Lab assignment competition law - sanmeet dhokay - pgpmx025

Legal Aspects of Business - Case Assignment – Sanmeet A Dhokay [2015PGPMX025]
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Competition Law
Effective tool for
Good Corporate Governance
in India
Sanmeet Dhokay
PGPMX 025

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Table of Contents
1.Introduction....................................................................................................................................3
2. Conceptual Discussion.....................................................................................................................4
Definition.......................................................................................................................................4
Features.........................................................................................................................................4
Anti-Competitive Agreements......................................................................................................4
Types of agreements ...................................................................................................................5
Abuse of dominant position.........................................................................................................5
Combinations..............................................................................................................................5
Competition Commission of India....................................................................................................5
Review of orders of Commission ..................................................................................................6
Appeal........................................................................................................................................6
Penalty.......................................................................................................................................6
3. Implementation of the existing system.............................................................................................7
CCI Details......................................................................................................................................7
Important decisions taken by CCI.....................................................................................................7
4. Alternative systems prevailingin other countries..............................................................................9
Overview........................................................................................................................................9
European Unionlaw........................................................................................................................9
United States Antitrust..................................................................................................................10
International expansion ................................................................................................................11
5. Data Analysis and Interpretation....................................................................................................12
State of Awareness and Perception on Sector-specific Competition and Regulatory Issues................12
Case Study I - Determination of Market..........................................................................................14
Case Study II - Assessment of Dominance and Abuse......................................................................18
Important achievements of CCI......................................................................................................25
Sector Wise Distribution................................................................................................................26
Orders passed by the Commission .................................................................................................27
Monetary penalties.......................................................................................................................28
6. Conclusion....................................................................................................................................31
7. Bibliography .................................................................................................................................32

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1.Introduction
The CompetitionAct, 2002 was enactedby the Parliamentof Indiaandgoverns Indiancompetitionlaw.
It replacedthe archaicMonopolyandRestrictive Trade PracticesAct,1969. Under thislegislation,
the CompetitionCommissionof India wasestablishedtopreventactivitiesthathave anadverse effect
on competitioninIndia. Thisactextendstowhole of Indiaexceptthe State of JammuandKashmir.
It isa tool to implementandenforce competition policyandtopreventandpunishanti-competitive
businesspracticesbyfirmsandunnecessaryGovernmentinterference inthe market.Competitionlaws
isequallyapplicable onwrittenaswell asoral agreement,arrangementsbetweenthe enterprisesor
persons.
The CompetitionAct,2002 wasamendedbythe Competition(Amendment)Act,2007 and againby the
Competition(Amendment)Act,2009.
The Indiancompetitionlawregimeisanascentregime.Itisbarelyfouryearssince our new competition
law- the CompetitionActhasbecome operational.Priortothe operationalizationof the CompetitionAct
inMay 2009, MRTP Act was the operational law thatregulatedcertainaspectsof competition.

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2. Conceptual Discussion
CompetitionLaw isanact to establishacommission,protectthe interestof the consumersandensure
freedomof trade inmarketsinIndia-
 To prohibitthe agreementsorpracticesthatrestrictsfree tradingandalsothe competitionbetween
twobusinessentities,
 To ban the abusive situationof the marketmonopoly,
 To provide the opportunitytothe entrepreneurforthe competitioninthe market,
 To have the international supportandenforcementnetworkacrossthe world,
 To preventfromanti-competitionpracticesandtopromote a fairand healthycompetitioninthe
market.
Definition
 Acquisition:Acquisitionmeans,directlyorindirectly,acquiringoragreeingtoacquire shares,voting
rightsor assetsof anyenterprise orcontrol overmanagementorassetsof anyenterprise.
 Cartel: Cartel includesanassociationof producers,sellers,distributors,tradersorservice providers
who,by agreementamongstthemselves,limitcontrol orattempttocontrol the production,
distribution,sale orprice of goodsor provisionof services.
 Dominant position:It meansa positionof strength,enjoyedbyanenterprise,inthe relevant
marketwhichenablesittooperate independentlyof competitiveforcesprevailinginthe marketor
affectitscompetitorsorconsumersinits favor.
 Predatory pricing: Predatorypricingmeansthe sale of goodsorprovisionof services,ataprice
whichisbelowthe costof productionof the goodsor provisionof services,withaview toreduce
competitionoreliminate the competitors.
 Rule of reasons: It isthe analysisof anyactivityunderthe challengeonthe basisof business
justification,competitive intent,marketimpact,impactoncompetitionandonconsumer.Itis the
logicbehindthe conclusionforanyorder.
Features
Anti-Competitive Agreements
enterprises,personsorassociationsof enterprisesorpersons, includingcartels,shallnotenterinto
agreementsinrespectof production,supply,distribution,storage,acquisitionorcontrol of goodsor
provisionof services,whichcause orare likelytocause an "appreciable adverse impact"on competition

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inIndia.Such agreementswouldconsequentlybe consideredvoid.Agreementswhichwouldbe
consideredtohave anappreciable adverse impactwouldbe those agreementswhich-
 Directlyorindirectlydeterminesale orpurchase prices,
 Limitor control production,supply,markets,technicaldevelopment,investmentorprovisionof
services,
 Share the market or source of productionor provisionof servicesbyallocationof interalia
geographical areaof market,nature of goods or numberof customersor anyothersimilar way,
 Directlyorindirectlyresultinbidriggingorcollusive bidding.
Types ofagreements
Competitionlawidentifiestwotype of agreements.Horizontal agreementswhichare amongthe
enterpriseswhoare ormay compete withinsame business.Secondisthe vertical agreementwhichare
amongindependententerprise.Horizontal agreementispresumedtobe illegal agreementbutrule of
reasonswouldbe applicableforvertical agreements.
Abuse of dominant position
There shall be an abuse of dominantposition if anenterprise imposesdirectlyorindirectlyunfairor
discriminatoryconditionsinpurchase orsale of goodsor servicesorrestrictsproductionortechnical
developmentorcreate hindrance inentryof new operatorsto the prejudice of consumers.The
provisionsrelatingtoabuse of dominantpositionrequiredeterminationof dominance inthe relevant
market.[7]
Combinations
The Act is designedtoregulate the operationandactivitiesof combinations,aterm, whichcontemplates
acquisition,mergersoramalgamations.Combinationthatexceedsthe thresholdlimitsspecifiedinthe
Act intermsof assetsor turnover,whichcausesoris likelytocause adverse impactoncompetition
withinthe relevantmarketinIndia,canbe scrutinizedbythe Commission.
Competition Commission of India
CompetitionCommissionof India isabodycorporate and independententitypossessingacommonseal
withthe powerto enterintocontractsand to sue inits name.It isto consistof a chairperson,whoisto
be assistedbya minimumof two,anda maximumof ten,othermembers.
It isthe dutyof the Commissiontoeliminate practiceshavingadverse effectoncompetition,promote
and sustaincompetition,protectthe interestsof consumersandensure freedomof trade inthe markets
of India.The Commissionisalsorequiredtogive opiniononcompetitionissuesonareference received
froma statutoryauthorityestablishedunderanylaw andto undertake competitionadvocacy,create
publicawarenessandimparttrainingoncompetitionissues.
Commissionhasthe powertoenquire intounfairagreementsorabuse of dominantpositionor
combinationstakingplace outside Indiabuthavingadverse effectoncompetitioninIndia,if anyof the
circumstancesexists:
 An agreementhasbeenexecutedoutsideIndia
 Anycontractingparty residesoutsideIndia
 Anyenterprise abusingdominantpositionisoutside India
 A combinationhasbeenestablishedoutsideIndia

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 A party to a combinationislocatedabroad.
 Anyothermatter or practice or actionarisingout of such agreementordominantpositionor
combinationisoutside India.
To deal withcross borderissues,Commissionisempoweredtoenterintoany Memorandumof
Understandingorarrangementwithanyforeignagencyof anyforeigncountrywiththe priorapproval of
Central Government.
Reviewof ordersof Commission
Anypersonaggrievedbyanorderof the Commissioncanapplytothe Commissionforreview of its
orderwithinthirtydaysfromthe date of the order.Commissionmayentertainareviewapplicationafter
the expiryof thirtydays,if itis satisfiedthatthe applicantwaspreventedbysufficientcause from
preferringthe applicationintime.Noordershall be modifiedorsetaside withoutgivinganopportunity
of beingheardtothe personinwhose favorthe orderis givenandthe DirectorGeneral where he was a
party to the proceedings.
Appeal
Anypersonaggrievedbyanydecisionororderof the Commissionmayfile anappeal tothe Supreme
Court withinsixtydaysfromthe date of communicationof the decisionororderof the Commission.No
appeal shall lie againstanydecisionororderof the Commissionmade withthe consentof the parties.
Penalty
If any personfailstocomplywiththe ordersor directionsof the Commissionshall be punishable with
fine whichmayextendto₹ 1 lakhfor eachday duringwhichsuch noncompliance occurs,subjecttoa
maximumof ₹ 10 crore.
If any persondoesnotcomplywiththe ordersor directionsissued,orfailstopaythe fine imposed
underthissection,he shall be punishable withimprisonmentforatermwhichwill extendtothree
years,or withfine whichmay extendto₹ 25 crores or withboth.
Section44 providesthatif any person,beingaparty to a combinationmakesastatementwhichisfalse
inany material particularorknowingitto be false or omitstostate anymaterial particularknowingitto
be material,suchpersonshall be liable toapenaltywhichshall notbe lessthan₹ 50 lakhsbutwhich
may extendto₹ 1 crore.

