Recent Developments in the Competition Law

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March 14, 2019

The Competition Act, 2002  replaced the Monopolies and Restrictive Trade Practices Act, 1969, as the same had become obsolete on account of international economic developments relating more particularly to competition laws and a need was felt to focus on competition. The Central Government to serve this need set up a High Level Committee on Competition Policy and Law to study the competition regime in the nation and prepare a report recommending modifications to the MRTP Act. This ultimately led to the repeal of the Act and a new Act namely, the Competition Act, 2002  was enacted by the Government. One of the essential elements of the New Law was establishment of the Competition Commission of India (CCI/the Commission).

Since its establishment, the Competition Commission of India has passed some noteworthy orders and obiter dicta which have been instrumental in streamlining the Competition Law in India.

The Law in a nutshell has been covered by us here- Competition Law in India- In a Nutshell.

In this article we demonstrate the recent orders passed by the Supreme Court as well as the Competition Commission of India which aid us in a better understanding of the Law.

Director General has the Power to Search and Seizure with Magistrate’s Authorization- Supreme Court (January, 2019)

Case name: Competition Commission of India v. JCB India Ltd. & ors.

In this recent case, the Two-Judge Bench of the Supreme Court was confronted with the issue of Director General (DG’s) power of search and seizure with Magistrate’s authorization. The relevant statutory provisions involved in this context are Sections 41(3) of the Competition Act, 2002 and 240A of the Companies Act, 1956. The provisions pertain to DG’s power to investigate contraventions and seizure of documents by Inspector.

While referring to the law contained in the aforesaid provisions, the Supreme Court stated that Section 41(3) specifically incorporates a reference to Section 240A in its application to an investigation by the Director General under the provisions of the Competition Act 2002.

That under Section 240A, an Inspector who has reasonable ground to believe that books and papers of, or relating to, any company may be destroyed, mutilated, altered, falsified or secreted may apply to the Magistrate to secure an authorisation for the seizure of the books and papers.

That the provisions of Section 240A do not merely relate to an authorisation for a search but extend to the authorisation of a seizure as well. Unless the seizure were to be authorised, a mere search by itself will not be sufficient for the purposes of investigation.

Motive of Dominant Entity not a Cirteria to Judge Abuse of Dominant Position- CCI

Case name: Velankani Electronics Private Limited v. Intel Corporation

In the case, the Informant alleged abuse of dominant position by Intel Corporation under Section 4 of the Competition Act, 2002.

In view of the facts and laws pertaining to abuse of dominant position, the Commission noted that at this stage the Commission is not required to go into the intent or motive of the OP in indulging into the alleged conduct that has been, prima facie, found to be abusive. Otherwise also the language of Section 4 does not impose any such obligation on the Commission.

Hence, the Commission was of the view that while determining abuse of dominant position by the OP (Opposite Party), motive of the dominant entity does not play any role.

Also read What is Abuse of Dominant Position under Competition Act?

CCI- Rounding off Base Fare by Railways is Prima Facie Abuse of Dominant Position

Case name: Mr. Meet Shah and anr. v. Union of India, Ministry of Railways and anr.

In this case, the Informant alleged that the practice of OP’s namely Ministry of Railways and Indian Railway Catering and Tourism Corporation Ltd. to round off the actual base fare to the nearest higher multiple of Rs.5 to arrive at the total base fare is in contravention of the provisions of Section 4 of the Competition Act, 2002 i.e. Abuse of dominant position.

In view of the representation made by the Parties, the Competition Commission of India (CCI/ Commission) was of the view that prima facie a case of contravention of the provisions of Section 4 of the Act was made out against the Opposite Parties.

Opposite Parties hold a Dominant Position in the relevant market– The Commission noted that the Opposite Parties enjoyed dominant position in the ‘market for sale of tickets by railways in India’. The Commission observed that the OP’s were not been able to convince the Commission as to why the policy of rounding off of actual base fares to the next higher multiple of Rs.5 is applicable to the sale of online tickets. Thus, the Commission was of the view that the OP’s are rounding off the actual base fares for the online bookings without any plausible justification for the same.

In view of the aforesaid, the Commission held that the practice of rounding off actual base fares to the next higher multiple of Rs. 5 by the Opposite Parties, prima-facie amount to an imposition of unfair condition in the market for sale of rail tickets in India, particularly for online booking of rail tickets, in contravention of provisions of Section 4 (2)(a)(i) of the Act.

Ex-Post facto Notice not contemplated u/section 6(2) of Competition Act- Supreme Court

Case name: SCM Solifert Limited & Anr. v. Competition Commission of India

Also read Impact of Merger & Acquisition on Competition- An Analysis

In the case, the CCI initiated proceedings against the appellants on whom due to the failure to notify a proposed combination as required under section 6(2) of the Act, the penalty of Rupees Two crores was imposed under section 43A of the Act.

The issue that fell for consideration before the Court was whether notifying within 30 days of the purchase was compliance of the provision as per provisions of section 6(2) it should have been notified before the acquisition?

The Supreme Court in appeal noted that from section 6(2) of the Act that the proposal to enter into combination is required to be notified to the Commission. The legislative mandate is apparent that the notification has to be made before entering into the combination. The Preamble of the Act contains that the Commission has been established to prevent practices having an adverse effect on the competition.

That the combination cannot be entered into and shall come into effect before order is passed by Commission or lapse of certain time from date of notice is also apparent from the terminology used in section 6(2A) which provides that no combination shall come into effect until 210 days have passed from the date of notice or passing of orders under section 31 by the Commission, whichever is earlier.

That Supreme Court thus concluded in the case that the notice of Section 6(2) is to be given prior to consummation of the acquisition. Ex post facto notice is not contemplated under the provisions of section 6(2) and same would be in violation of the provisions of the Act.

No Requirement of Mens Rea u/Section 43A of the Competition Act- Supreme Court

Case name: Competition Commission of India v. Thomas Cook (India) Ltd. & anr.

In the case, the Appeal was instituted by the CCI being aggrieved of the order passed by the Competition Appellate Tribunal, whereby the Tribunal has set aside order passed by Commission imposing penalty ofRupees One Crore under Section 43A of the Act on the respondents on the ground of non­compliance of provisions contained in section 6(2) of the Act. Section 6(2) of the Competition Act mandates notice to the Commission in the event any person or enterprise enters into a combination. Further Section 43A confers power on the Commission to impose penalty for non-furnishing of information on combinations.

The issue in the case pertained to malafides on the part of the respondents in not complying with Section 6(2) of the Act.

The Supreme Court in appeal while determining the aforesaid issue opined that the mens rea assumes importance in case of criminal and quasi criminal liability. For the imposition of penalty under section 43A, the action may not be mala fide in case there is a breach of the statutory provisions of the civil law, penalty is attracted simpliciter on its violation.

While ruling that the imposition of penalty by the Commission was rightly imposed, the Apex Court was of the view that there was no requirement of mens rea under Section 43A or intentional breach as an essential element for levy of penalty.