timeframe. A notice is considered valid only upon full compliance.
  • Request for Additional Information – Should additional information be required, the Commission will instruct the parties to provide it. The time taken to submit this information will not count towards statutory deadlines.
  • Documentation of Communications – All communications related to defects and additional requests for information must be properly documented.
  • Consequences of Non-Compliance – Failure to address defects or to provide the required information will result in the invalidation of the notice. However, parties may be given an opportunity to be heard before the notice is invalidated. The Commission will inform the parties of its decision within seven days.
  • Resubmission of Notice – If a notice is resubmitted after being invalidated, the original fee will be adjusted against the new fee if the resubmission occurs within 45 days.
  • External Information Gathering – The Commission may seek information from external sources about the impact of the combination on competition. The time spent gathering this information is excluded from statutory deadlines.
Comments
The updated regulations enhance the scrutiny process for notices of combination by implementing stricter requirements for completeness and compliance. Failure to meet these requirements may lead to the invalidation of the notice, though parties will have an opportunity to present their case before any final decision. Additionally, the Commission is authorized to gather external information regarding the competitive impact of the combination, with this process not counting towards statutory deadlines.

10. Notice Requirements for ‘Combinations’

The recent amendments have brought substantial updates to the notice requirements for ‘Combinations’. According to the new regulations, any party that has submitted a notice must notify the Commission of any changes in the information within ten working days following receipt of an acknowledgement from the Secretary.

Previously, parties were obligated to inform the Commission of any changes ‘at the earliest’ while proceedings under the Act were ongoing. Additionally, the rules concerning invalid notices remain consistent; parties are permitted to refile without incurring additional fees if they do so within 30 days of receiving communication from the Commission.

Comments
The recent amendments to the notice requirements for combinations have introduced a precise 10-working day timeline for parties to update the Commission on any changes, enhancing the clarity of the process. Additionally, the existing provision that allows for the refiling of invalid notices without additional fees within 30 days has been maintained. This ensures that parties are not penalized for technical errors while promoting a structured and efficient refiling process.

11. Hearing Procedures and Statutory Timelines in ‘Combination Inquiries’

Under the new regulations, if the Commission opts to grant the parties an opportunity to be heard during the inquiry, the Secretary must issue a notice detailing the date and time for the appearance as directed by the Commission. Importantly, the period from when the notice is issued to the scheduled hearing date, up to a maximum of ten days, will not count towards the statutory time limits set under Sections 6(2A), 29(1B), and 31(6) of the Act. Additionally, if the parties request an extension of time to prepare for their appearance, this extended period will also be excluded from the statutory timeframes.

Comments
This amendment introduces greater procedural flexibility while ensuring adherence to statutory timelines. It protects against delays that might otherwise hinder the efficiency of the inquiry process. By striking a balance between the need for thorough hearings and compliance with legal deadlines, the amendment enhances fairness and transparency in the proceedings.

12. Modification to the Proposed ‘Combination’

The recent amendments bring crucial enhancements to the procedure for managing modifications to proposed combinations, providing greater clarity and improving procedural efficiency:

  • Communication of Modifications The Secretary is now required to convey the Commission’s modification proposal within seven days. The notified party must respond within five days of receiving this proposal. Both communication and response periods are excluded from statutory deadlines.
  • Filing Modifications Any modifications must be submitted using Form IV within ten working days following the Secretary’s acknowledgement or simultaneously with the response to the communication.
  • Timing for Modifications Parties are permitted to propose modifications in Form IV when responding to the notice within 15 days of its receipt. This allows for addressing any initial concerns raised by the Commission and can facilitate a quicker approval under Section 31(1).
  • Approval and Compliance Combinations approved with modifications must be implemented according to the Commission’s specified terms and timelines. Any failure to comply within the designated period will lead to an enforcement order under Section 31(5)(b) within 30 days following the Commission’s determination of non-compliance.
Comments
The recent amendments significantly enhance the process for handling modifications to proposed combinations by introducing clearer timelines and procedural requirements. This structured approach bolsters procedural clarity, accountability, and adherence to regulatory standards, ensuring that combinations are scrutinized effectively to prevent anti-competitive effects.

13. Compliance and Monitoring Requirements for Combination Modifications

Under the new regulations, parties involved in a combination are required to file a compliance report and affidavit with the Secretary within seven days of implementing any mandated modifications, ensuring adherence to the Commission’s directives. For modifications that require ongoing compliance, parties must submit periodic reports according to the schedule outlined in the Commission’s order.

If the parties do not submit the necessary reports, it is the Secretary’s responsibility to report the non-compliance to the Commission for further action. This procedure ensures that modifications are executed as prescribed and that continued compliance is monitored effectively.