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3. Implementation of the existing system
CCI Details
CompetitionCommissionofIndia(CCI) isa bodyof the Governmentof Indiaresponsible for
enforcingThe CompetitionAct,2002 throughoutIndiaandto preventactivitiesthathave anadverse
effectoncompetitioninIndia.Itwasestablishedon14 October2003. It became fullyfunctional inMay
2009 withDhanendraKumaras itsfirstChairman.
The CommissioncomprisesaChairpersonandsix members. DevenderKumarSikri isthe current
Chairpersonof the CCI. The membersof the CompetitionCommissionof Indiaare:
1. M.L. Tayal
2. S.L. Bunker
3. SudhirMital
4. Augustine Peter
5. U. C. Nahta
Important decisions taken by CCI
 In December2010, CCI institutedaprobe toexamine if there wasany cartelization amongtraders
whenonionpricestouched80 rupees,butdidnotfindsufficientevidence of marketmanipulation.
 In June 2012, CCI imposedafine of ₹63.07 billion (US$930million) 11cementcompanies
for cartelization.CCIclaimedthatcementcompaniesmetregularlytofix prices,control market
share and holdback supplywhichearnedthemillegalprofits.

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 In January2013, CCImodifiedclausesinagreementsbetweenreal estate company DLFLimitedand
apartmentbuyers.[10]
Businessandfinance Portal Moneycontrol.comwelcomedthe ordersaying
that, "Thisisa landmarkrulingandwill benefitpropertyownersacrossthe country".Some of the
importantmodificationswere:
 The Buildercannotundertake anyadditional constructionbeyondthe approvedbuildingplan
giventothe buyers.[10]
The builderwill nothave complete ownershipof openspaceswithinthe
residentialprojectareanotsold.[10]
Notjustthe buyerbutthe builderwillbe liableforany
defaults.[11]
All paymentsmade bythe buyersmustbe basedonconstructionmilestonesand
not "ondemand".[11]
The builderwill nothave the sole powertoformthe owner’s
association.[11]
 On 8 February2013, CCI imposedapenaltyof ₹522 million(US$7.7million)onthe Boardof Control
for CricketinIndia(BCCI) formisusingits dominantposition.The CCIfoundthatIPL teamownership
agreementswere unfairanddiscriminatory,andthatthe termsof the IPL franchise agreements
were loadedin favorof BCCI andfranchiseshadno sayin the termsof the contract. The CCI ordered
BCCI to "cease anddesist"fromanypractice in future denyingmarketaccesstopotential
competitorsandnotuse its regulatorypowersindecidingmattersrelatingtoitscommercial
activities.[12][13]
 In 2014, CCI imposedafine of Rs. 1 Crore upon Google forfailure tocomplywiththe directions
givenbythe DirectorGeneral(DG)seekinginformationanddocuments.[14]
 On 17 November2015,CCIimposedafine of INR258 crore uponThree Airlines.Competition
Commissionof India(CCI) had penalized the three airlinesforcartelization indeterminingthe fuel
surcharge on air cargo. A penaltyof Rs151.69 crore was imposedonJetAirways,while thaton
InterGlobe Aviation(Indigo)andSpiceJetare Rs63.74 crore and Rs 42.48 crore,respectively.

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4. Alternative systems prevailing in other countries
Overview
Competitionlawisknownasantitrustlaw inthe UnitedStates andEuropeanUnion,[4]
andas anti-
monopoly lawinChina[1]
and Russia.Inpreviousyearsithasbeenknownastrade practiceslaw in
the UnitedKingdomandAustralia.
The historyof competitionlaw reachesbacktothe RomanEmpire.The business practicesof market
traders, guilds andgovernmentshave alwaysbeensubjecttoscrutiny,andsometimessevere sanctions.
Since the 20th century,competitionlawhasbecome global. The twolargestandmostinfluential
systemsof competitionregulationare UnitedStatesantitrustlaw andEuropeanUnioncompetitionlaw.
National andregional competitionauthoritiesacrossthe worldhave formedinternational supportand
enforcementnetworks.
Moderncompetitionlawhashistoricallyevolvedonacountry level topromote andmaintainfair
competitioninmarketsprincipallywithinthe territorial boundariesof nation-states.National
competitionlawusuallydoesnotcoveractivitybeyondterritorial bordersunlessithassignificanteffects
at nation-state level. Countriesmayallow forextraterritorial jurisdiction incompetitioncasesbasedon
so-calledeffectsdoctrine. The protectionof international competitionisgovernedbyinternational
competitionagreements.In1945, duringthe negotiationsprecedingthe adoptionof the General
AgreementonTariffsandTrade (GATT) in 1947, limitedinternational competitionobligationswere
proposedwithinthe Charterforan InternationalTrade Organization.Theseobligationswere not
includedinGATT,butin 1994, withthe conclusionof the UruguayRound of GATT Multilateral
Negotiations,the WorldTrade Organization (WTO) wascreated.The AgreementEstablishing the
WTO includedarange of limitedprovisionsonvariouscross-bordercompetitionissuesonasector
specificbasis.
European Union law
CompetitionlawgainednewrecognitioninEurope inthe inter-waryears,withGermanyenactingits
firstanti-cartel lawin1923 and SwedenandNorwayadoptingsimilarlawsin1925 and 1926
respectively.However,withthe GreatDepressionof 1929 competitionlaw disappearedfromEurope
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pressure fromthe UnitedStates,became the firstEuropeancountriestoadoptfullyfledgedcompetition
laws.Ata regional level EUcompetitionlaw hasitsoriginsinthe EuropeanCoal andSteel
Community (ECSC) agreementbetween France, Italy,Belgium,the Netherlands,Luxembourgand
Germanyin1951 followingthe SecondWorldWar.The agreementaimedtopreventGermanyfromre-
establishingdominance inthe productionof coal andsteel asitwas feltthatthisdominance had
contributedtothe outbreakof the war. Article 65 of the agreementbannedcartelsandarticle 66 made
provisionsforconcentrations,ormergers,andthe abuse of a dominantpositionbycompanies.[33]
This
was the firsttime thatcompetitionlawprincipleswere includedina plurilateral regional agreementand
establishedthe trans-Europeanmodelof competitionlaw.In1957 competitionruleswere includedin
the Treaty of Rome,alsoknownas the EC Treaty, whichestablishedthe EuropeanEconomic
Community (EEC).The Treatyof Rome establishedthe enactmentof competitionlaw asone of the main
aimsof the EEC through the "institutionof asystemensuringthatcompetitioninthe commonmarketis
not distorted."The twocentral provisionsonEU competitionlaw oncompanieswere establishedin
article 85, whichprohibitedanti-competitiveagreements,subjecttosome exemptions,andarticle 86
prohibitingthe abuse of dominantposition.The treatyalsoestablishedprinciplesoncompetitionlawfor
memberstates,witharticle 90coveringpublicundertakings,andarticle 92 makingprovisionsonstate
aid.Regulationsonmergerswere notincludedasmemberstatescouldnotestablishconsensusonthe
issue atthe time.[34]
Today,the Treaty of Lisbon prohibitsanti-competitive agreementsinArticle 101(1),including price
fixing.AccordingtoArticle 101(2) any suchagreementsare automaticallyvoid.Article101(3) establishes
exemptions,if the collusionisfordistributional ortechnological innovation,givesconsumersa"fair
share"of the benefitanddoesnotinclude unreasonable restraintsthatriskeliminatingcompetition
anywhere (orcompliantwiththe generalprinciple of EuropeanUnionlaw of proportionality).Article 102
prohibitsthe abuse of dominantposition,[35]
suchasprice discriminationandexclusivedealing.Article
102 allowsthe EuropeanCouncil regulations togovernmergersbetweenfirms(the currentregulationis
the Regulation139/2004/EC).[36]
The general testiswhetheraconcentration(i.e.mergeroracquisition)
witha communitydimension(i.e.affectsanumberof EU memberstates) mightsignificantly
impede effective competition.Articles106 and 107 provide thatmemberstate'srightto deliverpublic
servicesmaynotbe obstructed,butthat otherwise publicenterprisesmustadhere tothe same
competitionprinciplesascompanies.Article 107laysdowna general rule thatthe state may notaid or
subsidize privatepartiesindistortionof free competitionandprovidesexemptionsfor charities,regional
developmentobjectives andinthe eventof a natural disaster.
United States Antitrust
The ShermanAct of 1890 attemptedtooutlaw the restrictionof competitionbylarge companies,who
co-operatedwithrivalstofix outputs,pricesandmarketshares,initiallythrough pools andlater
throughtrusts.Trusts firstappearedinthe US railroads,where the capital requirementof railroad
constructionprecludedcompetitiveservicesinthenscarcelysettledterritories.Thistrustallowed
railroadstodiscriminate onratesimposedandservicesprovidedtoconsumersandbusinessesandto
destroypotential competitors.Differenttrustscouldbe dominantindifferentindustries.The Standard
Oil Company trustin the 1880s controlledanumberof markets,includingthe marketin fuel
oil,leadandwhiskey.Vastnumbersof citizensbecamesufficientlyaware andpubliclyconcernedabout
howthe trusts negativelyimpactedthemthatthe Actbecame a priorityforbothmajorparties.A
primaryconcernof thisact is that competitivemarketsthemselvesshouldprovidethe primary
regulationof prices,outputs,interestsandprofits.Instead,the Actoutlawedanticompetitivepractices,

