Keeping up with Competition - March 2025
A monthly newsletter by Axiom5.
Welcome to the eighteenth edition of our monthly newsletter, Keeping Up With Competition. The month of February 2025 saw significant activity from the Competition Commission of India (CCI) and the National Company Law Appellate Tribunal (NCLAT) with rulings addressing diverse issues across various sectors.
This newsletter provides summaries of the cases that address these questions.
CCI Dismisses Allegations of Bid Rigging in HP India Tenders: This CCI ruling underscores the importance of procurer autonomy in setting tender specifications and pricing, provided they operate within reasonable commercial frameworks. It emphasizes that similar pricing or warranty terms, when mandated by tender conditions, do not necessarily indicate collusion. Crucially, the decision reinforces the CCI's commitment to evidence-based enforcement, dismissing allegations lacking concrete proof of anti-competitive behavior.
CCI Dismisses Allegations of Bid Rigging Against Gokul Agro and Gokul Agri: This CCI ruling reaffirms that common ownership or management between entities does not necessarily imply collusion or bid-rigging. It emphasizes the necessity of concrete evidence demonstrating coordinated actions aimed at manipulating market outcomes, rather than relying solely on structural similarities. The decision highlights the importance of examining actual bidding behaviors and market dynamics, ensuring that competition law enforcement is grounded in demonstrable harm.
CCI Approves Bharti Airtel’s Shareholding Increase in Indus Towers: The CCI approved Bharti Airtel’s increase in shareholding in Indus Towers, concluding it would not harm competition in the telecom infrastructure market. This decision is particularly noteworthy as it related to a transaction involving a passive increase in shareholding percentage, without an underlying acquisition of shares or assets, which still constituted a notifiable combination under the Competition Act, 2002 (Competition Act).
NCLAT Upholds CCI’s Decision in Sri Balaji Traders vs. Asian Paints: This NCLAT ruling reinforces that businesses can make objective decisions based on performance metrics, and such actions are not anti-competitive. It underscores the necessity of substantial evidence to prove abuse of dominance, emphasizing that personal grievances, especially when already resolved, do not warrant competition law intervention. Furthermore, the decision highlights the importance of the "clean hands" doctrine, mandating honesty and transparency in litigation, and clarifying that while competition law proceedings are in rem, they must address genuine market concerns, not individual disputes.
The following sections provide a more in-depth look at these developments.
Balancing Procurer Freedom and Competition: CCI Dismisses Bid-rigging Allegations against HP India (CCI’s order available here.)
The CCI was approached by an individual informant alleging bid rigging in tenders floated by the Gurugram Metropolitan Development Authority (GMDA) and Faridabad Metropolitan Development Authority (FMDA). The informant claimed that HP India Sales Pvt. Ltd. (OP-1) and its resellers (OP-2 to OP-8) were involved in cartel-like behavior, resulting in inflated prices in two tenders for inkjet/LED plotter printers.
The informant argued that the tenders' specifications were designed to exclude certain multinational manufacturers like Canon India Pvt Ltd and Epson India Pvt Ltd., and that bid rigging was evident because all the bidders quoted similar prices and warranty terms. Additionally, it was alleged that in the tenders, HP products were priced higher than the component-based aggregate costs, which raised suspicions of coordinated pricing.
CCI’s Observations and Analysis:
The CCI examined the allegations and made the following key observations:
Procurer’s Prerogative: The CCI emphasized that the procurer (GMDA and FMDA) has the right to specify the product and service requirements, including product type, warranty duration, and included components, based on its own needs and budgetary constraints. This includes the freedom to exclude certain products (e.g., LED printers) if they do not meet the required specifications. As such, the specifications of the GMDA and FMDA tenders were not inherently anti-competitive.
Warranty Terms: The fact that all bidders quoted five years’ warranty instead of the required three years did not indicate collusion. The CCI found that the tenders included a buyer condition that specified a five year warranty, which made it mandatory for all participants to offer the same warranty term, dispelling suspicions of bid rigging.