Comments
This amendment significantly strengthens regulatory compliance and monitoring by ensuring timely verification of adherence to the Commission’s orders. The mandate for periodic reports on ongoing compliance enhances oversight, ensuring that long-term modifications are consistently monitored. This framework promotes greater accountability, guarantees that modifications are implemented as directed, and bolsters the overall effectiveness of regulatory oversight.

14. Conclusion

In conclusion, the recent updates to the Competition Commission of India (Combinations) Regulations, 2024 mark a significant enhancement in the regulatory framework governing mergers, acquisitions, and amalgamations. By expanding the definition of transaction value, refining criteria for substantial business operations, and improving procedural efficiency in handling notice requirements and modifications, these amendments provide a robust mechanism to deter anti-competitive practices.

The establishment of clear deadlines for compliance and reporting facilitates effective monitoring and enforcement, strengthening the Commission’s capacity to preserve market competition and ensure procedural fairness. These modifications aim to streamline regulatory procedures and increase transparency and accountability in the oversight of combinations.

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CCI Broadens ‘Transaction Value’ u/s 5(d) to Include All Forms of Consideration, Covenants, and Future Payables https://www.taxmann.com/post/blog/cci-broadens-transaction-value-u-s-5d-to-include-all-forms-of-consideration-covenants-and-future-payables https://www.taxmann.com/post/blog/cci-broadens-transaction-value-u-s-5d-to-include-all-forms-of-consideration-covenants-and-future-payables#respond Wed, 11 Sep 2024 11:53:23 +0000 https://www.taxmann.com/post/?p=76203 Notification No. CCI/CD/Comb. Regl./2024, Dated: … Continue reading "CCI Broadens ‘Transaction Value’ u/s 5(d) to Include All Forms of Consideration, Covenants, and Future Payables"

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Transaction Value u/s 5(d)

Notification No. CCI/CD/Comb. Regl./2024, Dated: 09.09.2024

CCI has notified the CCI (Combinations) Regulations, 2024, effective from 10.09.2024. Now, any request for confidentiality of information submitted during the inquiry shall be duly considered by the Commission. Further, the transaction value under Section 5(d) includes all forms of valuable consideration, direct or indirect, immediate or deferred, including covenants, obligations, interconnected steps, call options, and payables within two years for IP rights, supply, marketing, or future outcomes.

Click Here To Read The Full Notification

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Prohibition of Abuse of Dominant Position | Legal Boundaries and Regulatory Compliance https://www.taxmann.com/post/blog/prohibition-of-abuse-of-dominant-position https://www.taxmann.com/post/blog/prohibition-of-abuse-of-dominant-position#respond Tue, 10 Sep 2024 12:09:42 +0000 https://www.taxmann.com/post/?p=75815 Prohibition of abuse of dominant … Continue reading "Prohibition of Abuse of Dominant Position | Legal Boundaries and Regulatory Compliance"

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Abuse of a Dominant Position

Prohibition of abuse of dominant position is a legal framework designed to prevent entities that hold a dominant market position from engaging in practices that could harm competitive conditions in the market, consumer interests, or economic freedom of other companies. This prohibition is a cornerstone of antitrust laws globally and is aimed at ensuring a level playing field in the marketplace.
Entities are considered dominant if they have significant market power that allows them to act independently of competitors, customers, or ultimately, consumers. The abuse can take various forms, such as imposing unfair purchase or selling prices, limiting production, markets, or technical development to the prejudice of consumers, or applying dissimilar conditions to equivalent transactions, thereby placing certain partners at a competitive disadvantage.

Table of Contents

  1. Dominant position itself is not prohibited
  2. Meaning of Dominant Position
  3. Unfair or discretionary conditions or prices in purchase/sale is abuse of dominant position
  4. Limiting or restricting production or development
  5. Denial of market access is abuse of dominant position
  6. Supplementary obligations unconnected to main contract is abuse of dominant position
  7. Using dominant position to enter another market is abuse of dominant position
  8. CCI can order division of enterprise enjoying dominant position
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1. Dominant position itself is not prohibited

No enterprise or group shall abuse its dominant position. [Section 4(1) of Competition Act].

Definitions of ‘enterprise’ and ‘group’ have been discussed in earlier chapter of this book.

Note that ‘dominant position’ itself is not prohibited. For example, if over 90% of customers prefer Windows for computers, that is not fault of Microsoft.

If most of people use Google search engine, they cannot be stopped from doing so. That is choice of customers. CCI cannot order that Google should not cater to more than 50% of market of search engine.

Mere fact that the party is a dominant enterprise in the relevant market is not a violation of Competition Act. Its abuse is the violation of the Act – PDA Trade Fairs v. Indian Trade Promotion Organisation (2012) 116 SCL 357 = 27 taxmann.com 218 (CCI).