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codifyingthe commonlawrestraintof trade doctrine. Prof RudolphPeritzhasarguedthatcompetition
lawin the UnitedStateshasevolvedaroundtwosometimesconflictingconceptsof competition:first
that of individual liberty,free of governmentintervention,andsecondafaircompetitive environment
free of excessiveeconomicpower.Since the enactmentof the ShermanActenforcementof competition
lawhas beenbasedonvariouseconomictheoriesadoptedbyGovernment.
Section1 of the ShermanActdeclaredillegal"everycontract,inthe formof trust or otherwise,or
conspiracy,inrestraint of trade or commerce among the several States,or withforeignnations. Section
2 prohibits monopolies,orattemptsandconspiraciestomonopolize.Followingthe enactmentin1890
US court appliesthese principlestobusinessandmarkets.Courtsappliedthe Actwithoutconsistent
economicanalysisuntil 1914,whenitwas complementedbythe ClaytonActwhichspecifically
prohibitedexclusivedealingagreements,particularlytyingagreementsandinterlockingdirectorates,
and mergersachievedbypurchasingstock.From1915 onwardsthe rule of reason analysiswas
frequentlyappliedbycourtstocompetitioncases.However,the periodwascharacterizedbythe lackof
competitionlawenforcement.From1936 to 1972 courts' applicationof anti-trustlaw wasdominatedby
the structure-conduct-performanceparadigmof the HarvardSchool.From1973 to 1991, the
enforcementof anti-trustlawwasbasedonefficiencyexplanationsasthe ChicagoSchool became
dominant,andthroughlegal writingssuchasJudge RobertBork'sbook The AntitrustParadox.Since
1992 game theory has frequentlybeenusedinanti-trustcases.
International expansion
By 2008 111 countrieshad enactedcompetitionlaws,whichismore than50 percentof countrieswitha
populationexceeding80,000 people.81of the 111 countrieshadadoptedtheircompetitionlawsinthe
past 20 years,signalingthe spreadof competitionlaw followingthe collapse of the SovietUnion andthe
expansionof the EuropeanUnion.Currently competitionauthorities of manystatescloselyco-operate,
on everydaybasis,withforeigncounterpartsintheirenforcementefforts,alsoinsuchkeyareaas
information/evidence sharing.
In manyof Asia'sdevelopingcountries,includingIndia,Competitionlaw isconsideredatool tostimulate
economicgrowth.In Koreaand Japan,the competitionlaw preventscertainformsof conglomerates.In
addition,competitionlaw haspromotedfairnessinChinaandIndonesiaaswell asinternational
integrationinVietnam. HongKong'sCompetitionOrdinance came intoforce inthe year2015.

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5. Data Analysis and Interpretation
State of Awareness and Perception on Sector-specific Competition and Regulatory Issues
In addition,awarenessandperceptionsonspecificsectoral issueswere collectedthroughthe business
questionnaire byinterviewingbusinessstakeholders,sectoral expertsandpolicymakers.Thissection
discussesthe findingsof thatexercise.More than73 percentof the stakeholderswere of the view that
prohibitingcheapimportsisimportanttopreventunderminingof the productstandardsinthe country
and that competitorcountriesadoptunfairproductionpracticesathome,whichcreate distortionsin
the Indianmarket.To regulate these unfairpractices,50percentstakeholdersapproveof strict
monitoringof importsqualitythroughspottestsof productsbeingsold/atthe customsterminal.
Moreover,around48 percent(22 percentsaidimportantand26 percentsaidthisis veryimportant) of
the stakeholderswereof the viewthatthere shouldbe anational regulatorybodytomonitorthe quality
of the foreignproductssoldinthe domesticmarket,thougharound42 percentof the stakeholders
(mainlyfromthe businesssubgroup) disagreedwiththissuggestionof more stringentchecksand
regulatoryoversight.Notably,asimilar42 percent(30 percentsaidveryimportantand12 percentsaid
important) respondentssaidthatit’sthe innovativenessinproductdesignandunique competitiveness
inprice through bettermarketingstrategythatcaneffectivelymitigatethe importedcompetition
distortionasdiscussedabove.However,around61 percentof the stakeholdersagreedthatusing
safeguardmeasurestoprotect the domesticproducersaswell asmanagingthe importedcompetition
distortionisaneffectiveandsustainable practice.
On Micro Finance Institutions(MFI), the majorityof the stakeholders(68percent) were of the opinion
that the sectorin Indianeedstobe regulated.More than57 percentof the stakeholdersagreedthatthe
sector/consumerssufferbecauseof the coercive practicesandhighinterestrateschargedbythe
creditors.But,to control the on-goingproblemof over-borrowingandunsustainabledebtof MFIs(as
MFIs in32 Š CompetitionandRegulationinIndia,2011 Indiagive multipleloanstoborrowers),majority
of the respondents(63.7percent) suggestedthatthe creditorshouldconductanabilitytopaytest(a.k.a
the knowyour customeror KYC exercise) before extendingmultipleloans.Thisseemstosuggestthat
the industrystakeholdersaswell asthe policymakersneedtounderstandthe nature of functioningof
the MFIs and appreciate the continuedneedforsucha financial intermediationinthe country.
On the Natural Gas regulationshowever,itappearsthatthe respondents’perceptionsandawarenessof
the existingregulationsrelatingtogas supplyinfrastructure andpricingisnotadequate,includingon
majorissuesrelatedtothe natural gas supplies,namely,openaccesstopipeline infrastructure,
distributionandsupplyandsupplyagreements.A possiblereasonforthiscouldbe thatsince gas prices
are still regulatedinthe countryandthe supplyisdeemedtobe a largelygovernmentpolicyexercise (all
the natural gas companiesbeingPSUs),there islittle interestinunderstandingitsramificationseven
amongthe otherwise aware businesscommunity.The lackof private sectorparticipationinthe sector
was deemedtobe a functionof tariff regulations(especiallyLPG/residential citygassubsidies)andlack
of a level playingfieldvis-à-visthe PSUs(includingthe extantmarketdominance of the PSUplayers).
However,around46 percentof the respondentssuggestedthatpartnershipwithsupplyingnations

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couldbe a betterstrategyforinfrastructure development,whereasaround67percentof the
respondentsopinedthatlong-termsupplyagreementsmaybe helpinabetterwayin thisregards.
In the Real Estate sector,a majorityof the respondents(around52percent) agreedthatthe existing
regulationsinthe real estate sectorare notveryeffective inaddressingthe competitionconcerns and
regulationneedsof the sector.Infact, 63.2 percentof the respondentsare of the view thatthe
regulatoryrequirements,especiallymultiplicityof regulationandlackof consistencyamongregulations
indifferentstates,are the mainobstaclesforgrowthof thissector.Accordingto54.9 percentof the
respondents,astrongregulationpolicy(asproposedunderthe Model Real Estate ManagementBill) and
itsproperimplementationandenforcementwill helpimprovethe qualityof the governanceandreduce
corruptioninthe sector.
The Retail Distributionsectoralso isdeemedtobe sufferingfromonerous licensingrequirements.
Nearly55 percentof the respondentswereof the view thatthe licensingrequirementsforthe domestic
marketoperationshave restrictedcompetition,thusreducingconsumerchoice andinflatingfinal prices.
The respondentswere alsoaskedif PerceptionandAwarenessReporting ,theyfeel thatreductioninthe
numberof intermediarieswouldbe bestfacilitatedby:
(1) betterinfrastructure forimprovedphysical connectivity;
(2) integrationof supply-chainbyencouraging organizedretail;and
(3) remove the cross-borderbarriersformore efficientpan-nationalsourcing.
In eachoption,the respondentswere askedtorankthe efficacyof the choice.The resultsindicate that
physical infrastructure isseentobe the mostlimitingfactorandis alsothe prime cause for
fragmentationof the market/distributionchain.Thus,itisnotsurprisingthatreformthereinwas
consideredto be a highlyeffectivemethodof addressingthe problemsthatemanate fromthe
multiplicityof intermediariesinthe distribution/supplychain.Finally,the respondentswere askedto
rate howthe problemsof the small retailersandconsumerscanbe addressedmostefficiently.The
majorityof the respondentsseemtothinkthata structuredtwo-stage regulatorysystemwillbe of most
use,thougha large number(differingby14 percentage points) feelthateliminationof malpracticesand
timelyplanningwillsufficientlyhelpinresolvingthe small retailer/consumerwoes.Also,an
overwhelmingmajorityof respondents(more than56 percent) agreedthatthe relaxationof foreign
directinvestment(FDI) capinretail sofar (51 percentFDIinsingle-brandretailingand100 percentFDIin
cash-and-carry) hasbeenbeneficialforthe consumers,insofarasthe choicesavailable have increased
significantly,thusforcingproductandservice qualityupgradationfromdomesticmomandpop retailers.
In the Road/Highway Transport (passenger) regulations,animportantfindingfromthe surveyisthat
the myth thatthe exclusive rightsgiveninconcessionagreementstoconcessionaireinthissectoris
damaging,i.e.creatingthe possibilityof abuse of dominance hasbeendisproved.Around38 percentof
respondentssaidthatthe exclusive rightsgiveninconcessionagreementsare notrelevantfromany
abuse of dominance perspective,while around26percentof the respondentsexplicitlystate thatitis
not damaging.Similarly, around63percentof the respondentsdisagreethatroadtollsmaycause
potential abuse of authoritybythe concessionaire.Mostsignificantly,56 percentof the respondents
agree that the presentregulationsdonotadequatelypromotecompetitioninthissectorwhile 34Š
CompetitionandRegulationinIndia,2011 addressingthe demandforroadinfrastructure andthe
absence of an independentregulatorforthe sectorisa seriouslimitation.