Differentiated Product Brands: In the FMDA tender, while several bidders quoted HP products, one bidder (Digital Global) quoted a ROWE brand printer, for which HP was the deemed OEM. The CCI ruled that this did not amount to bid rigging, as the different bidders quoted different brands, and it was their prerogative to choose the products they wished to offer.
No Anti-Competitive Behavior Found: The CCI noted that while the prices quoted were higher than the aggregate cost of individual components, this did not necessarily indicate anti-competitive behavior. The procurers had the discretion to bundle products and services according to their specific needs, and the prices were in line with what was being offered on the Government e-Marketplace (GeM) portal.
Conclusion: No Prima Facie Case of Cartelization
In this case, the CCI found no prima facie evidence of bid rigging or cartelization by HP India and its resellers in the GMDA and FMDA tenders. The CCI concluded that the actions taken by the procurers and the tender participants were within the bounds of normal commercial conduct, and declined to initiate investigation. The CCI further decided to grant confidentiality over the identity of the informant for three years.
The case reinforces the CCI’s consistent recognition of the procurer’s sacrosanct right to define specifications, pricing models, and other procurement conditions, as highlighted in previous rulings such as Beach Mineral Producers Association and IREL (India) Ltd. (please find a detailed summary of this order in our last edition of Keeping up with Competition), and Pandrol Rahee Technology Pvt Ltd. v. Delhi Metro Rail Corp and Ors. In these cases, the CCI emphasized that procurers, much like individual consumers, have the autonomy to exercise free choice in selecting products and services that best meet their needs. This includes setting technical specifications, quality standards, and pricing conditions within reasonable commercial and procurement frameworks. The CCI has consistently held that such decisions, often informed by expert consultation and structured assessments, are integral to a market economy and do not inherently constitute anti-competitive conduct unless there is clear evidence of abuse. By upholding this principle, the CCI underscores the importance of balancing procurer autonomy with the need to ensure that procurement processes remain fair, transparent, and free from anti-competitive practices. .
Common Ownership Alone Insufficient for Bid-Rigging Allegations: CCI Dismisses Allegations of Bid Rigging Against Gokul Agro and Gokul Agri. (CCI’s order available here.)
The CCI dismissed allegations of bid rigging and cartelization against Gokul Agro Resources Ltd. (Gokul Agro/OP-1) and Gokul Agri International Ltd. (Gokul Agri/OP-2) in connection with a tender floated by the Army Purchase Organisation (APO) for the procurement of 31,000 MT of edible oil.
The APO alleged that Gokul Agro. and Gokul Agri, which are associated with the Gokul Group (collectively, Gokul Entities), were engaging in anti-competitive behavior during a procurement tender for edible oil. APO raised concerns about the possibility of cartel formation between these two entities, citing the resemblance in their bidding patterns, product offerings, and shared management structure. Specifically, the two companies had been bidding aggressively against each other in reverse auctions, which indicated a coordinated approach.
APO's reference to the CCI emphasized the presence of common management structures, which might point to the firms being "sister concerns," potentially enabling them to collude and reduce competition during the bidding process. The complainant invoked Section 3(3)(d) of the Competition Act, which specifically targets bid-rigging and collusion between competitors.
CCI’s Observations and Analysis
The CCI examined the allegations and made the following key observations:
Commonality of Ownership and Management: The central question, in this case, was whether the common ownership and related management structure between the two companies were sufficient to substantiate the claim of bid-rigging or cartelization. Importantly, the CCI found that common ownership by itself does not result in anti-competitive behavior. The CCI reviewed past cases and observed the legal position—that mere common ownership or shared business linkages cannot conclusively suggest collusion or bid-rigging. This principle was highlighted in previous rulings, including in the matter of Re: Ved Prakash Tripathi v. Director General Armed Forces Medical Services and Re: Reprographics India v. Hitachi Systems Micro Clinic Pvt. Ltd. In these cases, the CCI had emphasized that common ownership does not necessarily lead to anti-competitive effects unless there is clear evidence of collusion or coordinated behavior designed to reduce competition. This reasoning reflects an essential tenet of competition law: to establish a contravention of the Competition Act, material evidence must show that there was coordination between the parties to restrict competition or manipulate market outcomes.