Abuse of dominant position is prohibited – What is prohibited is its misuse. The abuse can be by an enterprise or ‘group’.

Act is not a penal Act, as action specified in section 4 by itself is not offence Competition Act is not a penal Act as it does not make punishable by itself an act of entering into an agreement, contrary to provisions of Act. Breach of sections 3 and 4 of Competition Act by itself is not an offence and, therefore, entering into an agreement, contrary to provisions of law, is not an offence but such agreement is only void that may not be enforceable in law. Even if parties enter into an agreement covered by Act that by itself, does not amount to an offence. What is made punishable is disobedience of order passed by Commission and its non-compliance – Kingfisher Airlines Ltd. v. CCI (2011) 108 SCL 621 = 12 taxmann.com 285 (Bom HC DB).

Government company is not exempted from purview of Competition Act – A State monopoly is not excluded from provisions of Competition Act. Government company is not exempted from purview of Competition Act – Coal India v. CCI (2023) 151 taxmann.com 235 = 179 SCL 159 (SC 3 members).

Provision applies even where agreement was entered prior to date when section 4 was made effective Section 4 of the Act came into effect on 20-5-2009. In Belaire Owners Association v. DLF Ltd. (2011) 109 SCL 655 = 14 taxmann.com 90 (CCI), it has been held that provisions of section 4 would apply even where agreement was entered prior to 20-5-2009.

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1.1 One sided contracts where bargaining power of parties is inequal are against public policy and are void

Section 23 of Contract Act states that consideration or object of an agreement is not lawful if Court regards it as opposed to public policy. If Court holds a consideration or object as against public policy, such agreement will be void as unlawful.

In case of enterprise or group in dominant position, it is in a commanding position and they can virtually dictate the terms of agreement and the other party has no option but to accept the terms and conditions.

These are termed as ‘dotted line’ agreements as the other party has just to sign on dotted line.

The approach of enterprise or group in dominant position is simply ‘take it or leave it’.

Such one sided contracts are against public policy and have been held as void.

The aggrieved person can approach Courts for relief in case of such one sided contracts.

Adhesion contracts If the contracting parties do not have equal bargaining power, contracts are often one sided. Such contracts are ‘Adhesion Contracts’. These are standardised form of contract form offered on essentially ‘take it or leave it’ basis without affording other party realistic opportunity to bargain. The weaker party has no realistic choice as to terms. One party is in a position to dominate other and there is inequality of bargaining power. Court can grant relief if clauses in such contract are so unreasonable as to be unconscionable – Central Inland Water Transport Corpn. v. Brojo Nath Ganguly (1986) 3 SCC 156 = (1986) 3 Comp LJ 1 = 60 Comp Cas 797 = AIR 1986 SC 1571 [In this case, it was held that clause of removal from service by three months’ notice is wholly unreasonable and against public policy]. – Quoted and followed in Pioneer Urban Land and Infrastructure Ltd. v. Govindan Raghavan (2019) 5 SCC 725.

Standard format of contracts void if absurd In Pawan Alloys v. UPSEB AIR 1997 SC 3910 = 1997 AIR SCW 3839 = (1997) 7 SCC 251 also, Supreme Court, quoting from various authorities, held that if the party signs an agreement with onerous condition as he has no option, it cannot be said that he has accepted the term willingly. No businessman in his senses would ever agree voluntarily to an absurd, incongruous and inconsistent condition. In this case, it was held that the appellant had only undergone the formality of signing standard form of contract. They had not voluntarily or by even remotest chance agreed to give up the benefit (by signing the standard form of agreement).

Unjust conditions in contract are against public policy – In Hindustan Times v. State of UP 2002 AIR SCW 4706, it was observed, ‘State cannot resort to theory of ‘take it or leave it’. The bargaining power of the State and subject (newspapers in this case) is unequal. Any unjust condition thrust upon them by the State would attract the wrath of Article 14 of the Constitution of India as also section 23 of Indian Contract Act.

Inequal one sided dotted line contracts are void In LIC v. Consumer Education and Research Centre AIR 1995 SC 1811 = (1995) 84 Comp. Cas. 168 (SC) = (1995) 5 SCC 482 = 1995 AIR SCW 2834, the Apex Court has come down heavily on such one sided contracts. It was held that an unfair and untenable or irrational clause in a contract is amenable to judicial review. In common law, a party was relieved from such a contract. This will also apply to ‘standard form of contract’ where there was inequality of bargaining power. If a contract is found unreasonable or unfair or irrational, one must look into relative bargaining power of the contracting parties. In ‘dotted line’ contracts, there would be no occasion to a weaker party to bargain. He has to accept the unreasonable or unfair terms or forego the service. There is no equal bargaining power, as the approach of authority is ‘take it or leave it’.