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Last, responsesonthe querieson TelecommunicationServices regulationsandregulatorypractice also
breaksome preconceivednotions.Despitethe multipleproblemswiththe spectrumsharingand
distributioninthe country,70 percentof the respondentsseemtoeithernothave anyconcernsor do
not agree that the prequalificationprocessesandrequirementsforbiddingfor licenses are inanyway
restrictive.Furthermore,contrarytopopularperception,approximately37percentof the stakeholders
were of the viewthatthe functional andfinancialperformance of the TelecomRegulatoryAuthorityof
India(TRAI) hasnot deterioratedovertime.Surprisingly,the analysisrevealedthat38 percentof the
stakeholdersdidnotconsiderthe efficiencyof regulatorybodiesasafactor contributingtothe growth
of the sector.The surveyalsotriedto capture the viewsof the stakeholdersonthe slow pace of growth
of the broadbandservices.There wasnosignificanttrendfound,thougharound39percentof the
respondentsopinedthatbothtechnologyandregulationsare equallyimportantforgrowthof the
sector.Andfinally,amajorityof the stakeholders(47.4percent) agreedthatmandatoryinfrastructure
sharingwithprivate entitieswill facilitatecompetitionaswell asreduce costsforthe telcos
Case Study I - Determination of Market
In this first part of our case study we will discuss two orders of the CCI, namely the DLF Case and MCX
Case to analyze the determination of market by the CCI.
i. DLF Case
The CCI while defining the relevant market in this case first established that that DLF was providing
services of a developer/builder as defined under the definitionof “service” provided under section2(u)
of the Competition Act. Once the nature of service was determined, the CCI next moved to define the
relevant product and geographic market. The CCI noted from the investigation report submitted by the
DG Investigation that that the nature of service being provided by DLF was described as services of
developer / builder in respect of “high-end” residential building in Gurgaon. The relevant market
definition had two important components “high-end” and “residential”. “Gurgaon” was defined as the
relevant “geographic market”.
Terms like “high-end” or “affordable” are relatively subjective and therefore it was felt necessary to
CompetitionLawinIndiato establishaclearand logical interpretationof the term“high-end”.The CCIin
its order noted that “high-end” is a complex mix of factors such as size, reputation of the location,
characteristicsof neighborhood,qualityof constructionetc.However,the mostsignificantcharacteristic
of a “high-end”hasto be the capacity of the buyerto pay the price for buyingthe “high-end”residential
apartment.
The CCI after it defined the relevant product market examined the relevant geographic market and
defined Gurgaon as relevant geographic market. The CCI was of the view that a decision to purchase a
high-endapartmentinGurgaonisnotsubstitutablebyadecisionto purchase anyapartmentinanyother
geographical location because Gurgaon possess certain unique geographical characteristics such as its
proximitytoDelhi,proximitytoAirportsandadistinctbrandimage.The CCIwasof the view thatadecision
to fix a residence dependson several factors ranging from occupation to children’s education,family,
friends,surroundings,amenities,qualityof life etc.The CCIalsoobservedthataresidentialpropertyisby
nature immovable, and the preference of residential property is generally not interchangeable or

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substitutablethereforeasmall,5% increase inthe price of anapartmentinGurgaonwouldnotmake the
person shift his preference to other location.
ii. Analysis of CCI’s determination of relevant market in the DLF Case
It is a settled principle of competition law that in order to find abuse of dominant position a three step
test is undertaken. The first step is to determine the relevant market, the second step is to find out
dominant position in the relevant market and the third and final step is to establish the abuse of
dominant position. Therefore the moment the relevant market definition goes wrong the rest of the
steps are bound to go wrong as well.
The CCI’s starting point in defining the markets in this case is similar to the approach that the US or
EU authorities would use which is to look at publicly available information, industry reports and
reports submitted by the parties themselves145. However the point at which the market definition
analysis of the CCI falls short is that CCI has probably gone no further than collection of data. One
would expect that the CCI would conduct rigorous economic analysis to test the various market
reports146. We make this statement because it is difficult to say from a perusal of the order of the
CCI on the DLF Case as to whether the data referred to in the order, whether the DG or the CCI
conducted a rigorous economic analysis to determine the relevant market.
As discussed above it is also a well settled principle of competition law that the market analysis
starts with conducting SSNIP test. Even when the necessary data to perform the hypothetical
monopolist test are not available, this test provides a coherent conceptual framework to define the
relevant market147. However in this DLF case the CCI convinced itself that the residential property
in Gurgaon was

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not substitutable and despite applying the SSNIP Test the buyers will not move from Gurgaon to other
peripheral locationsin Delhi such as to Vasant Kunj. The CCI without conducting a market survey and
SSNIPanalysismadeacase thata 5%increase will notmake thepeopleshiftfromthe relevantgeographic
market determined in this case.
As statedabove the definition‘relevantmarket’interaliais precursorto meaningfullyidentifythe scope
of competition in a market. In abuse of dominance cases the primary goal of market definition is to
determinethe existenceof marketpower,whichistheabilityof thefirmtokeepthe priceabove thelong-
run competitive level. Market definitionalso facilitates the identification of competitors in the relevant
market and identifying other relevant competition issues such as potential or actual entry barriers. A
wrong determination of market is fatal to analyzing and determining the abuse of dominance by an
enterprise.
Had CCI done a more rigorous economic analysis of the market, CCI could have come to a different
conclusion, in which case DLF may not have been perceived to be dominant and consequently the
provisions of Section 4 may not have been applicable.
iii. NSE Case
As statedabove the informantMCX allegedthatthe Opposite PartyNSEabusedits dominantpositionin
the relevant market. MCX is a stock exchange recognizedby the Securitiesand Exchange Board of India
(SEBI). MCX has regulatory approvals to operate in currency derivatives. NSE was incorporated in 1992
and was recognizedasa Stock exchange in1993. DG identifiedthatNSEruns operationsinthe following
relevantproductmarketsegments: (a) equity,(b) equityfuturesandoptions(F&O) (c) debtsegment,(d)
currency derivative (CD) and (e) over the counter (OTC) market for trades in foreign currency. However
the CCI identifiedthe relevant market for this case to be stock exchange services in respect of currency
derivatives’.
As per the CCI in termsof the differentproductstradedon the exchanges,a cleardifferentiationcanbe
drawnbetweenequity,F&OandWDMsegmentsintermsof underlyingassets.Toillustrate theCDmarket
is a futuresderivative marketandunderlyingsecuritiesforCDs are currencies.The OTC marketincludes
forwards,swapsandoptionsforhedgingcurrencyrisk.The CCIcontendedthatthoughCDand OTC could
be considered as similar products, they are vastly different products in terms of their respective
characteristic as well as participants. OTC segment is different in terms of settlement on maturity,
settlement period, counter party risk, size of market lot and participation. Whereas the CD segment is
primarily for speculators of currency values and short term hedgers who want to cover their economic
exposure but require greater liquidity.
The CCI inthe absence of historicdatapricesfounditunnecessarytodiveintoHMTor SSNIPtest,The CCI
foundthat the CD product segmentdidnot existpriorto August,2008 and secondlysince the inception
of the CD product marketthe exchangesdidnotcharge any transactionfees,datafeed CompetitionLaw
in India
fees etc. These fees may be said to constitute the price for product, and have not beencharged by any
market player in the CD segment. In this case, CCI further found that in the absence of such data, an
attempt to apply SSNIP test would be misuse of an econometric tool,which in itself, is not error-proof.
The proportionof transactionvalue thatabrokerpaysas transactionfeesandaccessoriesfeesissosmall
and insignificantthatitwouldhave practicallynobearingonsubstitutabilityeffectinthe SSNIP analysis.
iv. Analysis of market definition in NSE Case
As discussedabove the SSNIPtestapproachtodelineatingmarketsexamineswhetherahypothetical
monopolistwouldbe able toraise pricesandincrease profitsasa result.Thisquestionisexamined

