Keeping up with Competition - October 2023
A monthly newsletter by Axiom5
Axiom5 marked its first anniversary on September 1, 2023. One of the things that brought us together is our shared love of learning about new businesses and how they interact with competition law and policy. Our team has been following the development of Indian competition law since its inception. We've all enjoyed sharing updates on Indian competition law with our colleagues, clients, and anyone else who's interested.
As we continue our journey, we plan to spend some time each month keeping abreast of developments in Indian competition law. The inaugural edition of our monthly newsletter, Keeping up with Competition, is packed with great content.
We hope you enjoy it!
CCI becomes fully functional
After almost a year of uncertainty, the Competition Commission of India (CCI) is finally back in full swing. The former CCI chairperson, Mr. Ashok Kumar Gupta, retired in October 2022, leaving the Commission with only two members. This made it difficult for the CCI to clear mergers and acquisitions (M&A) transactions and decide on behavioural cases.
Until Ms. Ravneet Kaur was appointed on July 3, 2023, the technically inquorate CCI had to rely on the 13th century doctrine of "necessity" to clear M&A transactions. We had suggested invoking this doctrine to address the impasse in decision-making following Mr. Gupta's retirement. Subsequently, the Delhi High Court stepped in and directed the two-member CCI to adjudicate Alliance of Digital India Foundation's complaint against the measures adopted by Google to follow an order issued by the CCI headed by Mr. Gupta.
The CCI is a quasi-judicial body that requires at least three members to adjudicate cases. Therefore, with two members retiring in quick succession - Mr. Bishnoi in August this year followed by Ms Verma in September, the CCI was for a short while left with only its new Chairperson, Ms Kaur. That changed when the government appointed 3 new members on September 19: Mr. Anil Agrawal, Mr. Deepak Anurag, and Ms. Sweta Kakkad. The reconstituted CCI now has four members, including the Chairperson.
The appointment of the CCI members seems to have been well-considered. There are several firsts:
Ms. Ravneet Kaur is the first woman to head the CCI and joins the ranks of other female heads of competition authorities, most notably Ms. Lina Khan who heads the US competition regulator, the Federal Trade Commission, and Ms. Sarah Cardell who heads the Competition and Markets Authority in the UK.
Ms. Kaur is also the second woman to serve as the head of an economic regulator, after Ms. Madhabi Puri Buch who was selected to head the Indian securities market regulator in 2022.
The revamped CCI has equal representation, with 2 female and 2 male members.
Each of the 4 members will serve their full 5 year term, and Ms. Sweta Kakkad will be eligible for re-appointment, which is something that has not happened since the Competition Act was implemented in 2009.
This is all very exciting news, and it's great to see that the CCI is finally getting some much-needed diversity.
Stakeholder consultation on draft regulations
The new CCI Chairperson has been very active since taking office. Under her leadership, the CCI has issued draft regulations on settlements and commitments, and combinations, and is inviting comments and suggestions from all stakeholders. The regulations are expected to be finalized by mid-November. You can read Axiom5's analysis of the draft settlement and commitment regulations here, and our analysis of the draft combination regulations here.
M&A approvals invoking the doctrine of necessity
Despite lacking quorum in the first half of September, the CCI under Ms. Kaur’s leadership cleared several M&A transactions.
While the government was busy picking new members, the CCI kept clearing notified transactions based on the doctrine of necessity after Mr. Bishnoi retired in August 2023. In September, the CCI approved 10 transactions, including the acquisition of Carlsberg South Asia Pte. Ltd. by Carlsberg Breweries, under the green channel mechanism. It has only published its decisions on 5 transactions. A summary of those decisions is available here. Two decisions stand out because of the remedies imposed by the CCI, and one more for levy of penalties for misuse of the green channel approval route.
CCI approves AirIndia-Vistara merger
The merger of Air India and Vistara is the latest in a series of consolidations in the Indian airline industry. The government of India spent nearly two decades trying to sell Air India, which was in financial trouble. When Tata Sons agreed to buy Air India in 2021, the CCI approved the deal without hesitation, even though Tata Sons already held a stake in Vistara, a joint venture with Singapore Airlines.
However, the CCI took a longer time to approve the merger of Air India and Vistara, and only did so after the companies agreed to certain conditions. The CCI was concerned that the merged entity would have significant market power on certain domestic and international routes, which could lead to higher prices and lower quality service.
The companies agreed to maintain minimum levels of service on certain routes for four years in order to address the CCI's concerns. The CCI then approved the merger.
CCI also approved Ipca’s acquisition of controlling stake in Unichem pursuant to voluntary remedies. Both Ipca and Unichem manufacture and sell active pharmaceutical ingredients (APIs) and formulations. Unichem doesn't sell formulations in India.
Ipca and Unichem have a combined market share of 20-25% in one API, and 0-5% in others. The parties voluntarily offered to keep Unichem out of the Indian market for formulations for 36 months. This is surprising, as their combined shares in vertically overlapping markets only reach 20-25% in one segment.
The CCI penalized Platinum Trust and TPG Upswing for acquiring a 5% stake in UPL SAS through the green channel route, which is meant for transactions that do not exhibit any overlaps. The CCI noted that Upswing Trust- the acquisition vehicle belonging to the TPG Group, one of the acquirers, already held a 22.2% stake in UPL Corporation Ltd., which overlaps with UPL SAS's business.
Although the acquirers had disclosed this overlap in their notification, the CCI held that their use of the green channel approval route despite this overlap was inappropriate. The CCI's decision reaffirms its practice of strict reading of the eligibility criteria for notifications under the green channel route.
With two Members retiring within two weeks, the CCI appears to have slowed down on issuing behavioural decisions. In September, the CCI only issued two decisions, neither of which resulted in a finding of infringement. In both cases, the CCI decided to terminate the proceedings after a preliminary review of the complaints.
The CCI rejected a complaint against HMC and two of its super-stockists for imposing anti-competitive vertical restraints and abuse of dominance. The CCI found that HMC's discounts were standard industry practice and that the two entities together could not be said to be in a dominant position.
The CCI investigated allegations that Den Networks was abusing its dominance by charging excessive carriage fees from broadcasters, but determined that Den did not have a dominant position in the market. The CCI noted that the complainant had not provided any evidence to support its allegation of dominance against Den, and that Den was not dominant in the relevant market. Accordingly, the CCI terminated the proceedings.
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