2. Meaning of Dominant Position

“Dominant position” means a position of strength, enjoyed by an enterprise, in the relevant market, in India, which enables it to:

  • operate independently of competitive forces prevailing in the relevant market; or
  • affect its competitors or consumers or the relevant market in its favour. [Explanation (a) to section 4 of Competition Act].

If the TV programme viewership is not very high, it cannot be said to be in ‘dominant position’ and hence complaint against such TV programme (Kaun Banega Crorepati – KBC – in this case) is not maintainable – Anuj Kumar Bhari v. Sony Entertainment TV (2011) 110 SCL 2 = 14 taxmann.com 170 (Del HC).

In Surinder Bhakoo v. HDFC Bank Ltd. (2011) 110 SCL 17 = 14 taxmann.com 63 (CCI), it was found that the Bank is not in dominant position in housing finance loan and hence it was held that the complaint is not maintainable.

In Arshiya Rail Infrastructure Ltd. v. Ministry of Railways (2012) 116 SCL 417 = 27 taxmann.com 25 (CCI), it has been held that in transportation of containers within India, railways are not having dominant position as major transportation is by road.

2.1 Relevant Market

“Relevant market” means the market which may be determined by the commission with reference to the relevant product market or the relevant geographic market or with reference to both the markets. [Section 2(r) of Competition Act].

Relevant geographic market “Relevant geographic market” means a market comprising the area in which the conditions of competition for supply of goods or provision of services or demand of goods or services are distinctly homogenous and can be distinguished from the conditions prevailing in the neighbouring areas. [Section 2(s) of Competition Act].

Relevant product market – “Relevant product market” means a market comprising of all those products or services:

  • which are regarded as interchangeable or substitutable by the consumer, by reason of characteristics of the products or services, their prices and intended use; or
  • the production or supply of, which are regarded as interchangeable or substitutable by the supplier, by reason of the ease of switching production between such products and services and marketing them in the short term without incurring significant additional costs or risks in response to small and permanent changes in relative prices [section 2(t) of Competition Act, substituted vide Competition (Amendment) Act, 2023 from 18-5-2023].

Earlier definition “Relevant product market” means a market comprising all those products or services which are regarded as interchangeable or substitutable by the consumer, by reason of characteristics of the products or services, their prices and intended use. [Section 2(t) of Competition Act as existing upto 18-5-2023].

2.2 Factors to be considered while deciding whether enterprise enjoys dominant position

The Commission shall, while inquiring whether an enterprise enjoys a dominant position or not under section 4 of Competition Act, have due regard to all or any of the following factors –

  • market share of the enterprise.
  • size and resources of the enterprise.
  • size and importance of the competitors.
  • economic power of the enterprise including commercial advantages over competitors.
  • vertical integration of the enterprises or sale or service network of such enterprises.
  • dependence of consumers on the enterprise.
  • monopoly or dominant position whether acquired as a result of any statute or by virtue of being a Government company or a public sector undertaking or otherwise.
  • entry barriers including barriers such as regulatory barriers, financial risk, high capital cost of entry, marketing entry barriers, technical entry barriers, economies of scale, high cost of substitutable goods or service for consumers.
  • countervailing buying power.
  • market structure and size of market.
  • social obligations and social costs.
  • relative advantage, by way of the contribution to the economic development, by the enterprise enjoying a dominant position having or likely to have appreciable adverse effect on competition.
  • any other factor which the Commission may consider relevant for the inquiry [section 19(4) of Competition Act].

For determining whether a market constitutes a “relevant market” for the purposes of the Competition Act, the Commission shall have due regard to the “relevant geographic market” and “relevant product market”. [Section 19(5) of Competition Act].

Relevant geographic market The Commission shall, while determining the “relevant geographic market”, have due regard to all or any of the following factors:

  • Regulatory trade barriers.
  • Local specification requirements.
  • National procurement policies.
  • Adequate distribution facilities.
  • Transport costs.
  • Language.
  • Consumer preferences.
  • Need for secure or, regular supplies or rapid after-sales services.
  • Characteristics of goods or nature of services.
  • Costs associated with switching supply or demand to other areas. [Section 19(6) of Competition Act].

Relevant Product Market The Commission shall, while determining the “relevant product market”, have due regard to all or any of the following factors:

  • physical characteristics or end-use of goods or the nature of services
  • price of goods or service
  • consumer preferences
  • exclusion of in-house production
  • existence of specialised producers
  • classification of industrial products
  • costs associated with switching demand or supply to other goods or service
  • categories of customers [section 19(7) of Competition Act – The words in italics, inserted vide Competition (Amendment) Act, 2023 from 18-5-2023].