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primarilybyestimatingown-price elasticityof demandof the collectionof productsinquestion.Own-
price elasticityof demandmeasuresthe extenttowhichrevenueislostwhenprice of productsin
questionisincreasedgenerallyby5-10%.The accurate measurementof the extentof revenuelostin
response toprice increase requiresthe use of econometricanalysis.
Econometricanalysisisdependentonthe use of historical datarelatingtothe productsin questionto
isolate the impactof differentfactorsona givenvariable148.Specifically,adependentvariable,suchas
the demandfora product,isassumedtobe a functionof several ‘independentvariables’.Inthe absence
of data of sufficientquality,the impactof eachof these independentvariablesonthe dependent
variable cannotbe isolated149.
The CCI had rightlypointedoutinitsorderthat inthe marketsegmentcomprisingCDthe historical data
requiredtodelve intoSSNIPtestwasabsent.Since the inceptionof the CDproduct marketthe
exchangesdidnotcharge any transactionfees.Therefore inabsence of credibleprice relateddatathe
CCI wascorrect in itsapproachto not relyon SSNIPanalysis.
The CCI on the basisof data independentlycollectedbythe DGand submissionmade bythe partieswas
able to showthat CD segmentasa product cannotbe substitutable byequityandF&Oproductsegment.
The CCI foundthat CD segmentunderlinescurrenciesandthe relatedderivatives;itistradedon the
platformof derivativeswhichisadifferentmarketfromthe assetsplatforminwhichthe equityandF&O
productis traded.Technical,infrastructural orfinancialcapabilitiesof anyexchange inaparticular
productsegment,hasno bearingtodeterminationof supplysubstitutabilitybetweenthe different
productsegments.
The CCI in itsanalysis hadalsoconsideredthe 2008 report of RBI-SEBIStandingTechnical Committee on
exchange trade currencyfutures.The reporthadformedthe basistostart a new segmentof capital
marketinIndiai.e.the exchange tradedCDsegment: “Exchange tradedfutures ascomparedtoOTC
forwardsserve the same economicpurpose,yetdifferinfundamental ways...The counterpartyriskina
future contract isfurthereliminatedbythe presence of ClearingCorporation.Furtherinanexchange
tradedscenariowhere the marketlotisfixedata much lessersize thanthe OTCmarket,equitable
opportunityisprovidedtoall classesof investorswhetherlarge orsmall toparticipate inthe futures
market...”
The said report advocated a clear separation of CD segment from other segments in any recognized
exchange where other securities are also traded.

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Case Study II - Assessment of Dominance and Abuse
i. MCX Stock Exchange v/s National Stock Exchange
Thiswas one of the earliestandamongstthe mostcomplicatedcases that was broughtbefore the CCIin
its little over 3 year existence. The informants alleged that the opposite parties bused their dominant
position in respect of the following four measures contravening the section 4 of the Act:
i. Transaction fee waiver by NSE;
ii. Admission fee and deposit level waivers;
iii. Data feed fee waiver; and
iv. Exclusionary denial of “integrated market watch” facility.
The CCI found that –
i.NSE has abuseditsdominantpositionintermsof Section4(2)(a)(ii)and4(2)(e) of the Competition
Act.
ii.The intention of NSE was to acquire a dominant position in the CD segment by cross subsidizing
this segment of business from the other segments where it enjoyed virtual monopoly.
iii.It also camouflaged its intentions by not maintaining separate accounts for the CD segments.
vi NSE createda facade of the nascent positionof the marketfor not charging any feeson account
of transactionsinthe C.D.segment.Competitorswithsmallpocketswouldbe thrownoutof the
marketastheyfollowthe zerotransactioncostmethodadoptedbythe NSEandtherefore inthe
long run they will incur huge losses”.

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ii. Existence of dominance
The CCI orderidentifiesonlythree marketplayers,NSE,MCXand USE inthe relevantmarket.The report
submittedbyNSE indicatesfollowingmarketshare of each of the marketplayers.It is importantto note
here that NSE started with 100% market share in August, 2008.
According to the CCI in the Indian context, dominant position is a “position of strength”; such strength
should enable it to operate independentlyof the other competitive forces in the market or to affect its
competitors or the relevant market itself in its favor.
The evaluation of this ‘strength’ is to be done not merely on the basis of the market share. Evaluation
should also consider host of other factors such as size and importance of competitors, economic power
of the enterprises,entrybarriersetc.,asprovidedinsection19 (4) of the Act. The CCI isrequiredtotake
a holistic approach while inquiring into the dominant position of any enterprise. In context with the
analysis of NSE’s dominant position, the CCI observes that –
“it would be wrong to conclude that NSE does not enjoy such a position of strength as one of the only
three players in the relevant market delineated as above… We can first ascertain whether NSE has a
position of strength which enables it to affect MCX-SX as a competitor in its favor”.
1) Zero Pricing Policy
The CCI questionedthe zeropricingpolicy of NSE for such a longperiodconsideringthe objective of any
businessistomake profit,CCIfindsthat“Noenterprisewouldspendaneternityonselflessdevelopment
of anymarketwithoutanyprospectsof makingprofit.The greaterthe financial andcommercial strength
of an enterprise, the longer it can wait and the greater risks it can take… It cannot be argued that the
capacity of NSE to defer profits or to bear long term risk of possible market failure is lesser than that of
MCX-SX in the relevant market. This is clearly a position of strength”.

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2) NSE’s knowledge of the effect of zero pricing policy
The CCI, having not found any acceptable justification for why a professionallymanaged enterprise like
NSE wouldnot want to keepany track of the commercial viabilityof itsoperationsordoes not have any
concerns about the desire of its shareholders to earn higher dividends,the CCI concluded the following
that.
i. It was unthinkable that a professionally managed modern enterprise can afford such financial
complacency in the face of competition unless
ii. It was it is part of a bigger strategy of waiting for the competition to die out.
iii.Thiscomplacence canonlypointtoawarenessof itsownstrengthandthe realization thatsooner
or later, itwouldbe possible tostartgeneratingprofitsfromthe business,once the competition
is sufficiently reduced.
3) Structure of Stock Exchange business in India
The CCIalsolookedintothestructure andfunctioningof thestockexchangesinIndiasince independence.
It is a historical fact that post-independence several stock exchanges had gone out of business. In this
contextthe CCIobservedthathadNSEnotgottenthe undeniable advantagesarisingoutof itsoperations
in other markets, it would not have been able to or would not have wanted to charge zero price for
providingstockexchange servicesforthe CurrencyDerivativesmarket.Inthisregard,MCX-SX,or indeed
any other current or future competitor that does not have similar advantages is clearly in a weaker
position.
After analyzing these three points the CCI concluded that NSE enjoyed a position of strength in the
relevantmarketwhichenabledittoaffectits competitorsinits favor.“To conclude otherwisewouldnot
onlybe turninga blindeye tothe facts available butalsoto the provisionsof the CompetitionActand to
the intent and spirit of this economic legislation.”
iii. Abuse of Dominance by NSE
The CCI having concluded that NSE enjoyed a position of strength found that NSE found following
violations of the Section 4 of the Competition Act –
i.Violationof Section4(2) (ii) of the CompetitionAct- waiversof transactionfees,admissionfeesor data
feed fee waiver because the zero price policy in the relevant market is unfair
Section4(2) (a) (ii) dealswithunfairordiscriminatoryprice inpurchaseorsale (includingpredatoryprice)
of goods or service. The CCI finds that from the wording of the provisions, it can be concluded that
predatoryprice” is consideredasa subsetof “unfairprice”.Interestinglythe term‘unfair’is not defined
in the Competition Act. The CCI therefore observes that the fairness has to be determined from case to
case basis.The CCIlays downthat ‘unfairness’will have tobe determinedinrelationtoa customeror in
relation to a competitor. CCI concludes that in the context of this case, unfairness of pricing cannot be
determined by selecting cost benchmark. Since MCX-SX has no other source of income, the NSE’s zero
price policy cannot be termed anything but unfair as far as the informant is concerned.
ii.Violationof SectionSections4(2) (b) (i) and(ii);4(2) (c) and4 (2) (d) - denyingAPICtoODIN andputting
FTIL on watch list
The CCIon thisissue foundthatsoftware applicationssuchasNOW and ODIN are essential facilities.The
trading on stock exchangesisbeingdone extensivelyonelectronicapplications.There isan aftermarket
for marketwatchand data feedservices.SinceODIN andNOWare competinginthe aftermarket,the CCI
concluded that denial of APIC for CD segment foreclose competition of electronic platform for the CD
segment for NSE traded derivatives and was tantamount to exclusionary conduct in the main relevant
market.

