A more considered approach to investigations during tough pandemic times should not be construed as less commitment from the Competition Commission of India’s plans to ensure fair competition, write its Former Chair Dhanendra Kumar and NLSIU Competition Law professor Rahul Singh

The covid pandemic led to muted antitrust enforcement in many jurisdictions to help tide over the difficulties faced by industry and trade, and keep businesses afloat. In fact, there were all-round calls to dilute enforcement of competition policy during the time of the pandemic and facilitate combinations.

Dhanendra Kumar
Dhanendra Kumar

The Federal Trade Commission in the US created an expedited procedure for green lighting collaborations, which was aimed at augmenting health supply in the US. Similarly, a tacit acknowledgement by the Department of Justice aimed to tone down antitrust enforcement. In the EU we saw new exemptions to antitrust enforcement in medicines, wine, milk, potatoes, automobiles, etc.

The cumulative impact of these announcements has been to push competition policy to the back seat for the time being. Enforcement was further hindered by restrictions on physical movement and subpoenas, all of which impacted discovery and investigations.

Initially, the Competition Commission of India (CCI) responded by suspending its regulatory functions temporarily in order to help tide over the difficulties from the spread of the covid pandemic. Soon a procedure was put in place to conduct virtual hearings, pre-filing consultations and meetings with CCI officers.

In terms of enforcement, the Indian competition regime showed great empathy, but also some variance, compared to its global peers. The CCI seemed to follow the adage: “Keeping markets competitive is no less important during times of economic hardship than during normal times,” although with procedural accommodation as needed.

Rahul Singh
Rahul Singh

In fact, we saw active merger regulation and anti-cartel orders even during the height of the pandemic. A hybrid mode was leveraged to ensure that even advocacy efforts did not suffer due to the pandemic.

 

It would not be wrong to suggest that, in a post-pandemic era, a somewhat assertive competition enforcement is visible. Recent high-profile orders like the investigations into the business models of food delivery apps such as Swiggy and Zomato pertaining to allegations of cartelisation, or investigations into the abuse of dominant position by Google in the news media market, reflect this stance. Even Google and Apple’s play store policy have come under CCI scrutiny.

It is not only the technology sector that has seen aggressive enforcement. In December 2021, the Indian retail sector saw an intense fight develop between Amazon and Reliance over Future Retail. The CCI not only suspended approval for Amazon’s deal with Future Coupons, but also imposed an INR2 billion (USD26 million) penalty, stating that there was a failure to adequately identify and notify Amazon’s strategic interest in Future Retail.

The deal was seen as an attempt to acquire strategic rights over Future Retail. This order of abeyance was a bit unprecedented and sent shock waves.

Bid rigging of government tenders has also been a new thrust for enforcement. The CCI very recently imposed penalties exceeding INR10 million on 24 entities, including individuals, for indulging in bid rigging and cartelisation in tenders floated by the Indian Railways.

As many as 11 entities and 14 individuals of these entities were found to have violated competition norms. The North Western Railway had referred to the commission of cartelisation in the supply of high-performance polyamide bushes and self-lubricating polyester resin bushes.

Similarly the CCI recently penalised seven entities for bid rigging in a tender related to SBI signage. Fines totalling over INR10 million were imposed on seven entities. Such orders were also issued in tenders called by the Food Corporation of India and GAIL. The CCI also appointed resource persons at the state level and evolved diagnostic toolkits, highlighting a continued thrust during the pandemic.

Some people feel that there had been some change in the CCI’s priorities, responsiveness and assertiveness. During the peak of the first wave of the pandemic in India, the CCI imposed a massive penalty of over INR3 billion on Grasim Industries for abusing its dominant position. It had been held to be charging its customers a discriminatory price for the supply of Viscose Staple Fibre.

However, the most striking feature of the CCI’s newly invigorated posture was the use of dawn raids as a tool by the director general to collect evidence against violations of competition law. The Supreme Court, in 2019, upheld the sanctity of evidence gathered through such a raid. The tool proved most effective in its investigations against zinc carbon battery manufacturers Eveready, Nippo and Panasonic.

The pandemic has not slowed down the use of this intrusive tool aimed at busting cartels. In fact, in the past 18 months there has been a string of raids conducted in sectors such as tarpaulins, commodities, cement, beer, vegetable seeds and country liquor.

Even during the second wave of the covid pandemic, we saw an active director general’s office conduct raids at prominent tyre manufacturers Continental, Apollo Tyres and CEAT. The high conviction rate in these cases reflects the success of the dawn raids. In the beer manufacturers’ case, they provided evidence of cartelisation with an otherwise difficult investigation. Several people feel that dawn raids can be a future mainstay of competition enforcement in India.