Corporate restructuring: The CCI also considered the legal implications of the 2015 court order in the Gokul Refoils & Solvent Ltd., which had approved a corporate restructuring. The restructuring process led to the formation of two independent, listed entities. Notably, the order highlighted that the restructuring was intended to segregate businesses and allow each firm to focus on its core operations, which could benefit stakeholders, including shareholders and creditors. This further reinforced the idea that both OPs were independent entities with separate management and operational objectives.
Examination of the bid process: Upon closer examination of the procurement process, the CCI found that the tender in question had 15 participants, and only 2 of them were the Gokul Entities. Moreover, on several occasions, companies other than the Gokul Entities had won the bidding, which is inconsistent with the notion of cartelization. While the Gokul Entities had emerged as the lowest bidders (L-1) on a few occasions, the difference in their bid amounts was minimal, with variations ranging between 0.42% and 10.46%. This suggests that while the two firms were competitive in the bidding process, the differences in pricing were not large enough to suggest any coordinated manipulation of the process..
Conclusion: No Prima Facie Case of Bid Rigging
In light of these findings, the CCI concluded that the matter be closed, as no prima facie evidence of bid-rigging or cartelization was found in this case.
This ruling serves as an important reminder for businesses, policymakers, and legal practitioners that in the realm of competition law, the presence of shared ownership or management should not be presumed to lead to collusion or bid-rigging. Instead, authorities must look at the specific behaviors of the companies involved, their interactions in the market, and the actual outcomes of their participation in competitive processes before concluding that any anti-competitive behavior has occurred.
CCI Clarifies Notifiability of Shareholding Changes in Indus Towers Case (CCI order available here.)
The CCI approved Bharti Airtel Limited’s (Bharti Airtel) increase in shareholding in Indus Towers Limited (Indus Towers) from 48.95% to 50.005%, following a buyback of shares by Indus Towers. The CCI concluded that the transaction, which was notified under Section 6(2) of the Competition Act, was not likely to have an appreciable adverse effect on competition (AAEC) in India. This decision is particularly noteworthy as it addresses whether a passive increase in shareholding percentage, without an underlying acquisition of shares or assets, constitutes a notifiable combination under the Competition Act.
The case arose from a buyback of shares initiated by Indus Towers, a leading provider of passive telecom infrastructure in India. Bharti Airtel, a major shareholder in Indus Towers, held 48.95% of the company’s shares. When Indus Towers announced a buyback of up to 5.67 crore shares, Bharti Airtel chose not to participate. As a result, the total number of outstanding shares of Indus Towers decreased, leading to an increase in Bharti Airtel’s shareholding percentage to 50.005%.
CCI’s Analysis
Market Dynamics and Competitive Landscape: The CCI examined the competitive landscape of the telecom infrastructure market in India. It noted that Indus Towers is a leading provider of passive telecom infrastructure, with a presence in all 22 telecom circles in India. Bharti Airtel and its group company, Bharti Hexacom Limited (BHL), collectively have a presence in all 22 telecom circles but primarily use their infrastructure for captive consumption. Their market share in the provision of passive infrastructure services to third parties is less than 1%, and they do not have a significant presence in the micro tower/small cell segment.
Vertical Relationship and Foreclosure Concerns: The CCI analyzed the vertical relationship between Bharti Airtel (a telecom service provider) and Indus Towers (a passive infrastructure provider). It noted that under the Infrastructure Provider Category-I (IP-I) Guidelines issued by the Department of Telecommunications (DoT), all IP-I registered companies, including Indus Towers, are required to provide access to their infrastructure on a non-discriminatory basis. The CCI found no evidence that Bharti Airtel or Indus Towers would have an incentive to engage in foreclosure practices. The incremental cost of adding new tenants to existing towers is low, while the incremental revenue is significant, creating a strong incentive for Indus Towers to offer co-location services to multiple telecom service providers (TSPs).
