The Role of Competition Commission of India

Competition Commission of India is the competition regulator in India. It is a statutory body of the Government of India responsible for enforcing The Competition Act, 2002 and promoting competition throughout India and to prevent activities that have an appreciable adverse effect on competition in India. The Competition Act provides for establishment of a Competition Commission of India (CCI) which has been a quasi-judicial body bound by principles of rule of law (i.e. predictability in reasoning and uniform and consistent application of law) in giving decisions and the doctrine of precedents.

The CCI may initiate an inquiry in relation to an anti-competitive agreement or abuse of dominant position either on its own, on the basis of information or knowledge in its possession, or on receipt of information or on the receipt of a reference from the government or a statutory authority. Any person, consumer or their associations can file a complaint/information relating to anti-competitive agreements and abuse of dominant position. With respect to combinations, the CCI may initiate an inquiry either on its own or on the basis of the notification by the firms proposing to enter into the combination. The CCI and its investigative wing, the Office of the Director General (DG), is entrusted with extensive powers of investigation with respect to anti-competitive practices, which include powers to summon and enforce the attendance of any person, examine them on oath, receive evidence on affidavit and other similar provisions. If the CCI is of the opinion that there is a prima facie case, it shall direct the DG to investigate the matter and report its findings.

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Anti-Competitive Agreements under the Competition Act 2002

Section 3 of the Act states that any agreement which causes or is likely to cause an appreciable adverse effect on competition (“AAEC”) in India is deemed, anti-competitive. Section 3 (1) of the Competition Act prohibits any agreement with respect to “production, supply, distribution, storage, and acquisition or control of goods or services which causes or is likely to cause an appreciable adverse effect on competition within India”. Although the Act does not define AAEC and nor is there any thumb rule to determine when an agreement causes or is likely to cause AAEC, Section 19 (3) of the Act specifies certain factors for determining AAEC under Section 3:

i. creation of barriers to new entrants in the market;

ii. driving existing competitors out of the market;

iii. foreclosure of competition by hindering entry into the market;

iv. accrual of benefits to consumers;

v. improvements in production or distribution of goods or provision of services;

vi. promotion of technical, scientific and economic development by means of production or distribution of goods or provision of services.

The language in section 19(3) states that the CCI shall have ‘due regard to all or any’ of the aforementioned factors.

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Abuse of Dominance

Section 4 of the Act is the operative provision of the Act dealing with the abuse of dominant position. This provision is broadly fashioned on the European Union prohibition on abuse of dominance contained in Article 102 of the Treaty on the Functioning of the European Union (TEFU).

The Act sets out following factors which the CCI takes into account to establish the dominant position of an enterprise:

i. market share of the enterprise;

ii. size and resources of the enterprise;

iii. size and importance of the competitors;

iv. economic power of the enterprise including commercial advantages over competitors;

v. vertical integration of the enterprises or sale or service network of such enterprises;

vi. dependence of consumers on the enterprise;

vii. 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;

viii. 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;

ix. countervailing buying power;

x. market structure and size of market;

xi. social obligations and social costs;

xii. relative advantage, by way of the contribution to the economic development, by the enterprise enjoying a dominant position having or likely to have an appreciable adverse effect on competition;

xiii. any other factor which the Commission may consider relevant for the inquiry.

Issues of Mergers and Acquisitions

Combinations like mergers and acquisitions are common practices to business entities and the purpose of the combinations is to accelerate economic growth and enhance trade practices which are beneficial to the consumers. However, combinations may not always be beneficial and may cause socio-economic disruptions. It could be designed to bridge competition and lead to dominance in future. By a 2007 amendment to the competition act, issues like mergers, acquisitions and amalgamation were made integral to the act. This invested immense responsibility on CCI to mitigate any adverse effects which are detrimental to the interest of consumers.

To fulfil this obligation, the CCI is encouraged to take assistance from various experts in diverse fields such as the economy, business and technology. The Commission needs to invest significantly in broadening and deepening training and capacity building of its personnel. It needs to be ahead and not behind the Curve. The pace of technology is dramatic and identifying detrimental business practices will be a dynamic challenge.

CCI regulations for Digital Markets in India

India is a prominent market where tech firms, both domestic and foreign, are jostling for space. The antitrust issues that have arisen elsewhere have resonated in India as well.

The E-commerce market study by the CCI also flagged several concerns of Indian stakeholders in the e-commerce market, such as platforms not acting in a neutral way, unfair contract terms, use of price parity clauses, exclusive agreements, and deep discounts.

While the CCI is doing its bit to ensure fairness in digital markets, a need for some form of regulation is already felt. In its e-commerce market study, the CCI has mentioned the need for marketplace platforms adopting self-regulation to ensure transparency concerning search ranking; collection, use and sharing of data; user review and rating mechanism; revision in contract terms; and discount policy. This form of regulation, however, falls far short of preemptive ex-ante regulation that the EU has suggested in the proposed Digital Markets Act for ‘gatekeeper’ platforms. Consequently, India should adopt binding ex-ante regulations for digital ‘gatekeepers’ to ensure market contestability for businesses including start-ups and fairness for users.