Aggressive investigations have also been complemented by capacity building and infrastructure augmentation. On 26 February 2021, when the pandemic was at its peak and global competition regulators were lying low, the CCI inaugurated its regional office in Chennai, which was created for more effective competition enforcement in the relatively industrialised southern states of India.

This is not to suggest that the CCI has been blind to the economic and practical consequences of the covid pandemic. In the case of cartelisation with Industrial and Automotive Bearings, in a rare move it refused to impose a monetary penalty, recognising the economic impact of covid on micro, small and medium enterprises (MSMEs).

Furthermore, through its aggressive enforcement the CCI has also sought to address competition concerns in sectors most influenced by the pandemic. While aggressively rising commodity prices driven by increasing freight costs were prominently in the news, the CCI took an active role in regulating the market, keeping in view the interest of consumers.

It held that four Japanese shipping companies, Nippon Yusen Kabushiki Kaisha, Kawasaki Kisen Kaisha, Mitsui OSK Lines and Nissan Motor Car Carrier Company, had indulged in cartelisation. It reiterated how multinational corporations must keep a close watch for competition concerns within local units.

The CCI also concluded a market study in the pharma sector on 18 November 2021 and clearly declared its aim to actively shape the structure of the pharma market. It sought to leverage the insights gained from the market study to contribute significantly to the design of the pharma sector in India, and to attain the objective of affordable medicines for all.

Thus, unlike its global peers, the CCI has been proactive in using both its enforcement and non-enforcement tools to proactively guide the sector during the pandemic. While actively enforcing competition priorities, it has also sought to balance this with the government’s ease of doing business initiatives.

It has expeditiously cleared more than 100 combinations in a record time. It also introduced the first expedited green channel route to encourage enterprises undertaking self-scrutiny in straightforward combinations and to prioritise the CCI’s own resources for examining more complex merger approvals.

It is pertinent to note how the courts have reacted to the CCI’s active enforcement. Very recently, Delhi High Court refused to set aside a CCI investigation against WhatsApp and Facebook. Similarly, the Karnataka High Court upheld an investigation ordered by the CCI against Amazon and Flipkart. The Madras High Court also upheld the CCI’s investigation against domestic tyre manufacturers.

All the above-mentioned orders emphasised the purely administrative nature of the orders passed by the CCI under Section 26(1) of the act. This clearly established CCI orders under the section to the director general to be an administrative direction to one of its wings departmentally, without entering upon any adjudicatory process.

The Supreme Court has also refused to interfere with these orders, further augmenting the CCI’s assertive enforcement actions. Furthermore, a recent Supreme Court judgment confirming CCI jurisdiction over the lotteries business, in spite of active state regulation on the subject, has further expanded the scope of CCI jurisdiction.

The CCI, however, has been accused of jumping the gun in some cases, whereas the Supreme Court, in 2018, had laid down the rule with regard to a jurisdictional tussle between sectoral and market regulator. It established a clear verdict, where the CCI was to intervene after the relevant sectoral regulator had made its findings.

The Bombay High Court recently relied on this to direct the CCI not to take any action against the Trustees Association of India and its members until the Securities and Exchange Board of India (SEBI), the relevant regulator for debenture trustees, gave its opinion on the subject. Rather than hindering CCI active enforcement efforts, these judgments have actively aided and augmented CCI enforcement efforts. It shows how a clear trend of expanding competition enforcement in India is inevitable.

So, how should one take these trends? Obviously, take competition enforcement more seriously and don’t take the CCI for granted. A better course would be to undertake self-regulation and voluntary compliance of competition law, where the CCI is always available to help.

Another thing, in many jurisdictions a scheme exists for commitment and settlement, where enterprises can voluntarily offer to the CCI corrections in their market practices, which can also help in the achievement of CCI basic objectives as envisaged in its preamble, removal of anti-competitive practices, and the development of a competitive market. Such practice, if introduced – for which a Competition Amendment Bill is pending with the parliament – can also help in achieving avowed objectives, and saving time and costs involved in protracted litigation for everyone.


Dhanendra Kumar is the chair of Competition Advisory Services, the former chair of the Competition Commission of India, and India’s executive director at the World Bank. Rahul Singh is an associate professor of law at the National Law School of India University, Bengaluru, where he teaches competition law and policy, regulation, WTO and jurisprudence.

Law.asia subscripton ad red 2022