Impact of the 1.055% Shareholding Increase: The CCI observed that the increase in Bharti Airtel’s shareholding from 48.95% to 50.005% was minimal and unlikely to alter the competitive dynamics of the market. Bharti Airtel was already the single largest shareholder in Indus Towers, and the increase did not provide it with any additional control or influence over the company’s operations. The CCI noted that other TSPs account for the majority of co-location tenancies on Indus Towers’ infrastructure, further reducing the likelihood of foreclosure concerns.
Conclusion: No AAEC
Based on its analysis, the CCI concluded that the increase in Bharti Airtel’s shareholding in Indus Towers was unlikely to have an AAEC in India. The CCI approved the combination under Section 31(1) of the Competition Act.
The order is relevant because it addresses whether a change in the percentage of shareholding, without an underlying acquisition of shares, voting rights, or assets, constitutes a notifiable combination under the Competition Act. In this case, Bharti Airtel's shareholding in Indus Towers increased from 48.95% to 50.005% due to a buyback of shares by Indus Towers, in which Bharti Airtel did not participate. This increase in percentage shareholding was considered a notifiable combination, even though there was no change in the absolute number of shares held by Bharti Airtel.
NCLAT Upholds CCI’s Decision in Sri Balaji Traders vs. Asian Paints Case (NCLAT order available here.)
In a recent ruling dated 19 February 2025, the NCLAT dismissed an appeal filed by Sri Balaji Traders against the CCI and Asian Paints Limited (Asian Paints). The appeal challenged the CCI’s order dated 08 February 2022, which had dismissed the Informant’s case (Case No. 17 of 2021) alleging violations of Section 3(4) and Section 4 of the Competition Act. The NCLAT upheld the CCI’s findings, ruling that there was no evidence of anti-competitive practices or abuse of dominance by Asian Paints.
Background
The appellant, Sri Balaji Traders (Appellant), a dealer of Asian Paints, filed a complaint with the CCI alleging that Asian Paints had abused its dominant position in the market by revoking its Critical Retailer (CR) status after it took up dealership of JSW Paints (Respondent No. 3). The appellant claimed that the revocation of its CR status was a punitive measure for dealing with a competitor, which caused financial losses and reputational damage. The CCI, after reviewing the Director General’s (DG) investigation report, dismissed the case, finding no evidence of anti-competitive conduct or abuse of dominance by Asian Paints.
CCI’s Findings
The CCI, in its order, made the following key observations:
Objective Justification for Downgrade and Absence of Abuse of Dominance: The core dispute centered on whether Asian Paints' downgrade of Sri Balaji Traders' CR status stemmed from objective performance criteria or retaliatory action for engaging with a competitor. Both the NCLAT and the CCI concluded that the downgrade was justified based on demonstrable performance factors, and that there was no evidence of abuse of dominance.
The downgrade was justified based on the appellant’s reducing offtake (sales volume) over a 10-month period, from October 2020 to July 2021.
Asian Paints demonstrated that the CR status was restored in June 2021 after a review of factors such as sales performance, customer outreach, and future prospects.
The Appellant’s claim that the downgrade was punitive was unsupported, as other dealers who also dealt with JSW Paints did not face similar downgrades.
The Appellant failed to demonstrate that Asian Paints’ actions had an AAEC in the market. The CCI emphasized that allegations of abuse, without concrete evidence, are insufficient to establish a violation of Section 4 of the Competition Act.
Clean Hands Doctrine: The NCLAT highlighted the importance of the clean hands doctrine, which requires parties approaching the court to do so with honesty and transparency. In this case:
The Appellant concealed a material fact—that its CR status had already been restored in June 2021, before filing the complaint in July 2021.
The Appellant sought interim relief for reinstatement of its CR status, despite knowing that the status had already been restored.
The NCLAT cited the Supreme Court’s ruling in S.P. Chengalvaraya Naidu vs. Jagannath (1994), which held that courts are not meant to assist parties who approach them with unclean hands.
Proceedings Under the Competition Act Are In Rem: The Appellant argued that proceedings under the Competition Act are in rem (against the world at large) and not merely about individual grievances. While the NCLAT acknowledged this principle, it distinguished the case from Samir Agrawal vs. CCI (2021), where the Supreme Court held that competition law proceedings are in rem. In this case:
The Appellant’s grievance was personal and had already been redressed before the complaint was filed.