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iii. Violation of Section 4 (2) (e) – Use of the position of strength in the non CD segment to protect its
position in the CD segment.
The CCI identified two distinct relevant markets to examine the provisions of section 4 (2) (e) to assess
the charge of NSE leveraging its dominant position in one relevant market to enter into, or protect,
anotherrelevantmarket.The CCIobservedthattheActdoesn’tindicatethatthere hastobe ahighdegree
of associational linkbetweenthe twomarketsbeingconsideredforthissubsectionbecause competition
concerns are much higher in India due to historical lack of competitionpolicy and regulation. The CCI
found in the present case that the relevantmarket for the clauses (a) to (d) of section 4 (2) is the stock
exchange services for currency derivatives in India, whereas the relevant market for clause (e) of the
section 4 (2) is the stock exchange services for the non CD segment.
The CCI concluded that “the two relevant markets have associational links and that NSE has used its
positionof strengthin the non CD segmenttoprotect its positioninthe CD segment.Furtherthe Denial
of APIC for ODIN and distribution of NOW for free are clear acts of protecting its position in the CD
segment and are possible due to its position of strength in the non CD segment”.
iv. Analysis of the CCI’s Assessment of Dominance and abuse
While analyzingthisdecisionof CCI,we will be drawingliberallyfromthe dissentingopinioninthismat-
ter.150 The dissentingopinionoffersverydifferentrationalewhichispremisedonnetworkeconomicsto
establish that NSE didn’t abuse its dominant position in the market.
Networkindustriesforma large,significant,andfrequentlyfast-growingpartof the worldeconomy.151
A networkindustrycomprisesamarketin whichthe consumptionof goodsor servicesbyone consumer
has a positive impact on the value of goods or service consumed by another consumer. To illustrate a
telephone holds more value to an individual consumer if other individual also have phones. The more
people who have them, the greater the number of possible phone calls one can make, and the more
valuable telephones become.
The crucial definingfeature of networksisthe complementaritybetweenthe variousnodesandlinks152.
A common and defining feature of network industries is the fact that they exhibit increasing returnsto
scale inconsumption,commonlycallednetworkeffects.153Networkindustriesexhibitincreasingreturns
to scale inproduction,unitcostdecreaseswithincreasingscale of productionandoftenincremental cost
is negligible154.
The minority order was of the opinion that Stock Exchange Industry exhibits a strong characteristic of
networkeffect.Asdiscussedabove inanetworkindustrythe value tothe usersincreaseswithincreasein
the number of its users. Consumers are willing to pay a higher price for the value they derive from
operating in a robust network. In a financial stock exchange the externality that arises in the act of
exchanging assets or goods is of critical importance in a stock exchange.
v. Why NSE may not be a dominant player
Fromthe verybeginningof the CDMarketsegment,NSEenjoyed100% marketshare.Whereasthe market
share of the 3 DMarket segmentplayerin2010stoodat 33,17%, 38,82% and28,01% respectivelyforNSE,
MCX-SX and USE. The minority opinion rightly points that the minoritymembers “are not aware of any
case in the historyof jurisprudence globally,where afirm’smarketshare hasbeenreduceddrastically(to
lessthanone thirdinthiscase)inarelativelyshortperiod(twoyearinthiscase),andyetithasbeenfound
to be dominant by a competition regulator or a court”. Three way split in market share clearly indicates
that there isnomajorentrybarrierasevidencedfromthe entryof MCX-SXandlaterUSEinashortperiod
of time. The market share of the CD segment confirms fairly the oligopolistic characteristic in network
industry. Perhaps the majority order may have confused the evidence of network externalities as an
evidence of dominance itself and condemned NSE for being the dominant player.

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vi. Why NSE may not have abused its dominant position
In order to understand as to whether or not the zero price policy adopted by NSE resulted in directly or
indirectly imposition of unfair or discriminatory price in sale of services, we have to first analyze the
concept of predatory price or unfair price under the Competition Act.
Predatory pricing is on the one hand deemed as an instrument of abuse whereas on the other hand it
bringsbenefittoconsumersbyloweringthe price.Thisdilemmaisfurtherintensifiedbecause predatory
price abuse is particularly hard to distinguish from vigorous price competition between the market
players.
Globallythereare twomajorschoolsof thoughtonthismatter.The USisdrivenbytherecoupmenttheory
to establish monopolization.155 The recoupment theory in essence means that there should exist a
dangerous probability, or a reasonable prospect, that the predator can later raise price sufficient to
recoupits investmentinbelowcostpricing.The minorityopinioninthiscase has also toucheduponthe
proof of recoupmentinpredatorypricingscenario.Howeverevidence of below-costpricingisnot alone
sufficienttopermitaninference of probable recoupmentandinjurytocompetition.Inordertoestablish
abuse it shouldbe clearlyprovedthat the predatormust have a reasonable expectationof recoveringin
the form of later realizing monopoly profits of an amount which is relying in excess of the losssuffered
during the predation period156.
In the EU157, a detailed cost/price analysis is necessary to prove predation, and prices below average
variable costwill be regardedasabusive.Pricesbelow the average total cost,butabove average variable
cost, may be abusive only if it is proved that the intent of dominant undertaking was to eliminate a
competitor from the relevant market. EU rule as laid down in AKZO stands in contrast with the re-
coupment theory laid down by US Supreme Court, where generally a price above AVC is lawful without
condition. The ECJ in Tetra Pack II158 further confirmed that recoupment of losses is not necessary to
establish predatory behavior.159
Thus, while in the US the probability of recoupment has to be established to conclude predatory intent,
in EU, it is one of the factors, which could be examined to prove abuse.160
Surprisinglythe mainCCIorderhas not gone into the questionof predatorypricing,probablybecause of
difficultyindeterminingvariouscostfactorsinthe absence of credible pricedata.Eventhe minorityorder
has limiteditself topostulatingonthe competingtheoriesof predatoryprice withoutactuallygoinginto
analyzing the exclusionary effect of the below price strategy of NSE
The dissenting opinion in the NSE Case describes in lengththe ‘network industry’ and its unique attrib-
utes’. The dissenting opinion states that “in such fluid and dynamic framework, anticipating or adjudi-
cating on anticompetitive behavior carries the risk of being arbitrary defeating the purpose of interven-
tion. Competition regulators have to keep these developments in view, while considering cases where
theymaybe relevant.Itiswiththeseconcernsthatthe presentinvestigation”.Itisinthiscontextthatthe
dissenting opinion concluded that the zero pricing policy that the NSE adopted was a function of the
market dynamics and could not be attributed to an ‘abuse’ of its position.
Inthe contextof the NSEcase andourdiscussionaboveaboutthe price dynamicsinthenetworksindustry
it is easy to mistake zero price in a network industry for predatorypricing.However taking into account
the market share of CD segmentitis amplyclearthat vigorouscompetitioninthissegmentwaspresent.
Higher prices in after-market would again attract new players which are clearly demonstrated by easy
entryof USE andMCX-SXforcingNSE tocontinue withzeropricingdespite NSEsteadilylosingthe market
share to USE andMCX. Insuch situationthe CCIshouldn’thavedeprive theconsumerof zeropricesinthe
market.