Market leader in particular area can be dominant in relevant market In Belaire Owners Association v. DLF Ltd. (2011) 109 SCL 655 = 14 taxmann.com 90 (CCI), DLF was market leader in high end residential accommodation in Gurgaon. It was market leader in real estate sector in general and in relevant market in particular. It was held that DLF has dominance in ‘relevant market’ – Followed in Magnolia Flat Owners Association v. DLF Universal Ltd. (2012) 112 SCL 538 = 19 taxmann.com 278 (CCI). [That way, the scope can be limited to any extent. Can we say that a shopkeeper has ‘dominant position’ in ‘Lane No. 3’ as that is the only shop in that lane?]

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2.3 What is ‘abuse of dominant position’

Section 4(2) of Competition Act states that there shall be an abuse of dominant position under section 4(1) of Competition Act, if an enterprise or ‘group’ follows any of the practices specified in section 4(2) of Competition Act.

Note that these are defined as ‘abuse’, i.e. these are prohibited. If any of the following practice is followed, it is ‘abuse’, and no further proof of any damage or loss is required.

The actions which are defined as ‘abuse of dominant position’ are discussed below.

3. Unfair or discretionary conditions or prices in purchase/sale is abuse of dominant position

Directly or indirectly, imposing unfair or discriminatory:

  • condition in purchase or sale of goods or services; or
  • price in purchase or sale (including predatory price) of goods or service is abuse of dominant position. [Section 4(2)(a) of Competition Act].

Action not abuse if adopted to meet competition As per Explanation to section 4(2)(a) of Competition Act, the unfair or discriminatory condition in purchase or sale of goods or services and unfair or discriminatory price in purchase or sale of goods (including predatory price) or service shall not include such condition or price [The earlier words were – discriminatory condition or price] which may be adopted to meet the competition [section 4(2)(a) of Competition Act amended vide Competition (Amendment) Act, 2023 from 18-5-2023].

Thus, if such practices are adopted to meet competition, it will not be abuse of dominant power.

One sided agreement and changing terms of offer midway is abuse of dominant position – In Belaire Owners Association v. DLF Ltd. (2011) 109 SCL 655 = 14 taxmann.com 90 (CCI), DLF was market leader in high end residential accommodation in Gurgaon. It had dominance in ‘relevant market’. It was market leader in real estate sector in general and in relevant market in particular. DLF had entered into contract with allottees of flats in group housing complex ‘The Belaire’. DLF had added many floors to those announced earlier. Number of apartments were increased by 53%, without obtaining views of earlier customers. DLF had put one sided unfair conditions with the allottees who had become ‘captive consumers’. DLF was ordered to remove such unfair conditions in the agreements. Penalty of 7% of turnover (Rs. 630 crores) was imposed on DLF – the decision was confirmed in DLF Ltd. v. CCI (2014) 145 taxmann.com 300 = 127 SCL 68 (CAT) followed in Magnolia Flat Owners Association v. DLF Universal Ltd. (2012) 112 SCL 538 = 19 taxmann.com 278 (CCI).

Similar order about abuse of dominant position has been passed in Ashutosh Bhardwaj v. DLF Ltd. (2017) 139 SCL 381 = 77 taxmann.com 292 (CCI).

The decision in case of Belaire Owners Association has been confirmed in DLF Ltd. v. CCI (2014) 127 SCL 68 = 45 taxmann.com 300 (CAT).

3.1 Predatory Price

Predatory pricing is abuse of dominant position under section 4(2)(a) of Competition Act.

Predatory means ‘naturally preying on others’ – like jungle animals. This term is used to indicate persons who are out to kill competition by fair or foul means.

Predatory pricing means pricing below cost to eliminate competitor.

“Predatory price” means the sale of goods or provision of services, at a price which is below the cost, as may be determined by regulations, of production of the goods or provision of services, with a view to reduce competition or eliminate the competitors. [Explanation (b) to section 4(2) of Competition Act].

Determining cost of production During proceedings before CCI, it may be necessary to determine cost of production of a product within meaning of Explanation to section 4 of Competition Act. This should be determined as per CCI (Determination of Cost of Production) Regulations, 2009.

‘Cost’ shall be taken as average variable cost, as a proxy for marginal cost.

‘Average variable cost’ means total variable cost divided by total output during referred period [Regulation 2(b) of CCI (Determination of Cost of Production) Regulations, 2009].

CCI can consider other relevant concept such as avoidable cost, long run average incremental cost, market value etc. In arriving at figures of costs, CCU/DG may take help of suitable experts [Regulation 3(2) of CCI (Determination of Cost of Production) Regulations, 2009].

