2019 marks a decade of enforcement by the Competition Commission of India (CCI), following the notification in 2009 of the antitrust provisions of the Competition Act, 2002 (act). Despite challenges to its jurisdiction and a shortage of manpower, the CCI has emerged as a strong economic influence, and one of the most active regulatory authorities.
2019 was important for competition law. The Competition Law Review Committee (CLRC) submitted its long-awaited report to the Ministry of Corporate Affairs (MCA), recommending significant amendments. The CCI introduced its green channel route (GCR) and published its market study on the e-commerce sector. In enforcement, the CCI took notice of about 70 antitrust cases and cleared over 100 M&A matters. Penalties for antitrust violations exceeded US$47 million.
Proposals and amendments. To strengthen competition law, the CLRC has recommended: (i) a leniency plus regime; (ii) settlements and commitments in certain cases; (iii) the concept of deal value thresholds to cover certain combinations, and (iv) provisions relating to hub and spoke cartels. In response, the MCA circulated its draft Competition (Amendment) Bill, 2020 (bill), for public comments. If passed, it will enhance the powers of the CCI and pose new challenges for businesses.
Amendments to combination regulations. The CCI introduced GCR, a mechanism to fast track the approval process for transactions with no overlap i.e. horizontal, vertical or complementary, between the activities of the parties. Transactions are deemed to be approved once the CCI acknowledges a short form application. So far, the CCI has approved 10 such applications.
Enforcement. In a 2019 landmark decision, the Delhi High Court declared section 22(3) of the act, which gives the chairman of the CCI a casting vote when the CCI is divided in its opinion, unconstitutional and void. The court directed the CCI to appoint a judicial member in all adjudicatory proceedings.
This decision will entrench principles of natural justice in the procedures of the CCI. Recently, the Karnataka High Court granted interim relief to Amazon and Flipkart by staying a CCI investigation into alleged anti-competitive practices. The companies argued that the CCI had ordered the investigation without applying its mind to the allegations.
Digital markets. The advent of online aggregators has threatened traditional markets, with established players complaining to the CCI. There has been great debate on the impact competition law will have on digital markets. The debate intensified after the CCI started investigations into online travel platforms Makemytrip and Oyo, and into e-commerce platforms Flipkart and Amazon for allegedly imposing vertical restrictions and abusing dominant positions. Recently, the CCI has also published its market study on the e-commerce sector recognizing the anti-competitive conducts likely to arise in the sector and propagating self-advocacy.
M&A activities. The CCI approved the acquisitions of Aditya Birla Retail by Samara Capital and Amazon, a minority stake in IndiaIdeas.com (Billdesk) by Visa, a minority stake in Quess Corp by Amazon and of outstanding voting securities of MakeMyTrip by Ctrip.com International.
Automobiles. The CCI constantly turns its attention to this sector. It is investigating Honda and Maruti Suzuki over alleged anti-competitive activities including imposing restrictive clauses in dealer agreements and resale price maintenance.
The CCI penalized two major Japanese manufacturers of power steering systems, NSK and JTEKT Corporation, for running a cartel in their supply to car manufacturers. NSK received full immunity from fines, while the CCI granted a 50% reduction to JTEKT, following a leniency application. There have been innovative collaborations between manufacturers, especially in the electric vehicles segment. The CCI approved collaboration between Toyota and Suzuki and the formation of a joint venture between Mahindra & Mahindra and Ford.
Merger control. The CCI approved over 100 M&A deals in 2019, of which 85 were notified under the short form procedure. It approved most deals unconditionally, while requiring minor behavioural commitments in only a few. Just one, Schneider and L&T, resulted in the divestment of assets. The CCI continues to fast track matters arising from the Insolvency and Bankruptcy Code, 2016, to enable the speedy recovery of insolvent businesses and has cleared 10 such combinations.
Vaibhav Choukse is a partner and Nripi Jolly is an associate at J. Sagar Associates. The views of the authors are personal and not attributable to the firm.
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