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vii. Kapoor Glass
Schott Glass India Private Ltd (“Schott India”) is a subsidiary of Schott Glaswerke Beteilugungs GmbH a
German multinational company and a well-known manufacturer of borosilicate tube glass. Schott India
entered into a joint venture with Kasiha Manufacturing Company (Kaisha). Kasiha is a downstream
ampoule manufacturer. Schott India created a downstream link through the joint venture. Schott India
also soldto other ampule manufacturers.FDA approvedglassvialsisan importantfactor. The discounts
provided by Schott were the subject of inquiry before the CCI on the aspect of whether price
discrimination is anti-competitive.
viii. Existence of Dominance
The Opposite PartySchott Indiaoperatesinboth the upstreamrelevantmarkets,namely,‘Neutral Clear
USP-I borosilicate glass tubes in India’ and ‘Neutral amber USP-I borosilicate glass tubes in India’.
Market Share
In the relevantmarketfor‘Neutral amberUSP-Iborosilicate glasstubesinIndia‘,as per the submissions
of the Opposite Party,Schott India’smarketshare inIndia was 93% in the product knownas NGA range
of tubes and 87% in the branded Fiolax range in 2009-10. In the relevant market of ‘Neutral Clear USP-I
borosilicate glass tubesin India’, the OP’s market share,as per their submissions, stoodat 42% in 2009-
10, movingupfrom38% in2007-08 for the NGCrange.The marketshare data compiledbythe DG,which
includes all the sub categories of borosilicate glass tubesproduced by Schott India i.e., combining both
the relevantmarketsdiscussedabove,showedthatSchottIndia’sshareinthe Indianmarketforclearand
ambertubesincludingbothFiolax andNGC/NGA varietiesintermsof salesvalue haddeclinedmarginally
from83% in2007-08 to81% in2009-10. The figuresdemonstratedthatthe OppositePartyhadthe largest
market share in each of the two relevantmarketsseparately61.49% in termsof quantity and 81.17% in
terms of value in the broader market of ‘neutral USP -I borosilicate glass tubes’ in India; the nearest
individual competitor’s share in the broader market being 13.09% and 7.81% respectively.
Market shares isan importantfactor in assessingmarketpowerof an enterprise,thoughmere numbers
cannot in themselves determine dominance. The larger the market share, the more likely it is that the
undertaking in question is in a dominant position. The ECJ stated in Hoffman-La Roche161:
“Furthermore although the importance of the market sharesmay vary from one market to another the
view may legitimately be taken that very large shares are in themselves, and save in exceptional
circumstances, evidence of the existence of a dominant position.
This passage fromHoffman-LaRoche was alsoreferredtoby the ECJ in the AKZOv. CCI case162 and the
ECJ found that in the absence of evidence indicating lack of dominance, a 50% market share could be
consideredtopresume dominance.Inthe Virgin/BritishAirways163,case BritishAirwayswasheldto be
ina dominantpositioninthe UKairtravel agencyservicesmarketwithamarketshare of 39.7%. However
the Hoffman-La Roche court found that a 43% market share was not enough to establish dominance.
In the lightof international jurisprudence onthisissue,itcan be assumedthat the CCI was correct in its
approach to analyze the market share of industryplayersto determine the marketpowerof firmsand a
significantlyhighmarketshare of SchottIndia inthe relevantmarketdefinitelyindicatedthatSchottIndia
was a dominant player.
ix. Entry Barriers
Heavy capital requirement, huge running cost, high gestation period and economies of scale in the
production of the upstream relevant products were among the entry barriers identified by the DG. The
requirement of stability test by the Pharma companies’ acted as another entry deterrent, DG further
added. Given the growing demand and market size, these factors did not render a profitable entry into

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the market permanently infeasible; however they capable of erecting temporary entry parries and
delaying entry. For imports, the import duty of 10% acts as a significant entry constraint.
For antitrustpurpose,a barrier to entryis some factor inmarket that permitsfirmsalreadyinmarket to
earn monopoly profit while deterring outsiders from coming in.164
It wouldonlybe inexceptionalcircumstancesthatacompanyenjoyinghighmarketsharessuchasSchott
Indiainthiscase maynot be ina positiontoexertmarketpower.Onthe otherhanditisalsounlikelythat
an enterprise with high market shares will have the possibility of sustaining supra-competitive prices in
the long run if the entry barriers are low, because any price increase could be subject to competitive
reaction by the remaining or potential players on the relevant market. The fact that a company holds a
large market share would not be sufficient for a finding of dominance. In those cases, the high market
sharescouldbe simplyindicative of a“superiorskill,foresightandindustry”of the company.165 The CCI
inthiscase hasfoundseveral factorssuchasheavycapital requirement,huge runningcost,highgestation
periodandeconomiesof scaleintheproductionof the upstreamrelevantproductcoupledwithregulatory
barrier of entry indicates that the relevant market has very high barriers of entry.
x. Countervailing Buying Power
The downstreamrelevantmarkets,leavingaside the JV of the OP Schott-Kaisha,consistsof several small
manufacturers who individually lack the requisite size, importance or financial strength to exercise
countervailingbuyingpoweronthe OP.Collective considerationof the factorsreviewedinthe foregoing
paragraphs, in the light of the definition of dominant position as provided in the Act establishes the
dominance of Schott Glass India in the upstream relevant markets of ‘neutral clear USP -1 borosilicate
glass tubes in India’ and ‘neutral amber USP -1 borosilicate glass tubes in India’.
Buyer power is understood as the ability of one or more buyers, to obtain favorable purchasing terms
from their suppliers. Buyer power is an important aspect in antitrust analysis, because powerful buyers
may discipline the pricing policy of powerful sellers, thus creating a ‘balance of power’ on the market
concerned.The EC in the Knorr-Bremse166case approvedconcentrationswitha marketshare of 80 per
centdue tocountervailingfactorssuchas,interalia,ahighlyconcentrateddemandside.The CCIhasbeen
able to showin thiscase that otherthan Schott India- KaishaJV,the downstreammarkethas onlysmall
players, who are not able to exert countervailing buyer power on Schott India.
Collective consideration of the factors reviewed in the foregoing paragraphs and in the light of inter-
national best practice on determining the dominant position the CCI had correctly determined the
dominance of Schott India in both upstream relevant markets of ‘neutral clear USP -1 borosilicate glass
tubes’ and ‘neutral amber USP -1 borosilicate glass tubes’.
xi. Assessment of abuse of dominance by Schott India
The informant,KapoorGlassIndustries,allegationpertainingtoimpositionof unfair/discriminatoryprice
in sale of glass tubes was directed at the two kinds of discounts offered by Schott India:
i. volume/target discount; and
ii. loyalty discount.
Price discrimination was directed to both the upstream and downstream markets.
The majority opinion of the CCI inter alia observed that Schott Kaisha and other converters are not
similarly placed and since Schott Kaisha-JV is its major customer, it is giving more discounts to it as an
incentive.The CCI further observed that giving favorable discount to a customer who is providing more
businessmaynotbe anti-competitive providedthere isnoharmcaused to competitioninthe market.In
the instant case CCI found that Schott India was charging different prices to different customers for the
same andequivalentproductintermsof qualityandothercharacteristics.Theprice oftubesforthe Schott
Kaisha JV was fixed under long termtubing supplyagreement by Schott India. Due to this arrangement,

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Schott Kaisha JV will always be getting price benefits over other converters even if it does not get any
targetor functional discount.Therefore,dissimilarconditionsof saleshave beenimposedbySchottIndia
for equivalenttransactionsbetweenJV andother converters.Inadditiontoprice benefit,SchottIndiais
not onlygivingenhancedquantumof discountto the group JV in comparisonwiththe other converters,
butis alsoapplyingdissimilarconditionsforgivingsuchdiscounts.Allthesefactorsare givingcompetitive
edge to Schott JV overother competitorsinthe downstreammarketwhichis reflectedintheirdeclining
profit margins. The margins of other convertersin downstream market vis-à-visthe Schott JV have also
gone down considerably over the years.
It is generallyaccepted that discounting practices are oftenpro-competitive,efficiency enhancing, or at
worst benign, however under certain circumstances they can prevent entry of equally efficient
competitors or force them from the market.167 These effects depend on three factors that must be
present168:
i. the discounting firm must have a dominant position in at least one market,
ii.there must be economies of scale in the competitive markets, and
iii.the discounting practice must affect a sufficient volume of sales so as to deprive rivals of
economies of scale.
Schott Indiaisa dominantplayerinthe upstreammarket.SchottIndiainitssubmissionmade tothe DG
didn’tcontestthisfact.Eveninthe down-streammarketSchottIndiaisadominantplayeralongwithits
JV Partner.While analyzingthe entrybarrierthe DGhas alsoconcludedthateconomiesof scale inthe
productionof the upstreamrelevantproductsare amongthe entrybarriers.The informationrelatingto
the volume of salesisconfidential informationtherefore we cannotdraw conclusiononthese issues.
Howeveronthe remainingtwoissuesthe factpatternof SchottIndiaperfectlyfitsintothe condition
that OECD inits reporthas declaredtobe anti-competitive.We are alsoof the view thatin thiscase CCI
has takena correct approach to conclude thatSchottIndiaisabusingitsdominantpositionbyoffering
loyaltyorvolume discount.
Important achievements of CCI
Table No.A1 presentsperformance of the Commissiononselectparametersin2014-15 vis-a-vis2013-
14. It tooknotice of 128 allegationsof infringementof the provisionsrelatedtoanti-competitive
agreementsandabuse of dominantpositionof the Act.Afterformingaprimafacie opinion,the
Commissiondirectedthe DGto undertake investigationsin41 casesand closed73 cases.The DG
completed34investigationsdespite severestaff crunch.The Commissionpassedatotal of 95
appealable orders(73undersection26(2),02 undersection26(6) and 20 undersection27),imposingan
aggregate penaltyof Rs.2,592 crore onwrongdoers,inadditiontoeightinterimordersundersection33
of the Act.The personsaggrievedbyordersof the Commissionchallenged30% of its ordersbyappeals
to the Hon’ble CompetitionAppellateTribunal (theCOMPAT).Insyncwithtake-off of the economy,the
numberof combinationsincreasedbymore than100% duringthe year.The Commissionreceived94
(excluding4invalidated/withdrawnnotices) noticesof proposedcombinationsin2014-15. It approved
a record numberof 87 combinations,with84of these approvedinlessthan30 days.It may be noted
that the data presentedinthisreportmaydiffermarginallyfromthose providedinearlierreportsas
there hasbeenre-groupingandreconciliationof the same ina few cases.Havinga mandate to create
awarenessof competitionlawandbenefitsof competition,the Commissionconducted49advocacy
workshops,conferences, seminarsandotherinteractionsamongthe stakeholders,suchas,government,
trade associations,judiciary,etc.Anykindof manipulationinthe bidsforprocurementiscondemned