Giving heavy discounts to drivers to exclude other market players In Uber India v. CCI (2019) 156 SCL 141 = 109 taxmann.com 84 (SC), Uber was offering discounts/incentives to its drivers to keep them attached on its network to the exclusion of other market players. Uber was losing Rs. 204 per trip. It was held that Uber is misusing its dominant position.

Giving cross subsidy to protect another market is predatory pricing – In MCX Stock Exchange Ltd. v. National Stock Exchange of India Ltd. (NSE) (2011) 109 SCL 222 = 13 taxmann.com 110 (CCI), NSE had used its dominant position in non-CD (i.e. other than Currency Derivatives) segment (where NSE had virtual monopoly) to protect its position in CD (Currency Derivatives) section by cross subsidising this segment of business from other segments where NSE had virtual monopoly. It had waived transaction fee and admission fee for memberships in CD market. It was held by CCI that this is predatory pricing. It was also held that there was clear intention of NSE to eliminate competitors in relevant market. A penalty of Rs. 55.5 crores (5% of turnover) was imposed on NSE. – – – The order has been confirmed in National Stock Exchange of India Ltd. v. Competition Commission of India (2014) 128 SCL 236 = 48 taxmann.com 100 (CAT).

Mala fide intention is required to be shown even if price below cost In Modern Food Industries In re – (1996) 4 CTJ 81 (MRTPC), it was held that it requires to be established that the pricing below cost was with intention to drive competitor out of business or to eliminate competition. Mere offer of price lower than cost of production cannot automatically lead to an indictment of predatory pricing. – Followed in Britannia Industries Ltd. In re (1997) 24 CLA 136 (MRTPC), where it was held that charge of predatory pricing cannot be sustained on basis of cost of production of one month. Further, presence of mala fide intention is necessary to hold charge of predatory pricing.

Price reduction and then huge price rise after eliminating completion In DGIR v. Seraikella Glass Works (1999) 33 CLA 225 (MRTPC), it was held that mala fide intention on part of the charged party to drive its competitors out of business or to eliminate competition has to be established. In this case, it was found that prices were drastically lowered and when competitor’s businesses closed down, prices were jacked up after ouster of competitors. It was held that allegation of predatory pricing is proved. Cease and desist order was issued.

4. Limiting or restricting production or development

Limiting or restricting (i) production of goods or provision of services or market therefor; or (ii) technical or scientific development relating to goods or services to the prejudice of consumers, is abuse of dominant position [section 4(2)(b) of Competition Act].

5. Denial of market access is abuse of dominant position

Indulging in practice or practices resulting in denial of market access in any manner, is abuse of dominant position [section 4(2)(c) of Competition Act].

Denial to broadcaster of market access In CCI v. Fast Way Transmission P. Ltd. (2018) 4 SCC 316 = 92 taxmann.com 243 = 147 SCL 198 (SC), Cable Operators’ group, which was in dominant position, prematurely terminated agreement with broadcaster of a TV Channel, resulting in denial to broadcaster of market access. It was held that this action is violative of section 4(2)(c) of Competition Act [However, penalty was waived as reason for termination of agreement mid-stream was found to be justifiable].

BCCI blocking entry of competitive league cricket matches is abuse of dominant position by BCCI – In Surinder Singh Barmi v. Board for Control of Cricket in India (BCCI) (2013) 118 SCL 226 = 31 taxmann.com 61 (CCI), it was held that BCCI used its dominant position by explicitly agreeing not to sanction any competitive league during currency of IPL media rights agreement. A penalty of Rs. 52.24 crores (6% of average gross turnover) was imposed.

In Pan India Infraprojects P. Ltd. v. BCCI (2018) 94 taxmann.com 50 = 148 SCL 520 (CCI), it was found that BCCI was holding dominant position in relevant market for organisation of private professional league cricket in India. It had abused its dominant position by restraining informant from organizing competitive league i.e. ICL and blacklisted informant. It was held that this is abuse of dominant position by BCCI.

ICAI’s non-outsourcing of CPE seminars that are eligible for CPE credits doesn’t indicate abuse of dominance – Members of CA Institute are required to attend Continuous Education Programmes for minimum specified hours in a year. Such programmes can be organized and conducted only by CA Institute and their branches.Other organisations are not allowed to conduct programmes which are eligible for CPE Hours.

In Institute of Chartered Accountants of India (ICAI) v. Competition Commission of India [2023] 151 taxmann.com 32 (Delhi HC), this restriction has been upheld. It has been held that ICAI is not guilty of abuse of dominance for not outsourcing holding of CPE seminars eligible for CPE credits. There is a relevant market “for organising recognised CP Seminars/Workshops/Conferences”, as ICAI is statutory body and fulfilling its statutory obligations.