The NCLAT emphasized that the Appellant’s failure to disclose the restoration of its CR status undermined its credibility.
While competition law proceedings are generally in rem, they must still be based on genuine and substantiated claims. Personal grievances that have already been resolved do not justify further legal action.
Conclusion
The case underscores fundamental principles that guide competition law and litigation, offering critical lessons for businesses and litigants alike. First, the case highlights the importance of objective and transparent decision-making in business practices. Asian Paints’ decision to downgrade the Appellant’s CR status was upheld because it was based on clear, non-discriminatory criteria such as sales performance and customer outreach. When allegations of anti-competitive behavior arise, the presence of such objective criteria can serve as a robust defense, demonstrating that the actions were commercially justified rather than aimed at stifling competition.
Second, the case emphasizes the necessity of substantive evidence to support claims of abuse of dominance or anti-competitive practices. The Appellant’s failure to provide concrete evidence of harm to competition, coupled with the restoration of its CR status before filing the complaint, weakened its case. This aligns with the broader principle that competition law is designed to protect the competitive process, not individual businesses. Additionally, the application of the clean hands doctrine serves as a reminder that litigants must approach courts with honesty and transparency. Concealing material facts, as the Appellant did by failing to disclose the restoration of its CR status, can lead to the dismissal of the case. Ultimately, the case reaffirms that competition law proceedings, while in rem in nature, must address genuine market-wide issues rather than individual grievances, and parties must act in good faith when seeking legal remedies.
CCI Tightens Grip on Predatory Pricing
In a significant move aimed at modernizing India’s competition laws, the CCI has released the Draft Competition Commission of India (Determination of Cost of Production) Regulations, 2025 (Draft Regulations). These draft regulations bring important changes to the methodology used for determining production costs in predatory pricing cases, which has become an increasingly pressing concern in the evolving market landscape.
What is Predatory Pricing?
Before diving into the specifics of the new draft regulations, it’s important to understand what predatory pricing is and why it is an issue for regulators. Predatory pricing occurs when a dominant company sets prices for its goods or services below the cost of production with the intent of driving competitors out of the market. Once rivals are eliminated, the company can then raise prices to monopolistic levels, harming consumers and stifling fair competition.
Under Section 4(2)(a)(ii) of the Competition Act, predatory pricing is prohibited in India as it undermines market competition and consumer welfare. However, distinguishing between legitimate competitive pricing and predatory pricing can be difficult, especially in industries like e-commerce and digital platforms, where business models and pricing strategies vary significantly.
Key Changes in the Draft Regulations:
The Draft Regulations aim to update the existing Determination of Cost of Production Regulations, 2009. Here are the key changes that businesses need to be aware of:
Removal of "Market Value" Definition: The current regulation defines "market value" as the price customers pay for a product or service, and predatory pricing is considered a price below that market value. However, the definition has been criticized for being vague and difficult to apply in practical situations. The Draft Regulations remove this definition entirely, which is seen as an effort to bring more clarity and precision to the assessment of predatory pricing.
Introduction of "Average Total Cost": One of the most significant additions is the inclusion of the "average total cost" (ATC) as a key parameter for evaluating predatory pricing. The ATC takes into account both fixed and variable costs of production, offering a clearer benchmark for determining whether a company's pricing practices are predatory. The inclusion of ATC aligns India’s regulations with international standards, particularly in Europe, where ATC is often used to assess predatory pricing strategies.
A Response to Digital Market Challenges: The rise of digital platforms and the proliferation of e-commerce have complicated the task of determining predatory pricing. Companies like Amazon and Flipkart, for example, have faced scrutiny over their aggressive discounting and pricing strategies, with critics arguing that these tactics harm small businesses and local retailers. The CCI’s draft regulations appear to be a response to these concerns.
The Consultation Period and What’s Next
The CCI has opened the Draft Regulations for public consultation from February 17, 2025, to March 19, 2025. During this period, stakeholders from various sectors, including industry leaders, legal experts, economists, and consumer rights advocates, can provide feedback and suggest modifications to the regulations.