26 | P a g e
worldoveras it isharmful tothe economyandconsumers.Manipulationinpublicprocurementis
consideredthe mostheinousoffence againstthe economyandsocietyasitisfundedfromtax payers’
money.Inorderto professionalize publicprocurementandprotectthe interestsof publicprocurers,the
Commissionincollaborationwiththe WorldBank,oragnisedaworkshopon‘CompetitionLaw and
PublicProcurement’inMarch2015 whichhad participationof 130 seniordelegatesfromleadingCentral
PublicSectorUndertakings(CPSUs) andofficersfromthe Central andState Governments.
Sector Wise Distribution
The Commissiondealswithtwokindsof matters,namely,anti-competitive conductsuchascartel or
abuse of dominance,andcombinations.The sectoral distributionof these mattersalertsthe
Commissionof the potential areasforitsfocusedattentionandadvocacyinitiatives.Intermsof
allegationsof anti-competitiveconduct,the real estate sectortopsthe listeveryyearsince the lawcame
intoforce.Otherprominentsectorswithrelativelymore reportsof anti-competitiveconductare
financial sector,films,andpharmaceuticals.The sectoral distributionof anti-competitive conduct
reportedto/noticedbythe CommissionispresentedinTable No.A3.

27 | P a g e
Orders passed by the Commission
On noticinganallegedcontraventionof section3or4 of the Act, the Commissiontakesaview if there
existsaprimafacie case.In case itexists,itpassesanorderundersection26(1) for investigation.If it
doesnot,it closesthe matterbyan order undersection26(2) of the Act. The ordersundersection26(1)
and 26(2) are calledprimafacie orders.If nocase ismade out on completionof the investigation,it
closesthe matterby an orderundersection26(6) of the Act. If there isanycontravention,itpassesan
orderundersection27 of the Act. Occasionally,amattermay warrantinterimdirections.Insuchcases,
the Commissionissuesinterimordersundersection33of the Act. It ispossible thatall the membersof
the Commissionmaynotholdthe same view ina matter.Insuch cases,an orderis passedwithdissent.
A fairshare of orderswithdissentreflectsthe rule of reasonandcomplicationsinapplicationof the rule
incompetitionmatters.The detailsof orderspassedbythe Commissiontill 31stMarch, 2015 are
presentedinTable No.C1.

28 | P a g e
The Commissiondidnotfindanyviolationof the Actin73 casesand closedthemundersection26(2) of
the Act. Afterconsideringthe objectionsandsubmissionsmade bythe parties,the Commissionclosed
twomatters undersection26(6) of the Act. Oncompletionof investigationandafterfollowingthe
principlesof natural justice,itfoundcontraventionsin20mattersand accordinglypassedordersunder
section27 of the Act. Table No.C2 presentsthese details.The brief detailsof orderspassedunder
section27 are presentedinPartD of thisreport.
Monetary penalties
The rule of lawrequiresthatthe State mustcompel observance of orcompliance withthe applicable
laws,if itnot voluntarilydone,toinduce the desiredconductonthe part of participantsatmarketplace.
The law empowersthe authoritiestotake avarietyof measuresforthispurpose.The Actenablesthe
Commissiontotake a numberof measures,includingmonetarypenalty.Section27of the Act enables
the Commissiontolevymonetarypenaltyincase of contraventionsof Sections3or 4 of the Act in
additiontootherappropriate directionssuchascease and desist.Sections42,43 and 43A empowerthe
Commissiontolevymonetarypenaltyincase aparty failstocomplywithitsdirectionsorordersor to
provide the requiredinformation.Sections44and 45 empowerthe Commissiontolevypenaltiesincase
a party makesa false statementorfurnishesfalse document.The amountof monetarypenaltyimposed
and realized till31stMarch, 2015 ispresentedinTable No.D1.The Commissionhasleviedanaggregate
penaltyof Rs.12,479 crore in78 cases. Nopenaltyhasbeenleviedsofarfor non-compliance with
provisionsof Sections44and 45 of the Act.However,the recoveryisnotencouragingasmostof the

29 | P a g e
mattersare underappeal atthe higherfora.Nocase hasyet beenreferredtoIncome Tax Department
undersection39(2) of the Act for recoveryof penalty.
The distributionof penaltiesleviedundervarioussectionsof the Actoverthe yearsis presentedinTable
No.D2. Anaggregate penaltyof Rs.12,458 crore has beenleviedundersection27of the Act, that is,for
anti-competitive conduct.During2014-15, the Commissionimposedmonetarypenaltyin21matters,as
indicatedinTable No.D3. Of these,12 are section27 caseswithan aggregate penaltyof Rs.2,581 crore.
An amountof Rs.16.8 crore has been realizedbythe endof March, 2015.

30 | P a g e

31 | P a g e
6. Conclusion
Competitionlawanalysisentail complexlegal andeconomicconsiderations.The CCIordersdiscussed
above suggeststhatthe CCI has beencalledupon veryearlyinitsexistencetodeterminecomplex
antitrustissuesarisingfromthe conductorenterprisesengagedinverycomplexmarket.There hasnot
yetbeenanyfinal orderfromthe COMPAT or Supreme Courtonany of the majorSection3 or 4 cases
decidedbythe CCI,where the partieshave gone intoappeal fromthe order of the CCI. Therefore to
analyze andidentifyjurisprudentialtrendsatthisearlystage of developmentof competitionlaw in India
isdifficult.
Howeverthe studyhashighlightedcertainkeytrendsinthe orderspassedbyCCI. It wasfoundthat CCI
has showndeterminationininitiatinginquiryagainstthe SOEs,there isalsosteadyincrease inthe
numberof informationreceivedbythe CCIandinformantsfromvarioussectionsof societyhave come
forwardto provide the informationthe commission,whichindicatesgrowingawarenessaboutthisnew
piece of legislation.Intermsof relyingonforeignauthorities,the CCItendstorelymore on EU
authorities,primarilybecause the CompetitionActisfashionedonthe linesTFEU. The analysisalso
pointstocertaininconsistenciesinthe orderpassedbythe CCI,suchas the CCIordershave been
inconsistentinthe applicationof economicprinciplesinanalyzingthe market,establishingabuse of
dominance.CCI’sinconsistentstandardsinimposingpenaltyandexcessivereliance oncircumstantial
evidence have alsobeenamajorarea of concern forthe industry.
It has alsobeen pointedoutin the reportcertaintrendsandobservationswithrespecttothe
functioningof the CCIsuchas the debate aboutpublicationof dissentingopinionandthe role of CCIas
administrativeexpertbody.The CompetitionActisa bigstepin India’scompetitionlaw frameworkfrom
MRTP regime focusedon‘curbingof monopolies’topromote competitioninmarketbyproscribing
practicesthat have ‘appreciable adverse effectoncompetition’.The CCIhasto be cautiousand
consistentwithrespecttoitsapproachintermsof itsoperationsandadvocacyexercise.A consistencyin
CCI’sapproach inwill golongwayin enablingthe industryinplanningpro-competitivebusinessstrategy
withinthe frameworkof the CompetitionAct.
No legislationisperfect.Itevolvesthroughtime.Historyiswitnesstothe fact that competitive pressure
has alwaysdone wondersforthe economyof anycountryand let’shope thatthe CCI will alsobe able to
do the same in Indiabyfosteringthe culture of competitioninbusinesspractices.

32 | P a g e
7. Bibliography
 https://en.wikipedia.org/wiki/The_Competition_Act,_2002
 https://en.wikipedia.org/wiki/Competition_Commission_of_India
 https://en.wikipedia.org/wiki/Competition_law
 http://www.cci.gov.in/
 http://www.cci.gov.in/sites/default/files/cci_pdf/competitionact2012.pdf
 PS Mehta. 2012. Competition_and_Regulation_in_India-
2011_Leveraging_Economic_Growth_Through_Better_Regulation. [ONLINE] Available
at: http://www.cuts-ccier.org/icrr2011/pdf/Competition_and_Regulation_in_India -
2011_Leveraging_Economic_Growth_Through_Better_Regulation.pdf. [Accessed 20
February 16].
 http://www.cci.gov.in/sites/default/files/annual%20reports/Annual%20Report%202014-
15%20Eng.pdf
 Nishith Desai. 2013. Competition Law in India - Jurisprudential Trends and the way
forward. [ONLINE] Available at:
http://www.nishithdesai.com/fileadmin/user_upload/pdfs/Research%20Papers/Competiti
on%20Law%20in%20India.pdf. [Accessed 20 February 16].

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