Regulatory intervention without evident anti-competitive practice hampers autonomy of enterprise, trade should be free to take decision on basis of commercial considerations – Commercial wisdom of exhibitors to exhibit a particular film is largely governed by consumer demand and unless harm to competition is apparent, any intervention will only lead to undesirable consequence by taking away autonomy of such undertaking and substituting decision of such entity by decision of CCI. Decision to exhibit particular movie is commercial decision and CCI cannot interfere. Regulatory intervention without evident anti-competitive practice hampers autonomy of enterprise – Yogesh Pratap Singh v. PVR Ltd. [2024] 158 taxmann.com 138 (CCI). [a good and practical view indeed. Trade should have sufficient freedom to take decisions on basis of commercial considerations]

6. Supplementary obligations unconnected to main contract is abuse of dominant position

Making conclusion of contracts subject to acceptance by other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject to such contracts, is abuse of dominant position. [Section 4(2)(d) of Competition Act].

7. Using dominant position to enter another market is abuse of dominant position

Using dominant position in one relevant market to enter into, or protect, other relevant market is abuse of dominant position [section 4(2)(e) of Competition Act].

For example, Microsoft used its dominant position in Disk Operating System (DOS) to dominate browser market and ruined Netscape.

Google fined Rs. 1337.76 crores for using dominant position in multiple markets – Google has been fined Rs. 1337.76 crores by CCI for using dominant position in multiple markets in the Android mobile devise ecosystem. Google indulged in mandatory pre-installation of certain products and perpetuated its dominant position in the online search market. Google secured and embedded for itself through Mobile Application distribution Agreement (MADA). Its Revenue Sharing Agreement (RSAs) helped Google to secure exclusivity for its search engine. With these agreements, competitors had no chance to compete with Google – CCI Press Release No. 55/2022-23 dated 21-10-2022.

This case has not been reported on website of CCI, possibly because the party might have requested confidentiality.

Appeal against the order by Google LLC was admitted by NCLAT on condition of deposit of 10% penalty amount – Google LLC v. CCI (2023) 146 taxmann.com 112 (NCLAT). Order of NCLAT of pre-deposit of 10% of penalty was affirmed in Google LLC v. CCI (2023) 176 SCL 441 = 146 taxmann.com 380 (SC).

The penalty of Rs. 1,337.76 crores has been confirmed in Google LLC v.Competition Commission of India [2023] 148 taxmann.com 458 (NCLAT). However, some directions issued by CCI have been set aside.

CCI imposes penalty of Rs. 936.44 Cr. on Google for abuse of dominance in market for licensable OS for smartphones & in market for app store for Android – Google is held to be dominant in two relevant markets i.e., market for licensable OS for smart mobile devices in India and market for app store for Android smart mobile OS in India by CCI.

Google made access to the Play Store, for app developers, dependent on mandatory usage of GPBS (Google Play Billing System) for paid apps and in-app purchases, which constitutes an imposition of unfair condition on app developers. It follows discriminatory practices by not using GPBS for its own applications i.e., YouTube. YouTube is not paying the service fee as being imposed on other apps covered in the GPBS requirements.

Mandatory imposition of GPBS disturbs innovation incentives and the ability of both the payment processors as well as app developers to undertake technical development and innovate and thus, tantamount to limiting technical development in the market for in-app payment processing services. Different methodologies used by Google to integrate its own UPI app vis-à-vis other rival UPI apps with the Play Store results in violation of Section 4(2)(a)(ii), 4(2)(c) and 4(2)(e) of the Competition Act.

The prohibitions laid down in section 4 the Act are straight forward and any abuse of dominant position in terms of imposition of unfair conditions, denial of market access, leveraging, imposition for supplementary obligations etc., is prohibited. Accordingly, in terms of the provisions of Section 27 of the Act, the Commission directed Google to cease and desist from indulging in anti-competitive practices and a penalty of Rs. 936.44 crore has been imposed upon Google for violating Section 4 of the Act. The amount is 7% of relevant turnover (average of last three financial years) – XYZ (Confidential) v. Alphabet Inc., Google LLC and Others [2022] 145 taxmann.com 43 (CCI).

Google making pre-installation of Google Play Store mandatory is abuse of dominant position – In Kshitij Arya v. Google LLC (2021) 127 taxmann.com 779 (CCI), Google had made pre-installation of its proprietary apps (particularly Google Play Store) mandatory for all android devises manufactured, distributed or marketed by device manufacturers. It was held that this is abuse of dominant position.

8. CCI can order division of enterprise enjoying dominant posi- tion

The Competition Commission of India (CCI) may direct division of an enterprise enjoying dominant position to ensure that such enterprise does not abuse its dominant position. [Section 28(1) of Competition Act].

Order of division passed under section 28(1) of Competition Act may provide for all or any of the following matters –

  • the transfer or vesting of property, rights, liabilities or obligations.
  • the adjustment of contracts either by discharge or reduction of any liability or obligation or otherwise.
  • the creation, allotment, surrender or cancellation of any shares, stocks or securities.
  • (Omitted).
  • the formation or winding up of an enterprise or the amendment of the memorandum of association or articles of association or any other instruments regulating the business of any enterprise.
  • the extent to which, and the circumstances in which, provisions of the order affecting an enterprise may be altered by the enterprise and the registration thereof.
  • any other matter which may be necessary to give effect to the division of the enterprise. [Section 28(2) of Competition Act].

8.1 No compensation to any officer of company if there is division of enterprise

Notwithstanding anything contained in any other law for the time being in force or in any contract or in any memorandum or articles of association, an officer of a company who ceases to hold office as such in consequence of the division of an enterprise shall not be entitled to claim any compensation for such cesser. [Section 28(3) of Competition Act].

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Govt. Specifies Criteria for Parties to Combination to Give Notice to CCI u/s 6(4) of the Act https://www.taxmann.com/post/blog/govt-specifies-criteria-for-parties-to-combination-to-give-notice-to-cci-u-s-64-of-the-act https://www.taxmann.com/post/blog/govt-specifies-criteria-for-parties-to-combination-to-give-notice-to-cci-u-s-64-of-the-act#respond Tue, 10 Sep 2024 12:03:56 +0000 https://www.taxmann.com/post/?p=76172 Notification No. G.S.R 548(E); Dated: … Continue reading "Govt. Specifies Criteria for Parties to Combination to Give Notice to CCI u/s 6(4) of the Act"

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New Competition Rules

Notification No. G.S.R 548(E); Dated: 09.09.2024

The Govt. has notified Competition (Criteria of Combination) Rules, 2024. The Rules define the terms under which parties may notify combinations u/s 6(4) of the Act. Parties, group entities, and their affiliates can notify if they neither produce similar products/services nor engage in complementary or different production stages. Affiliates are defined based on shareholding, voting rights, board representation, or access to sensitive information. The rules come into effect on 10-09-2024.

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MCA Notifies New ‘Competition Rules’ Exempting Certain Combinations From Disclosure and Timeline Requirements https://www.taxmann.com/post/blog/mca-notifies-new-competition-rules-exempting-certain-combinations-from-disclosure-and-timeline-requirements https://www.taxmann.com/post/blog/mca-notifies-new-competition-rules-exempting-certain-combinations-from-disclosure-and-timeline-requirements#respond Tue, 10 Sep 2024 12:03:29 +0000 https://www.taxmann.com/post/?p=76167 Notification No. G.S.R. 549(E)., dated … Continue reading "MCA Notifies New ‘Competition Rules’ Exempting Certain Combinations From Disclosure and Timeline Requirements"

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New Competition Rules

Notification No. G.S.R. 549(E)., dated 09.09.2024

The MCA has notified the Competition (Criteria for Exemption of Combinations) Rules, 2024, effective from 10.09.2024. Under Rule 3, combinations that meet the criteria outlined in the Schedule are exempt from the requirements to disclose combination details, adhere to the 210-day timeline, and comply with exemptions under Sections 6(2), 6(2A), and 6(4) of the Competition Act. The Schedule specifies 12 different criteria for exemption under Section 6.

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Govt. Exempts Acquisitions Below Rs 450 Cr Assets or Rs 1250 Cr Turnover From Competition Review https://www.taxmann.com/post/blog/govt-exempts-acquisitions-below-rs-450-cr-assets-or-rs-1250-cr-turnover-from-competition-review https://www.taxmann.com/post/blog/govt-exempts-acquisitions-below-rs-450-cr-assets-or-rs-1250-cr-turnover-from-competition-review#respond Tue, 10 Sep 2024 12:02:58 +0000 https://www.taxmann.com/post/?p=76166 Notification No. G.S.R 547(E); Dated: … Continue reading "Govt. Exempts Acquisitions Below Rs 450 Cr Assets or Rs 1250 Cr Turnover From Competition Review"

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New Competition Rules

Notification No. G.S.R 547(E); Dated: 09.09.2024

The Govt. has notified the Competition (Minimum Value of Assets or Turnover) Rules, 2024, outlining key thresholds for mergers and acquisitions. As per the rules, the transactions where the value of assets or turnover of the enterprise being acquired, controlled, merged, or amalgamated in India does not exceed Rs 450 crore and Rs 1250 crore, respectively, shall not be considered a combination under Section 5 of the Act. These rules will take effect from September 10, 2024.

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